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Not sure why you guys continue to inject the savings rate into this discussion... if people are actually "saving" at some sort of "rate" that would somehow make you more "comfortable", they would then be spending less.
In any event, home prices falling or stagnating is a good thing. Incomes continue to rise. The Baby Boom Generation (the largest and wealthiest generation to ever walk the planet) will begin to retire in the next 2-3 years and will carry through over the next 2 decades.
You see these things are negatives. I see them as extremely POSITIVE!
As I said earlier, if the Bush tax cuts remain intact and are made permament, we all are in for a long run of sustained solid economic times. Should congress eventually remove the tax cuts, well... all bets are off!!
Savings are what cushion economic downturns. Freshmen in college know this...
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Freshmen in college plan for economic downturns?? Must be something new...
I think he meant it's econ 101, not saying they retain it or apply it, they just for that time period know it.
__________________
At what point then is the approach of danger to be expected? I answer, if it ever reach us, it must spring up amongst us. It cannot come from abroad. If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen, we must live through all time, or die by suicide.
Mortgage Lender Implode O Meter, that site covers who's gone out really well, although they're a bit heartless to my peers, or in this case they'd be ex peers.
Here's a good explanation of a debt based economy and how it happens, GSE's he's mentions are Fannie Mae and Freddie Mac, as well as FHA and the VA loans to a lesser degree, mainly Fannie and Freddie who both have a goodly portion of Alt A like stuff but with very high credit standards, usually a 700 plus score. True Alt A starts just below there and goes down to about 620 and then subprime is below that generally or that's how it has been it's changed since this came out.
__________________
At what point then is the approach of danger to be expected? I answer, if it ever reach us, it must spring up amongst us. It cannot come from abroad. If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen, we must live through all time, or die by suicide.
This is the explanation for the Yen carry trades, how they work and what's going on in markets.
It's imperitive to understand this to understand how big a circuit board the various governments are trying to manage.
The Yen carry trade I explained is simply water running downhill or maybe a magnet and some metal is a better analogy, anyway it wasn't intended to flow to us but since we consume more and pay more for money it gravitated towards us.
I think the implications are obvious, if you shut things like this down it's going to be very interesting to say the least.
__________________
At what point then is the approach of danger to be expected? I answer, if it ever reach us, it must spring up amongst us. It cannot come from abroad. If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen, we must live through all time, or die by suicide.
This one is one of my all time favorite studies in human stupidity. Ethanol is possibly the dumbest form of energy of all time.
This is a long in depth article chiefly about inflation, my dad lives on a farm and is planting corn this year... duh wonder why?
It's too expensive to feed corn to cattle now so you can blame that 20$ a pound steak comming down the pipe directly on the idiots that dreamed up ethanol.
__________________
At what point then is the approach of danger to be expected? I answer, if it ever reach us, it must spring up amongst us. It cannot come from abroad. If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen, we must live through all time, or die by suicide.
Read the posts by the kitty lady, she's an Alt A lender insider, the telling thing about Alt A and the real key for you folks outside mortgages is the 95% ltv.
That is the death of a lender when it loses the 100% ltv level of lending, because that means a ............ down payment.
So in simple terms loan volumes plummet, costs don't, death ensues shortly thereafter and the next leg down hits.
Alt A goes, I'd be what's the word.... it's opposite of tall the market... hmmmm because, you want the truth.... you can't handle the truth..
The truth is every lender that can't fund loans of 100% ltv's will get crushed, the decider on this astonishingly isn't GWB, it's Wall Street, if they cut the lines of credit to fund loans it's see ya later wouldn't want to be ya.
She puts it pretty well, scared young Wall Streeters getting very harsh tounge lashings from guys they thought were buddies above them means they're going to freak and start stepping on these lenders like they were fire ants.
Oh and BTW Alt A is huge, which for laymen again means much more than Subprime, it means...... You won't get a mortgage unless you qualify.... no really qualify or have really really good credit that's probably smart long term. Short term it's devastation in a box.
This all goes to what I was saying about things being connected, about this being a train driving the action, these lenders we're speaking of, Alt A and Subprime, all get funding from the SAME SOURCE, Wall Street, not banks because they can't do this many risky loans or they'd get imprisoned.
Which means at least 50% of the market or the market as it's grown now is teetering on the brink of extinction which would leave only in essence, Fannie and Freddie and FHA and VA to do 100 no money down financing, FHA has a 3% down but you can get around that easily.
The Alt A lenders can't go, it would annihilate the West Coast and East Coast markets... annihilate them.
__________________
At what point then is the approach of danger to be expected? I answer, if it ever reach us, it must spring up amongst us. It cannot come from abroad. If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen, we must live through all time, or die by suicide.
~Abraham Lincoln Lyceum Address
Last edited by conraddobler; March 15th, 2007 at 08:30 PM.
It is SOOOOO far and few between that a borrower actually has a downpayment anymore. I suppose many people just do it that way because it's available, but I couldn't imagine the reduction in volume that would occur if every loan required at least 5% down - PLUS CLOSING COSTS!!!!
So, here you are, Mr. Borrower, with a standard $240,000 home. Well, you gotta bring $12K to the table AND you gotta pay your $5000 in CC and prepaids on top of that.
That is a totally atypical borrower. You couldn't imagine the number of times when I ask a borrower, "So, how much money down are you planning to use?" You wanna hear the most common response? I'd say $2000 is the most common answer if it's not $0.
Conrad still hasn't even explained the reserve requirements. You have the borrower above bringing $17K to the table (down + cc + prepaids), but he STILL can't qualify for reserves because he needs 3 months or 6 months worth of provable reserves. So, on top of the $17K he's gotta pony up, he's gotta have about $8K to $15K in liquid assets sourced and seasoned for at least 2 months! Again, a very atypical borrower.
You wanna hear a very common answer to my assets questions?
Me: "Sir, how much do you have in checking?"
Borrower: "Oh, about $500 or so."
Me: "......"
Me: "OK, then. How much do you have in savings, such as a savings account, 401K, stocks, bonds or any other type of liquid assets?"
Borrower: "Well, I've been putting into a 401K and I think I'm up to about $1800 now."
I think he meant it's econ 101, not saying they retain it or apply it, they just for that time period know it.
Precisely. It is one of the first thing you learn in any economics class. You can pretend that the economy isn't heading for a downturn but to dismiss personal savings in the grand scheme of the American Economy only makes your entire arguement seem like a grand facade.
I've said all along that what's keeping the economy strong is the consumer, so far you can punch them flat in the face and they'll come back spending and spending and spending time after time.
My opinion is that the American consumer is unstoppable until you simply won't give them more money then they stop.
The question you have to ask yourself is with a negative savings rate, tightening credit standards and now falling home prices or at least stagnant prices nationwide, where's the money comming from?
I guess the money fairy.
We are an addictive society.
__________________
In politics, nothing happens by accident. If it happens, you can bet it was planned that way.
Franklin D. Roosevelt
"Those who can make you believe absurdities can make you commit atrocities." --Voltaire
I've found this thread extremely interesting and have learned quite a bit.
In its most simple form, the economy appears to rely heavily on consumer spending which is made up mostly of $$ the consumer really doesn't have to spend in the first place. Am I on the right track?
Yes.
__________________
In politics, nothing happens by accident. If it happens, you can bet it was planned that way.
Franklin D. Roosevelt
"Those who can make you believe absurdities can make you commit atrocities." --Voltaire
I've learned a lot working on some of this, most of it I'd been taught before it just never really hit me what all the jabber about the gold standard was.
This whole mess, our whole economic mess is simply a fiat currency gone the way it always, always, ALWAYS does.
A fiat currency is backed by nothing but the governments word, obviously it starts out slowly backing away from it's promises, it lies, it deceives but not all of that was intentional in the beginning, it's just too easy to do.
It may even mean well but what you see is simply the fruits of our government working the market.
Money isn't evil or bad, it's a method of exchange, it's supposed to represent the value of your production, no more, no less and it's used to trade for other things you want, ie if you want to buy a sheep but your're a boot maker you don't have to find a guy with sheep who needs boots.
Gold eventually became the standard by which money was based on, even paper money was just a reciept for gold that you could exchange for the actual gold at any time you wished. This meant what you were paid was agreed to by all parties and totally based on an objective standard that no one could manipulate.
A fiat currency can float be inflated or deflated, in essence it can be manipulated... that's the operative word.
"History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible, to maintain their control over governments, by controlling money and its issuance."
- James Madison -
In essence the gold standard simply protects you from the cheats, the stated mission of the cheats always begins but we know a better way, the market is so complicated mr. consumer you'd better let us handle it.....
From there the end is always the same, growing corruption, growing lies, growing deceit then total eventual breakdown.
The above is an excellent website, money isn't evil or good men and women are. The problem with our current system is we don't control it. The government produces nothing but controls the means of exchange in a free society....
Why?
It's stated reason starts out as one of protection, then it moves into the role of dominance and before you know it we're all slaves to it instead of what the founding fathers envisioned it's exactly what they detested, all powerful.
Read history, it's all there, it's the same story every time, all the time, every country ever has gone through roughly the same stages and every time eventually the people put the money system back to a gold system and then the government eventually as people forget starts the cycle all over again.
It's a simple struggle for power over our lives, the government always wants more, our founding fathers put things in our constitution to fight this and we give any of it back at our extreme peril.
The Fed is one such give back.
Our leaving the Gold Standard was another.
Now they'll attack our individual liberties....
It's pretty obvious where all this is going.
All this cheap money isn't real, it's just inflating the money supply at a whim to fix market problems but each and every step they take only makes the unintended consequences meter spike higher, they think they can control this but really they can't over time it always moves to correct itself, you can't avoid pain by faking people out forever only over the short run.
If there were a gold standard and our gold kept getting shipped over seas and we could see the pile shrink I think people would easily understand how this cannot continue. They've done exactly the same thing by allowing imbalances that over time will break us, they just don't want you to see that so you won't get upset, it's that simple.
__________________
At what point then is the approach of danger to be expected? I answer, if it ever reach us, it must spring up amongst us. It cannot come from abroad. If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen, we must live through all time, or die by suicide.
~Abraham Lincoln Lyceum Address
Last edited by conraddobler; March 16th, 2007 at 11:09 AM.
It is SOOOOO far and few between that a borrower actually has a downpayment anymore. I suppose many people just do it that way because it's available, but I couldn't imagine the reduction in volume that would occur if every loan required at least 5% down - PLUS CLOSING COSTS!!!!
So, here you are, Mr. Borrower, with a standard $240,000 home. Well, you gotta bring $12K to the table AND you gotta pay your $5000 in CC and prepaids on top of that.
That is a totally atypical borrower. You couldn't imagine the number of times when I ask a borrower, "So, how much money down are you planning to use?" You wanna hear the most common response? I'd say $2000 is the most common answer if it's not $0.
Conrad still hasn't even explained the reserve requirements. You have the borrower above bringing $17K to the table (down + cc + prepaids), but he STILL can't qualify for reserves because he needs 3 months or 6 months worth of provable reserves. So, on top of the $17K he's gotta pony up, he's gotta have about $8K to $15K in liquid assets sourced and seasoned for at least 2 months! Again, a very atypical borrower.
You wanna hear a very common answer to my assets questions?
Me: "Sir, how much do you have in checking?"
Borrower: "Oh, about $500 or so."
Me: "......"
Me: "OK, then. How much do you have in savings, such as a savings account, 401K, stocks, bonds or any other type of liquid assets?"
Borrower: "Well, I've been putting into a 401K and I think I'm up to about $1800 now."
Me: "...."
I see you're in the business too so you know what I mean when I say if they require down payments the whole ball game is over in a very big fashion.
At some point they will they have too, it's a universal concept, it's like income documentation, like credit, like any part of the loan decision.
Over time it was put there for a good reason, it's not a new concept, the lack of a down payment is.
I will say if someone's credit is good enough that you can in essence forget about it and be safe enough.
The question is when the dust settles where that magic score level is and at what level of income documentation because everyone then below that is now basically not homeowner material anymore and that determines the size of the problem.
I've been in the business long enough to have worked for direct lenders where I had to foreclose on people.
The reason down payments are there pops out pretty quickly when you foreclose on a few houses, by the time they leave they trash the place, your wonderful 240k house is not primed for a fire sale price of about 180 with holes in the drywall, raw sewage in the basement or unspeakable things in the home. Scratched floors, urinated on walls, it's pretty bad stuff.
Then you've got to eat the interest while you foreclose, spend about 6 to 7 k for an attourney to get you a piece of paper saying it's yours again, pay a realtor commission of 5 or 6%, even the full 7% sometimes it goes on and on.
You're extremely lucky if you get back 80% of the value, which is why over time the level of conforming loans not requiring private mortgage insurance is established at 80%, you put that much down and it's considered a safe loan, above that is risky.
So if you default on a 100% ltv loan that actually dropped in value, the lender without PMI get's killed, the lender with PMI on the loan does ok but the PMI company dosen't etc etc. Subprime and Alt A have no PMI... it's all on them.
What's going on is a total rewrite of credit policies on the fly and until it stabilizes the size of the damage to the housing market is impossible to gauge.
__________________
At what point then is the approach of danger to be expected? I answer, if it ever reach us, it must spring up amongst us. It cannot come from abroad. If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen, we must live through all time, or die by suicide.
~Abraham Lincoln Lyceum Address
Last edited by conraddobler; March 16th, 2007 at 11:53 AM.
Honestly, the "magic number" should be at least 660, if not 680. I wish I knew the statistical breakdown of FICO ranges, but I'd suspect that 680+ only represents about 30% of the population, so loans would be very few and far between....
Honestly, the "magic number" should be at least 660, if not 680. I wish I knew the statistical breakdown of FICO ranges, but I'd suspect that 680+ only represents about 30% of the population, so loans would be very few and far between....
LOL
I'm not laughing at you it's just funny and I can tell you obviously work in the business, everyone that does can't believe how high the average score is, but that's normal, you only see a certain subset that constantly wants money, very good credit people are rare birds in our business because they rarely borrow.
I couldn't believe that over 3 times as many people have 800+ scores than have a score anywhere below 600.
It's about 15 percent of the people who used to be able to buy a home but now can't and will be shut out of a mortgage but that's a tough percentage to swallow, in effect it's huge.
Imagine what would happen to car makers if tomorrow you removed 15% of the buyers, chaos and destruction.
Edit grrr that is a Canadian chart, what the heck do they post that for?
Who knew Canadians had that high of scores eh?
Actuall the American score chart I have is in a pdf you can download here... it's actually a bigger percentage of people that will get shut out using that chart. http://www.myfico.com/Downloads/Brochures.aspx#uycs
__________________
At what point then is the approach of danger to be expected? I answer, if it ever reach us, it must spring up amongst us. It cannot come from abroad. If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen, we must live through all time, or die by suicide.
~Abraham Lincoln Lyceum Address
Last edited by conraddobler; March 16th, 2007 at 12:15 PM.
