Does your house have one of these signs?!?!?
It's GROUNDHOG DAY!!
Not really, but it sure seems like it. Of the 8 loans I looked at today 6 were stated and 2 were full doc. The "full docness" of the loans was about all they had going for them. On one, the bwr had multiple mortgage lates, and a sub 520 FICO score. At least the LTV was under 60%. At least I could actully price that loan out. It wasn't a great rate, but it was a decent diving or gymnastics score! On the other full doc deal, the bwr, who incidentally refi'd only 5 months ago, wanted to do a 100% refi, to pull the last remaining 10-15k out of his property. I guess he has one of the signs above parked in front of his house.
Of the other 6 stated deals, 4 were high LTV refi's, and 2 were high LTV purchases. The purchase deals were for $700,000+ homes. The refi's were all 90 LTV plus deals. People trying to tap that last little bit of equity. Needless to say, high LTV stated deals are not pricing the best right now...and my company has tightened standards more than some of our competitors.
Nothing surprises me anymore. I used to think that "people can't be that stupid"...but they can. Have you ever had one of those friends that pulls out only $20 bucks when they go to the ATM? You watch them spend a $1.50 five different times over the course of a weekend because they don't plan ahead and take out $80-100 bucks at one time. I see the same thing with many borrowers doing refinances. I don't know if they don't plan, underestimate that there are costs for doing a loan, don't account for pre-pay penalties, or just plain don't care. Either way, they are spending tens of thousands of dollars on nothing but fees to pay for their poor planning.
This borrower is a prime example. They payed 15k for a refi 4 months ago, turned around, decided they wanted more cash, and refi'd again. These people have no idea that they spent 50 cents to borrow a dollar. Or maybe they do know...but they just need money so bad. The problem is that most lenders will not do a loan unless the cash out is at least 2x the amout of fees charged for the loan (including pre-pay penalties that usually run 6 months interest, or 80% of 6 months interest). Lenders have to be careful of the perception of "predatory" lending, or taking advantage of borrowers. It doesn't make sense to spend 8k to get 10k cash...even if that is what the borrower wants.
The ones that really get me are the people that had a $68,000 dollar mortgage balance in 1994. Fast forward 10 years, and they have a $600k loan! You might think they used their equity wisely, but since the same broker has done all of their loans over the past 20+ years, they told me that the bwrs just upped their lifestyles and that is about it. They remodled this, drove that, visited there. I'm sure it was fun, but to think you were $68,000 away from being free and clear on a piece of property in Southern California. They still have plenty of equity, but $600k is not a cheap mortgage.
All I know is that the FEDs meeting today and the one in January will be very telling as to what we will probably see this "spring" season when everybody is banking on things taking off again after this 4-5 month "return to a more normal market". If the fed raises at both of these meetings, watch the house of ATM start running pretty dry, as it will be empty, or the "withdrawl fee" will be too much for many borrowers to handle.
Some people are going to see that the "ATM is out of service" here very soon.