- Jul 24, 2020
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Mortgage rates
- Thread starter Zambo
- Start date
- Nov 19, 2014
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Nothing to see here, move along.
Real estate firms Compass and Redfin announce layoffs as housing market slows
In filings with the Securities and Exchange Commission, Compass announced a 10% cut to its workforce, and Redfin announced an 8% cut.
- Nov 16, 2017
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Pricing sheet yesterday was an absolute blood bath. I'm talking tide at Omaha Beach.
No short term extensions are permitted which is murdering dudes that locked new construction that was delayed. Home price inversion is inbound, which appraisers - to their credit) have been pointing to for at least two months. The number of significantly low appraisals hasn't stopped people with the fear of missing out from plunging headlong into these overpriced homes. The only thing I'll give them credit for is that they at least fiddled with investment and second home pricing early enough to make them less attractive than last time.
No short term extensions are permitted which is murdering dudes that locked new construction that was delayed. Home price inversion is inbound, which appraisers - to their credit) have been pointing to for at least two months. The number of significantly low appraisals hasn't stopped people with the fear of missing out from plunging headlong into these overpriced homes. The only thing I'll give them credit for is that they at least fiddled with investment and second home pricing early enough to make them less attractive than last time.
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- Jul 29, 2014
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We had to take ALTA seminar today for hours(CE)......guess what the topic was? .....Insuring foreclosures....
- Sep 4, 2014
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- Feb 1, 2017
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At a 6.125% mortgage rate the average home price in the US needs to fall ~32% to reach its pre-Covid affordability relative to income.
- Nov 7, 2015
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- Nov 16, 2017
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Well the graphic is (as is usual for the media) muddling terms because they don't know anything.
Pretty sure they are meaning 400,000 purchase price, 20% down with a final loan amount of $320,000. That is the math for an eighth above six. That's actually closer to par for peeps with credit scores in the 740s the last couple days.
As for the "opportunity loan" types - forget about it. Those deals are sinking faster than the Titanic. Sellers and unfortunately for them some buyers have not figured out what is happening to real values yet. They are about to.
A year and a half from now expect DU/LP refi plus version 3.0 schemes to keep people paying for houses that are deep underwater. Like always with the bubbles you're going to have builders hurting, a ton of foreclosures and a bunch of the people that bought in the last 6 months feeling like total chumps.
- Nov 7, 2015
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Those numbers make sense: I thought they meant 20% down to avoid PMI (an expense just like escrow costs the unsophisticated don’t understand and get burnt)Pretty sure they are meaning 400,000 purchase price, 20% down with a final loan amount of $320,000. That is the math for an eighth above six. That's actually closer to par for peeps with credit scores in the 740s the last couple days.
A year and a half from now expect DU/LP refi plus version 3.0 schemes to keep people paying for houses that are deep underwater.
I know enough lingo to be dangerous, could you clarify what DU/LP refi and version 3.0 schemes mean?
FWIW, I think there’s going to be a TON of foreclosures coming up. Wife and I bought our first home Feb 2020 (right before bubble, thank you lord). They qualified us for a loan with a 50% debt to income ratio.
We knew better than to push that ratio, but a lot of people don’t. Then, when the higher property taxes hit after 1st year and the recent spike in home owners insurance, some people are probably putting 55%+ of income into housing.
YIKES!
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- Jul 29, 2014
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- Jul 29, 2014
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I don't think the Fed can keep rates up(not buying MBS)for very long, 3-4 months....Remember it's ok to destroy the SM, and even chip away at the bond market but the housing market is twice as big as both combined and we saw what happened in 2008....they will stop short and reverse course somewhere this fall IMO...
- Sep 4, 2014
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I don’t disagree that they won’t raise and keep them there. But they also won’t revisit the lows we’ve seen over the last few years, imo. You also have a correlation between housing and rates. So the cooling is at least in part due to the current uptick trajectory we’ve been seeing.
So between defaults or at minimum delinquencies in other areas of credit, and the damage it will do to scores, plus a market that will still be higher than it was a decade ago, even a median 5-6% 30 year will be out of reach, imo.
- Nov 16, 2017
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Yeah so few things here.
First, as to your question:
DU - Automated Underwriting System, Desktop Underwriter - Fannie Mae
LP - AUS Loan Prospector - Freddie Mac
refi plus - a no documentation loan for those current on their mortgages that were automatic approvals provided the P&I payment was reduced. Essentially it helped keep the ship from capsizing by having rubes - I mean customers - refi their loan for a slightly lower payment and longer term thus adding stability to the MBS (mortgage backed securities) market by having Joe Average throw good money after bad while the property speculators dropped those underwater homes like they were radioactive.
3.0 - because this would be the third iteration of this silver bullet by the GSEs (government sponsored entities - aka Fannie Mae, Freddie Mac and Ginnie Mae - although the later had programs through FHA)
Your lender was offering those terms because that's what LP (and I'm going out on a limb that this was either a Freddie Loan or VA) gave an automated approval for. Mysteriously the non-VA people I had qualifying with 50% DTI and not at favorable LTVs either were mostly flagged for first time homebuyer programs. Meaning political direction had come down on the GSEs to get more first time homebuyers loans. This pattern with <insert demographic flagged by someone as underserved> has been repeating over and over in the industry. It started with the rewrite of the Community Reinvestment Act and the virtual take over of the GSEs of purchasing of loans to be packaged as MBS.
Don't worry - Dodd Frank fixed everything....also, I'd like to sell you the Buckman Bridge. Make the check for 10,000 out to cash. I'll tell you where you can leave it and pick up the deed. I literally chuckle (as I'm sure the people that passed it do) every time I hear the name; as there is perhaps no bigger middle fingers that could have been given to the American people than to name the bill designed to "correct the issues in the industry" after two of the biggest profiteers off of the previous methods of grift in industry. But I digress...
Yes, there are going to be a ton of foreclosures - starting when the panicked investors realize they can't sell the properties that are collapsing in value and simply stop paying the mortgage.
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- Jul 29, 2014
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Yes and no.....If there are less qualified buyers in the market due to higher rates and still pretty low inventory that creates a larger pool of renters and will keep rent levels close to where they are at now. 85% of the investment purchases that we've closed over the last 2 years were cash deals....That's not to say they aren't leveraged somehow and in fact we are SLAMMED with cash out HELOC's on both primary and investment properties over the last 2-3 months.
- Nov 16, 2017
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Uh yeah, and what happens when the equity that exists merely on paper disappears? Kinda my point here. I had qualified borrowers who couldn't get an offer accepted because you had loons (and not just cash buying ones) competing at amounts over the asking price. Many of those "cash buyers" were actually using HELOCS to purchase properties with the false equity cash and with no plans on actually being a landlord, merely hold and sell. At least they'll have one to live in.
That's to say nothing on the wider effects of what is certain to be a recession on the larger economy and the ATR.
But I'm not panicked as this is far from my first rodeo. This is why you build your book of business and your business relationships deeply. Refis are all well and good, but purchases should always be your engine. No matter what the rate, people will always need housing - and I want to eat in six months too. For the many, many people that I couldn't get into a home during this crazy, I just keep the message of patience going. For many there will probably be damaged credit that will require the right products and then refis down the road to get them out of those **** terms once they burn off the derogs.
If they can stop fiddling long enough the market will find equilibrium and we'll be chugging along nice and steady. It always has been that way.
- Nov 7, 2015
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Awesome write up. Thanks!
My mortgage was traditional, but we had enough in portfolio to put the 20% down. Maybe that’s why we got approved for the higher DTI loan? We have good credit too.
It’s amazing how many people are house poor, because they just “had to have” the open floor plan, all white kitchen, and wine fridge, that some property flipper slapped on there instead of repairing the plumbing, fixing the roof, etc.
There’s a lot of stupid money out there propping up this market, and sounds like a lot of it is not end-user money either.
- Jul 29, 2014
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Not sure, maybe for a lot of shoestring investors but most of our clients have 10,15-20 and sometimes more rental units that they have decided to use as fixed income instruments to replace the bonds in their portfolio. If rental rates stay high on something you own outright you just collect the rent until the market comes back which it will at about another 20-25% increase...at that point you dump and go back to equities and bonds which will be toast for the next 3-5 years minimum save for bear market rallies.... Why do you think large hedge funds/Institutional funds started buying rental properties 1.5-2 years ago? To replace bonds.....
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- Nov 16, 2017
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I get the economics, but that's a much different client you're working than what I've got. Admittedly my developed base is primarily rural; but typically like myself, the rural by choice crowd. I've got a handful of uber investors that would have north of 15, but I'm not sure even my biggest hits 20. Mostly what I have in the BOB are people who have worked with me for years that are true long-term landlords who mortgaged and then paid down the investments in a bid to provide more predictability to their retirement income.
The top 5%-10% of those in our system are always going to pretty much be fine if they aren't total chuckleheads.
