All Encompassing Mortgage and Real Estate Thread

[Neonmoon 38,126]

Just got word. Last day to lock is 3/8/2023 before they price in the new LLPAs. 

[Nice Guy Eddie 13,311]

Will this be a major shift if developers start to build entire communities of nothing but rental homes? 

https://www.houstonchronicle.com/business/real-estate/article/canadian-homebuilder-starts-build-to-rent-houston-17746039.php

Quote

Now under construction with the first houses expected to be available for lease in April, Empire Rental Living at Dellrose will consist of 182 single-family detached homes in Dellrose, a master planned community north of U.S. 290 at Becker Road in Hockley. The community is about 35 miles northwest of downtown

 

[Captainant 26,917]

1 hour ago, Nice Guy Eddie said:

Will this be a major shift if developers start to build entire communities of nothing but rental homes? 

https://www.houstonchronicle.com/business/real-estate/article/canadian-homebuilder-starts-build-to-rent-houston-17746039.php

 

Shit should be illegal. Literally just rent seeking and denying residential ownership from more people. 

[LebongJames 1,770]

8 hours ago, Nice Guy Eddie said:

Will this be a major shift if developers start to build entire communities of nothing but rental homes? 

https://www.houstonchronicle.com/business/real-estate/article/canadian-homebuilder-starts-build-to-rent-houston-17746039.php

 

We are a subcontractor in the RNC business. We are currently doing 4 of these type of projects with another dozen in the pipeline. So yes more and more of these communities are coming but the developers are also having issues with securing funding. I am working with Empire on two other projects, one in Kyle and one in New Braunfels. 

[LebongJames 1,770]

7 hours ago, Captainant said:

Shit should be illegal. Literally just rent seeking and denying residential ownership from more people. 

Should apartments be illegal? Homes are expensive and a lot of people can’t afford them especially down payments and closing costs. These communities will look better in 10 years than a low cost traditional SF community where the yards and homes are not maintained. I would prefer these down the street from me compared to the lowest product Lennar, Rausch Coleman and LGI are putting out.

[We’reTexas 1,467]

18 minutes ago, LebongJames said:

Should apartments be illegal? Homes are expensive and a lot of people can’t afford them especially down payments and closing costs. These communities will look better in 10 years than a low cost traditional SF community where the yards and homes are not maintained. I would prefer these down the street from me compared to the lowest product Lennar, Rausch Coleman and LGI are putting out.

Yeah how are those different than apartments? Private development isn’t denying home ownership, failure to build enough housing is. 

[Captainant 26,917]

8 minutes ago, LebongJames said:

Should apartments be illegal? Homes are expensive and a lot of people can’t afford them especially down payments and closing costs. These communities will look better in 10 years than a low cost traditional SF community where the yards and homes are not maintained. I would prefer these down the street from me compared to the lowest product Lennar, Rausch Coleman and LGI are putting out.

Apartments are specifically different and more dense than single family housing. And lmfao if you don't think they wouldn't build cheap shit boxes to slum lord over. It's got the best profit margin when you want to advertise it as "affordable". 

I don't think a company owning all of the property and building a business model for merely existing is what would improve a community, no. I think that's how you drive better shareholder value, but not how you make people's community better. 

[Nice Guy Eddie 13,311]

I don’t necessary see it as unethical and definitely not illegal but I find it a shame that if real estate starts to shift towards rental home communities as opposed to building communities with owner occupied homes. It’s a bad trend if this progresses.

the example that I linked above is a rental community in Hockley.  Hockley is effectively an exurb of Houston if not just a outlying small town. That is where people should be buying homes not renting.  People definitely make bad financial decisions all the time but you don’t look to indefinitely rent a starter home. 

[Gravy Train 970]

On 1/28/2023 at 5:51 PM, We’reTexas said:

Yeah how are those different than apartments? Private development isn’t denying home ownership, failure to build enough housing is. 

They're the same as apartments, albeit an asset class which the property developer/manager can unload at nearly any time for some measure of appreciation.  Land value aside, most multifamily (apartments) are beholden to competition from rivals on the basis of what looks newer, cleaner, more desirable.  They all still smell funny on the inside with the same cheap finishes.

These developments could be planned for single-family homes, but instead have been developed specifically for rent-lording.  Also, I'm of the opinion that building more housing isn't the solution when insitutional and mom-and-pop investors have been buying up multiple properties (in the recent era of cheap capital) for near-effortless speculation.

All of this investment activity is occuring within price categories previously dedicated to the starter-home family.  That family now has no option to buy in most metro cores, fucking them out of an earlier life opportunity of financial security.  

Then again, things have changed where it's cheaper to rent than own in nearly every market in the U.S. https://www.marketplace.org/2023/01/20/renting-is-now-cheaper-than-owning-in-most-of-the-country/

Prices for SFHs haven't cooled as much as they should be, builders paused many of their starts, buyers of new homes backed out of their contracts, and nobody wants to sell when it implies giving up a cheap mortgage.

[Incredulity 11,189]

“We need more housing”

”We want to build a bunch of housing”

”not that housing, wrong XXXXX”

 

fucking idiot world 

[We’reTexas 1,467]

33 minutes ago, Gravy Train said:

These developments could be planned for single-family homes, but instead have been developed specifically for rent-lording.  Also, I'm of the opinion that building more housing isn't the solution when insitutional and mom-and-pop investors have been buying up multiple properties (in the recent era of cheap capital) for near-effortless speculation.

 

Well, they are planned for SFH. I know SFH = ownership is a Texas mindset, but that’s not the case in HCOL areas and unfortunately may increase. I just take the opposite view of the situation. That investors see yield in affordable SFH gives up the whole game - there’s scarcity because we haven’t built enough housing, and in much of the country that’s primarily due to decades of regulatory obstruction of development. I see this and think it’s a shame that many folks are priced out of starter homes in the Houston exurbs, but I don’t see anything wrong with it. 

[gmr548 16,312]

Shit should be illegal. Literally just rent seeking and denying residential ownership from more people. 

What? Supply is supply. The only difference between a project like that and an apartment complex is physical design of the buildings.

[Incredulity 11,189]

He would only be satisfied if it was owned by HUD.

[HamsterHookah 112]

1 hour ago, gmr548 said:

What? Supply is supply. The only difference between a project like that and an apartment complex is physical design of the buildings.

I could see the argument if you are arguing for sustainability, but on general principle of housing supply, it's a net positive.

[Hefeweizen 5,222]

Build for rent is a specific market class much like mobile home developments.  Arguing against them is an argument against the current economic system.  Property tax and interest rates are the fault here, along with capital looking for return.  
 

Railing against the people building to meet demand seems counterproductive.  Instead work on ways to facilitate home ownership through tax incentives and lower entry costs (by reducing regulatory burden, increasing supply by decreasing time for entitlement of projects, and facilitating utility availability for raw land).   Unfortunately none of those are sexy for politicians.

[LebongJames 1,770]

 

On 1/28/2023 at 5:52 PM, Captainant said:

Apartments are specifically different and more dense than single family housing. And lmfao if you don't think they wouldn't build cheap shit boxes to slum lord over. It's got the best profit margin when you want to advertise it as "affordable". 

I don't think a company owning all of the property and building a business model for merely existing is what would improve a community, no. I think that's how you drive better shareholder value, but not how you make people's community better. 

Garden style apartments are no more dense than most of these projects. A five story apartment with a parking garage below it is but that’s not the competition for these properties. We are doing a 46 unit project in San Antonio that no apartment developer would touch because of the topography and size.

The second point is beyond short sided and makes no sense. What do you mean a business model of merely existing? They are builders and developers and have sold SF homes and developed communities for years. That is their business model, they are just diversifying what they are bringing to the market and what their customers are telling them. 

[Nice Guy Eddie 13,311]

https://www.cnn.com/2023/01/28/tech/chatgpt-real-estate

Quote

“It [ChatGPT writing property descriptions and documents] saved me so much time,” Johannes told CNN, noting he made a few tweaks and edits to ChatGPT’s work before publishing it. “It’s not perfect but it was a great starting point. My background is in technology and writing something eloquent takes time. This made it so much easier.”

I guess ChatGPT can allow real estate agents more time to find buyers and earn their 6%.  

[closetohumping 17,302]

1 hour ago, gmr548 said:

What? Supply is supply. The only difference between a project like that and an apartment complex is physical design of the buildings.

This hurts those who rent out their SFH

[Captainant 26,917]

15 hours ago, Incredulity said:

“We need more housing”

”We want to build a bunch of housing”

”not that housing, wrong XXXXX”

 

fucking idiot world 

We need to either be: building denser housing, or allowing individual owners rather than businesses to realize the gain from ownership of SFH's. Cheering on for-profit entities squatting in what used to be a family home and source of generational wealth is just useful idiots cheering on the rich getting richer.

1 hour ago, Incredulity said:

He would only be satisfied if it was owned by HUD.

Despite your inability to have an honest discussion, I've been pretty persistent in saying that I think it would be better if the family living in a single family home, OWNED that single family home. Rather than an outside investor or entity that doesn't give a fuck about that community owning that home and realizing the real estate gains from it.

Your insistence on going to this place of "hurrr durrrr SOCIALISM AMIRITE GUIZEE??" is an old schtick. Go surf some more parler and find a new slant

[Incredulity 11,189]

3 minutes ago, Captainant said:

We need to either be: building denser housing, or allowing individual owners rather than businesses to realize the gain from ownership of SFH's

The best part is when you and yours start in with the, "predatory lending" horseshit from the 1995-2008 home ownership boom.

 

[Captainant 26,917]

1 minute ago, Incredulity said:

The best part is when you and yours start in with the, "predatory lending" horseshit from the 1995-2008 home ownership boom.

 

I'm sorry, was there an argument or point you're trying to get across there? Lol

Because if you're arguing that the "home ownership boom" from 95-08 was sustainable growth and not just smoke and mirrors, I would point out to you what happens to home ownership after 2008 and how it actually ends up lower than in 1995. Crazy how considering a whole dataset can change your interpretation of a specific portion, right?

[Incredulity 11,189]

The government went full blown on getting anyone and everyone to own a house from the 1990's to 2008.  

https://www.theatlantic.com/business/archive/2011/12/hey-barney-frank-the-government-did-cause-the-housing-crisis/249903/

Quote

For most of his career, Barney Frank was the principal advocate in Congress for using the government's authority to force lower underwriting standards in the business of housing finance. Although he claims to have tried to reverse course as early as 2003, that was the year he made the oft-quoted remark, "I want to roll the dice a little bit more in this situation toward subsidized housing." Rather than reversing course, he was pressing on when others were beginning to have doubts.

 

 

Subsequently, the housing crisis was pinned on the lending industry as "predatory lending".

[jimmyjazz 45,192]

It was predatory in the sense that loans were being made to people who had no business taking out those loans.  The lenders knew it, but many of the buyers didn't.  You can certainly argue that they should have been more aware of their affordability limits, but taking advantage of an ignorant person is not wholly the fault of the ignorant person.

[Wulaw Horn 18,918]

The lending crisis is so misunderstood and overblown it’s stupid. 
we should be making loans to people with suck dick credit. It’s the American dream. It’s how wealth is built. It strengthens communities. There basically aren’t a ton of foreclosures. 
what we shouldn’t do is then collateralize that debt, call it A paper, sell it on the secondary market and then leverage that debt 100X’s over. 
mid the market still worked like George Bailey explained it in “it’s  a wonderful life” 2008 wouldn’t have been a housing crisis it would have been a pimple on an elephants ass and easily containable/fixable. 
it wasn’t lenders (and I wasn’t a lender then) who turned they into an economy wrecking shit storm it was the Wall Street guys with their bright ideas. 

[Gil Bang 25,651]

I'm curious about how this housing is entitled.  Is each home on a separate parcel?  Could a given home, in theory, be sold? 

[BabaYaga 15,173]

1 hour ago, Wulaw Horn said:

The lending crisis is so misunderstood and overblown it’s stupid. 
we should be making loans to people with suck dick credit. It’s the American dream. It’s how wealth is built. It strengthens communities. There basically aren’t a ton of foreclosures. 
what we shouldn’t do is then collateralize that debt, call it A paper, sell it on the secondary market and then leverage that debt 100X’s over. 
mid the market still worked like George Bailey explained it in “it’s  a wonderful life” 2008 wouldn’t have been a housing crisis it would have been a pimple on an elephants ass and easily containable/fixable. 
it wasn’t lenders (and I wasn’t a lender then) who turned they into an economy wrecking shit storm it was the Wall Street guys with their bright ideas. 

And the ratings agencies legitimized the "A paper" by rating horse shit as gold.  The speculation and securitization would have still taken place, but not at the levels we saw.  There was next to zero transparency nor accountability as lenders were playing with house money

[Wulaw Horn 18,918]

39 minutes ago, BabaYaga said:

And the ratings agencies legitimized the "A paper" by rating horse shit as gold.  The speculation and securitization would have still taken place, but not at the levels we saw.  There was next to zero transparency nor accountability as lenders were playing with house money

Yep.  And then the wrong lesson was learned.  We learned that it was a bad idea to loan money to people with Shitty credit scores b/c 3% of them might default instead of 1.5 (oh noes the horror) instead of learning that wall street fucks shit up.  But, by all means, if we can pin it on the little guy trying to make his way in the world and absolve Goldmen of any responsibility lets get in line to do that.  

Harry the Homeowner is going to fight like hell to stay in his home.  When you loaned 100% to bad credit risks that's obviously going to juice the foreclosure rate somewhat- but it never got all that bad. I believe the foreclosure rate topped out at about 3.6% and that was in January of 2011.  Lets say that the bank still had all those assets on their own books and they had to go to foreclosure sale and then list with an agent.  Lets say they had 1B of total loans at median loan amount of $213,800.00.  That's 4,700 home loans.  That's 168 actual foreclosures.  If you assume, say, a 10% haircut (remember- this is in a world where we didn't bring on a major recession by collateralizing all this shit) on the foreclosures that's about a 3.6M loss on the foreclosed houses.  The interest rate then was roughly 4.5%.  So, they were collecting roughly 47M in interest on the performing loans, against a loss of 3.6M.  And this is what brought a melt down to the whole world?  This is why we can't give loans anymore to shitty borrowers?  

We have enough surplus in the FHA account right now that we could basically get rid of the PMI requirement altogether- and loan 96.5% of any loan amount to any moron that can fog a mirror and we'd be A-ok.  

[Incredulity 11,189]

would rep more if could^^^^

[Hefeweizen 5,222]

1 hour ago, Gil Bang said:

I'm curious about how this housing is entitled.  Is each home on a separate parcel?  Could a given home, in theory, be sold? 

Yes, generally it’s platted into individual lots because it increases the flexibility of the owner to change course and start selling the lots fee simple.

[Neonmoon 38,126]

1 hour ago, Wulaw Horn said:

The lending crisis is so misunderstood and overblown it’s stupid. 
we should be making loans to people with suck dick credit. It’s the American dream. It’s how wealth is built. It strengthens communities. There basically aren’t a ton of foreclosures. 
what we shouldn’t do is then collateralize that debt, call it A paper, sell it on the secondary market and then leverage that debt 100X’s over. 
mid the market still worked like George Bailey explained it in “it’s  a wonderful life” 2008 wouldn’t have been a housing crisis it would have been a pimple on an elephants ass and easily containable/fixable. 
it wasn’t lenders (and I wasn’t a lender then) who turned they into an economy wrecking shit storm it was the Wall Street guys with their bright ideas. 

Okay, fuck it. I've read way too many books on this to not reply. 

The lending crisis is so misunderstood because there were soo many different people responsible for it. 

There is nothing wrong with collateralizing mortgage debt and selling it on the secondary market. It literally has been happening since Fannie Mae was created by the National Housing Act in 1938. The whole point is liquidity. They need to collateralize the debt and sell it, so they can buy more loans to collateralize, so lenders can offer more loans, and more people can become homeowners. 

Responsible Party #1 - Ronald Regan signed the Garn-St Germain Depository Act of 1982 which deregulated the banks and allowed them to offer adjustable rates mortgages, balloon payments, etc. Deregulation = increased risk

Responsible Party #2 - In 1994 JP Morgan created the Credit Default Swap financial derivative product in order to get risk of their books when they wanted to open a line of credit for 5 billion for Exxon for the Valdez spill. They had to keep 8% of capital in reserves for outstanding loans, so to get the risk off their books, they sold the risk to someone else in a Credit Default Swap. Later on, these swaps were used to bet against the collateralized debt obligations. 

Responsible Party #3 - President Bill Clinton signed the Gramm-Leach-Bliley Act (GLBA) into effect in 1999. GLBA repealed Sections 20 and 32 of the Glass-Steagall Act, which had prohibited the interlocking of commercial bank and investment firms. 

Responsible Party #4 - The ratings firms that rated CDOs filled with subprime mortgages as AAA because everyone was paying them to do it, and they were making too much money. (special fuck you to these people)

Responsible Party #5 - SEC for not coming up with any rules or enforcing any of the existing rules. 

Responsible Party #6 - The "Greenspan Put". Alan Greenspan kept lowering interest rates any time there was a hint of trouble, creating huge bubbles that eventually burst. In fact, he probably deserves more blame than most, or the ratings houses that rubber stamped dogshit. 

Responsible Party #7 - Buyers of Mortgages (Fannie/Freddie/Banks/Investor) - They were making so much fucking money on Mortgage Backed Securities, they couldn't get enough of them. They literally were asking loan officer to do whatever it took to get more. 

Responsible Party #8 - Lenders & Loan Officers - There wasn't any rules like the Dodd-Frank act, so the private industry was supposed to be acting responsibly, not being greedy, and only loaning money to people that could pay it back? Wrong, the investors were saying give us more loans, we don't give a fuck, so lenders were more than happy to oblige. 

The answer is a lot of people were responsible. 

 

 

[jimmyjazz 45,192]

So the collapse of the housing market was driven by qualified borrowers going tits up?

Nah.  Wall Street's insatiable appetite for MBS products, with excessive leverage, etc. was certainly part of the problem, but when housing prices turned, it was the unqualfied buyers with ARMs, etc. who couldn't sustain, and those MBS products tanked.  (My words, just from observation, but my main point is that risky loans helped make those products risky.)

EDIT:  that was a half-assed attempt to characterize some of what @Neonmoon posted in much more detail.

Edited January 30, 2023 by jimmyjazz

[Wulaw Horn 18,918]

6 minutes ago, Neonmoon said:

Okay, fuck it. I've read way too many books on this to not reply. 

The lending crisis is so misunderstood because there were soo many different people responsible for it. 

There is nothing wrong with collateralizing mortgage debt and selling it on the secondary market. It literally has been happening since Fannie Mae was created by the National Housing Act in 1938. The whole point is liquidity. They need to collateralize the debt and sell it, so they can buy more loans to collateralize, so lenders can offer more loans, and more people can become homeowners. 

Responsible Party #1 - Ronald Regan signed the Garn-St Germain Depository Act of 1982 which deregulated the banks and allowed them to offer adjustable rates mortgages, balloon payments, etc. Deregulation = increased risk

Responsible Party #2 - In 1994 JP Morgan created the Credit Default Swap financial derivative product in order to get risk of their books when they wanted to open a line of credit for 5 billion for Exxon for the Valdez spill. They had to keep 8% of capital in reserves for outstanding loans, so to get the risk off their books, they sold the risk to someone else in a Credit Default Swap. Later on, these swaps were used to bet against the collateralized debt obligations. 

Responsible Party #3 - President Bill Clinton signed the Gramm-Leach-Bliley Act (GLBA) into effect in 1999. GLBA repealed Sections 20 and 32 of the Glass-Steagall Act, which had prohibited the interlocking of commercial bank and investment firms. 

Responsible Party #4 - The ratings firms that rated CDOs filled with subprime mortgages as AAA because everyone was paying them to do it, and they were making too much money. (special fuck you to these people)

Responsible Party #5 - SEC for not coming up with any rules or enforcing any of the existing rules. 

Responsible Party #6 - The "Greenspan Put". Alan Greenspan kept lowering interest rates any time there was a hint of trouble, creating huge bubbles that eventually burst. In fact, he probably deserves more blame than most, or the ratings houses that rubber stamped dogshit. 

Responsible Party #7 - Buyers of Mortgages (Fannie/Freddie/Banks/Investor) - They were making so much fucking money on Mortgage Backed Securities, they couldn't get enough of them. They literally were asking loan officer to do whatever it took to get more. 

Responsible Party #8 - Lenders & Loan Officers - There wasn't any rules like the Dodd-Frank act, so the private industry was supposed to be acting responsibly, not being greedy, and only loaning money to people that could pay it back? Wrong, the investors were saying give us more loans, we don't give a fuck, so lenders were more than happy to oblige. 

The answer is a lot of people were responsible. 

 

 

Did you miss the part where I said "call it A paper and then leverage it 100-1?"  Because I don't think that was happening back to 1938.  
The point remains- we learned the wrong and stupid lessons.  Bad credit buyers were stigmatized and lenders were made out to be sub human trash trying to talk the buyer into doing something the buyer didn't want to (which was unadulterated bullshit and absurd) while those behaviors were microscopically small in bringing about the housing crash and subsequent recession.  Look at the numbers on total foreclosures and delinquencies and what the average loan sizes were man. It just doesn't add up to be any kind of a problem at all if it wasn't for all the leverage that was layered on in a unique and a-historical way leading up to that collapse. 

[Wulaw Horn 18,918]

3 minutes ago, jimmyjazz said:

So the collapse of the housing market was driven by qualified borrowers going tits up?

Nah.  Wall Street's insatiable appetite for MBS products, with excessive leverage, etc. was certainly part of the problem, but when housing prices turned, it was the unqualfied buyers with ARMs, etc. who couldn't sustain, and those MBS products tanked.  (My words, just from observation, but my main point is that risky loans made those products risky.)

EDIT:  that was a half-assed attempt to characterize some of what @Neonmoon posted in much more detail.

Foreclosures PEAKED at 3.6%  that's not enough to crash and burn the system that George Bailey described in It's a wonderful life. It's just not.  I had the back of the envelope numbers for a scenario with an institution that had a hypothetical 1B in outstanding loans at stake. 

Of course they were riskier loans. They were also paying 8.5% when everyone else was paying 4.5%  that shit was priced into the loan!  And we have mortgage insurance!  

[Captainant 26,917]

2 minutes ago, Wulaw Horn said:

The point remains- we learned the wrong and stupid lessons.

We didn't learn any lessons. Lenders and the bad actors that caused the situation were bailed out and allowed to give themselves huge bonuses for doing such a great job in adverse market conditions (that they created)

[Wulaw Horn 18,918]

5 minutes ago, Captainant said:

We didn't learn any lessons. Lenders and the bad actors that caused the situation were bailed out and allowed to give themselves huge bonuses for doing such a great job in adverse market conditions (that they created)

The lending environment and who is given credit looks completely different than it did 15 years ago man. Which was my point in saying that we learned the wrong lessons (I.e. you can't lend money to the poor/bad credit borrower to buy a house).  It's a completely and totally different environment.   

[Wulaw Horn 18,918]

21 minutes ago, Neonmoon said:

Okay, fuck it. I've read way too many books on this to not reply. 

The lending crisis is so misunderstood because there were soo many different people responsible for it. 

There is nothing wrong with collateralizing mortgage debt and selling it on the secondary market. It literally has been happening since Fannie Mae was created by the National Housing Act in 1938. The whole point is liquidity. They need to collateralize the debt and sell it, so they can buy more loans to collateralize, so lenders can offer more loans, and more people can become homeowners. 

Responsible Party #1 - Ronald Regan signed the Garn-St Germain Depository Act of 1982 which deregulated the banks and allowed them to offer adjustable rates mortgages, balloon payments, etc. Deregulation = increased risk

Responsible Party #2 - In 1994 JP Morgan created the Credit Default Swap financial derivative product in order to get risk of their books when they wanted to open a line of credit for 5 billion for Exxon for the Valdez spill. They had to keep 8% of capital in reserves for outstanding loans, so to get the risk off their books, they sold the risk to someone else in a Credit Default Swap. Later on, these swaps were used to bet against the collateralized debt obligations. 

Responsible Party #3 - President Bill Clinton signed the Gramm-Leach-Bliley Act (GLBA) into effect in 1999. GLBA repealed Sections 20 and 32 of the Glass-Steagall Act, which had prohibited the interlocking of commercial bank and investment firms. 

Responsible Party #4 - The ratings firms that rated CDOs filled with subprime mortgages as AAA because everyone was paying them to do it, and they were making too much money. (special fuck you to these people)

Responsible Party #5 - SEC for not coming up with any rules or enforcing any of the existing rules. 

Responsible Party #6 - The "Greenspan Put". Alan Greenspan kept lowering interest rates any time there was a hint of trouble, creating huge bubbles that eventually burst. In fact, he probably deserves more blame than most, or the ratings houses that rubber stamped dogshit. 

Responsible Party #7 - Buyers of Mortgages (Fannie/Freddie/Banks/Investor) - They were making so much fucking money on Mortgage Backed Securities, they couldn't get enough of them. They literally were asking loan officer to do whatever it took to get more. 

Responsible Party #8 - Lenders & Loan Officers - There wasn't any rules like the Dodd-Frank act, so the private industry was supposed to be acting responsibly, not being greedy, and only loaning money to people that could pay it back? Wrong, the investors were saying give us more loans, we don't give a fuck, so lenders were more than happy to oblige. 

The answer is a lot of people were responsible. 

 

 

Apologies if my post sounded bitchy.  That wasn't the intent at all.

[Captainant 26,917]

3 minutes ago, Wulaw Horn said:

The lending environment and who is given credit looks completely different than it did 15 years ago man. Which was my point in saying that we learned the wrong lessons (I.e. you can't lend money to the poor/bad credit borrower to buy a house).  It's a completely and totally different environment.   

The derivatives market is right back to where it was, and firms are even more leveraged than they were in 2008. No doubt small buyers are getting priced out (following the trend of fewer resident/owners, more large businesses with many many renters) but the secondary markets that actually hold the mortgage for 99% of the lifetime of the paper are still doing what led to the 2008 meltdown. It's just that they haven't gotten unlucky again. Yet. 

[HamsterHookah 112]

I know we've talked a lot the last couple of years, mostly laughing at, the iBuyers and how they lost and folded, but I read this today and I think it might put our perennial sourpuss friend Captainant in a good mood to read about the man taking it on the chin here. This is a funny story we can all get behind and enjoy:

Quote

 

[Individual home-flipper Raad] Yousif punches in a code and swings open the door to his most lucrative 2022 flip, a two-bedroom town home in this development. He unloaded it last spring, just as the market was starting to sink. Big institutions from Silicon Valley and Wall Street were still on a buying binge, at times making unbelievable offers sight unseen. In this case a company called Opendoor Technologies Inc. in April paid $265,000—$30,000 above the five other bidders, he says.

Opendoor is now asking $218,000, a $47,000 loss, not including its fees and renovation expenses. But even that asking price is too high, Yousif says. After four price cuts, he smells blood. He’s eager to buy back the home he once owned. “It’s always about the right number,” he says. 

Yes if you find a market maker who is bad at market making, you should sell to them high and buy back low, like Yousif did. A market maker like that won’t last long, and many iBuyers didn’t, though Opendoor is still in the business. But you have to take advantage while you can. And there’s this:

Laurie Tayrien, a former schoolteacher, and her husband, Rick, love the new market. They just snapped up the deal of a lifetime for a Phoenix three-bedroom built in the 1980s. Surrounded by golf courses, below a mountain vista, it was quite an upgrade from their previous home, in a crime-ridden neighborhood.

In November the Tayriens paid $485,000 for what they call “their forever home.” In June the seller, Opendoor, had paid $646,800. That’s a 25% loss in just five months. …

The couple are busy on a $50,000 renovation of their kitchen, where plywood counters wait to be topped in quartz. The Tayriens have the cash in part because of a bungled bet by a big institution. “They rode a wave, and it’s crashing on them,” Laurie says. “It’s a corporation. I don’t feel bad for them.”

Of course not! What a feel-good financial story. “Giant corporations swooped into the market for homes and gave everyone cheap houses, because they were dumb.” In general, people tend to be suspicious of financial intermediation, because the intermediaries are making money and it feels like that must be at your expense. But here the intermediaries were losing money, and that had to be good for someone.

 

Bolded the parts that I think will make captainant smile.

[Wulaw Horn 18,918]

2 minutes ago, Captainant said:

The derivatives market is right back to where it was, and firms are even more leveraged than they were in 2008. No doubt small buyers are getting priced out (following the trend of fewer resident/owners, more large businesses with many many renters) but the secondary markets that actually hold the mortgage for 99% of the lifetime of the paper are still doing what led to the 2008 meltdown. It's just that they haven't gotten unlucky again. Yet. 

You quoted my post and said we didn't learn any lessons and then keep talking about something that is completely non-responsive to my post.  I said, the lesson that seems to be taken away from this whole thing is that we shouldn't lend money to shitty borrowers.  That's how it was sold to the public at large. That's what we've stopped doing. And that's the wrong lesson I said. Everything you've said is more or less non-responsive to me yet you continue to quote me. 

[Wulaw Horn 18,918]

4 minutes ago, HamsterHookah said:

I know we've talked a lot the last couple of years, mostly laughing at, the iBuyers and how they lost and folded, but I read this today and I think it might put our perennial sourpuss friend Captainant in a good mood to read about the man taking it on the chin here. This is a funny story we can all get behind and enjoy:

Bolded the parts that I think will make captainant smile.

Fuck em. They were arrogant enough to believe that professionals in a local market were dumb and they were so much smarter and their computer formula was so smart that they were going to win win win.  HA.  Serves them right for their arrogance. 

[HamsterHookah 112]

Just now, Wulaw Horn said:

Fuck em. They were arrogant enough to believe that professionals in a local market were dumb and they were so much smarter and their computer formula was so smart that they were going to win win win.  HA.  Serves them right for their arrogance. 

Yep and good for those who were able to come up on the come up!

[Captainant 26,917]

4 minutes ago, Wulaw Horn said:

You quoted my post and said we didn't learn any lessons and then keep talking about something that is completely non-responsive to my post.  I said, the lesson that seems to be taken away from this whole thing is that we shouldn't lend money to shitty borrowers.  That's how it was sold to the public at large. That's what we've stopped doing. And that's the wrong lesson I said. Everything you've said is more or less non-responsive to me yet you continue to quote me. 

I guess I just disagree that the lesson learned was "don't lend to poor people" - the lesson was "it's less profitable to lend to poor people". We stopped lending to poor borrowers because in a free market economy, why SHOULDN'T a bank prefer to lend to "more qualified" buyers that can shoulder higher rates of fees?

I don't think it was sold as "American buyers were irresponsible and poor buyers", the financial crisis has pretty much always been described to me as market makers getting greedy and overextending. 

The only people "learning the wrong lessons" are the same people who have been making money hand over fist as housing markets have skyrocketed, thanks to the lessons they learned. I don't think they'd agree it was the wrong lesson to learn. 

[Wulaw Horn 18,918]

24 minutes ago, Captainant said:

I guess I just disagree that the lesson learned was "don't lend to poor people" - the lesson was "it's less profitable to lend to poor people". We stopped lending to poor borrowers because in a free market economy, why SHOULDN'T a bank prefer to lend to "more qualified" buyers that can shoulder higher rates of fees?

I don't think it was sold as "American buyers were irresponsible and poor buyers", the financial crisis has pretty much always been described to me as market makers getting greedy and overextending. 

The only people "learning the wrong lessons" are the same people who have been making money hand over fist as housing markets have skyrocketed, thanks to the lessons they learned. I don't think they'd agree it was the wrong lesson to learn. 

We are clearly talking past each other.  It seems readily apparent that you don't understand what I'm saying. I can't explain it any better than I have, so I'm going to have to parachute out of this discussion with you. continue to have whatever discussion you want with yourself but no need to quote me as it's not responsive to anything I've said.  I have enough reps and likes on the post that I think the point conveyed to most of the board but that doesn't mean I couldn't have explained it differently or better. I just don't know any other way to make the point make sense. 

Edited January 30, 2023 by Wulaw Horn

[Neonmoon 38,126]

46 minutes ago, Wulaw Horn said:

Apologies if my post sounded bitchy.  That wasn't the intent at all.

No worries. Same. I wasn’t trying to be a dick. My reading comprehending might need updating. 

[Neonmoon 38,126]

You can still lend to shitty borrowers, but they are not qualified mortgages and cannot be sold to GSE unless they have 36 months of seasoning, aka timely payments to current lender. (2 30 day lates allowed) 

[Wulaw Horn 18,918]

1 minute ago, Neonmoon said:

You can still lend to shitty borrowers, but they are not qualified mortgages and cannot be sold to GSE unless they have 36 months of seasoning, aka timely payments to current lender. (2 30 day lates allowed) 

Yeah but those aren't really shitty borrowers. Those are people that are pretty strong in the downpayment game and have pretty decent ratios.  It's just fucked up credit.  

I personally think that we ought to have zero underwriting for anything with 50% DTI or less and I could probably be talked into 60 or 65% DTI.  Basically it's impossible for a lender to lose money on that deal and the likelihood of foreclosure is about 0.1 or 0.2. I'd much rather hold a house with 40% equity from a 500 credit score buyer than I would a place with 3% equity from an 800 credit score buyer.  The market can't crash enough to destroy my paper on the 40 or 50% dti guy.  Or, even if it does, so what? The world is probably over and my company is long since out of business before we get around to taking a loss on that deal.  But we don't.  I never have heard a really good explanation of why not.  

[jimmyjazz 45,192]

1 hour ago, Wulaw Horn said:

The lending environment and who is given credit looks completely different than it did 15 years ago man. Which was my point in saying that we learned the wrong lessons (I.e. you can't lend money to the poor/bad credit borrower to buy a house).  It's a completely and totally different environment.   

WTF dude?  You're literally agreeing that it's a bad idea to lend money to poorly qualified borrowers and then you're not putting any blame on those loans?

[jimmyjazz 45,192]

13 minutes ago, jimmyjazz said:

WTF dude?  You're literally agreeing that it's a bad idea to lend money to poorly qualified borrowers and then you're not putting any blame on those loans?

EDIT:  wait, you ARE correct in that you're not being clear.  I think what you're now saying in the quote is that it's not necessarily bad to lend money to less qualified borrowers.  I took it the other way.  That said, those loans blew up and helped trigger a collapse because they were part of products that were too leveraged to sustain the downturn.  Agreed?

[LCHorn 2,560]

2 hours ago, Wulaw Horn said:

I personally think that we ought to have zero underwriting for anything with 50% DTI or less and I could probably be talked into 60 or 65% DTI.

Before everyone piles on I’m pretty sure @Wulaw Hornis referring to loan to value, not DTI.  

[Wulaw Horn 18,918]

12 minutes ago, LCHorn said:

Before everyone piles on I’m pretty sure @Wulaw Hornis referring to loan to value, not DTI.  

I’m sorry yes. I meant loan to value of course as I was talking about 60+ being good.