Thursday, November 17, 2005

THIS is why I decided to do this blog!!

Here are 2 posts from one of the threads on this blog...and this illustrates exactly why I decided to do this blog!

Now I just have to figure out a way to make a helping people NOT make terrible financial choices!! any suggestions?? anybody need a consultant???

Poster from the blog 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.


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.



Blogger Check's In the Mail said...

Notice how the fed waited until people we're at their absolute debt limit before springing the bankruptcy law change on them.

Since we're now in the post "walk away" bankruptcy era for most f@cked borrowers, what's going to happen to all these people? No house to live in and forced debt service for a lifetime?

Great blog BTW

11/17/2005 3:58 PM  
Blogger SD_suntaxed said...

Wow, this brings back memories.

Awhile ago, I was talking to a mortgage broker before starting to look at buying a house. I had figured out beforehand what I could honestly afford. I dismissed suggestions of exotic financing. I remember him saying to me as I left that "we can always get you more money." The way he said it struck me as a little odd at the time.

I started making offers on a few places, only to have 8 other offers to compete with. These were so-so houses on the market for a day and a half. Buyers were offering insane amounts over comps, asking and high end range prices, figuring that they would make back that amount in appreciation in a few months after they closed. Appraisals magically came back right where they were needed for these lucky buyers. Get in at any price. I was astonished to see friends buying impossibly priced houses! Huh? How??

Sometimes what seems like incredibly bad luck is actually very good luck.

I decided not to buy. Eventually the market slowed and I realized that I had been trying to compete against I/O Monopoly money. Socalmtgguy, you've made me realize now that I was up against buyers with bogus income ON TOP OF Death or Glory financing.

What a joke! And this type of financial activity is assisting in fundamentally supporting prices and our currently housing driven economy?!

Look out below!!

Now, if I could just convince family and friends that I really was being financially responsible by not buying? *chuckle*

11/17/2005 4:02 PM  
Blogger SoCalMtgGuy said...

sd suntaxed..

Don't worry...I think you will be "vindicated" here in the next 12-36 months.

Hindsight is always 20/20...but you were like me, YOU took some personal responsibility to see what you could ACTUALLY afford.

YOU did the math...and did not rely on somebody else (who is 100% commission...and does not get paid unless you make a transaction) to figure out what you could "afford". Many brokers don't care if/how the bwr is going to make the payments...they just want to get PAID!

Just wait until the screaming starts from the people who thought "they couldn't lose".

I don't know how far prices will retrace...but I'll be here following this roller-coaster whereever it goes!

11/17/2005 5:03 PM  
Blogger AZgolfer said...


I was in the very same situation. I was making a offers on 350K houses of say 360K and others were coming in at 380K. It did not make any sense to pay 25K to 30K over what the house was worth so I got out the the bidding war and now am just waiting on the sidelines to what will happen.

11/17/2005 6:07 PM  
Blogger chiphxla said...

sd suntaxed - I can relate; I went thru the same experience this qualified for a 30 year fixed, with proof of income - pay stubs, tax returns, the whole 9 yards, and then went out into the r.e. market here in L.A. Well, I soon came to realize that UCLA's Anderson School experts were right - what I was seeing was clearly at least 40% overvalued, if not more, but what was worse, I could tell the potential buyers I was competing with clearly were lower income than me. When I kept getting 500k listings of 1 bedroom condo's w/out laundry, I decided to sit this out. But, 2 friends bought, both current or former homeowners, and both used arm and i/o, and one told me the house is 5 times his income - but he's not worried. They look at me - a boomer who is still renting - with pity in their eyes, like I've missed the boat.

I really hope this turns around and I'm proved right for not jumping off the cliff with the rest of them.

11/17/2005 7:13 PM  
Blogger SD_suntaxed said...

socalmtgguy said:

'Just wait until the screaming starts from the people who thought "they couldn't lose".'

Kinda gives a new meaning to "no-brainer" doesn't it. I wonder how much longer it will be before the lawsuits begin. Maybe we'll see things like-

...Your Honor, my client cannot be held accountable for any financial documents that he signed during that period because he was under the influence of fear, desperation, and euphoria... He is now under a great deal of mental strain and is currently receiving the necessary treatments while making considerable effort toward an understanding of the recently proven concept that Real Estate doesn't always go up.

'I don't know how far prices will retrace...but I'll be here following this roller-coaster whereever it goes!'

Same here. I find I learn something every day from the collective wisdom of the communities of the housing bubble blogs. Yours is great. Thanks for the kind words. I hope we all will be proven right!

11/17/2005 8:32 PM  
Blogger SoCalMtgGuy said...

SD suntaxed...

Have faith in the FUNDAMENTALS...they will always return.

11/17/2005 8:44 PM  
Blogger SD_suntaxed said...

azgolfer said:

"...I got out the the bidding war and now am just waiting on the sidelines to what will happen."

I can't tell you how glad I am that I decided to sit this one out too. There are days when I jokingly talk about sending thank you cards to the people that outbid me.

chiphxla said:
"They (friends) look at me - a boomer who is still renting - with pity in their eyes, like I've missed the boat.

I really hope this turns around and I'm proved right for not jumping off the cliff with the rest of them."

I know that look all too well. I get it most often as "oh, you're only renting." My friends in LA are looking at me with less pity lately. They're starting to get worried as their ARM and second mortgage/line of credit is adjusting upward. They still won't admit a bubble in LA. Maybe San Diego, but they are seeing that people are starting to get unfomfortable as amounts are forced up on already high payments.

My friends, family and acquaintances still think I'm nuts for not buying. Somehow, the market will sort itself out, and people like us will have the last laugh.

Agreed, socalmtgguy. I look forward to the return of market fundamentals. :)

11/17/2005 9:19 PM  
Blogger SoCalMtgGuy said...

it is coming...don't worry.

Save cash...stay liquid...and look for opportunities that make financial sense.

11/17/2005 9:42 PM  
Blogger grim said...

Cash will be king!

I agree, stay short-term and stay liquid. CD rates are better than anything we've seen in a long time, and the online bank money markets are even starting to give the CDs a run for their money. In fact, Bankrate is listing several institutions offering over 4 percent on a 3mo CD. Fed will be almost certainly pushing short term rates up in December and January, so ladder up!


11/18/2005 3:37 AM  
Blogger tollhousecookies said...

here's my fb of the week:
80/20 purchase
540 fico
40 di
on the 80- 3/27 8.5%, 3 pts
on the 20 6mth arm 10% 2 pts

what does this mean?
the fb has no equity
the 3/27 will adjust in 3 yrs, 1.5 max, then every 6 mths, 7% lifetime cap, the 2nd will ajust every 6 mths, 1% max, 6% cap
hey socal- even as we up our rates i see an increase in activity, what about you? granted its mostly cash out outs, but i see a lot of 80/20s in the middle states and south- TX is a 'problem' as its 'high cost' max apr on 2nds is 9.9 apy, IL is HC too, but it still doesn't stop the ae's from being creative

11/19/2005 8:40 PM  
Blogger SoCalMtgGuy said...


I have no idea who is going to do that loan. I don't know of any major company that will do 100% with a 540 fico.

Most companies are 580-600 going full doc. I know some that USED to be 560...but increased months ago back to 580 or higher.

Overall things are slowing down, and the scenarios that I'm looking at are getting worse. With rates rising, the income needed to do the 100% stated deals is becoming "not believable", so they are being declined.

Thanks for the post!

11/21/2005 10:42 AM  
Blogger tollhousecookies said...

i should use the disclaimer:
"these are not funded deals, but ones that look like they they will go through UW"
i see anywhere from 200 to 500 loans a day that the branch mgr may send our way. It's not the most rewarding job but it cracks me up every now and then. All I can say is 'Cash outs, Cash outs,' it seems the 'buying' has shored up, but $$ will still be extracted until we see an inverted yield curve to coincide with LA's drop in mth over mth median

11/21/2005 10:34 PM  
Blogger SoCalMtgGuy said...


I'm seeing fewer purchases, but I'll be darned if people think that the "house of ATM" is anywhere close to being shut off.

I'm seeing people do refi-cash-outs so that they have money to make their mortgage payments.

I'm sure you see some quality files in there...

11/22/2005 12:21 AM  

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