MOST IMPORTANT POST EVER

NEW -> Contingent Buyer Assistance Program
NIR





"The available money has not changed, only the players changed."





I don't think you understand the credit markets quite well. The available money <strong>has changed quite significantly </strong>and is exactly why this post is so important. No longer will brokers be able to broker out loans at the rates nor volume they did just a few months ago because their warehouse lines and the secondary market do not want these loans. This is one reason why these brokers went out of business b/c of their liquidity and margin calls.





And just an FYI...many of the rates went up to price in risk and also to cover their hind ends on all the bad loans that have already been funded through the traditional banks...ie WaMu, Wells, BAC...etc.
 
<p>Market ALWAYS over react either on good news or bad news. It is the just the nature of the game. The whole rate things will settle down for "old fashioned" borrowers in a matter of couple months. On the other hand, it is very obvious housing market will correct more than many of us have anticipated due to decreasing number of buyers who can get qualifed in an old fashion way. </p>

<p>Unless one can get a good rate with a bank that holds its mortgages ( like Union bank), it is probably a wise decision to delay the purchase until the "dust" settles down. </p>

<p>Bill Gross said yesterday that he believes the Fed will have to cut rate soon. Whether one likes it or not, he is more correct than wrong most of the times, and he is ten time more qualifed then any of us to make a correct prediction. </p>

<p> </p>

<p> </p>
 
NIR,


I will make this as simple as possible. It doesn't matter if you go to 'the bank' or 'a broker' for your borrowing needs. The SECONDARY market (i.e. the investors who buy the loans from the banks, REGARDLESS of if they come from broker (wholesale) or bank (retail) origination are NOT buying alt-a, payoption, subprime loans. It's that simple. In addition, they stopped buying anything with a doc type OTHER than 'FULL DOC' for the most part. This means that MANY, MANY existing homeowners AND THE VAST MAJORITY OF BUYERS!!! are now unable to obtain FINANCING THAT IS AFFORDABLE given current home prices, IF AT ALL. The effects from this will ONLY become apparent on deals you work on from THIS POINT FORWARD. Just because you sold some homes last week to people who had loans locked in when they were available (prior to Wed. last week) doesn't mean it isn't true... The available money HAS changed. It isn't there anymore! :) Unless you are conforming loan amount, full doc, great credit, etc... then you're fine! :P Bottom line: There is no 'magic bank' that's still doing loans which it will NEVER be able to unload and it's stockholders will have to hold on to forever (i.e. a portfolio bank doing crazy loans still). Common sense... has it left the building?
 
go directly to Countrywide, Indymac, and Wells Fargo. Have each pull your credit and underwrite an actual approval for you. Between those three you should be able to get good pricing. If your first mortgage will be 417k or less than you can pretty much check anywhere you like.
 
NIR





I am going to disagree with you on this one. If money was laying around to invest with why would the secondary market be shriveling up like a wilted flower and banks pretty much eliminating every Alt-A and Subprime loan from the originations?





Unforunately the free money that has been around for the past 5 yrs is no longer their. Retail Banks will keep originating and funding loans b/c it's part of being a bank and they can control the underwriting much better. Only the big brokers like Countrywide will be around after all the dust settles, they actually have some liquidity on the balance sheets to fund loans. However, more than likely as their quarterly and yearly reports do not meet the street's expectations they will be bought up by a retail bank....IMO.
 
My two cents is that a lot of "money" we're talking about is gone. This is because loans were given to people based on inflated home values that no longer exist. Just like the homebuilders having to take deductions for the land that they own, banks and mortgage brokers have to discount the value of the loans that they hold because they are no longer adequately secured. If someone got 100% financing on a million dollar home and the bank can only get $750K for it now, $250K simply vanishes.
 
<p>Fortunately for renters, home prices are going to take a significant hit . Unfortunately for homedebtors that bought homes since 2004 with zero to 10% down, they're going to be in for a world of hurt. We just go too far ahead of ourselves. If you are a realtor, you are going to have a very hard time in the next 3 to 6 months. If you can successfully target buyers who have sufficient down payments you will be able to sell as prices come down. </p>

<p>The vast majority of people do not care about timing the bottom, they only care about being able to afford a home. I'm not talking about being able to make the minimum payment an a neg am loan either.</p>

<p>The fallout that has occured in the last seven days was strictly a result of investors shutting the party down. Let's not forget that we still have the ticking ARM reset time bomb out there. With 25% of mortgages orginated as neg am loans last year, we really are in for armaggedon. Even if you didn't take out a neg am loan...let's say you did a 5/1 ARM @5.0% in 2003. Based on the recent rate hikes, you'll be looking at a rate near or above 7%. <strong>A 2% rate increase on a 625k loan equates to an increase of</strong> <strong>$1,041.67 a month!!! </strong>This is assuming you choose to refi. If you let your loan run its course you are probably looking at a minimum 2% increase, possibly even a 5% adjustment! This is going to be very bad. If the investor flight would have happened only one year later, we may have been able to save thousands, but now they will be casualties.</p>

<p>How many thousands of loan officers, processors, underwriters, managers, and appraisers have lost their jobs in the last week. By the end of the month we're going to see a lot more. Many of these people have mortgage payments to make. Do you know of a single industry that can absorb thousands of employees within a few months time? I don't.</p>

<p>As much as I utterly despise bailouts, the government, in conjunction with Fannie Mae and Freddie Mac, need to do something. Increase the conforming loan amount, expand doc types, offer one time rate reductions into fixed rates...something!</p>
 
<p><em>"Do you know of a single industry that can absorb thousands of employees within a few months time? "</em></p>

<p>I can think of a few. "You know if you join our frequent shopper club today you can get 10% off this entire purchase."</p>

<p>"Just a car wash today, or do you want the complete package with hot pink wax for $5 more?</p>

<p>"You want fries with that?"</p>

<p>I would be completely incensed by any form of government bailout, as should any fiscally responsible person who has been working and saving, who knew this market was unsustainable, and who is waiting for it to correct so they can finally own the home they want. As IR has stated, the people in trouble are the ones who have speculated and done stupid things, driving prices out of sense, if not out of reach, of those who are a little more financially savvy. I don't care how many unemployed friends Jim Cramer has. Let the markets function and change the laws to make fraud and abusive lending practices punishable by public caning.</p>
 
<p>mino,</p>

<p>I have not yet heard banks ran out of money.</p>

<p>lending,</p>

<p>I too have 5/1 ARM in 2003. I am also looking at 7% and I am fine with it (index 12-MTA). I would think many are in similar situation. If not, I ought to think a bail out is needed.</p>
 
<p>HAHA! Nice! I went to Mickey D's the other night a got 2 dbl cheeseburgers, a filet o' fish ,a 42 oz coke, fries, and a strawberry sundae for only 6.46 including tax!!! I think they'll be doing more business as the RE industry/economy crashes.</p>

<p>I hate the idea of bailouts, as I said before, but I'm looking at reality. However stupid and financially retarded these borrowers were, they were vital to our GDP and thus our economy as a whole. Like it or not, if a large scale recession hits us, which I think is set in stone, people in all walks of life will be affected. Car companies like Fletcher Jones and Sterling BMW will be hard hit. Lease defaults will skyrocket. The travel industry will be affected as well. Any sort of healthcare that is non-life threatening (cosmetic) will be affected.</p>

<p>As rates rise, not only can consumers spend less, but business development becomes less affordable. Lack of job growth will further stifle a slumping labor market. </p>
 
<p>lendingmaestro,</p>

<p>I agree. At this point, whether we like it or not. Something has to be done. Sooner or later, this will affect everyone. Not just those that had gotten us into this mess.</p>
 
I actually wouldn't mind a recession. The business I work for actually increased their business during the last one (2001-2003ish). We do better when money is tight.





Trade off is I don't make the most money, but that's ok. Job security is nice!





Affordable (sane) house prices are even nicer.
 
NIR





It's not that the banks have run out of money, it's that they are not giving it out like they give ice cream out at Little League Ice Cream Socials anymore.





I am not trying to be rude but have you at all watched the financial markets at all this past week? Have you not heard about the credit crunch and how the secondary markets is being repriced b/c of the risk involved in so many of the CDOs and MBS that have been created over the past few yrs?
 
I wouldn't mind a recession either. Recessions are ripe with opportunities for those who are prepared. They are an efficient (and relatively quick, believe it or not) way of rebalancing and flushing out economic ills.
 
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