Housing

[Doove]

Originally Posted by WTF

Yes but when you have put nothing/hardly anything down and the economy takes a turn for the worse, what keeps these people from walking away from their homes?

Fair point...but... First, credit worthiness really shouldn't be determined by what might happen in the future, particularly when the possibility of what we're afraid of is entirely out of the hands of the person trying to get the loan. The day that occurs is the day we're all deemed to be bad risks. And secondly, isn't this where PMI comes in? If someone were to just walk away?

Not everybody is responsible enough to own a home.

No, they're not. But i don't see why a 35 year old woman with a 780 FICO score, who's been at the same job for 15 years should be determined to not be responsible enough to own a home simply because she doesn't have a $30,000 down payment at hand. Especially if she's paying PMI until she has 20% equity.

[Doove]

Originally Posted by WTF

Google No Doc Loans! My God it was easy to get a loan.

And i'm not saying it should be easy to get a loan. It shouldn't. What i'm saying is that while the lack of a significant down payment can, and probably should, affect the terms of the loan, it alone shouldn't affect the up or down decision as to whether someone qualifies for a loan.

[Doove]

Originally Posted by OliviaHoward

I also don't think the criteria for qualifying for a loan amount should be three times your annual income. That's a heavy burden even before adding interest, taxes and insurance.

Here i agree. I remember when i started looking for my first house - there was no way i could afford the payments they were telling me i was qualified for. At least not if i wanted to participate in the hobby!

[pjorourke]

Originally Posted by Doove

And i'm not saying it should be easy to get a loan. It shouldn't. What i'm saying is that while the lack of a significant down payment can, and probably should, affect the terms of the loan, it alone shouldn't affect the up or down decision as to whether someone qualifies for a loan.

Agreed, in the long-run the ability to carry the loan is more important than the equity. But the stuff that was going on was insane. The "liar loans" falsified the income so that was no good, then the loan was structured with negative amortization so what equity there was evaporated. It was insane. Thats what happens when a dingbat government policy meets unadulterated capitalism.

[charlestudor2005]

Originally Posted by pjorourke

I read somewhere that there is actually some evidence that high levels of home ownership can be harmful -- it locks people into places where there may not be jobs (e.g., Detroit). Communities with a better balance between home ownership and rentals are better able to adjust to booms/bust in the economy.

Originally Posted by WTF

Maybe we should all aspire to own our own tepee

I think we should do away with brick and mortar homes and go straight to RVs. They cost a bloody fortune anyway, but they are moveable. And when you retire, you don't have to sell the old place and invest in a Florida condo next to PJ. You just go park it in his driveway.

[phatdaty]

Originally Posted by pjorourke

I read somewhere that there is actually some evidence that high levels of home ownership can be harmful -- it locks people into places where there may not be jobs (e.g., Detroit). Communities with a better balance between home ownership and rentals are better able to adjust to booms/bust in the economy.

Originally Posted by WTF

Maybe we should all aspire to own our own tepee

Originally Posted by charlestudor2005

I think we should do away with brick and mortar homes and go straight to RVs. They cost a bloody fortune anyway, but they are moveable. And when you retire, you don't have to sell the old place and invest in a Florida condo next to PJ. You just go park it in his driveway.

I am going to invest in building the ultimate shopping cart for when the shit really hits the fan.

[Rudyard K]

Originally Posted by Doove

Fair point...but... First, credit worthiness really shouldn't be determined by what might happen in the future, particularly when the possibility of what we're afraid of is entirely out of the hands of the person trying to get the loan. The day that occurs is the day we're all deemed to be bad risks.

That also is a fair point...but predicting the future (or at least the probablity of a certain future) is how risk is determined. Someone is sholdering the risk of a low equity loan. We can think it is a bank...in other words a private company...but its not. Banks operate at a low equity ratio themselves because the capital providers (i.e. all of us by way of deposits) are guranteed by the Fed (i.e. all of us again). Fannie Mae & Freddie Mac have taken over the guarantee of the mortgage process which is again...us. We were fooling ourselves that the risk was covered. It sure was...by us. And instead a lot of mortagage brokers, bankers, executives, and even our coworkers left us all holding the bag.

Originally Posted by Doove

And secondly, isn't this where PMI comes in? If someone were to just walk away?

I think you are right...that was what PMI was for. But I think you were wrong earlier when you said it hadn't previously been required. Maybe it hadn't been required legislatively...but I think it was by the Fannies & Freddies. I believe, in the effort to grow Fannie & Freddie, such PMI insurance was removed as a requirement. I've been out of that game for a while, so I just "think" those comments are true...but if PMI was around like it used to be a couple of decades ago...there would not be near the losses that are being absorbed today. That is unless all the PMI insurers went broke...but I haven't really heard that.

[Doove]

Originally Posted by pjorourke

Agreed,

Originally Posted by Rudyard K

I think you are right.

Holy shit!

[Rudyard K]

Originally Posted by Doove

Either way, it seems to me that whether or not you can comfortably afford the monthly payment should be the over-riding criteria, whether you have 2% to put down or 50%.

I think when you say this Doove...you are thinking that they need to qualify as 'comfortable" with a fully amortizing loan...over 20 or 30 years. But most of the problem loans were qualifying with 1, 3 and 5 year ARMs where the interest rate could adjust...and even at the end of the 1, 3 or 5 year loan they had to requalify. That's just too thin.

A 98% loan leaves no room for errors...and life is too uncertain for "no error" planning.

[Rudyard K]

Originally Posted by Doove

Holy shit!

Don't freak out Doove. I've still got you pegged as a commie, wild eyed, crazy liberal.

[Doove]

Originally Posted by Rudyard K

I think when you say this Doove...you are thinking that they need to qualify as 'comfortable" with a fully amortizing loan...over 20 or 30 years.

Pretty much.

[Guest050715-1]

Originally Posted by pjorourke

Agreed, in the long-run the ability to carry the loan is more important than the equity. But the stuff that was going on was insane. The "liar loans" falsified the income so that was no good, then the loan was structured with negative amortization so what equity there was evaporated. It was insane. Thats what happens when a dingbat government policy meets unadulterated capitalism.

It's called a Stated Income loan. I state how much I make. The investor "believes" it - undocumented. I've seen it done.

Capitalism is great. Runaway capitalism is wonderful until it's dangerous. And Co-mingling of government and industry, according to Mussolini - is fascism.

[WTF]

Originally Posted by Rudyard K

That also is a fair point...but predicting the future (or at least the probablity of a certain future) is how risk is determined. Someone is sholdering the risk of a low equity loan. We can think it is a bank...in other words a private company...but its not. Banks operate at a low equity ratio themselves because the capital providers (i.e. all of us by way of deposits) are guranteed by the Fed (i.e. all of us again). Fannie Mae & Freddie Mac have taken over the guarantee of the mortgage process which is again...us. We were fooling ourselves that the risk was covered. It sure was...by us. And instead a lot of mortagage brokers, bankers, executives, and even our coworkers left us all holding the bag.



.

Bingo

[pjorourke]

The key for low down payment loans is quicker amortization (e.g., 20 years instead of 30) and buying less house (because the payment will be higher from the higher loan % and shorter amortization).

[Rudyard K]

Originally Posted by pjorourke

The key for low down payment loans is quicker amortization (e.g., 20 years instead of 30) and buying less house (because the payment will be higher from the higher loan % and shorter amortization).

Yep. Of course it depends on the interest rate...but a 30 year mortgage has paid down 20% in 12-14 years...a 20 year mortgage has hit that same 20% paydown in 6-7 years.