Date: Tue Jul 15 07:06:22 2008
Sender: Karim Cheaib
I am surprised no one has mentionned the big issue with Fannie Mae and Freddie
Mac. I mean how could thingsget that bad without no one doing anything about it
before.
Date: Tue Jul 15 08:01:27 2008
Sender: AJ Perko
I think we here are becoming more insensitive toward our economic disaster.
Another giant bank, Indymac, closed yesterday.
Fannie and Freddie only operate on the secondary market, so most American's
never deal with them and aren't even sure who they are.
Unfortunately Bush and Congress are passing a bill which will all but eliminate
anything but W2 buyers from the market place, and pushing tougher lending
guidelines.
So despite the fact housing prices have dropped and their is much interest in
the market place again- unless you have about $80,000 in W2 income (most
people don't) and no real other debt- you can't buy a house anymore.
Date: Tue Jul 15 12:41:58 2008
Sender: Bill Edwards
I just bought a house. Things are fine. People should not live there lives in
fear.
Date: Tue Jul 15 14:37:01 2008
Sender: Mike Boofer
The dollar usually rebounds well when presidential approval ratings rise. That
is likely to happen no matter who wins in November- so although I don't think
we've seen the worst of it- I do believe we have some light still shining.
Barrack is likely to really start out high in approval ratings- that alone
ALMOST makes his associations acceptable. But then I remember the idiot named
Pelosi that will have a lot more power then- and cringe.
Date: Tue Jul 15 17:01:46 2008
Sender: Gregor Ellis
Fannie and Freddie have a long history of buying off congressmen and senators
(unethically but legally) through massive contributions and even more through
the use of programs aimed towards so-called affordable housing and low income
housing: both of which are outside of their charters but near and dear to many
politicians. The goal has been to keep their implicit guarantee of federal
backing (no-risk investing for their stock) intact as they got into riskier and
riskier businesses. While Dems Barney Frank and Chris Dodd are the most to
blame lately, plenty of Republicans are dirty as well.
The problems aren't that bad right now, even here in California, and the new
regulation seems just meaningless for the most part. Although my understanding
is that it isn't limiting activity to W2 lending only but just rules requiring
that loan brokers and lenders actually verify income before a loan will be
eligible for Fannie/Freddie purchase. If that's the case, its about time that
the unscrupulous lenders were reigned in and prevented from writing loans to
unqualified buyers knowing that someone else would own the loan before any
problems could develop.
Date: Tue Jul 15 19:08:49 2008
Sender: William Johnson
" People should not live there lives in fear. "
A life lived in fear is a life half lived.
Date: Tue Jul 15 20:26:22 2008
Sender: AJ Perko
"Although my understanding is that it isn't limiting activity to W2 lending
only but just rules requiring that loan brokers and lenders actually verify
income before a loan will be eligible for Fannie/Freddie purchase. If that's
the case, its about time that the unscrupulous lenders were reigned in and
prevented from writing loans to unqualified buyers knowing that someone else
would own the loan before any problems could develop."
This is such an unthought out idea. It will certainly prolong the housing
crisis. Anyone who is trying to sell a property on plans to sell one before
long- just took a big hit.
The gov't uses a 41% eligibility debt to income ratio on approved loans.
Meaning if you make 48000 per year.
Thats 4000 per month x.41 = 1640.00
This 1640.00 is your max expense ratio. When you add in your mortgage, taxes,
insurance (remember you must escrow now as part of this same stupid bill), any
monthly car payment, credit cards etc.....
The average home price in Florida is around 305K, but I'll drop that all the
way to 200K just to show the problem.
Lets say taxes = 1600 per yr, insurance = 2000 per yr. (both low for FL)
A mortgage on 200,000 at 6.5% is = 1265.00 + 300 (mo tax and insurance) =
1565.00 That leaves about 75.00 for all the rest of your bills. If you have a
car payment, a 1000 in credit cards- your not eligble.
A mortgage on a 250,000 is 1580.00
A mortgage on a 300,000 is 1896.00
(now 6.5% is a great rate, things like condo fees I ignored)
How many W2 people do you know that make 70 or 80K per year... the answer very
few.
(Keep in mind gov't standards don't allow overtime!!)
The problem is Florida is full of people that make 100K + per year. Most of
them are business owners, self-employed etc. We can only use their taxed
income. The old programs would allow us to state income while showing a bank
transaction balance, or business statements, income before write offs...
with this legislation we can only use the amount claimed.
A) that 41% figure is incredibly outdated. People can comfortably live on a
65-70% debt ratio and still be profitable.
B) There are no W2 emplyees out there that can afford the 300,000 + houses. and
I know self employed people that make 500K per year... but when everything is
said and done they can't afford it either. (In most cases you can only use
50-75% of corporate income- even if you corporation is rocking)
** C) People want to use the word "unscrupulous" for lenders and broker when in
fact program guidelines were created by hedge funds and investors. It is
estimated only around 10% of defaulted loans had some inpropriety by the
broker, lender or appraiser. (Keep in mind very few lenders service the
loans.. they are almost all packaged and sold on the secondary markets)
Programs like - No Doc, Stated Everything... never would have existed had the
secondary buyers not wanted them.
So if you want to point fingers- START AT THE TOP - NOT THE BOTTOM.
Date: Tue Jul 15 20:38:42 2008
Sender: AJ Perko
Here is an example from a Mortgage Journal, written by a now defunct lender on
a foreclosed loan:
You will rarely hear this version, the last thing the politicians want to do
is blame the investment model, when it's so easy to blame the Lindsey
English's... or I mean mortgage brokers.
"When Bitner reviewed the loan to find out where his company went wrong he was
shocked to see that, technically, no mistakes were made.
Neither the borrower nor the mortgage broker did anything dishonest or
fraudulent to obtain the loan. The home's appraised value was correct, and the
income stated on the application was accurate.
But the fact was that the Cutters simply didn't have enough income to handle
this mortgage - the loan never would have been approved a few years earlier.
Their debt-to-income ratio was 54%, way higher than the 36% that most mortgage
lenders recommend. But Kellner Mortgage made the loan because the firm knew
that loose investor guidelines meant that the mortgage could be resold, at a
profit of course.
"We were ultimately driven by the investor guidelines," said Bitner. "If it fit
we closed the loan. It was an indication of how far the industry was willing to
go."
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