Crisis Looms in Mortgages

[Herman Munster]

http://www.nytimes.com/2007/03/11/business/11mortgage.html?pagewanted=1&_r=1&hp

“I think there is no doubt that home sales are going to be weaker than most anybody who was forecasting the market just two months ago thought. For those areas where the housing market was already not too great, where inventories were at historically high levels and it finally looked like things were stabilizing, this is going to be unpleasant.”

Like worms that surface after a torrential rain, revelations that emerge when an asset bubble bursts are often unattractive, involving dubious industry practices and even fraud. In the coming weeks, some mortgage market participants predict, investors will learn not only how lax real estate lending standards became, but also how hard to value these opaque securities are and how easy their values are to prop up.

Owners of mortgage securities that have been pooled, for example, do not have to reflect the prevailing market prices of those securities each day, as stockholders do. Only when a security is downgraded by a rating agency do investors have to mark their holdings to the market value. As a result, traders say, many investors are reporting the values of their holdings at inflated prices.

“How these things are valued for portfolio purposes is exposed to management judgment, which is potentially arbitrary,” Mr. Rosner said.

[youngdem]

1. 34...Yes, 34 mortgage companies have gone UNDER this year alone

This subprime rape and pillage (which I saw first hand as a broker and builder) with the Adjustable, teaser rate mortgages are gonna be a LEGENDARY mistake on the order of the S&L crisis. I saw SO many loans get pushed through that should never have happened. And Stated loans, where the applicant simply states his income and assets to qualify for a loan - well, that should NEVER be allowed for a loan that goes to Fannie or Freddie underwriting. That's just way too ripe for abuse, and there is NO good reason someone should be unable to prove their worth and income for a major purchase.

This is gonna get SO MUCH worse. Many people are just treading water, and when more and more people have life changes and need to move, and the market begins to get flooded by eager sellers with no equity who are a paycheck or medical crisis or car wreck away from default - it's gonna get BAD.

Many markets are gonna see north of 40% corrections on homes above median price. Some already have, when you count in the Seller concessions that are now paid by many sellers - from the Seller paying all brokerage in today's market to closing costs, repairs, mortgage points, contents, maintenance policies, etc. I sold a house in Austin a few years ago where the guy even included his jaguar to get the sale done.

Look out below. It's gonna get rough.

[Bobbieo]

2. I can't tell you how many telemarketer mortgage brokers I hung up on or how many

I deleted from my e-mail but it was it was a staggering number. I feel so sorry for the poor people who got sucked in on their rotten deals. Now, I'm afraid we all are going to pay for them in one way or another.

[WannaJumpMyScooter]

3. Duh

just plain duh

[sam sarrha]

4. we have till july to sign on a new house, the company pays the closing and Realtors fee's..we just

moved to Winston-Salem NC, what do you think the market will be like then,

do you think it will be wise to buy about them.. we lucked out getting rid of our house in Dyer TN after the F4 Tornado wiped a lot of it off the face of the earth and knocked down nearly every tree for miles... the neighbors house took nearly 3 years to sell.. before the tornado

[Error]

10. You may want to wait until people are really hurting more

and then you'll be able to take advantage of a great deal.

[mia]

13. “Why Buy? Rent Cheap And Wait For Foreclosures”

I've been reading the housing bubble blog for well over a year now and the prevailing wisdom there seems to be that now, and throughout the coming year, is the worst time to buy. Real Estate values are declining in most areas. The huge overbuilding that has been propping up the economy has produced a glut of housing. Rent and save your money. In a year's time you'll save more than enough to make up for what you would lose from your company.

Today's top post at the Housing Bubble Blog is titled:“Why Buy? Rent Cheap And Wait For Foreclosures". Be sure to read the comments.

http://thehousingbubbleblog.com/

[Gormy Cuss]

15. According to the PMI Group risk analysis, W/S is in decent shape compared to many markets.

The PMI Group quarterly market analysis is one that I've watched for several years now and it tends to be pretty good at pointing out the most risky markets. I don't know how well it performs with less risky market but the Winston-Salem number put in the category of low to moderate risk as of the most recent report. Download and print the report and appendix because the charts are difficult to read on screen. Winston- Salem's numbers are listed in the appendix, but the explanations of what each number means is in the main report.

http://www.pmi-us.com/lenders/eret.html

There is no easy answer to your question but since your company is paying a hefty portion of the transaction fees, you're in a better position than many. If you don't think that you'll be staying in that area for more than a couple of years, look at the rental market and determine the cost vs. buying.

[BlueIris]

5. Yeah, this is going to get nauseating...

...egh.

[BlueIris]

6. Kick. Be prepared, folks. nt

[sarcasmo]

7. Kick, from the #1 Foreclosure State, the State of Michigan.

[XanaDUer]

8. I thougt it was Georgia

I thought I read that a few months ago in the Atlanta Journal COnstitution.

Anyway, it's going to be a bumpy ride.

[Error]

9. where are the people who are forclosed on going to live?

Is there going to be a glut of renter all of a sudden?

[WannaJumpMyScooter]

16. You think the RE people give a shit?

Think again.

[KG]

11. good 'ol american style greed.

nothin' like it in the world. it will be the downfall of this country...

[leftyladyfrommo]

12. Well and FNMA and Freddie Mac's own underwriting websites

made fraud a lot easier.

The industry tried to take people out of the equasion - do all the underwriting by computer using the credit report and appraisals. But fraud became a lot easier to accomplish.

I really wondered about that at the time. No one who really knew anything was checking the files.

[mia]

14. Another thread with some graphs...

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x2763240