Feb192013
Contrary to media spin, mortgage delinquencies were trending higher in 2013
The mainstream media is obsessed with making people believe the housing market has bottomed. Even if it requires spinning negative news, they write as if they have a duty to bolster consumer confidence. I think market reporters have a duty to the truth, whatever that truth might be. To do less than that, to spin the news like a two-bit realtor, is a disservice to those who may rely on the news for important decisions about purchasing a house. I think much of the mainstream media’s coverage of the housing market is wrong, and when they resort to intentionally spinning bad news, it’s downright shameful.
Let’s take a look at some recent headlines regarding delinquencies:
National Mortgage Delinquency Rate Down 14% In 2012
Home Loan Delinquencies Plunge
Late-Payment Rate on US Mortgages Hits Four-Year Low
Mortgage Delinquencies Fell in 2012
To read those headlines, one would assume all is well in housing, perhaps the market is on the road to recovery, right? Let’s look at a recent press release and see what spin we can find.
LPS’ December Mortgage Monitor: 2012 Continued Trend of Delinquency Improvement
JACKSONVILLE, Fla., Jan. 31, 2013 /PRNewswire via COMTEX/ — The December Mortgage Monitor report released by Lender Processing Services (NYSE:LPS) and covering performance data for the full 2012 calendar year, found that while mortgage delinquency rates remained at elevated levels, they have shown steady improvement, ending the year 32 percent lower than the January 2010 peak. Additionally, following a year of regional improvement in foreclosure inventories (marked by stark contrasts between judicial and non-judicial foreclosure states), the national foreclosure inventory rate began to decline toward the end of 2012 from historic highs experienced during the crisis.
This statement is from Lender Processing Services. It accompanied their most recent mortgage monitoring report. One would think the data in the report would show that delinquencies have shown steady improvement in 2012, but did it?
Perhaps they can argue that the long term trend is still down, but ever since the mortgage settlement agreement was signed, mortgage delinquencies have been on the rise — and this comes in spite of aggressive attempts to kick the can with loan modifications. Lenders stopped foreclosing, approved more short sales, and initiated millions of loan modifications in a so-far successful attempt at drying up the MLS inventory and forcing prices to bottom.
Unfortunately, due to continuing high redefault rates on loan modifications and an overly slow foreclosure rate, delinquencies have been steadily rising since March of 2012 right after the mortgage settlement was signed.
The LPS report has a two-month reporting lag, so until May of 2013, financial reporters can continue to ignore the obvious recent uptrend and tout the year-over-year declines as a sign that mortgage delinquencies are falling. But what will they do when the year-over-year data shows an increase as it likely will when the March 2013 numbers are reported? My guess is they will continue to make excuses for the market and if they’re lucky, they’ll have a monthly decline they can put their blind faith in.
Perhaps it’s too much to ask, but for once, I would like to see some real analysis and reporting without any attempt to spin the news out of some misguided desire to positively influence consumer sentiment. We are a culture addicted to bullshit, and sometimes it can be very financially painful.
[…] Bloomberg On foreclosures, housing, economic recovery … oh, and lying – Mandelman Matters Contrary to media spin, mortgage delinquencies are rising – O.C. Housing News Fed Officials Want to Tackle “Reaching for Yield” – […]
There are 2 sides to every deal; 1) winner. 2) loser.
Investersspeculators who make buying decisions based on what the mainstream/corporate media puts-out typically get what they deserve, not what they expect.One effective stock trading strategy is to short whatever pundits on CNBC say to buy.
Like Apple? I took my kids to D-land last week and I had a complete stranger in line complaining to me about how his Apple shares had taken a 33% haircut. I tried to explain to him that when growth stocks stop growing, this type of thing happens. His only response was about how their products are the greatest and it just doesn’t make sense…
When he gives up and sells, it will be a good time to buy Apple stock.
That’s a guy that just needs to stick to investing in Index Mutual Funds.
The delinquency numbers would be even worse if not for the endless can-kicking and repeated loan modifications.
Loan Modifications Fail at Shocking Rates
The pace of modifications is slowing compared to the 2010 peak, but repeat modifications are on the rise, according to a recent research report from Barclays. Not only are mods returning for seconds, but researchers from Barclays also found remodifications perform more poorly than first-time mods.
In the report, Barclays revealed about 40 percent of recent subprime and 10-20 percent of other sector modifications are remods.
Barclays gave three reasons for the rise in repeat mods: first-time mods did not reduce payments enough, leading to higher re-defaults; servicers are taking advantage of HAMP principal reduction alternatives; and servicing transfers are leading to an increase in remodifications.
The report explained that many early mods redefaulted in 2011, with some having very small or no payment reductions when first modified.
However, even loans with significant payment reductions were in need of a second mod.
“Somewhat surprisingly, we find that a quarter of the remods are offered on loans that have already been offered a payment reduction of more than 40% in their prior modification,” the report stated.
The report also revealed about 75 percent of remods occur after 18 months of the previous modification, and about a quarter of those remods were given to borrowers who were current.
Barclays also stated nonbank servicers such as Ocwen Financial and Nationstar Mortgage tend to have about twice the share of remods compared to bank servicers. Banks, on the other hand, are more likely to pursue a short sale, according to the report.
Thus, as more loans get transferred to nonbank servicers, Barclays expects the rate of remodifcations to increase.
The report also noted repeat mods actually perform more poorly than initial mods, with the remod re-default rate at about 55 percent 18 months after the previous modification compared to a first-time mod re-default rate of about 40-45 percent.
Can Kicking: 50% of Loans Remodified within 30 Months
Obtaining a loan modification is no indication that a borrower has successfully moved into a territory where they are safe from the threat of foreclosure.
In fact, a research note from Barclays Securitised Products Research team says most loans that end up going through a re-modification do so 30 months after a previous modification.
“As bank loans get transferred to Ocwen and Nationstar servicing, the rate of remods will likely go up,” the research report said.
About three-quarters of re-modifications occur at least 18 months after the first loan modification, Barclays added.
Loans that are repeatedly modified generally perform worse than first-time modifications, the report says.
The local inventory is still declining. It’s gone well beyond being ridiculous. Prices are going straight up, and the mini-bubble rebound is quickly inflating.
California Inventory Continues to Diminish as Foreclosure Activity Falls
Foreclosure activity was somewhat mixed in the five Western states—Arizona, California, Nevada, Oregon, and Washington—observed by ForeclosureRadar over the month of January.
Notably, California foreclosure sales were down in January, despite a past trend of an uptick in the month following a decline in December. However, this January, both notices of default and notices of foreclosure sale declined in January—down 60.5 percent and 34.83 percent, respectively, over the month.
Foreclosure sales declined 65.65 percent since January 2012, while notices of default fell 77.66 percent.
California processed 5,447 foreclosure sales in January after 5,908 in December.
“While the alphabet soup of Federal programs has successfully prolonged, or catapulted delinquent homeowners out of the foreclosure process, the unintended consequence is now an acute lack of available housing inventory for sale,” according to ForeclosureRadar.
Adequate inventory is necessary for a recovery to take place, but is lacking in much of the state, according to the analytics firm.
They’ve gone insane. This is going to end in a sovereign debt crisis and currency crisis. How’s that for “saving” the real estate market?
Most homeowners don’t care. They’ll gladly accept a dollar with 50% less buying power if it means their house value stabilizes. Insane, but that’s what most homeowners consider the better alternative.
Aren’t we the smartest generation in American ever ?!?
Our generation has never really tasted poverty, I’m talking depression like poverty. If we did, our financial situation would be very different. Even before the housing bubble, since about 1980 in this country savers are mocked.
Matt, spot-on! But Lenin called them ”useful idiots” for good reason….
Most citizens are the product of public education who are then subjected to a constant barrage of sell-side corporate media propaganda which reinforces the ‘wealth transfer mechanism’ (oh wait, they call it ”credit”) type of economic system.
That’s a little harsh. The homeowning class has not generally voted to continue the current regime. Had the election been up to them, you’d have a President Romney in his SOTU telling the ciizens that unfortunately foreclosure must be allowed to run its course, and a Republican Senate letting Helicoper Ben know he better be cleaning out his office this spring. Kamala Harris would be back in private practice and her “Homeowner Bill o’ Rights” would only exist on her laptop. Prop 30 would’ve failed, and the California Legislature would be anxiously thinking over policies to lure business back to Calfornia, and how to speed foreclosures and delinquincies through the pipeline.
The present regime is sustained by an unholy alliance of the very rich — original Facebook employees, wealthy Hollywood stars, $400,000 a year network TV anchors and talk-show hosts, Wall Street quants and fund managers — and the very unhappy poor — recent college grads with $100k in student loans and no job offers, recently divorced mothers and young women who can’t find a man with a job and a moderate sense of responsibility. You can’t really blame the latter. Their prospects have never been worse and the future looks bleak, and what recent history has taught them is that the idea that hard work, thrift, savings and integrity are the route to a comfortable middle class life is a joke: what matters is being a photogenic victim, or having access to power, or finding an angle to work the system.
That’s what they’ve seen works. They’ve seen if you’re connected and you look good on the TV, you can get away with anything. They’ve seen if you just do your job, save your dough, keep your promises — you’re a chump, and you can lose everything without anyone giving a damn. Indeed, if you manage through inhuman levels of self-discipline and thrift to eke out prosperity in bad times, you’ll just be branded evil 1% rich and handed a tax to bail out the hapless and hopeless. How’s that for an ethical system? Who can blame them for being deeply cynical that the system works, and looking for some Strong Man to put it all to rights again?
As for the former…well, they, too, are voting their self-interest. They’re buying access — special rules, “waivers” of this and that, access to lawmaking. influence when the career bureaucrats decide the new rules that will govern who can borrow and who can’t, who can own guns and who can’t, who can get a liver transplant and who just needs palliative care. They’re buying the right to continue their privileged lifestyle, just like wealthy medieval lords buying indulgences or contributing a few silver coins to the Church poorbox.
“That’s what they’ve seen works. They’ve seen if you’re connected and you look good on the TV, you can get away with anything. They’ve seen if you just do your job, save your dough, keep your promises — you’re a chump, and you can lose everything without anyone giving a damn. Indeed, if you manage through inhuman levels of self-discipline and thrift to eke out prosperity in bad times, you’ll just be branded evil 1% rich and handed a tax to bail out the hapless and hopeless. How’s that for an ethical system?”
That’s a brilliant description of our modern world.
Uh…..if you’d open your eyes a bit more, you’d quickly discover Romney and Obama are essentially playing on the same team.
Yes, their ideologies are decidedly different, but that part of the ‘process’ is put-out to the public just so the candidates (chosen ones) can participate with legitimacy in a nasty little game called ‘divide the folks, easier to conquer’. Which btw, has been orchestrated by world financier’s (their handlers) and underway for many decades.
Underwater sellers have collectively decided to keep their properties off the market in hopes that a reflating housing bubble will bail them out.
Redfin: New Short Sale Listings Down 54% from 2012
In a blog post Friday, Redfin revealed new conventional listings have actually gone up 2 percent compared to last year, while listings for distressed properties have been reduced in half.
Redfin conducted an analysis of new property listings in the first five weeks of 2013 (January 1 to February 11) compared to the same period in 2012.
The Seattle-based brokerage found short sale listings decreased 54 percent from 2012, while REO listings are down by 46 percent. Overall, new listings declined 18 percent from 2012.
“Prices have gone up enough to stem the tide of short sales and bank-owned homes, but not enough to bring out the pent-up supply of would-be home sellers who have been sitting out the declining market,” Redfin explained.
Boy, that’s a gamble. Mortgage rates are trending up, but I don’t think they will go to much further. However, FHA’s lifetime PMI starts in the summer plus QM & QRM in 2014 is going to reduce the buyer pool. In addition, we are probably looking at another decrease for deductions (PEP and Pease) in the coming tax years in the higher income range.
So far the banks have successfully responded to a diminished buyer pool by restricting the MLS inventory even further.
The ultimate barrier they will run into to fully reflate the bubble is that people can only afford a loan of a certain size now that interest-only and negative amortization is banned. They must keep interest rates low, or the recovery will fizzle no matter how much they restrict inventory.
Problem is, lower rates = higher cost basis; higher rates = lower cost basis. Then there are those pesky comps.
Hopefully, the folks in OC who’re holding-on a few more years to recapture lost equity are hedged accordingly.
It’s seems these institutions (banks) want to dump bad debt through new loanowners by encouraging them to purchase on the new bubble. Most of the buyers are speculators, hedge funds, and just normal buyers. Saying the delinquency numbers are down gives prospective buyers a false sense confidence about the true market conditions. It’s a rush by these banks, because in 2014 you are finally looking at better loan standards. Banks want to have low loan standards with a government guarantee.
“Saying the delinquency numbers are down gives prospective buyers a false sense confidence about the true market conditions.”
That’s exactly what it does, and it’s why I find the spin so shameful.
“…We are a culture addicted to bullshit, and sometimes it can be very financially painful…”
Our instant gratification society cannot be instantly gratified with bad news.
What I find particularly amazing is how brittle many O.C.household finances really are.
To wit, I am sure we will start reading about households who can’t make the mortgage payment simply because the cost of gasoline has been quickly rising recently.
Having observed a few such households first hand, its astounding that a household can be living literally paycheck to paycheck, but yet they still subscribe to premium cable TV, have enormous cell phone bills and drive very nice leased automobiles.
Yet these very same households complain about/ignore fixed costs such as a mortgage.
IMO, just a bizarre set of life priorities.
When consumption is more important than security, people make odd choices.
Should they save $500 a month toward retirement or get a lease on a BMW? If security is a priority, they save the money. If consumption is a priority, they lease the BMW. Consumption is obviously a high priority in OC, so you have many people living paycheck-to-paycheck hoping a new creditor will come along to give them a new infusion of spending money. When it does come crashing down, these are the people looking for bailouts.
The problem is “these people looking for bailouts” voting block along with social and corporate welfare block control the country. Nothing will change due to this power structure or as famously said by Franklin “When the people find that they can vote themselves money, that will herald the end of the republic.”
I’ve been noticing similar comments have been increasing in frequency on moderate blogs such as this one. It’s not just the doom porn crowd anymore. The amend-extend-pretend meme is being exposed for the monster it is. That’s a good thing.
What would you do with that $500 saved for retirement? Put it in the bank and earn 0.15%, so your money will double in a mere 462 years? Throw it into the stock market, now nearing historic highs, so you, too, can get back $50 when you finally exit the correction? Buy bonds, yielding a big 1%? Maybe just stuff it under the pillow, so The Bernank can degrade its value by 5% a year ad infinitum, and by the time you retire you might as well use your 5 benjamins as toliet paper? Buy gold at $1,600 an ounce, double its average value over the past 20 years, and hope you’re the last man standing when the dollar collapses?
Preferring consumption over investment right now is quite rational, given the hideously distorted macroeconomic situation. You’re probably actually better off leasing a Beemer — at least you have the pleasure of driving a nice car for a while. Putting you money in the bank is, for most people, given the available options, almost equivalent to throwing it in the fire.
I agree that the incentive is to consume, but you still have to save. I still dollar cost average my mutual funds and don’t sell my real estate, because like you said why put it in the bank.
However how long does this go on? As I say this for the 5th year…
$1600 is a bargain. I’m buying. Both hands. 80% of my meager portfolio. Everything else feels too risky so I’m forced to hedge my savings and watch us leave the eye of the hurricane. I’d buy productive farmland but dont know a damn thing about it and am fairly stuck here in SoCal.
Let them eat paper.
I think many of the fragile O.C. household financials come from those who have lived here a long time. In my service-sector business, I’ve found that most of the recently-acquired recurring clientele (the best ones) have recently moved into the O.C. from other areas or out-of-state. Not all, of course, but a large enough proportion to make you take a second look, and it makes sense. When posers like IR’s neighbors who can’t afford their O.C. homes are booted out, people like these clients I refer to replace them. People who have purchased in OC post-2010 home tax credit bubble blip, make fully informed decisions to purchase said home which they can obviously afford. These aren’t the “underwater” people. If they truly have assets, they can readily drop $500k or more down into a $1mm+ home in one of the nicest places in the U.S. to live, weather-wise. O.C. will always be desirable, it will just be a matter of folks who can truly afford it moving in and replacing those who can’t.
To clarify the above post, IMHO regarding to the conspicuous wealth display mentality of the OC culture, it’s either the folks who have lived here a long time who have unknowingly succumbed or others who haven’t readily adopting said mindset when they get here. Or a blended bit of both. It’s hard not to get swept up in the consume now, worry later frame of mind…
California’s Budget Miracle A Mirage After All
the historic $5bn revenue bump appears to have been an accounting anomaly!
http://www.zerohedge.com/news/2013-02-19/californias-budget-miracle-mirage-after-all
We need more guns, right?
O.C. shootings: Ladera Ranch neighbor heard a ‘bunch of ruckus’
Residents in one Ladera Ranch neighborhood saw crime tape and police vehicles when they awakened Tuesday morning as authorities investigated what appeared to be the first in a string of shootings across Orange County that left at least four people dead, including the suspect, and others wounded.
Jason Glass said he was across the street from the crime scene, working in his garage, when between 2 and 3 a.m. he heard what he now believes were three to five gunshots. About 4 a.m., Glass said, he “heard a bunch of ruckus” — no yelling, but lots of doors slamming — before a car sped away from the house.
“I just thought somebody was being really loud and obnoxious,” Glass said.
Deputies arrived about 4:45 a.m. after receiving a 911 call from inside the home reporting a shooting, Orange County sheriff’s spokesman Jim Amormino said. Deputies found a woman dead inside the home; no one else was hurt. It’s unclear whether anyone was home at the time of the shooting.
The suspect, described as a man in his 20s, fled in an SUV to Tustin, where “multiple incidents” occurred, Amormino said.
“There’s a lot to sort out,” he said.
Tustin Police Lt. Paul Garaven said the suspect attempted to carjack multiple vehicles in Tustin, with each shooting occurring a few minutes apart.
Police received a report about 5:30 a.m. of a carjacking near Red Hill Avenue and Nisson Road near the 5 Freeway in Tustin, Garaven said.
The carjacking suspect opened fire and wounded a bystander, he said.
Soon after that, another carjacking was reported near the 55 Freeway, Garaven said. The victim of that carjacking was killed, Garaven said. A body lay covered by a yellow tarp on Village Way near the McFadden Avenue freeway entrance.
Another shooting was reported on Edinger Avenue near the Micro Center in Tustin, Garaven said. Officers confirmed that another carjacking had taken place, he said.
One person was killed and another was taken to a hospital. Officers spotted the suspect in a stolen vehicle, followed him into the city of Orange and initiated a traffic stop near the intersection of East Katella Avenue and North Wanda Road, Garaven said.
The suspect then shot and killed himself, Garaven said. Garaven said there is “no threat to the community” because the suspect is deceased.
This explains the non-stop helicopter noise early this morning. A couple weeks ago a couple is executed on the top of Avenue 1’s parking structure where I regularly park, and now this!
Every Swiss household is required to store a military weapon and ammunition in it, a part of their civil defense. Go look up the rate of home invasion and murder in Switzerland, then ask your question again.
I’m just glad the stat holds true again – that a person in the house where the gun lay, was killed. You’re far more likely to be injured or killed, or injure/kill someone you love, with that gun in your house you keep for “protection.”
That stat is comparing injuring a known persons vs. killing the bad stranger. Most of the time, once the bad stranger knows your armed, it fleeing time. Too bad some of the normally known person or loved one are very stupid and when asked to identify themself don’t respond properly. No verbal response and further physically advancing. Also the stat is for a “loved one”, but can be involved in criminal and violent activity.
We need less lunatics.
Banks are now selling snake oil….
Bad US mortgage loans now big business on Wall Street
By Adam Tempkin Tue Feb 19, 2013 2:43pm EST
Feb 19 (IFR) – Delinquent and defaulting mortgage loans to struggling US borrowers have become big business on Wall Street, as investors scoop up bonds backed by non-performing loans (NPLs).
With millions of borrowers still under water or facing foreclosure, real estate investment trusts (REITs) and others are snapping up NPLs at a discount, hoping to earn returns from their eventual resolution or liquidation.
And the more value that can be extracted from each loan, the better the returns – which means it is in the interest of investors to work with troubled borrowers to find solutions.
As the cost of funds comes down and yields tighten, loan buyers are finding it more attractive to finance these purchases through securitization, which can sometimes fund between 75% and 85% of the market value of the NPLs, according to structured finance experts.
“Investors are interested in buying NPL securitizations because the senior bond has tremendous credit enhancement and it’s a fairly short-term investment providing more yield,” said Eric Burner, a partner at law firm Hunton & Williams.
“In this interest rate environment, that’s appealing.”
Moreover, the deals delever quickly, and issuers can call the deal after about a year, which is an attractive feature for investors worried about so-called tail risk, or the possibility that an external shock can suddenly cause losses in a portfolio.
From the issuer’s point of view, “securitization is a good way to lever up if you’re a buyer of these assets”, and is an efficient exit strategy, said James Raezer, the head of RMBS at Royal Bank of Scotland.
“There are potentially good returns and you can redeploy the capital.”
Last week, Wells Fargo led a US$260m residential mortgage NPL bond with participation from California-based broker-dealer Carrington Investment Services, which was also the servicer. The distressed loans were bought from several different sellers, including CitiMortgage, Bank of America, and BankUnited NA. The aggregate unpaid balance of the pool was more than US$700m, according to a term sheet.
The deal had a thick 63% layer of credit enhancement and a short maturity of just 1.5 years. The unrated transaction, Stanwich Mortgage Loan Company 2013-NPL1, was priced to yield 3% and was oversubscribed.
SERVICING IS KEY
Most NPL securitizations include loans where foreclosure, short-sale, or modification are offered as potential resolution options for borrowers but increasingly deals, including the Stanwich transaction, include an option to rent as well.
Some investors frown upon this because the more rentals of REO properties, the less cash coming into the deal and the longer it will take for the bonds to pay down. In other words, the transaction will receive monthly rental payments rather than the proceeds from the sale of the property.
Experts say that players getting into the business of buying and servicing NPLs stand a better chance of maximizing returns when they communicate closely with borrowers to find the best resolution.
“A big part of value creation is through the servicing process,” said Chris Whalen, executive vice-president and managing director at Carrington.
“The key question to the borrower is, Do you have the capacity to get back on track? Do you want to stay in the house?”
Whalen called Carrington a “high-touch” servicer that talks to borrowers in a very constructive way to find strategies to either keep them in their house or talk about creative ways to exit their distressed situation.
“The servicer must be hands-on, and experienced with NPL loans,” said Burner.
“To the extent that you can modify the loan, you want to have a servicer that can work that out and not drag their feet.”
In assessing each deal from a bond investor’s perspective, “so much depends on the expertise and cost of the servicer in concert with the enhancement protections”, said Chris Sullivan, chief investment officer of the United Nations Federal Credit Union.
“In this environment, the note buyers will be forced to weigh these factors and others – including assessments about future home price appreciation and recovery values – against the prospect of receiving a 3% return attached to a presumably relatively short-lived asset.”
In addition to Carrington, firms such as Bayview Financial, Arch Bay Capital, and Residential Mortgage Services Inc, and alternative asset managers such as Oaktree Capital Management, have also been heavily involved in the burgeoning NPL securitization market.
MARKET HEATS UP
NPL assets typically trade as a percentage of their market value, and for distressed loans this is approximately 50%-60% of aggregate unpaid balances in the current environment, experts say.
Supply of these loans emanates from any financial entity looking to offload NPLs from their books – banks, government-sponsored enterprises, the Department of Housing and Urban Development (HUD), the Federal Deposit Insurance Corporation (FDIC) or the Federal Housing Administration (FHA).
But given the current uncertainty as to whether these entities will continue providing a fresh supply of NPLs, as well as the fact that the booming real estate owned (REO)-to-rental market has attracted new players hungry to buy up distressed loans, prices of NPLs are getting bid up higher than expected – a concern for observers who worry that the market might get too competitive and frothy.
“The REO-rental players have driven NPL prices up, because they view it as a good way to source product,” said RBS’s Raezer. “They are converting them to REOs.”
And because of the high level of credit enhancement and short duration, most issuers don’t bother getting credit ratings.
Raezer said that rating agencies take such a long time to get through the process, and the deals factor down so quickly, that it’s typically not worth it to get a rating.
So far, the transactions have performed well, with no blow-ups. Mostly money managers, insurance companies, and REITs buy NPL bonds, the securitization executive said, although the chief investment office of a large global bank also invested in several recent NPL deals, according to market sources.
However, some participants are worried that if the market heats up too quickly, there could be risk to retail investors who have recently been attracted to the yields that the product offers.
“Historically, the NPL asset class has been an institutional fund – or vulture fund – product,” said a senior executive involved in purchases of NPLs. “The notion that you can address a retail audience is untested.”
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With prices going back up, collateral value behind these bad loans is increasing the value of the ABS pools.
I get nervous because in my mind it’s a bet that requires the government continuing the stimulus/QE programs. It just reminds of 2007, but not as dramatic when it drops. And I remember the old saying never invest in anything that requires the weather or the government.
“Boomerang buyers” are all the rage:
http://www.ocregister.com/articles/years-496154-stucker-loan.html
It’s pretty funny that even after getting burned 3+ years ago after buying a house she couldn’t afford, and all of the ensuing “pain” and “knowledge” gained, that she now bought a $625k house using an FHA mortgage with 3% down paying a 1.75% UFMIP and 1.25% annual MIP. The question for the panel is, does she represent the typical American?
With the boyfriend the first condo was purchase with nothing down. The doing some fixing. Was nothing down maintained with an home improvement loan?
The new loan with husband is still a goverment supported walk-away loan — 4.5% down up front cost. Say upfront of $28,000 for a non-recourse loan with the possiblity of free housing for over a year for if they defaut is a really good deal for them and the bank — not a very good deal for the taxpayer, who will be stuck the the house and making good on the the bad debt and fees to the bank. It’s less than what I pay for rent without an option to squat.
My vote is yes.
She is a typical sheeple. She will overpay for this property compared to rent, and if the price goes up, she will likely take out HELOC money to pimp it out.
[…] in foreclosure processing is not because they ran out of delinquent borrowers to foreclose on. Contrary to media spin, mortgage delinquencies are trending higher. Squatters are enjoying a free ride, and the banks are endlessly can-kicking with hopes that rising […]