The effect of the credit crunch begins in December

If the value of the home is greater than the mortgage, the owner will sell before foreclosure to extract remaining equity, or the owner will borrow on the equity until such time they are underwater. It would seem that all foreclosed homes have mortgages which are greater than the value of the home. It would follow that home value is a much greater influence on foreclosure statistics than ability to pay. A home owner with equity always has the ability to make payments.
 
lendingmaestro, is your company still making loans on inadequate down payments, hoping to be able to securitize them later? I remember you talking about that a while back.
 
In terms of walking from underwater homes, I knew people who did that in the last cycle. However, all of them had some life change (e.g. a divorce or a domestic partnership) that really necessitated a move. I don't know anybody who walked just to lower payments. Of course, things were not nearly as bad last time as they are likely to become now. My friends seem to be a relatively decent sample of society though, so perhaps they're not representative.
 
I read about these situations such high credit card debt, over-used HELOC, financing super expensive cars and it is just so hard for me to believe that it is the way so many people are currently living - it is like I can believe it in my head but I really can't internalize it - very strange feeling. My parents have used a lot of thier equity over the past 30 years but primarily they used for things like sending us kids to college - not to buy new Hummers - still debt though.
 
<p>We are in really really big trouble. Every day it becomes more and more obvious. What's funny is that I don't even understand how we will get out of this mess. Mayeb time will pass and things will come back to normal, but there's such a big disconnect here. I'm sorry but I blame the banks here. It's so easy to play with people's mind and have them take a bad loan under bad circumstances. The problem is that people, even at the top of the country, don't always think the way they should. The main problem is how far ahead are you lookign at. As a country, you should have politics that will take into considerations the next 50 years. Have a middle of the road plan, 15 years, and a short-term plan, 5 years (government term). What happens is that the government does what is good for the next 5 years, maybe 10 if they can be reelected. Who cares about the next party anyway...If I did a good job during my tenure people will remember me as a good president, and the next president will be the one looking bad because of my bad selffish decisions. Well, the banks acted the same way, the grass is always greener on the other side. The saw one stupid company making bad loans (call it ARM, subprime, no docs, ...). The first company doing so wasn't causing any problem to the housing market, the second neither, but after a while when everybody is overinflating the market, you are causing a bubble. Do you know what the prisoners dilemna is?</p>

<p>Now what? Well people won't be able to make their payments and soon it will get ugly really ugly. Even for me who doesn't own a home, it makes me sad why? because I'm ready to buy a home but I can't because of this mess.</p>

<p>About all the people who took HELOC and are now selling their homes and the bank is eating it up...well I'm not sure if I am angry or jealous...depends what happens with them...if they get away with it and don't get hit with bankruptcy then good for them, otherwise it's not worth it. Too bad for the banks, but that's what they deserve. You make bad decisions, you have to pay for it.</p>

<p>Fnally, about the $3000 or $5000 or $10000 monthly housing payments. Well, who's to say how much is to much for anybody? For the couple in this example $4000 is reasonable, for someone making $300,000 $7,500 is reasonable. As long as it is a real payment, not IO or ARM or whatever other crap you could qualify for.</p>

<p>To bad real estate is not like the stock market...it would already be 25% lower than today's market and it would make it much easier to recover and start fresh again. </p>
 
<p><em>"graphrix's law"</em></p>

<p>I like it, but it doesn't exactly roll off the tongue. Sounds like I have had too much to drink when I try to say it! </p>

<p>SCHB</p>
 
We are still originating conforming loans with little down payment. IF you need a jumbo loan the max LTV for full-doc is 90%. If you need stated income, the max LTV is 75%!!! Yes 75%. The secondary market or non-conforming loans is only getting worse. Rates are super low for conforming deals today. 30 year fixed rates are below 6%. 1 point will get you 5.625% at my bank. Meanwhile a 30 year fixed jumbo w/ no points is 7.75% and that's full-doc.



I think these low rates will help sales in the low end of the spectrum and help facilitate rapid price declines.
 
<em>I like it, but it doesn't exactly roll off the tongue. Sounds like I have had too much to drink when I try to say it!





</em>That's alright... I probably had too much to drink when I wrote that rant. I forget who it was, but someone said they feel like they sound like scooby doo when they try to say my name.





Maybe it should just be graph's law.
 
<p><em>I think these low rates will help sales in the low end of the spectrum and help facilitate rapid price declines.</em> </p>

<p>If all of a sudden that's all you can finance, you bet!</p>
 
hell i didnt realize there was a second r in there till it was pointed out, thought it was graphix the whole time!
 
<p><em>"That's alright... I probably had too much to drink when I wrote that rant. I forget who it was, but someone said they feel like they sound like scooby doo when they try to say my name. "</em></p>

<p>That was me.</p>
 
<p>Just go with Graph's Canon. </p>

<p>People can guess which one is meant.</p>

<p> </p>

<p>Now, since I'm heretic, I'll violate the canon. Even in LM's low conforming rates above, a 3% down and conforming loan still results in $2400 out of pocket after taxes from a $3000 up front combined PITI of which only $450 is principle. That's steep. Better than renting? Maybe, but much of Irvine's rental pool is really geared towards pooled yuppies. The IAC apartment complexes with their amenities and configurations are not geared towards families or even couples. They are geared towards single professionals sharing an 2/2 to make rents more affordable while they live is realitive comfort. Hence, you see little discrepancy between 2/2 at IAC and late model 3/2 SFR/townhome rentals from private landlords.</p>

<p>So unless home ownership changes from predominantly single family occupancy to multi-generational or single professional with boarders, even given the low conforming rates, high defaults will continue as the required conforming costs still pressure a family near above median income.</p>

<p> </p>

<p> </p>
 
<p>Personal bankruptcies rising in SD County </p>

<p><a href="http://www.nctimes.com/articles/2008/01/05/business/news/7_02_521_04_08.txt">http://www.nctimes.com/articles/2008/01/05/business/news/7_02_521_04_08.txt</a></p>

<p><img alt="" src="http://images.townnews.com/nctimes.com/content/articles/2008/01/05/business/news/7_02_521_04_08.jpg" /></p>
 
<p>They were high in 05 because the law was changing in the creditor's favor, no?</p>

<p>Also grammar police-wise. "Principal" is a loan amount. Principle is, say, Newton's laws.</p>
 
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