[patientrenter]

[quote=jpinpb]Well, that’s what I’m thinking. They’ll keep what makes sense, either rent or re-work some loans, but let the ones that don’t make sense just go to market for whatever, b/c no skin off them, really. Basically, just delaying again. Seems all they can do is continue to sweep under the rug. I don’t know how long they can procrastinate. I mean, forever. That’s a lot of houses to just twist in the wind forever. [/quote]

I think I see what you’re wondering about, jp. My assumption is that our leaders are aiming to generate inflation that will allow prices to return to levels in the ballpark of the peak. But it might take years to get that done. In the meanwhile, they have to limit market supply, and make lending easy, to prevent house prices going so low for so long that expectations are completely reset.

So the goal would be to mod enough existing loans (and keep short-term rates low enough that ARMs don’t have a sting) to slow down the foreclosure supply, and on the demand side allow high LTV FHA and FNMA/Freddie-backed loans to flow easily. They don’t have to keep it going at full tilt forever, just until inflation gets going. Maybe 1-2 years. The gradually ease up and focus on inflation.

[patientrenter]

[quote=jpinpb]Well, that’s what I’m thinking. They’ll keep what makes sense, either rent or re-work some loans, but let the ones that don’t make sense just go to market for whatever, b/c no skin off them, really. Basically, just delaying again. Seems all they can do is continue to sweep under the rug. I don’t know how long they can procrastinate. I mean, forever. That’s a lot of houses to just twist in the wind forever. [/quote]

I think I see what you’re wondering about, jp. My assumption is that our leaders are aiming to generate inflation that will allow prices to return to levels in the ballpark of the peak. But it might take years to get that done. In the meanwhile, they have to limit market supply, and make lending easy, to prevent house prices going so low for so long that expectations are completely reset.

So the goal would be to mod enough existing loans (and keep short-term rates low enough that ARMs don’t have a sting) to slow down the foreclosure supply, and on the demand side allow high LTV FHA and FNMA/Freddie-backed loans to flow easily. They don’t have to keep it going at full tilt forever, just until inflation gets going. Maybe 1-2 years. The gradually ease up and focus on inflation.

[patientrenter]

[quote=jpinpb]Well, that’s what I’m thinking. They’ll keep what makes sense, either rent or re-work some loans, but let the ones that don’t make sense just go to market for whatever, b/c no skin off them, really. Basically, just delaying again. Seems all they can do is continue to sweep under the rug. I don’t know how long they can procrastinate. I mean, forever. That’s a lot of houses to just twist in the wind forever. [/quote]

I think I see what you’re wondering about, jp. My assumption is that our leaders are aiming to generate inflation that will allow prices to return to levels in the ballpark of the peak. But it might take years to get that done. In the meanwhile, they have to limit market supply, and make lending easy, to prevent house prices going so low for so long that expectations are completely reset.

So the goal would be to mod enough existing loans (and keep short-term rates low enough that ARMs don’t have a sting) to slow down the foreclosure supply, and on the demand side allow high LTV FHA and FNMA/Freddie-backed loans to flow easily. They don’t have to keep it going at full tilt forever, just until inflation gets going. Maybe 1-2 years. The gradually ease up and focus on inflation.

[patientrenter]

[quote=jpinpb]Well, that’s what I’m thinking. They’ll keep what makes sense, either rent or re-work some loans, but let the ones that don’t make sense just go to market for whatever, b/c no skin off them, really. Basically, just delaying again. Seems all they can do is continue to sweep under the rug. I don’t know how long they can procrastinate. I mean, forever. That’s a lot of houses to just twist in the wind forever. [/quote]

I think I see what you’re wondering about, jp. My assumption is that our leaders are aiming to generate inflation that will allow prices to return to levels in the ballpark of the peak. But it might take years to get that done. In the meanwhile, they have to limit market supply, and make lending easy, to prevent house prices going so low for so long that expectations are completely reset.

So the goal would be to mod enough existing loans (and keep short-term rates low enough that ARMs don’t have a sting) to slow down the foreclosure supply, and on the demand side allow high LTV FHA and FNMA/Freddie-backed loans to flow easily. They don’t have to keep it going at full tilt forever, just until inflation gets going. Maybe 1-2 years. The gradually ease up and focus on inflation.

[patientrenter]

[quote=Arraya]…..I spoke to a lawyer that works at a firm that does loan mods. He said they do about 200-300 a month and 1/3 of them are principle reductions which essentially is a FHA refi were they will take somebody from like 120% LTV down to 97.5% LTV. The other re-works are with the existing lender based on “hardship” and ability to pay. A very common hardship is one spouse lost a job, but he said that the hardship “umbrella” is wide and they can get “creative”…..[/quote]

I wish I had been irresponsible. I feel stupid. But I do learn.

[patientrenter]

[quote=Arraya]…..I spoke to a lawyer that works at a firm that does loan mods. He said they do about 200-300 a month and 1/3 of them are principle reductions which essentially is a FHA refi were they will take somebody from like 120% LTV down to 97.5% LTV. The other re-works are with the existing lender based on “hardship” and ability to pay. A very common hardship is one spouse lost a job, but he said that the hardship “umbrella” is wide and they can get “creative”…..[/quote]

I wish I had been irresponsible. I feel stupid. But I do learn.

[patientrenter]

[quote=Arraya]…..I spoke to a lawyer that works at a firm that does loan mods. He said they do about 200-300 a month and 1/3 of them are principle reductions which essentially is a FHA refi were they will take somebody from like 120% LTV down to 97.5% LTV. The other re-works are with the existing lender based on “hardship” and ability to pay. A very common hardship is one spouse lost a job, but he said that the hardship “umbrella” is wide and they can get “creative”…..[/quote]

I wish I had been irresponsible. I feel stupid. But I do learn.

[patientrenter]

[quote=Arraya]…..I spoke to a lawyer that works at a firm that does loan mods. He said they do about 200-300 a month and 1/3 of them are principle reductions which essentially is a FHA refi were they will take somebody from like 120% LTV down to 97.5% LTV. The other re-works are with the existing lender based on “hardship” and ability to pay. A very common hardship is one spouse lost a job, but he said that the hardship “umbrella” is wide and they can get “creative”…..[/quote]

I wish I had been irresponsible. I feel stupid. But I do learn.

[patientrenter]

[quote=Arraya]…..I spoke to a lawyer that works at a firm that does loan mods. He said they do about 200-300 a month and 1/3 of them are principle reductions which essentially is a FHA refi were they will take somebody from like 120% LTV down to 97.5% LTV. The other re-works are with the existing lender based on “hardship” and ability to pay. A very common hardship is one spouse lost a job, but he said that the hardship “umbrella” is wide and they can get “creative”…..[/quote]

I wish I had been irresponsible. I feel stupid. But I do learn.

[patientrenter]

Never used it, but don’t like limitations on others’ personal, private behavior.

My room-mate in college used it constantly, when he wasn’t drinking. Graduated top of class in 3 majors, and went on to Stanford PhD and a job as a researcher at Bell Labs. That’s what slacking will do for you.

[patientrenter]

Never used it, but don’t like limitations on others’ personal, private behavior.

My room-mate in college used it constantly, when he wasn’t drinking. Graduated top of class in 3 majors, and went on to Stanford PhD and a job as a researcher at Bell Labs. That’s what slacking will do for you.

[patientrenter]

Never used it, but don’t like limitations on others’ personal, private behavior.

My room-mate in college used it constantly, when he wasn’t drinking. Graduated top of class in 3 majors, and went on to Stanford PhD and a job as a researcher at Bell Labs. That’s what slacking will do for you.

[patientrenter]

Never used it, but don’t like limitations on others’ personal, private behavior.

My room-mate in college used it constantly, when he wasn’t drinking. Graduated top of class in 3 majors, and went on to Stanford PhD and a job as a researcher at Bell Labs. That’s what slacking will do for you.

[patientrenter]

Never used it, but don’t like limitations on others’ personal, private behavior.

My room-mate in college used it constantly, when he wasn’t drinking. Graduated top of class in 3 majors, and went on to Stanford PhD and a job as a researcher at Bell Labs. That’s what slacking will do for you.

[patientrenter]

[quote=davelj]

The problem with your “local bank” model is it will never exist again. Nor should it. (Local UNDERWRITING makes sense – but not using local BALANCE SHEETS to fund the loans.) Please explain to me what local institution – other than perhaps a crazy credit union – is going to underwrite a fixed-rate 30-year loan at 4.5%? I’m a director of a local bank and I’d sooner put a bullet in my head. That is a recipe for losing your ass. (See “S&L Crisis.”) Just as the government’s going to lose its ass on the current crop of mortgages it’s underwriting (UNLESS someone is smart enough to match fund this crap with long-dated treasuries – here’s to hoping). So, if you really think this “local bank mortgage model” is a good idea, then you need to sit back and think about it for another 1/2 a second.

There are groups for whom a 30-year fixed-rate piece of paper is appropriate because they have liabilities of matching duration. Insurance companies, Fannie/Freddie in the past, foreign governments, and a few others. But absent the government buying them (via Fannie/Freddie), there isn’t enough “real” demand for this paper – which is why these rates will eventually go WAY up. But that’s an issue for another day.

Regarding the “big bank” mortgage model and “just a few data elements” is concerned, you obviously haven’t gotten a mortgage lately. I’m refinancing right now and it’s a very thorough process as the poster above has outlined. I sent in two years of tax returns, business documents, various bank account statements as well as brokerage statements, retirement account statements, etc. It was a joke a couple of years ago, no doubt about it. But right now, based on my experience, they’re asking for all the right documents right now. It’s a pain in the ass – as it should be!

Regarding the historical pattern of W-2 wages versus self-employed wages in a downturn, I don’t know what the historical pattern is. Care to share the source of your “evidence”? Inquiring minds and all…[/quote]

I work for a large financial institution, and one of the things I have to do is price products, so I have a real appreciation for your comment that lending at a fixed rate for 30 years at 4.5% doesn’t make a lot of sense. As for the comment about local underwriting being good, but not local lending… let’s leave that to another day. (One of our biggest systemic problems was that separation of underwriting and risk.)

I’ve never had a loan, so you’re right, my knowledge of underwriting is 3rd hand. I sure hope things have changed from what I’ve heard was common practice, but I admit that until I hear Barney Frank say in public that the government needs to get out of the lending business, I will remain skeptical that the changes go beyond appearances. (I will be very happy to be proved wrong.)

Source for variations in income: BEA, National Acccounts, Personal Income, (a) Received Compensation of Employees, and (b) Proprietors’ income with inventory valuation and capital consumption adjustments. Sample standard deviation of % changes in the annual series from 1929-2008 is 7.4% for the wage measure, and 11.9% for the owner measure.

[Author]

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