FB's and comments/feedback
I got busy working on a few things tonight, so I don't have the time to hammer out a long post. Let me hear it......awwwwwh!!!! Yeah, like most of you read the long posts anyways!!! ANYWAY...but since I know everybody loves a good FB story, I have a few quickies to share.
I get a call on this one secnario. 2 borrowers. Primary borrower has credit in the mid 600's and the co-bwr has credit in the high 500's.
Ok, no problems yet.
The LTV was less in the 70% range and they had a BK almost a decade ago.
Things still looking good.
They were trying to go full doc, but looking at the income they had (about 5k a month between them), they were probably going to come up short on the 400k loan amount.
That might be an issue...buy hey! ...there is always 'stated' income ;)
THEN they tell me there is one other 'little' thing. Let me tell you something...when somebody says a 'little' thing...it usually isn't!! Turns out the borrowers are being foreclosed on NEXT WEEK...and the Notice of Default (NOD) was sent a little while ago.
Sooooo, needless to say, I can't do much of anything once the NOD has been launched and the foreclosure process starts in a week. But besides that, I don't think there would have been a way for the borrowers to afford the payments either. $5000 a month incomes don't "afford" 400k loans...especially with those fico scores and mortgage lates (prior to the foreclosure).
I looked at another loan where the borrower was going stated with a Fico in the high 500's. The only problem was that they wanted a loan to 98% LTV. "They needed some cash"....don't they all. Might as well take it to 100%, no sense in refinancing to leave a few measly grand on the table. Needless to say, I can't do stated loans to that high of an LTV anyway...but the 550k loan amount helped to put another nail in the coffin.
I looked at a few other 'ugly' loans, but nothing that really put the borrower in an FB type position.
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Now I want to hear from you. What do you like/dislike about the site? Do you like the wider format? I have a 17" flatscreen and I think it reads better. Anybody on laptops or smaller screens that are having problems?
What do you want to hear more about? What are you tired of hearing about? What can I do to make the site better?
I look forward to the comments and feedback...
Thanks for stopping by!!
SoCalMtgGuy
posted by SoCalMtgGuy at 11:51 PM
42 Comments:
Always love the stories.... Although when I use to door knock in 2003 for foreclosures, I was never able to get into acquistion discussions because the borrower was able to refi after they got their NOD. Have lending standards changed or does your company just not get involved with foreclosing properties?
The following description is a feature I wish your site had. A statistical break down of rough lending estimates that you observe (just guessimation). Such as, how many loan requests came in the last week, approval percentage, stated income percentage, ARM percentage, IO percentage, median FICOs, median LTV, median rate, and median loan amount.
Then track these trends weekly or monthly and see how things evolve. Or is there a site that reveals this information -- how much does it lag? (Of course, the specific stories are the best.)
I like the stories from the trenches. Perhaps there are some realtors, appraisers, escrow officers who can chime in with stories, too. The site can evolve into something like, "FBs: Stories from the Front Lines".
I have not seen any other sites that has first hand stories.
The NAR and other data lags by many months. Furthermore, yoy data is pretty useless to get a picture, since you need an entire year to go by before you see the decline that is already going on. Although sales prices are down 10% since 9/1 in SD, hey, they can say we are up 20% or whatever year over year.
So any kind of current information would be interesting.
I'd like some more stories from the enablers. Do any RE agents call you and ask why you wouldn't approve a $103% 550 FICO 1yr out of BK loan? Are any participants pushing you for a favor so they can meet their quota?
I like the wider format. Not so much %$#@! mousing and clicking every couple of seconds to read the stories.
Is there a way to put a couple chars of left margin in? It's right up against the side of my browser.
Love the FB stories, today's story about the ones trying to refi one step ahead of the sheriff is a keeper.
I like the stories from the trenches.
Me too. Perhaps you should solicit these stories from insiders who read your blog.
The new format is fine. Everyone has their own preference.
A bit OT, ok way way OT but last week I went to the NYC boat show and noticed flyers for boat loans that were adjustable. Then I noticed that prices on boats included statements roughly like “$2,600 a month APR adjustable” on a $405,000 Grady White. It makes you wonder how big the credit bubble is. Adjustable rate boat loans? So I searched the web and found that if you want to borrow more than 100K you can get a 20 year loan with a 3 year fixed rate. Boats depreciate a whole hell of a lot in 20 years and an owner pays a fortune in costs during that time. It would seem that a boat owner would almost be guaranteed to get “upside down” on the loan in way less than half that time.
Gruber:
That makes me sick. If one can't afford a boat MAYBE YOU SHOULDNT BUY ONE. These assholes use their leverage, jack up prices, and make sane half of the population's lives more miserable.
I'll be locked out of buying a house (all I ask for is 2-3 bedroom!) through "normal" means for at least two years, and the job I have is supposedly "upper middle class", and I don't even live on the east/west coast!
This is a great blog, but I would like to see not only the FB stories, but a way to get around the guidelines as well. Can you add hints as to how to make a $%#& deal smell like roses? I think that takes some creativity, not just telling a story...
Grubner...
Funny you mention that.
The big boat/yacht show just left San Diego and is headed up the CA coast.
I will never forget this quote that was told to me by a friend who was a boat owner:
--The two happiest days in a boat owners life is the day the BUY the boat, and the day they SELL the boat--
SoCalMtgGuy
A glossary of terms would be nice. Maybe make a post and then have it as one of your "Hot posts" on the side? I know what FICO is but HELOS has me stumped and I'm sure other readers are clueless about IO, LTV, ARM etc.
I like the wider format as well.
I would love some insight about the breakdown on types of loans that people are getting these days. Especially after todays news of the jump in "new" mortgages taken out.
It's being stated as tho it's a sign that the housing market is taking off again.
I'm wondering how many of them are just refis.
(I second the request for a smidge more space on left margin if possible-sorry, you're giving us so much and yet we want more!)
If those bwrs had come into the lobby of NationsBank or Bank One in 1992 with that scenario, they would have been handed a mop.
socal,
great blog, caught your byline over at ben's blog. attended the wholesale lending fair in denver last week, saw quite a few nervous wholesale reps looking for greener pastures (new century has just gaffed most of its local staff), but i can't imagine that anyone has a firm grip on who will have better product in six months. wondered what your plans were for the future, staying in the business, branching out. just interested as you seem to have a good grip in what's evolving.
bo
Anyone buying a boat under those terms deserves to really be F&CK%D. Can anyone be really be that dumb? At least the FB homedebtors have some expectation for the home to maybe increase, and historically it has. Boats always depreciate. Only people that have the cash should be buying boats. Ciao to California.
I've been keeping up with this blog for a few days now and I must say that I enjoy it (SoCalMtgGuy, we've conversed back and forth via e-mail).
Its a shame that Americans have placed their common sense (and in many cases education) on the shelf for a lousy buck and furthermore to purchase that 25k Plasma television from Bang and Olufsen they can't afford.
And the boat thing. I have no words.
OT, but I hear stories periodically about FBs. Recently, a co-worker expressed to me how a married couple she knows uses 1 of each of their bi-weekly checks to make mortgage.
*In my Best Carlos Mencia voice* Dun Duh Duhhhhhhh
How 'bout this for a gem:
I get a call from a borrower. She wants to get out of the loan she has because her balance doesn't change (okay, either an I/O or a neg-am.... fair enough). Problem is, she can't afford to pay any more than her existing payment (funny how the timing in your "mathematically challenged" post was spot on).
Her and her husband live in a home worth (supposedly) $650,000 and owe $250,000
Okay,methinks to myself, maybe we can look at the overall financial picture and see if there is any way to get her TOTAL monthly expenses down...... ON TO THE CREDIT REPORT!!!!
(Oh lawd. Here we go).They currently have a neg-am loan. They've had it less than a year and they already have four mortgage lates (on a 1% payment!!!)
Their credit scores are in the low 500s. The wife works two jobs (making approx. $1,500/mo. and the hubby makes "almost $2,000".
They had a BK back in 2002 and since then have opened NINE new credit cards (five of which were in the last year) and TWO auto loans.
When I told her the best thing to do was to pay off ALL the debt (including the cars) to save money she told me "My husband would not go for that. He only wants to pay off the credit cards. He wants to preserve as much equity as possible"
..... Idiots. They don't realize that soon they'll only qualify for a hard money loan they still won't be able to afford. their mortgage payment right nowis $862/mo.... you can't even rent an apartment in LA for so little.
Cannot wait for that phone call a month or two from now after they get that NOD letter.
It's all been great reading so far; no reason to change anything. I'm guessing variety in your stories won't be a problem, since truth is stranger than fiction.
They currently have a neg-am loan. They've had it less than a year and they already have four mortgage lates (on a 1% payment!!!)
Their credit scores are in the low 500s. The wife works two jobs (making approx. $1,500/mo. and the hubby makes "almost $2,000".
They had a BK back in 2002 and since then have opened NINE new credit cards (five of which were in the last year) and TWO auto loans.
Yow! That story makes my head hurt. I love love love this site.
Two more stories from Whine Country....whining about RE that is..
friend who had his house up for sale for a large part of last year (after lowering it three times) finally took it off the market, but now he's putting another 30k into the kitchen.
Another vey wise friend told the story of an idiot neighbor with an in over her head type loan trying to sell her SF condo..very small but in a great locale..evidently she really needs the money.Well, of course no takers so she takes it off the market..(after turning down a cash offer for 20k below her asking price) she is now relisting the place for even more than she was asking before!
Thanks loonofficer. Love the story, love the nickname!
Do they make $3500/mo gross or net? Either way, they should have been able to handle a $863 payment. I hope they have very nice friends or family because they are going to have to crash at their place(s) soon.
Out at the peak-
$3,500 is gross. The wife works two jobs- one at a grocery store, the other at a school. She's been at the grocery store for 5 months and working at the school for one year. Both are part-time positions.
Hubby owns a Pizza parlor. What gets me is that he could probably work at McDonalds flipping burgers and make the same amount.
This is just your typical story of living a deluded life way above one's means.It is all too prevalent in LA, as SoCal pointed out recently.They subsidize their income by taking out store credit cards, don't pay them off and then, when the fan starts to get brown, they refinance. They simply cannot live within their means.
It sounds harsh and sneaky but I'll admit I've kept their address and plan on taking a look at it.
I doubt they'll still own it by year's end.
A friend of mine who was strapped for cash (just bought a condo in Sacramento for "investment") told me he was recently able to refinance his motorcycle loan to get a lower payment.
Refinance a motorcycle?? I didn't even know that was possible. Boats, cars, motorcycles...anything that depreciates that fast is not worth financing in my book. What ever happened to saving up for a big purchase? Something's gotta give.
i would like to hear how any 'sensible' first time buyers are affording a home in So Cal. i just can't imagine that many young couples that have $140,000 cash for a 20% down payment on a $700,000 home (about the lowest price on any SFR in decent areas of Orange County) and even if they have somehow managed to save that much, how many young couples can afford a $560,000 mortgage? (remember, i am looking for 'sensible' scenarios). thanks.
breakthespeculators-
If they are sensible they rent and hold onto their hard-earned money. It's that simple.
Bottom line is NO ONE has a crystal ball. It could dive or keep going up. Yeah yeah all the signs are there but things have been crazy and can get crazy-er. 50/50. If your income suuports the debt, you plan to stay and not ATM-it,do it with a fixed 30 or 15 and let it ride.
Anon...
Even the stats from the California Assoc of Realtors say that income does NOT support the loans.
Lots of people are NOT putting money down, are NOT getting fixed loans, and most are NOT planning on staying.
Yeah, nobody has a crystal ball...but if you had to place a bet...where would you put YOUR money: on houses going up the next 2 years, or houses going down the next 2 years.
SoCalMtgGuy
I went to a real estate seminar put on by an outfit called "Income Strategies Institute" based out of Salt Lake City, UT. They were claiming to have Remax realtors have a contract to help the seminar attendee find preforeclosure homes (at 75 days, too late for normal sale) and have the realtor approach the distressed owner. They were then going to help the seminar investors place the homes for sale on a website to have them presold at a discount. Of course, they are banking on finding foreclosures with a lot of equity. There was no mention of any potential downturn, and just talked about continued appreciation. Has anyone else run into them, and are they legitimate, or full of hot air?
So Cal Mort or HARM, have you heard of these people. They have been doing seminars around CA. They were in San Ramon today (East Bay of SF Bay)
Love the stories! This gives us the facts that the media and MBA and other sources never discuss when they talk about the "health" of the RE market.
boulder bo...
I'm not waiting. I'm branching out now and looking for other opportunities. Some of them are my own doing, some are with other people.
I'll stay at my job until things tank incredibly, or one of my other projects "takes off".
E-mail me if you want to talk more...
SoCalMtgGuy
SoCal
If you approach buying a home like dropping a bet on the dont pass line, then you are definitely screwed.
I agree on that stats, but I am saying what you have said in other posts. If you take that chance, do it right (right income, loan type, fixed, etc ) and plan to stay, do it.
Most people I know 'can' afford and plan to stay in their homes. They bought it as a HOME and not an investment/ATM.
3yrs ago, I heard the same stuff. Even though I could afford it and got in with a fixed, I still heard..Don't do it, your a fool, wait till it drops, yada yada yada. I went for it and it was luck. Prices went nuttier after I took the leap. It's 50/50.
Anon,
I know lots of people do buy responsibly...and if they can do the things you and I stated, then go for it. They just need to be aware that the "value" might go down...that's all.
Yeah, you "could" afford it 3 years ago...and you were looking for a home, not an investment.
Could you afford to buy your home today, at these prices with a fixed rate?
I don't think anybody thought 5 years ago that we would be giving money to everybody with a pulse...and with no money down...and with stated income.
A lot has happened in the industry to "fuel" it the past 3 years since you bought.
Glad you are in a good spot, with a nice home that you can afford.
Best of luck to you!
SoCalMtgGuy
Breaking news!
I needed to edit this news to protect my source and others involved.
"[...] owns a title company in [Southern CA]. He is laying off a lot of his staff, [...] he is selling all his nice assets, because housing is really going to get ugly down there. He said it is tanking, and most people still don't even realize what is going on. [...] The whole family has been pro real estate for years."
Sorry I had to take out all the specifics.
When you say 5K income, do you mean before or after tax?
Anon,
When dealing with mortgages, gross income is used...before taxes.
So, if a mortgage company will take a person to a 55% debt ratio...that means that 55% of their GROSS income is going towards debt (mortgage, taxes, insurance (PITI), car payments, credit cards, etc.).
so that means only 45% of their gross income is left for TAXES, food, gas, incidentals, retirement savings, etc.
is it any wonder why housing went up sooooo much?!?!?
Great blog. I enjoy reading the stories. Keep up the great work. I always enjoy your thoughts on Ben's blog as well.
melody...
you still working on that get together?!?
SoCalMtgGuy
great blog, it's in my 'Frequent Access' bookmark folder. Love the schadenfreude fix.
Like the new format, no worries.
betamax,
If I have to use examples of people who made bad decisions...to help others NOT make the same decisions, so be it.
People need to realize that 'forever' is a long time...and they don't need to be worried about being 'priced out'.
Besides, financial matters aren't exactly entertaining topics.
Glad you like it though!!
Somehow, I don't think there will be any shortage of 'stories' in the coming months and years.
SoCalMtgGuy
Love the stories. Not for the schadenfreude but as a daily affirmation.
I am good enough to buy a house.
I am smart enough to buy a house And gosh darnit people like me. (sorry for the Stuart Smalley)
Seriously, it is an affirmation that all of those crazy buyers (and lenders)are the reason house prices were climbing. I look forward to F'd Refi Bwr stories.
I love this site. I'm not in the RE biz in any way, and therefore love your explanations and breakdowns of things.
I'd love a permanent link that explained the acronyms (like FICO, LTV) and reasonable values for them to remind me when I read your posts.
It would also be interesting to see a "tutorial" on buying a house sanely to educate someone like me how doesn't know what all the rules of thumb are and all the hidden charges. I think you'd do an excellent job of laying down what a sane purchase would look like, even if the market doesn't really allow that to happen right now.
Thanks for the great blog!
I second the request for a glossary.
I also would like to see some things that you are in *no way obligated* to provide. These things are a breakdown of the steps to buy a house SENSIBLY. Every book I've seen, even the "Dummies" books, gush about how owning a house is exciting and neat and then they drop two dozen steps on you all at once and my eyes glaze over.
It's not really that hard, as you demonstrated in you "six reasons to buy now" post. If they'd write "Step 1: Saving Money" and then break down all of the expenses you're likely to have... or even just saying, "save three to six month's living expenses, PLUS at least 3-5% of your prospective down payment [link to how to calculate a smart mortgage given your income], PLUS this amount in closing costs, PLUS..." would be invaluable.
Because all I really understand is that at this point, I should be saving money, which is all well and good, but I want to understand the step AFTER that...
So what happens now?
I am a risk manager at a very large lender and am seeing more foreclosure potential all the time. Previous posts have discussed how first time borrowers are getting in over their heads when a broker convinces them they can have more house than they can really afford, or take out more cash out than they can really pay back - ALL because the broker needs a fat commission. By the time these files come across my desk, the damage has already been done and it's too late to help these people. The next step is usually foreclosure.
My question to all of you is: What happens next? Obviously, the houses get sold at auction, but does the lender recoup the total loss? Is the house sold at true value, or does the final selling price drive up the value even further, or down?
Any feedback would be appreciated.
Foreclosure auctions usually start with a minimum bid of the oustanding debt of the mortgage holder foreclosing. 2nd TD will bid up to their exposure, if possible. Cash on the courthouse steps is the final arbiter.
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