Investors!

[trifecta124]

Originally Posted by Danzig

hmm...countrywide won't be doing loans over 400-some thousand dollars. are those the ones who default the most? the high dollar mcmansion buyers?? some people no doubt are 'house poor'--get ambitious, buy a huge house--and then can't even afford to furnish it.

This is something that I think most people knew would happen. I have been renting because I live in a market where it is very difficult for first time buyers to get involved. I won't buy until I know that I can comfortably afford it.

[Danzig]

Originally Posted by Sightseek

This is completely a guess, but with the economy I have to think these are the harder homes to sell. Rental units will always do well, but I think a lot of buyers feel uneasy buying a home that high when they listen to the news...plus many of them have to sell before they can buy.

well, than there's the fact that many are going to a required down payment again--so it may just be outside the realm of possibility for many to cough up that kind of cash up front.

[Danzig]

Originally Posted by trifecta124

This is something that I think most people knew would happen. I have been renting because I live in a market where it is very difficult for first time buyers to get involved. I won't buy until I know that I can comfortably afford it.

we bought less than we could afford. i enjoy going out for dinner, buying a book, or into a horse, having ready cash to go have fun, more than making payments on things that you then can't afford to have fun with. and it's lucky for us that we do that--my husband has been off work since june 1 with a broken heel, and is on short term disability that pays half his usual check. but we're still kicking along, no sweat!

Originally Posted by Sightseek

It's insane how much the price of real estate varies in this country. When I lived in RI, you couldn't get a decent house that you would be willing to raise a family in for less than $290K+. When I lived in Kentucky, I lived with someone who had a 3 bedroom, 2 bath ranch on some land that was built to their desire for less than $90K. I think the housing prices in NY are extremely fair. You know things aren't looking good when Home Depot reports losses.

The house that I live in San Antonio in the same type of socio-economic area would go for 1/2 million in Dallas. Same state. It ridiculous. The house is valued at 145,000 in San Antonio.

So I guess like Z said. If you can get a nice paying job (which I dont), in an area where the cost of living is low and you like (which I do), everything works out nicely.

[Sightseek]

Originally Posted by pgardn

The house that I live in San Antonio in the same type of socio-economic area would go for 1/2 million in Dallas. Same state. It ridiculous. The house is valued at 145,000 in San Antonio.

So I guess like Z said. If you can get a nice paying job (which I dont), in an area where the cost of living is low and you like (which I do), everything works out nicely.

Yeah, unfortunately for me my two favorite places in this country are Newport, RI & Saratoga Springs...I'm screwed. LOL

[pmacdaddy]

Originally Posted by trifecta124

This is something that I think most people knew would happen. I have been renting because I live in a market where it is very difficult for first time buyers to get involved. I won't buy until I know that I can comfortably afford it.

Please John... Tell the truth...you rent because you are a degenerate gambler.

[trifecta124]

Originally Posted by pmacdaddy

Please John... Tell the truth...you rent because you are a degenerate gambler.

Yes.....That may have something to do with it.

[otisotisotis]

Originally Posted by Danzig

hmm...countrywide won't be doing loans over 400-some thousand dollars. are those the ones who default the most? the high dollar mcmansion buyers?? some people no doubt are 'house poor'--get ambitious, buy a huge house--and then can't even afford to furnish it.

i believe that is all the amount govt. agencies will insure.

[Danzig]

Originally Posted by otisotisotis

i believe that is all the amount govt. agencies will insure.

the govt insures loans?

[otisotisotis]

i could be wrong, but i thought agencies like fannie mae backed up loans that were no more than $400k or thereabouts.

[timmgirvan]

417K

[SuffolkGirl]

Mortgages have (had?) become a big business. The loans are written and then bundled together and sold on the secondary market in a Mortgage Backed Security (MBS), thus generating additional money that could be lent out again. With most real estate in the country appreciating there was little risk that the payments on the underlying security (the loan) would not be made. Recently, values have softened if not declined. People who were in a 2/28 (fixed for 2 years then adjusted for 28) were facing murderous increases in their interest rates (the Fed has raised interest rates 17 times!! - although just dropped .5% this a.m.). These people then tried to refinance but the value of their home no longer supports the loan amount. So now they are faced with a criminally high interest rate on a property that is not worth what they owe on it.

FNMA (FannieMae) and FHLMC (FreddieMac) are quasi public entities that were created to alleviate the credit crunch that we may very well be experiencing. Each year they survey the real estate market and set a limit for the amount of the loan that they will buy. This becomes the "conforming" loan amount limit. At present it is set at $417,000 for a single family/condo. One can purchase a property for whatever amount, as long as the first lien does not exceed $417,000 then it is considered a conforming loan. Because FNMA and FHLMC are nominally backed by the government, investors have decided that they only want to purchase mortgages that fit this guideline.

Given the softening RE market, large institutions that purchase MBS have completely lost their appetite for any security that is not backed by FNMA or FHLMC. These institutions have gotten into lots of bond trouble recently, check out Bear Sterns and Goldman Sachs.

This is a very far reaching problem right now. Those individuals and institutions that have a good supply of cash and are not over leveraged should be able to weather this storm.

[wiphan]

Originally Posted by SuffolkGirl

Recently, values have softened if not declined. People who were in a 2/28 (fixed for 2 years then adjusted for 28) were facing murderous increases in their interest rates (the Fed has raised interest rates 17 times!! - although just dropped .5% this a.m.). These people then tried to refinance but the value of their home no longer supports the loan amount. So now they are faced with a criminally high interest rate on a property that is not worth what they owe on it.



This is a very far reaching problem right now. Those individuals and institutions that have a good supply of cash and are not over leveraged should be able to weather this storm.

Alot of what you said is true, however some is not. The Fed did not drop the Fed Funds rate, which it has raised 17 times, it dropped the discount rate .5%today temporarily which allows banks to borrower $, not consumers. This will have no direct affect on the consumer yet, however the stock market will like this today

Non-conforming or Jumbo loans(over $417k) are sold separately and Fannie and Freddie do not buy these types of loans. The biggest problem in the industry is companies that offered option ARMs or negative amortization loans. These loans people did not pay the all of the interest on the loan, they actually add principal to the loan. Many companies like Countrywide and WAMU offered these loans and when home prices slipped or fell, consumers are finding themselves owing more than the home is worth. The home they bought 1 year ago for $500k, is now worth $450k and they owe $510-525k. Imagine that a lot of customers will just let the house go into foreclosure. I personally work in the mortgage industry for another more reputable company and we never offered these types of loans and have not been affected by these problems. The other issue with Non-conforming or Jumbo loans is that investors currently are scared to buy these loans due to uncertainty of their performance. This has driven the price/interest rates up.

Working with a educated mortgage professional you can still find great advice and low interest rates. Currently I am structuring blended Jumbo loans with 2 mortgages and both mortgages on 30 year fixed rates around 6.75%, this is a way around the increases in Jumbo loan pricing.
I hope that helps clarify things

I think all of this is a lesson in how volatile the stock market can be. We have put in all sorts of controls and still we get pretty big swings. The housing market was driving a lot of the highs, and now it turns.

Fundamentally I feel with all the innovation that occurs in this country the long term will be good. Lots of drugs, electronic consumer products, new types of cars, etc... yet to come that will be wildly different, innovative and highly sought. Just my feeling. Even with China and India becoming energy gulpers just like we are.

[pmacdaddy]

Originally Posted by wiphan

Alot of what you said is true, however some is not. The Fed did not drop the Fed Funds rate, which it has raised 17 times, it dropped the discount rate .5%today temporarily which allows banks to borrower $, not consumers. This will have no direct affect on the consumer yet, however the stock market will like this today

Non-conforming or Jumbo loans(over $417k) are sold separately and Fannie and Freddie do not buy these types of loans. The biggest problem in the industry is companies that offered option ARMs or negative amortization loans. These loans people did not pay the all of the interest on the loan, they actually add principal to the loan. Many companies like Countrywide and WAMU offered these loans and when home prices slipped or fell, consumers are finding themselves owing more than the home is worth. The home they bought 1 year ago for $500k, is now worth $450k and they owe $510-525k. Imagine that a lot of customers will just let the house go into foreclosure. I personally work in the mortgage industry for another more reputable company and we never offered these types of loans and have not been affected by these problems. The other issue with Non-conforming or Jumbo loans is that investors currently are scared to buy these loans due to uncertainty of their performance. This has driven the price/interest rates up.

Working with a educated mortgage professional you can still find great advice and low interest rates. Currently I am structuring blended Jumbo loans with 2 mortgages and both mortgages on 30 year fixed rates around 6.75%, this is a way around the increases in Jumbo loan pricing.
I hope that helps clarify things

Just curious. That is a conforming fixed loan and second mortgage with 30 year fixed amortization? Had not heard of that. What is rate on second mortgage?

[wiphan]

Originally Posted by pmacdaddy

Just curious. That is a conforming fixed loan and second mortgage with 30 year fixed amortization? Had not heard of that. What is rate on second mortgage?

Correct. 30 yr fix 6.75% on 1st mortgage and 3 yr fix on the 2nd at 6.75%. The 2nd mortgage can be 30 yr amortization, 1.5% balance payment or interest only. This is kind of a creative way of getting around some of the higher rates on Jumbo loans. I personally believe prime is going to start coming down, so I would be more willing to accept a 3 yr fix on the 2nd mortgage at that rate and obtain a better rate on the $417k. Now it is a different story if you are looking at loans that are in the $750k+ range, you might not want the risk on a huge 2nd mortgage that is only fixed for 3 yrs. It is entirely up to the customer, but my job as a mortgage professional is to find all of the available options and make suggestions to the client. I hope that helps

Originally Posted by wiphan

Correct. 30 yr fix 6.75% on 1st mortgage and 3 yr fix on the 2nd at 6.75%. The 2nd mortgage can be 30 yr amortization, 1.5% balance payment or interest only. This is kind of a creative way of getting around some of the higher rates on Jumbo loans. I personally believe prime is going to start coming down, so I would be more willing to accept a 3 yr fix on the 2nd mortgage at that rate and obtain a better rate on the $417k. Now it is a different story if you are looking at loans that are in the $750k+ range, you might not want the risk on a huge 2nd mortgage that is only fixed for 3 yrs. It is entirely up to the customer, but my job as a mortgage professional is to find all of the available options and make suggestions to the client. I hope that helps

30 years is a long time. I realize many people sell and move before 30 years but man that just does not seem attractive. But I guess if you really want a house. I would just rent if it came to that.

[SentToStud]

Originally Posted by wiphan

Correct. 30 yr fix 6.75% on 1st mortgage and 3 yr fix on the 2nd at 6.75%. The 2nd mortgage can be 30 yr amortization, 1.5% balance payment or interest only. This is kind of a creative way of getting around some of the higher rates on Jumbo loans. I personally believe prime is going to start coming down, so I would be more willing to accept a 3 yr fix on the 2nd mortgage at that rate and obtain a better rate on the $417k. Now it is a different story if you are looking at loans that are in the $750k+ range, you might not want the risk on a huge 2nd mortgage that is only fixed for 3 yrs. It is entirely up to the customer, but my job as a mortgage professional is to find all of the available options and make suggestions to the client. I hope that helps

How does this help the guy with no equity in a home he paid 500k for that is now worth 450k? Are you saying you are moving people off theirr adjustables into a $0 down package that is 50k above what the property will appraise for?

[pmacdaddy]

Originally Posted by SentToStud

How does this help the guy with no equity in a home he paid 500k for that is now worth 450k? Are you saying you are moving people off theirr adjustables into a $0 down package that is 50k above what the property will appraise for?

I read the above as just an alternative to a Jumbo 30 year fixed mortgage.

[skippy3481]

Pgardn, I can tell you why i went with a 30 year fixed. First we are locked into a very nice interest rate with no prepayment penalties. We always planned on a 15(to pay off in about 10), but we recieved a nearly identical interest rate on the 30 as we did the 15. So we went with the 30 which offers more flexibility in case of some unforeseen economic issues. Typically we just double our mortage payment every and send that in paying the principal off quicker. But in case of a crunch, we have a lower payment at a very nice interest if we need it.