MOST IMPORTANT POST EVER

NEW -> Contingent Buyer Assistance Program
<p>"The homeowners are going to need some "green relief" anyways since their dollars are burning up in flames."</p>

<p>I think many of the homeowners were smoking it while they bought their house!</p>
 
<i>"Countrywide has stated publicly that it is misleading because 2/3 of the borrowers whose loans were going to be reset this fall have already refinanced."</i><p>


Wow! If Mozillo said it, it must be true.<p>


But on further review, two questions come to mind. First, how does Mozillo know how many of the upcoming reset mortgages have been refinanced? And second, if the loans to reset have been refinanced, what type of loan were they refinanced into? All of sudden the folks who couldn't qualify for 30 yr. fixed now qualify to get out of their ARM resets? Yeah sure, why not?
 
More gas on the flames





<a href="http://www.cnbc.com/id/20202424">www.cnbc.com/id/20202424</a>








Daniel Mudd, chief executive of mortgage lender <a href="http://www.cnbc.com/id/15837290?q=FNM"><strong>Fannie Mae</strong></a>, told CNBC that the housing slump won't hit bottom for another year and that the current credit crunch will spread “all across the housing market.”

<p class="textBodyBlack">In an interview, Mudd said Fannie Mae is seeking regulatory approval to increase its lending limits in order to put more liquidity back in the mortgage market, which has been hurt by growing subprime lending troubles and tightening credit. </p>

<p class="textBodyBlack">“We’re ready to start investing now,” Mudd said. A lot of "people and institutions in the middle of the system" could benefit from the increased liquidity, he added, including subprime borrowers. </p>

<p class="textBodyBlack">Mudd also believes the housing slump is likely to get worse before it gets better. “We don’t see a bottom until the second half of next year,” he said. "The question is what can we do to make that as moderate a downturn as possible, and the answer is to us is liquidity."</p>
 
This was just posted by someone over on the HBB:







<p>Major Disconnect in Subprime</p>

<p>Late last Friday I gave a call to Dave Donhoff at No Bull Mortgage and was wondering about subprime and Alt-A, and how they were affected by these treasury gyrations. Before I go further, let me say that Dave is one of the good guys. He has not had a single returned loan or foreclosure on one of his customers in the last 6 years. Although Dave has not been tracking exactly what I wanted he did offer this:</p>

<p>Almost all stated income loans everywhere vanished last Friday.


Almost all 2/28 ARMs vanished last Friday.</p>

<p>While this was eventually expected it was not expected by everyone overnight.


As we were talking I was fortunate that a representative of major mortgage lender who had a scheduled appointment stopped by to see Dave. That person agreed to talk to me on condition anonymity so I will honor the request. But here is what I found out from that major lending insider.</p>

<p>Subprime rates have risen by as much as 190 basis points at his organization in just the last 2 weeks!


Many other lending institutions have done the same thing.</p>

<p>The definition of prime has tightened considerably, everywhere.


Any variance from prime raises the mortgage rate.


Small differences in FICO score now matter (sometimes by a lot).


Every little thing adds up.


90% LTV rates are higher than 85% LTV rates which are higher than 80% LTV rates.


100% LTV rates are very difficult to come for subprime and even Alt-A.</p>

<p>Condos vs. homes matters significantly.


There were 3 rate increases in the last 2 weeks even as 10 year treasury rates rallied.


Second mortgages have nearly vanished - no market.


2/28 arms - gone.


Someone who is “really clean” but is not prime (but close) and is putting down 20% has had a 70-80 basis point hike in the last 2 weeks.


The bankrate charts might not show it, but in the last two weeks nearly every loan rate went up even as treasuries rallied significantly. The primest of prime was perhaps flat.</p>

<p>A 190 basis point hike in two weeks was so shocking that I asked for a repeat. “90?” I asked. “No. that’s 190 basis points” came the reply. For those not familiar with the term basis points, 100 basis points is a 1% rise in the loan rate. For example, 190 basis points would send a mortgage loan from 7% to 8.9%. The bigger the loan the bigger the increase in monthly payments (ouch!)</p>

<p>Virtually any subprime borrower whose arm is due to reset later this year or early next year and has not yet rolled over the loan is obviously in deep trouble regardless of what the Fed does or does not do. Not only is the teaser rate itself going to rise dramatically because of the rising treasury rates, the risk component has risen as much as 190 basis points in addition to that.</p>

<p>Furthermore, anyone in a stated income loan, anyone with a second mortgage, anyone in a pay option arm, or anyone in a 2/28 is now locked out of all those options. (Please see Locked Out for more on what’s happening through the eyes of Bankrate.com). And finally, as Dave Donhoff put it to me, “Many buyers are discovering there is a difference between quoted rates and actual availability of funding at those rates”. </p>
 
<p>"Virtually any subprime borrower whose arm is due to reset later this year or early next year and has not yet rolled over the loan is obviously in deep trouble regardless of what the Fed does or does not do."</p>

<p>While this may be true for many, if not most, it's blanket statements like this that irk me.</p>

<p>Any broker/lender will tell you that the theory of lending to a sub-primer on a short-term arm is that it gives the borrower an opportunity to improve their credit standing.</p>

<p>Credit scores are extremely fluid - extremely.</p>

<p>A person who might have had a 580 score two years ago, might easily be today's 680 borrower.</p>

<p>(And let me tell you - a lot of the "subprime victims" were thrilled that someone, anyone, gave them a chance at the time.)</p>

<p>Having a clean mortgage history is very positve thing to have in your profile.</p>

<p>(And yes, I agree that if that happened, those people are probably in the sub-group who have already refinanced.)</p>

<p> However, some people really are lazy when it comes to these things. Plus, they could have been waiting for the supposed drop in rates that lots of people have been predicting for later in the year.</p>

<p>Of course, that will come back to bite anyone who didn't pull the trigger sooner.</p>
 
Janet, I disagree with you slightly. My view is that most people with bad credit got there for a reason.





While I understand things like emergencies and divorce can screw up your credit, most people get bad credit because they sign up for 18 credit cards and then pay the minimum payments. A lot of the "sub-prime" people got homes because the brokers were basically given loans aways. That does not make them responsible all of a sudden.





Another problem is that people do not refinance because they cannot afford the higher payments. Many of them got in via I/O loans with teasers rate of 1-3%. . . Now, the only loans that are available are regular loans with interests of 7-8% or more. People simply cannot afford it.
 
<p><em>"I imagine there are lots of money out there from foreign countries due to economic booms. These available money need a safe place to be, I am thinking US is the best place. "</em></p>

<p>I guess Ben just showed us how safe it is to invest your funds in the US and USD. Buy an American equity for $100 today and it will be $110 next year. Great, except with Ben's helicopters, that $110 will only buy half of what the original $100 would have bought you last year.</p>

<p>NIR - Ben, the fed, can print as much as he wants, but do you understand there are consequences and what those consequences are?</p>
 
<p>I personally have never seem a subprime loan which allowed negative amortization (the only kind with a 1% "rate"). </p>

<p>It wouldn't suprise my to see one, I just haven't.</p>

<p>It's far more likely that they were given two- and three-year arms, which were not that much lower than today's rates.</p>

<p>While I agree that low scores do have good reasons behind them, many borrowers have low scores because of having very little credit history, or may have had some collections that need some seasoning behind them.</p>

<p>Again, not to defend - just like to keep it honest.</p>
 
<p>that would be "surprise me"!</p>

<p>Gosh, I'm so used to spellcheck!</p>
 
Janet, that credit score fluidity runs in the other direction as well. A borrower can go from 740 to 640 overnight when a missed mortgage payment reports on a tradeline.
 
<p>Actually World Savings was and still may be giving option arms to borrowers with ficos in the 500 range. That's insane.</p>

<p>I also see people quote 1% teaser rates. There is no such thing. The actual interest rate accrued on the mortgage from day one was the fully amortized rate. The 1% or 1.25% rate that is advertised is just the pay rate. For example. a 500k loan with a 7.5% interest rate will yield a full payment of $3,496 and an interest only payment of $3,125. The minimum payment option is just a random dollar amount that the lender allows the borrower to pay. Whether it is described as 50% of the full payment, or a 1% P & I payment doesn't matter. It is arbitrary. If it allows for a 1% principal and interest payment that amount would be$1,608 a month.</p>

<p>Don't be misled. There is no principal reduction involved here. Why on God's green earth would lender put this specific verbiage in the documents??? So that brokers can sell it as a 1% FIXED RATE for 5 years, when in actuality, the rate is adjusting every month and it is 7.5%. Lenders turned a blind eye becuase they did disclose in fine print that the loan could allow for negative amortization. I can attest to this fact: the documents were horrendously misleading for sometime. One California Bank used to put an option on the doc order form that allowed the borrower to setup automatic payments of the minimum payment!! The borrower would never even know the balance was increasing unless they looked at their statement</p>
 
<p>Where did they sell that paper?</p>

<p>You're right: subprime + negative amortization takes the cake as worst idea in the history of mankind.</p>

<p>Acutally, negative amortization - period - is a close second.</p>

<p>I still think I/O is a valid option for lots of responsible folk, and is probably here to stay. (Some will argue that.)</p>

<p>I have a 30 year fixed with an I/O option, and have every intention of paying the fullly amortizing payment.</p>
 
Janet, I do agree with about the I/O loan. . . I actually do not think that 30 year fixed loans are prudent anymore. Most people do not stay in their homes for more than 5-7 years and one is simply paying interests the first 10-11 years of a 30-year fixed loan.





The I/O options give one flexibility. . . if you are a responsible adult, you can still make a regular "fixed" rate loan payment every month by pay extra money into your mortgage. That way, even if you don't move out of the house. . . you're paying down your principal. But if you have some financial difficulties, you can cut back your payments for a few months. Why have the bank be your parents if you are a responsible adult. . . that is a big if though.
 
<p>Was World bought by Wachovia?</p>

<p>Time to short!</p>

<p>Idiots.</p>

<p> </p>
 
Is that where World is hiding? In Wachovia? I tried to find World awhile back to see if if might be a good short, and couldn't find it.
 
<p>Please don't sink this because of that last remark!!!</p>

<p>I was KIDDING!</p>
 
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