So, what makes somebody a FB?!?!?!?
For a lot of people out there, this housing bubble, froth, bubbelette, or whatever you want to call it, is NOT hard to spot. For the mathematically challenged, the financially illiterate, and those loan officers and real estate agents that are blinded by the past 5 years success, this might come as a BIG surpise...but housing does NOT always go UP!!
Not only does housing not always go up...but rates do not always go down. That is where many borrowers are starting to run into trouble. There are a couple of scenarios I am seeing on a regular basis now days:
1. "I need payment relief" Well isn't that nice. If you can't afford your interst only loan that you got months ago when rates were in the 5's, how do you expect anybody to help you when rates are in the 6's and 7's?!?!? Ok, a neg-am might help you in the very short term, or you could sell. BUT WAIT!! I can't sell!! I have pre-pay penalties, and my house didn't appreciate as much as I thought....
As Carlos Mencia would say....Dee Dee Dee!!!
You are officially a FB!
2. I want to refi and pull some cash out. Ahhh, the ole house of ATM. I need to pay bills, buy an Escalade, do my kitchen, take a vacation, insert whatever reason you "need" money here __________. Well, lets run a comp check to see how much equity you have......
wow! You're house is worth 600K! That's great! How much is your mortgage?
"I have a 1st and 2nd...totaling $585,000."
Well, after you pay for the refi, you will have NO money left to cash out.
Soooooo....you are another type of FB!!
I could go on and on....but the basics of an FB is somebody that is financially strapped with the payments they have and/or is dealing with a property they have little/no/or negative equity. Being upside down is fun...at the fair, not on your house.
Feel free to post ideas, questions, or anything else you would like to talk about.
Not only does housing not always go up...but rates do not always go down. That is where many borrowers are starting to run into trouble. There are a couple of scenarios I am seeing on a regular basis now days:
1. "I need payment relief" Well isn't that nice. If you can't afford your interst only loan that you got months ago when rates were in the 5's, how do you expect anybody to help you when rates are in the 6's and 7's?!?!? Ok, a neg-am might help you in the very short term, or you could sell. BUT WAIT!! I can't sell!! I have pre-pay penalties, and my house didn't appreciate as much as I thought....
As Carlos Mencia would say....Dee Dee Dee!!!
You are officially a FB!
2. I want to refi and pull some cash out. Ahhh, the ole house of ATM. I need to pay bills, buy an Escalade, do my kitchen, take a vacation, insert whatever reason you "need" money here __________. Well, lets run a comp check to see how much equity you have......
wow! You're house is worth 600K! That's great! How much is your mortgage?
"I have a 1st and 2nd...totaling $585,000."
Well, after you pay for the refi, you will have NO money left to cash out.
Soooooo....you are another type of FB!!
I could go on and on....but the basics of an FB is somebody that is financially strapped with the payments they have and/or is dealing with a property they have little/no/or negative equity. Being upside down is fun...at the fair, not on your house.
Feel free to post ideas, questions, or anything else you would like to talk about.
posted by SoCalMtgGuy at 8:21 PM
23 Comments:
WOOHOO! 1st comment.
Good work, by the way.
Thanks!!!
I'll keep adding to this. I do NOT want to compete with Ben's blog...but a lot of people ask me there what I am seeing. Instead of typing it a bunch of times, I'll let people use this.
socalmtgguy,
What do you think of the impact of Ameriquest's settlement with state attorney's general? The article is in LA Times Business Section, November 8.
http://www.latimes.com/business/la-fi-ameriquest8nov08,1,1888084.story
Mortgage fraud sweeping Chicago's poor communities
http://www.belleville.com/mld/belleville/news/local/13091513.htm
Interesting read about mortgage fraud
Added you to my bookmarks!!
Hi socalmtgguy,
great idea to start this. I agree that it will work best if you stick to what you know best - the mortgage/borrowing market.
I've always enjoyed your posts at Ben's place. It's great to get an insider's perspective on what is really going on.
Good luck - and I look forward to reading more as you post it in the months to come.
VHB
Thanks for the posts!
I will keep posting here...and giving my view of what is going on in the market.
I also look forward to what others in the industry are seeing as well.
Again, there are 10's of thousands of people in the business...and I am only 1 person.
Thanks again for the support...and I'll keep adding!
SoCalMtgGuy,
Any chance of a thread here on boulderbo's 10:11 post today on the "Fannie Mae 'Errors' Mount" thread on Ben's blog?
Is that sh*t really going on?
ajh,
I WISH he was kidding.
The loan business is NOT rocket science. It is about putting paper together to show a bwrs qualification for repaying a loan.
If you know what "guidelines" you need to meet...it isn't hard to make the paperwork meet those guidelines.
With today's laser printers and other technology...it is not hard to get stuff past already lax underwriting standards.
Not to mention that like the junk bond boom...it is almost encouraged. "get the deal done...whatever you have to do".
Where else can you make 20-100k per month (in the good times) with barely a high school education...but a smooth voice on the phone?!?!?
Heck, you don't even need that. You would be amazed at the quality of some of the peole that were making a bundle.
Former la homeowner...
In the short term I don't think much will happen. I deal with several brokers that were trained at Ameriquest.
Once they found out what they were really doing, they left for other places.
They "train" a lot of new/young people. So that is all they know. They make a lot of money...and don't question it.
I'm sure there are some "good" people at Ameriquest, but from the 10 or so people that I have dealt with that used to work there, they do not agree with the way they do business.
As long as there is a lot of easy money being generated, I don't think the regulations will be changed.
Thanks for your reply. I guess I was being an optimist. They were talking about "sweeping changes" in the mortgage industry due to Ameriquest's pressure on appraisers to inflate prices and stated income that looks ridiculous. Oh well, I guess this real estate bubble has some more life in it.
former la homeowner
there WILL be sweeping changes ones the good times end...and all the FB's get lawyers.
Like the stock market boom...nobody complained when they ignored logic and made easy money on "paper"...only when the easy money goes as fast as it came, do people care.
When the masses really find out about "stated" income and how it was allowing people that make 40k a year to buy 500k homes...they will want guvment action.
Once the "masses" start complaining for guvment to protect them from their own stupidity, the politicians will jump in and "energize" that voting block...which I think has the potential to be very large.
Good idea with the new blog.........
Are you seeing the so called "Fed Guidance" on mortgage companies tightening lending taking effect yet? Or is it still easy to qualify for a huge no doc loan?
Thanks in advance.
Vic
Lenders have tightened loan scrutiny policies in the Central Valley but left them unchanged in Los Angeles County and the Inland Empire
http://www.dailynews.com/business/ci_3203257
__________________________________
Did you hear about this? I wonder what this will do to markets like Bakersfield? LOL!
you're not competiting with ben's blog - you're adding perspective (to his and all of our blogs)
keep it coming! these are historic times and we're on the front line - and doing good work for those who'll listen
http://housingpanic.blogspot.com
socalmtgguy
Can you post what all the acronims stand for? Can you also list some things that we should be asking a mortgage company when some of us do buy a house in the future? I did not know that loans had things like $10,000 early payoff penalties. Can you tell us the companies to avoid? I have not heard good things about Country Wide. Any comments?
what is a prepay penalty?
last 2 posters...see the new posts on the blog.
I should have answered your questions there.
In regards to your question about Countrywide and pre-pay penalties. ALL lenders have loans with pre-pays and with out prepays.
The more 'creative' the financing...count on a prepay.
Socalmtgguy,
Great format. I cringe when I hear about young people with little income doing these creative mortgages. I think they (Interest only mortgages) do have a place in the business, but the wrong people are using them. Interest only is a wealthy man's tool that can be used under some economic conditions and if rates head up fast, they have the ability to pay off, or greatly reduce their exposure. Unfortunately the financially strapped are buying these, and they are showing up way too late for the party. I think they'll get crushed and there is going to be tons of entry level stuff on the market soon with banks competing for people to take their repos off their hands. It's going to be ugly. Hoard cash. There are going to be some bargains in days ahead, but picking the bottom might be hard to identify.
Reardonsteel
Thanks for the comments. I completely agree that there will be some major pain in many bwrs near future. Too many people used short term financing that they could "barely" afford...so they could make a quick buck.
I like your blog name as well!!! I am very familiar with where your name came from.
Mesa Safes
Protex Safe
Mesa Safes
Protex Safe
Excellent
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