mortgage

All posts tagged mortgage


When the victory din for Obama was ringing loudest, I must admit that I was caught up in the hope that a regime change was something more, that there was hope that this time. It would be an end to our past decades of policy sins. I should have known better.

Forget that Obama hires a Raytheon lobbyist Bill Lynn into the DOD (among other lobbyists) right after banning such action. Forget that former lobbyist Tim Geitner who now heads out treasury is a tax dodger. Forget the laughable half mil salary cap on fat cats, which only affects the top 25 employess (promote a few janitors) and ISN'T RETROACTIVE! Where's the accountability for the bailout money spent as CEO bonuses?

The hypocrisy of the left wing denouncing conservative tax cuts and ignoring democrat ones makes me want to just tell you to forget it all. But when I saw the mortgage relief plan, well I snapped back to reality. I hope you do too.

So pretend for a moment that throwing $275 billion at a trillion dollar hole was somehow enough. Here's the gist of the plan, with my comments in red:

  1. For 5 years, mortgage interest will be reduced by banks so that monthly payments are 38% or less of monthly income.
    So the tax deductible part is reduced, and even then for only 5 years. Right now it's a blessing to have any tax at all to deduct! Got Job?
  2. Treasury will help get this down further to 31%.
    …with our tax money. Just clarifying.
  3. Both banks and borrowers get paid for modifying their loan.
    We're paying these guys to do something they need to do anyways? Are the banks even trying to survive?
  4. Modified loans get bolstered insurance policies as an incentive.
    So that when fundamental real estate forces cause more foreclosures, the banks will get more protection for their assets. Aren't we supposed to be stemming those forces in the first place?

The best things for banks to do now (by my uneducated guess) is to modify as many loans as possible on the worst terms possible. This is a reckless win-win for the banks. Either get paid for modifying loans you had to anyways, or foreclose on modified loans if the asset price + insurance adds up to more than what the owner can short sale.

Really, the only solution right now is to define exactly how much capital banks need to survive, kill the real estate market to that level, and then give them the bailout money for that use only. Too bad that bailout money is made of caviar and yachts right now.

Long live change.

Sept. 11 (Bloomberg) — U.S. Senate Banking Committee members urged Fannie Mae and Freddie Mac, the mortgage companies placed under federal control this week, to freeze foreclosures on loans in their portfolios for at least 90 days.

"This action would provide immediate relief to many homeowners and let the companies turn these non-performing loans into performing assets to minimize losses," Senators Charles Schumer, Robert Menendez and other panel Democrats said today in a letter to the companies and the Federal Housing Finance Agency, which is overseeing them under the government conservatorship. The companies also should ease their policies on modifying mortgages, the senators wrote.


I'll quote Lil' Jon on this one….. OKAAAAAAAAAAAAAAAAAAAAY!!!!!!!

If you listen to the anti-capitalists, they will tell you that the answer is “none, the market will fix the problem.” And then they’ll tell you that the market hasn’t fixed the problem, and that’s why Freddie Mac and Fannie Mae should be taken back into tight government control.

If you are an intelligent human being, you should understand that that line is a turd of bullshit so large you’d never stop counting the agendas embedded in it like corn in crap. Was that disgusting enough imagery for you? ‘Cuz that’s how you should be feeling right now.

What part of “backed by the government, yo” tattooed on F&F’s back sounds privatized? You see, it’s not just how you run the company, it’s not just what investors are rubbing your balls in cash, it’s what your contingency plan is. And when that plan is “the Treasury will bail us out” then that is NOT free market. Unless you think it has no effect on the decisions/mistakes they make.

F&F are GSEs. This means they were created by the government, for the government, regardless of how “privately” they are run. The Fed gives them cheap loans that they securitize for a profit and then pass on to borrowers, who have special faith in that relationship.

So now look at the Fed’s latest bail-out plan:

  • F&F CEO removed… GOOD, though I’m sure they get some nice parachutes…
  • F&F Conservatorship… RIGHT, because the goverment’s had such a good track record before…
  • Buyer of the Last Resort… WHAT? So the Fed keeps F&F stock afloat with $200 billion of our money? BTW there is only the “last resort” left, ding dong.
  • 10% per annum portfolio reduction… WTF?! Who the hell? Wha…? How are you going to achieve this, how is this relevant, and what are you saying when you tell a company to reduce its business as you buy up its stock with our money?

All that does is keep or lower existing mortgage rates. Solving the credit crisis is not going to address the lack of DEMAND for things to DO with that credit. Like I’m really going to buy a house now that lending rates fell 1% when the nation is facing mass unemployment and inflation. Like I’d really solve the latter by doing the former anyways.

You’d think the Republicans would be against ham-handed intervention. Too bad they’ve confused F&F with Terry Schiavo.

Xstine and I finally went to watch the new Batman movie The Dark Knight, and Christopher Nolan's direction (and writing) continues to amaze me. It's not often that I experience a drama so intense that my chest is left seized in bathyspheric shock, even with a mostly trivial cast.

With one huge exception… Heath Ledger's dying silver screen gift of the most insane Joker yet. His character earns the spot for my third all-time favorite movie villain, the first being Bill the Butcher, and the second being Oldman's corrupt nothing-like-Gordon cop Stansfield. Ledger was chaos incarnate, and reached a place in himself he couldn't return from.

I absolutely loved the rhetorical sarcasm of his finest line "why – so – SERIOUS?" that he delivered with a maniacal slurp of his mutilated jowls. Today, catching up on old news, I found myself repeating and cackling that line over and over as I read this article on the Senate's "landmark" housing bill.

Here's an amateur's opinion, for what it's worth:

  • Establish a stronger regulator for the GSEs.
    And who will that be? Government? Private? Where's the fundamental change?
  • Permanently increase "conforming loan" limits.
    This is good news for me an Xstine, but honestly, I've never understood conforming loans. If the point of the conforming loan is to keep borrowing at a less risky level (less than jumbo), and the amount is determined by median house price across the country, why apply the same loan limit to everyone? Why isn't it by the local median price around the house that the borrower wants to buy?

    You get a conforming loan limit that was too small for us middle-income folks in overpriced California Bay Area, and way too much for low-income people in downtrodden areas. Is it any surprise that those low-income people who couldn't qualify for conforming-loans then went over to non-conforming sub-primes?

    Even worse, those just just failed to get conforming loans went over in droves to Alt-A loans. I'll let Mr. Mortgage explain what those are and why you should continue to fear the housing market.

  • The FHA maximum loan limits for high-cost areas would also increase to $625,500.
    Ok a blanket increase in limits for whatever "high-cost areas" means. I've got to ask how this is paid for, and if this isn't just a way to keep the masses of potential educated middle-class from just defaulting? It's like increasing the credit limit of someone who already can't pay the card off.
  • Create home-buyer credit.
    Up to $7,500 tax rebate for first time home-buyers? Good start, who's going to pay for this? Oh wait a minutes…
  • The refund, however, serves more as an interest-free loan, since it would have to be paid back over 15 years in equal installments.
    …ah we pay for it. Very very sneaky. I see what you did there.
  • Bar down-payment assistance for FHA loans.
    No comment, don't know the full ramifacations of this. I don't see the upside of stopping sellers from helping buyers, is this to stop speculation?
  • The bill would also increase to 3.5% from 3% the down payment requirement for borrowers getting FHA loans.
    Not great, but not that bad either. Not a monumental change.
  • Create an affordable housing trust fund.
    Hahaha… they want Freddie and Fannie's fees to pay for this? Freddie and Fannie who were using $83 billion in cash to juggle $1.15 trillion in debt at 60-to-1 leverage? It's like asking a broke junkie to put something into his IRAs before someone with a tire iron comes to get his due.
  • Give grants to states to buy foreclosed properties. The bill would grant $4 billion to states to buy up and rehabilitate foreclosed properties.
    More money we don't have going to ever more fiscally endangered states to buy properties that you really don't want to encourage people to sell.

So, I'll ask again… WHY – SO – SERIOUS?! :jester:

The last two weeks, Xstine and I made some house-hunting trips. At the moment, I believe that the end of 2008 will be a prime time to buy a house in the Bay Area if you plan on staying at least another 5 years. In many counties, prices have fallen over 25% with supply volume soaring. I'd like to catch a deal before 2009 when non-conforming loan limits drop. This coming winter, a cyclically low season, will be the perfect time to do so.

My God it's a disaster out there. We went out to Brentwood, the edge of flat earth, and found massive tracts of abandoned new construction. It looked like a city that tried to cash in on rising property taxes, but with no facilities to keep anyone there. Nothing but endless residentials. A surburban wasteland.

It's absolutely hilarious to me that angry forum posters on Zillow.com are threatening them with legal action, claiming the site's price estimate algorithm is destroying their property values. Aside from some isolated errors, I'd say their house values are being overestimated, and if they want to sue for "defamation" or whatever, they need to show proof that the site cost them damages. Which means you sell for significantly more than the estimate. Which none of them are going to be able to show because prices continue to plummet.

We decided we like the beautiful Concord/Walnut Creek area, which has had excellent price drops and lies in mostly convenient, comfortable location. A local Fry's Electronics and Rasputin's Music didn't hurt either. With this spring taking such big hits (with the exception of February), I am quite excited that such a great deal has come along in our lifetime. If this sounds predatory, so be it. Americans need to learn to spend only what they can afford.

The word mortgage comes from French, combining the meanings of the words "mortal" and "engagement" into one dysphemistic way to describe the deathly pact we make when we buy a house. With the ensuing real estate stagnation, which could easily turn into an all-out freefall at any second, I've been looking more seriously at buying. I'm betting on house prices in the Bay Area falling another 10% or more by the election. This year, the economic stimulus package will allow us to borrow up to $729k before getting jumbo loan interest rates (as opposed to $417k).

So over the weekend, I made myself this nifty little fixed mortgage calculator. There are probably some bugs in it, but it helped me a lot. Unlike other Rent vs. Buy calculators out there, this one also compares 15yr to 30yr investment growth. For example, if I took a 15 year mortgage, paid it off, then invested the money I would have spent for the next 15 years, how would that compare to just getting a 30 year mortgage? Unsurprisingly, a simple 30 year mortgage would just beat a 15 year mortgage for the first 15 years, and then the 15 year would take a major lead.

Therefore, my plan is to buy something small, like a condo, with a monthly payment we could afford, on a 15 year fixed mortgage (low interest), and maximize our tax benefit (short time span). If we survive, we'll be able to buy a real house in the future for half the interest, with the only major risk being a real estate rut that lasts over 5 years. Now obviously the better my investment yield the bigger a hit it is to buy a house, and while my yield is pretty good, that's not the only reason to buy a house, and houses tend to be inflation-safe.

And that's how I'll sign my own death warrant.