Archive for 2013

ARM's, option ARM's, negative amortization loans, and interest only loans were going to cause a wave of defaults as these affordability products where going to reset and/or recast.  This was the grim prediction after 2008.  However, due to programs like HARP which modified these loans into...well affordability products part 2, these homes weren't sold by the banks.  In addition, the Federal Reserve through it's ZIRP and QE programs pushed mortgages rates to their recent ultra lows which allowed the new affordability products part 2 to have lowest possible rates.  However, in the past few months mortgage rates have increased which has caused number of refinances to drop. Home equity lines due for reset may be looming financial disaster Some borrowers…[READ MORE]

Look out coastal California! The loan limits are going to drop. The acting director of the GSEs, Edward DeMarco, openly lamented how the government guarantee of GSE loans inflates house prices, and he plans to move ahead with his program of gradually lowering conforming loan limits. Will lower conforming limits price buyers out, force sellers to reduce price, or cause sales volumes to plummet? (See: How will a reduced loan limit impact Coastal California?) DeMarco's comments came from a speech where he discusses the problems with the GSEs and makes note of the selective amnesia GSE supporters are exhibiting. DeMarco: People Are Forgetting Why Fannie, Freddie Failed By Nick Timiraos -- November 8, 2013, 1:44 PM Fannie Mae and Freddie…[READ MORE]

For house prices to go down, the market requires must-sell inventory from sellers who will take whatever the market will bear. Desperate sellers will lower their prices and accept less than recent comparable sales prices in order to close the deal. Many housing bears during the bubble predicted the toxic loans of the era would blow up causing many foreclosures and distressed sales which would push prices lower. The scenario played out just as bears said it would from 2007 to early 2009. In fact the situation got so bad that banking regulators altered accounting rules to reduce pressure on banks to liquidate and remove must-sell inventory from the market. By 2011 lenders changed their foreclosure policies, dried up the…[READ MORE]

I've noticed a meme floating around the bearish blogosphere portraying all securitizations as unstable financial products that should be avoided. I think this is completely wrong. Securitizations got a black eye in the financial crisis of 2008. Many AAA rated securities turned out to be garbage, investors lost billions of dollars, and these bad securities threatened our entire financial system. However, it wasn't the securtizations that were the problem. It was the products inside them and the failure of ratings agencies to properly forecast the risks. The old adage in computer science is garbage in garbage out. The same is true of securtizations. The problem with these complex financial products, particularly the ones created from mortgages, was the quality of…[READ MORE]

During the rally of the housing bubble, buyers responded to rising prices and higher interest rates with unbridled enthusiasm. Everyone believed house prices could rise without limit, and they would do so forever. It was a collective delusion fueled by greed, NAr sales propaganda, and foolish lenders who sought to make money from giving loans to those who wouldn't repay. The enthusiasm of buyers and homeowners was apparent. Real estate was the topic of every conversation. Stand in line at Starbucks, and you would overhear someone talking about how rich they were because their house was going up so much in value. If you didn't own a house, you were a "bitter renter," too stupid to take advantage of rising…[READ MORE]

When I designed the OC Housing News monthly market reports, my intention was to help people with their home search by pointing them toward undervalued locations and away from overvalued ones. These reports have great value to owner occupants, but they are even more useful to investors. Today, I want to demonstrate how to use the information in these reports to find areas where cashflow bargains abound. Very soon I will unveil a major website upgrade investors will find particularly interesting. As I will show today, the monthly reports I publish will guide investors on where to look, but that's only the first step. Knowing where bargains are isn't helpful information without the ability to identify which properties are good…[READ MORE]

We get questions all the time, how long must I wait before I can purchase a house after foreclosure, bankruptcy, or short sale.  Finally here is some valuable information. Chapter 7 Bankruptcy Chapter 13 Bankruptcy Fannie Mae 4 years (Chapter 7 or 11) Fannie Mae 2 years from discharge date Freddie Mac 4 years from dismissal (Chapter 7 or 11) 4 years from dismissal date FHA 2 years from discharge date Freddie Mac 2 years from discharge date VA 2 years from discharge date 4 years from dismissal date USDA Rural 3 years from discharge date FHA & VA 1 year of the payout must elapse and payment performance must be satisfactory. Buyer must receive permission from the court to…[READ MORE]

When interest rates are falling, which they were for most of the last 30 years, borrowers generally let their mortgage rate float until the last minute before committing. In a falling rate environment, there is no urgency to lock an interest rate. However, now that mortgage rates are rising -- and projected to keep rising -- home shoppers are locking in rates as quickly as they can. Ordinarily, lenders won't extend a rate lock for more than 60 days, but demand for this feature is so strong that some lenders are offering longer term rate locks to secure more business. Occasionally, the free market works. Lenders Extend the Clock on the Lock Recent Fluctuations in Mortgage Rates Are Prompting Home…[READ MORE]

Prior to the housing bust, when a borrower became delinquent, either they cured the loan quickly, or they were processed as a foreclosure. Banks didn't want to keep their capital tied up in non-performing loans, so foreclosure allowed them to force a sale of a property and get their money back so the lender could loan it to someone else. All that changed when house prices collapsed. At first lenders followed their normal procedures, but overwhelmed by the huge volume of delinquencies and crashing house prices, lenders aborted their normal procedures. It got so bad they convinced banking regulators to change the accounting rules so they could pretend their bad loans were still good so they wouldn't have to process…[READ MORE]

Banks around the globe face the same perils as those in the United States. Housing bubbles inflated in many countries during the 00s, and the banks that provided the cheap debt find themselves dangerously exposed to losses. The only way lenders can save themselves is to reflate the housing bubbles so they can liquidate their bad loans and recover their capital. The same dynamic that prompted US officials to coordinate with lenders to reflate a housing bubble is at work overseas. What can California can learn from Britain’s housing bubbles? I've been reporting over the last few months that house prices in Coastal California have reflated back to historic levels of affordability. We aren't in a bubble yet, but if…[READ MORE]

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