Wednesday, November 16, 2005

Bwr makes 28k...buys 40k SUV...now wants 400k house....HAHAHAHAHA

This bwr had a car payment of almost $800 a month...and only made about $28,000 last year. Wanted to buy a 400k home...but would look at a condo "if they had too". Somehow I don't think that spending 34% of ones gross income on a car payment is the best thing to do...but what do I know. That USED to be the rule when buying a house. Oh how times have changed. There is no way I was going to help this guy get a loan...but I'm sure somebody out there will "state" his income so that he will "qualify". This bwr has all the makings of AFB...but maybe they will be lucky...let's hope so.

20 Comments:

Blogger chiphxla said...

Maybe I'm being mean spirited, but I want all of these people to get OUT of the housing market and leave it to people like me who qualified for a 30 year fixed but refuse to buy overpriced crap. This guy needs a slap across the face, but good, and so do the 60% of people who used IO's to buy in California this past year.

11/16/2005 8:11 PM  
Blogger SoCalMtgGuy said...

I hear ya...

but it's not the I/O that is killing the market...it is STATED INCOME.

I/O is part of it...but people are going STATED to QUALIFY on the I/O payment.

If people had to verify their income...then even I/O would not have added so much fuel to the market.

11/16/2005 8:18 PM  
Blogger il said...

I have been talking to a mortgage broker recently about getting a loan and was very surprised by how quick she jumped to offerring me a "low doc" / "no doc" mortgage.
My current income and the savings I have for the downpayment should be enough to qualify me for a loan I want to get and I really do not want to go overboard.
Why is she pushing for a stated income loan? I realize that this is an issue of fees, but how exactly does it work? Is she getting more because the loan amount is larger? Is it because the interest rate on a low doc is higher? Is there a kickback from the lender?

11/16/2005 9:45 PM  
Blogger SoCalMtgGuy said...

il

brokers like to do stated loans because they are "easier" to put together...and lots of brokers don't know how to properly structure loans to make them work.

They might not know what income can be grossed up, how to figure out the REAL DTI, etc.

If your LTV is low enough, FICO high enough, and you have reserves, I do know of some a-paper lenders that give "full doc" rates to stated loans.

Generally, you will get a better rate for going fulldoc as opposed to stated.

11/16/2005 10:01 PM  
Blogger il said...

This particular broker has been in the business for a long time, I hope putting the paperwork together should not be a problem for her.

What LVT is considered to be "low enough" to get a fulldoc rate for a lowdoc loan? We are in SFBA, if it matters.

11/16/2005 10:09 PM  
Blogger keith said...

20% down. proven income. good credit.

WHAT THE FUC* HAS HAPPENED TO THIS COUNTRY? WHERE ARE THE RESPONSIBLE BANKERS? HOW HORRIFIC WILL THIS CRASH NOW BE?

Unreal.

http://housingpanic.blogspot.com

11/16/2005 10:10 PM  
Blogger SoCalMtgGuy said...

housing panic...

it is simple...they found somebody to "pass the risk to".

If the banks had to hold the loans...most of this would NOT have started. BUT, since they sell the loans in 30-90 days...what do they care. If somebody will buy the "risk" they will be the intermediary and make the loan.

I hear ya...but that is what happens during manias. This is a lot like the junk bond mania of years ago. The bigger they got, the more risky they got...same thing applies here to mortgages.

11/16/2005 11:03 PM  
Blogger SoCalMtgGuy said...

il

I know that countrywide has a loan called the "fast n easy". I hear about it when I am out and about. I don't know all the details...but if you have over a 700 fico, and the LTV is 80 (maybe 90?!??), and you have reserves, then you get full doc pricing on stated loans.

Again, don't quote me on that... I hear about all sorts of loans out there...and I grab flyers that are out there to see what all the different companies are doing.

But that is one that I know of off-hand.

11/16/2005 11:11 PM  
Blogger Flatteningyieldcurve said...

Socalmtguy,

I am hearing from a number of sources that the small mortgage lenders are having a much more difficult time securitzing the loc doc structures? I have also heard that the banks a much less willing to buy them as well. Any thoughts?

11/17/2005 9:05 AM  
Blogger SoCalMtgGuy said...

I would agree with that statement. Again, in that sense, I only know what I hear from friends and others in the industry.

I have heard about companies being stuck with a loans they cannot sell, but I cannot 100% verify through my seeing of their financials if that is true or not.

From my experience in the field...I know that there are a few companies that have been WAY below the market on many loans. I think (know) those companies will be hurting when they try to sell those loans.

For example...if my company and 2-3 other major lenders (all publicly traded big names in the industry) are all within 10-20 bps from each other...then here comes lender XYZ that is 75-125 bps better than 3-4 of us?!?!??!?

How is it possible to be that far "ahead" of your competition and still make money?!?!??

But yes, I think a lot of these lenders will be hurting in 3-6 months when they are still holding these crappy loans, or they have to sell at a loss.

I hope that helps some.

11/17/2005 9:13 AM  
Blogger AZgolfer said...

socalmtgguy

I came real close to buying a house with my Fiancé last April. It was with Country Wide. We both make good money for Phoenix, about 120,000 combined. Absolutly no bills and no car payment. The Country Wide load officer was going to do this "quick and easy" loan. They did not need proof of income because we both have scores over 800 and were going to put 20% down. They did not need an appraisal on the property either. All whis did not make any sense to me. Then I found out the property I was going to pay 350K for was sold 11 months earlier for 200K. Now I have to say that a lot of work had gone into this house in 11 months. All new cabnets, carpet, tile, landscaping, ect but still! I decided I wanted an appraisal and when it did not meet the selling price we pulled out. Also had the house inspected and it had some roof problems and termits.

11/17/2005 9:19 AM  
Blogger Flatteningyieldcurve said...

Socalmtguy,

I use CFC as my barometer of the mortgage market. looking at their most recent earning report, I saw that the asset side of their balance sheet grew at 33% y/y. That tells me that they have to carry alot more of these loans. Additionally in the NYT article on CFC, Mozilo was complaining that the push to increase regs on fannie and freddie was hurting his business. As he could not longer get them to purchase loans on the same volume basis.

11/17/2005 9:46 AM  
Blogger SD_suntaxed said...

Your insight into the current RE financial lender lunacy is priceless, socalmtgguy. Thanks!

I love your blog!

11/17/2005 10:18 AM  
Blogger Econ_101 said...

Interesting vignette on Counrtywide.

We sold our condo a few months ago. When we were interviewing realtors, one told us that they have a Countrywide office /rep in their office (not sure what the exact arrangement was). This was a selling point to us as sellers and he told us why.

Recently, he had worked on a sale where, during escrow, the sale almost fell through because the buyer's bank wouldn't appraise the property at the sales price. (the buyer was qualified, it was only an issue of the appraisal)

Here's where Countrywide came to the rescue and saved the sale. Countrywide was willing to step in and do the loan on the sale price that the other (I would think more prudent) bank had refused.

The basic sales pitch (as I interpreted it), was, Countrywide is much less strict and will do anything to make the transaction work.

11/17/2005 10:42 AM  
Blogger SoCalMtgGuy said...

Here is the thing with a company like Countrywide.

They are a massive company...one of the largest in the industry.

Like all of the other big companies, they have a wholesale side, and a retail side.

Wholesale works strictly through brokers...they do NOT interact with bwrs at all.

Retail on the other hand is direct with the bwr. This is where you see the "offices" in shopping centers, banks, etc. Where you sit down with a loan officer, and they take your application and tell you what you can do.

Here is the thing. Each retail branch has their own numbers they have to meet. So they have more "liberty" to "make a deal happen" if they need the loan.

So why wouldn't everybody go retail then?? because the retail office can ONLY offer that companies products. A broker can go to ANY bank out there. So if you go in a well fargo, b of a, countrywide, bank office, etc...they can only offer you their own product lines.

There are certain situations where I have seen appraisals waived...but that is NOT the norm...and certainly NOT in this market we are entering now.

11/17/2005 11:31 AM  
Blogger WArenter said...

socalmtgguy said...
"I/O is part of it...but people are going STATED to QUALIFY on the I/O payment.

If people had to verify their income...then even I/O would not have added so much fuel to the market."
------------------

Responsible buyers have been competing to buy houses with this nonsense. First of all I'm mad (but not as mad as I would be if I were a recent buyer) and secondly, I'm scared for the impact on the overall economy. Irresponsible doesn't even begin to describe this.

And that idiot with the $28k income and the $800/mon car pmt wanting to buy a $400k house! Give me a break!!!!

Thanks again for the detailed info, I have been so mystified about what was driving this. That lending standards could fall this far was beyond my imagination.

11/17/2005 11:40 AM  
Blogger SoCalMtgGuy said...

THAT is why I'm doing this blog!!!

Before I got into this industry I was dumbfounded how soooo many people were buying homes that were soooo expensive!!

MOST people have NO idea that they are competing with people that are STATING their income to "qualify" for a 100% loan!!

The people that are actually making the money ASSUME that because people that are making less than them can "afford" a house, they should be able to get one as well.

THERE IS A HUGE DIFFERENCE BETWEEN BEING ABLE TO AFFORD A HOUSE...AND GETTING A LOAN FOR THAT HOUSE!!!!!

11/17/2005 11:49 AM  
Blogger processor said...

Thank you for acknowledging a phenomenon that I've been commenting about for approx. the last couple of years. First Time Homebuyer's Approach: #1 Run up credit cards #2 Purchase expensive car within 6 months of applying for mortgage #3 Save little to no money. & then one morning 1 partner rolls over and says to the other, 'Honey, let's go for the house.' It's all been turned on its head. & your final comment is correct, too, he probably will just go elsewhere to obtain financing.

11/17/2005 11:52 AM  
Blogger Econ_101 said...

One more comment on my story about Countrywide, in response to:

====
There are certain situations where I have seen appraisals waived...but that is NOT the norm...and certainly NOT in this market we are entering now.

===

Again, I heard this story secondhand from a realtor that was explaining the advantages to sellers of working with a realtor that is connected with Countrywide.

If I remeber correctly, Countrywide didn't waive/skip the appraisal - they had an appraiser that they work with a lot and had a new appraisal done that came in at a least the sales price (thereby allowing Countrywide to make the loan and to save the home sale).

11/17/2005 12:44 PM  
Blogger SoCalMtgGuy said...

yeah, that is pretty much "standard" throughout the industry.

That also means that it was a retail outlet.

Wholesale would NOT deal with appraisers at all.

That countrywide LO, had another appraiser take a crack at it. I'm not saying they pushed value necessairly, but I have seen some appraisers do a pretty poor job looking for comps.

11/17/2005 1:10 PM  

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