FBI investigating for fraud at Fannie Mae, Freddie Mac, Lehman Brothers and AIG

[wiphan]

Originally Posted by dalakhani

It plays a part but a.r.m resets arent as big of a deal as people thought it would be because most are based on LIBOR and that hasnt adjusted terribly. Libor is the index most arms switched to back in the early part of the decade. When an A.R.M (adjustable rate mortgage) "adjusts", its based on an index plus a margin. Most arms used Libor as an index and used a margin of 2.25%. So, fully indexed, the new rate is only 5.25% if it were adjsusting today. Thats not a bad rate and people can still "hang on" with the adjustment. The people that are having the problems are ones who qualified based on the interest only payment at 4%. Those people shouldnt have been buying in the first place. Again, it was systemic. Wall St. created these products, loan officers/brokers sold the product and many a customer (some knowing the risk and some NOT) bit off on the chance to buy into a real estate market that was returning up to 50% yearly.

The lowest rates for arms were between 2003-05. Five year arms are adjusting this year and seven year arms from 03 in 2010. The 2003 vintage probably have equity built in. The 2005 vintage will present yet another shoe dropping as that was the top of the market and there is no equity to refinance. Hopefully, the market will stabilize by then.

Most of the REALLY toxic stuff is already on the table meaning already in foreclosure or already foreclosed upon. I mean the subprime when i say that. The rest of the subprime will be DONE by spring of 2009 as most were done in 2 year arms and spring of 2007 was the end of those products.
Speculators are pretty much done and the rush will subside with them in the coming months as it already has been.

Interest only loans are NOT bad loans...for the right people. This is NOT a new instrument. They have been around for years but only used by the rich in the past. What people dont talk about and get lumped in with interest only are the Option Arms which are negatively amortizing. Many of those come do in the next year.

Option Arms are going to present a real challenge IF rates start to go up in the next two years.

You sound like a well educated, responsible fellow mortgage lender. All of your points are spot on. Fortunately I work for a responsible lender that chose not to offer option ARMs (probably the only responsible large lender in the industry). What amazes me is that recently I have heard of other lenders still offering mortgages that they should not be doing especially in times like today. Unfortunately there needs to be a ton of regulation especially against mortgage brokers and irresponsible institutions. I am never a fan of more regulation, but it needs to happen unfortunately. About 2 yrs ago we were joking asking when some one was going to offer a stated FICO loan.

[dalakhani]

Originally Posted by wiphan

You sound like a well educated, responsible fellow mortgage lender. All of your points are spot on. Fortunately I work for a responsible lender that chose not to offer option ARMs (probably the only responsible large lender in the industry). What amazes me is that recently I have heard of other lenders still offering mortgages that they should not be doing especially in times like today. Unfortunately there needs to be a ton of regulation especially against mortgage brokers and irresponsible institutions. I am never a fan of more regulation, but it needs to happen unfortunately. About 2 yrs ago we were joking asking when some one was going to offer a stated FICO loan.

I work for a small bank and one of my duties (when we actually had money!) was risk assesment for a tiny set of portfolio products that we had along with cherry picking a select group of notes that we wanted to keep. let me tell you that when its your signature signing off on the risk, that pen gets a ton heavier. Needless to say, our portfolio products had guidelines that most lenders would just laugh at because they were so strict. Although even the clean loans weigh on banks during this liquidity crisis, at least they aren't actual losses.

Regulation needs to be tighter on the broker/lender level but at the same time they need not go overboard. I think the market is really doing the Fed's work in terms of regulation in the mortgage industry. How easy is it to cheat now? You want to use a lease? Fine...show us the cancelled rent check and demonstrate equity. You want to inflate an appraisal? Fine...we are going to run a corelogic and then perhaps a review before we buy your note. The market is dictating all of this. The feds havent done anything yet. But you probably have a point in terms of weeding out the bad apples.

I dont think Option Arms are necessarily a bad product but again, there is only a tiny segment of the population that it could work well for. Option Arms were indeed the crack cocaine in recent years because they were profitable to every rung of the ladder. Now? You should see the execution on Option Arms. No one wants them. The government doesnt need to ban them because the market already has. That, along with low documentation and high LTV's. The market doesnt want them thus you cant sell them.

My God...you republicans out there are probably having a heart attack. Maybe this liberal, democrat wench might have a few conservative ideas yet.

The stated Fico thing is hilarious. By saying that you didnt offer any neg am, it is easy to figure who you work for. The only risks you took were on seconds and community housing iniatives that the govt forced your hand on.

[Mortimer]

Show tits.

[wiphan]

Originally Posted by dalakhani

I work for a small bank and one of my duties (when we actually had money!) was risk assesment for a tiny set of portfolio products that we had along with cherry picking a select group of notes that we wanted to keep. let me tell you that when its your signature signing off on the risk, that pen gets a ton heavier. Needless to say, our portfolio products had guidelines that most lenders would just laugh at because they were so strict. Although even the clean loans weigh on banks during this liquidity crisis, at least they aren't actual losses.

Regulation needs to be tighter on the broker/lender level but at the same time they need not go overboard. I think the market is really doing the Fed's work in terms of regulation in the mortgage industry. How easy is it to cheat now? You want to use a lease? Fine...show us the cancelled rent check and demonstrate equity. You want to inflate an appraisal? Fine...we are going to run a corelogic and then perhaps a review before we buy your note. The market is dictating all of this. The feds havent done anything yet. But you probably have a point in terms of weeding out the bad apples.

I dont think Option Arms are necessarily a bad product but again, there is only a tiny segment of the population that it could work well for. Option Arms were indeed the crack cocaine in recent years because they were profitable to every rung of the ladder. Now? You should see the execution on Option Arms. No one wants them. The government doesnt need to ban them because the market already has. That, along with low documentation and high LTV's. The market doesnt want them thus you cant sell them.

My God...you republicans out there are probably having a heart attack. Maybe this liberal, democrat wench might have a few conservative ideas yet.

The stated Fico thing is hilarious. By saying that you didnt offer any neg am, it is easy to figure who you work for. The only risks you took were on seconds and community housing iniatives that the govt forced your hand on.

You are right on. The unfortunate problem is that no one is buying Jumbo mortgages and the banks can't afford to keep them due to liquidity issues. We are keeping the cream of the crop via portfolio, but a lot of customers with good credit, good income, etc are getting hurt by the lack of investors for these products.

Yes I am sure you know who I work for and yes you are correct in the only risk that we took on.

[dalakhani]

Originally Posted by wiphan

You are right on. The unfortunate problem is that no one is buying Jumbo mortgages and the banks can't afford to keep them due to liquidity issues. We are keeping the cream of the crop via portfolio, but a lot of customers with good credit, good income, etc are getting hurt by the lack of investors for these products.

Yes I am sure you know who I work for and yes you are correct in the only risk that we took on.

You are lucky in that your balance sheet is so massive you can still shelf the arm products and subsidize the lower spreads with the cross sells. But even the biggest banks can't afford to do that with the fixed rate jumbos for fear of what going yield will be when there finally is liquidity. Regardless of what anyone says, there are no true large scale portfolio lenders. The loans on the books right now are being "held for investment" and it is catch 22. If you are lucky enough to find a vulture fund or private investor that will buy your non agency paper, most often you are going to get scalped. But that isnt the worst problem. After you sell, you have to mark to market and the rest of the loans on your shelf are given a massive haircut.

To put it simply, you need to sell the loans for money but if you sell them you are going to take a huge paper bath. So what do you do? You wait...and wait...and wait. If you are wells, b of a, chase or citi, you have a zillion dollars in deposits to cover things while your loans sit in purgatory. If you are a small bank, you only have so long to wait. It doesnt take that many realized losses before you are insolvent and such is the dangers of borrowing short and lending long. Even if you are perfect and didnt make any mistakes on who you lent to, you're still going to have solvency issues because of the leverage ratios.

Bottom line? Deposits are king!



Small banks like mine are getting killed

[GBBob]

No wonder all the banks are going belly up...they are all posting on DT

[SCUDSBROTHER]

Let me ask you people something. This money they want our taxpayers to inject into the financial system? I don't get why we have to do that. This money didn't go into a fireplace. People have this money already. It just not in the hands of people that sell loans. It's in the hands of speculators that sold their homes to people that got bad loans. They need to basically sell these homes back to these same speculators at low prices. They will then have money to loan again, but the financial companies will have to take a loss. You know what that is? Tough s-h-i-t. Don't be such greedy fkrs next time. I say no to the bail out, and yes to selling these homes right now to the highest bidders(people who have the loan companies money right now.) That is capitalism. The way I see this is the loan companies fkd up, and are refusing to take the responsibility that anybody else has to take for fkn up at capitalism. Bailing these people out is bullshit. They can get money in the next 30 days if forced to sell these homes for bargain prices to those people that kicked their a-s-s in the 1st place. People that sold high have this money. Don't come to us for it. Get it back from the sellers you gave the money to. FK OFF.

[Mike]

Originally Posted by SCUDSBROTHER

Let me ask you people something. This money they want our taxpayers to inject into the financial system? I don't get why we have to do that. This money didn't go into a fireplace. People have this money already. It just not in the hands of people that sell loans. It's in the hands of speculators that sold their homes to people that got bad loans. They need to basically sell these homes back to these same speculators at low prices. They will then have money to loan again, but the financial companies will have to take a loss. You know what that is? Tough s-h-i-t. Don't be such greedy fkrs next time. I say no to the bail out, and yes to selling these homes right now to the highest bidders(people who have the loan companies money right now.) That is capitalism. The way I see this is the loan companies fkd up, and are refusing to take the responsibility that anybody else has to take for fkn up at capitalism. Bailing these people out is bullshit. They can get money in the next 30 days if forced to sell these homes for bargain prices to those people that kicked their a-s-s in the 1st place. People that sold high have this money. Don't come to us for it. Get it back from the sellers you gave the money to. FK OFF.

I'm 100% with you, Scuds. But I'm an economic novice, I hope your summary is correct.

I say "Just say no" to the bailout-it's welfare for the rich

[wiphan]

Originally Posted by SCUDSBROTHER

Let me ask you people something. This money they want our taxpayers to inject into the financial system? I don't get why we have to do that. This money didn't go into a fireplace. People have this money already. It just not in the hands of people that sell loans. It's in the hands of speculators that sold their homes to people that got bad loans. They need to basically sell these homes back to these same speculators at low prices. They will then have money to loan again, but the financial companies will have to take a loss. You know what that is? Tough s-h-i-t. Don't be such greedy fkrs next time. I say no to the bail out, and yes to selling these homes right now to the highest bidders(people who have the loan companies money right now.) That is capitalism. The way I see this is the loan companies fkd up, and are refusing to take the responsibility that anybody else has to take for fkn up at capitalism. Bailing these people out is bullshit. They can get money in the next 30 days if forced to sell these homes for bargain prices to those people that kicked their a-s-s in the 1st place. People that sold high have this money. Don't come to us for it. Get it back from the sellers you gave the money to. FK OFF.

It isn't that simple. without the bailout there would be HUUUUGE problems including a possible depression and it would affect the consumers/individuals, etc. in many ways. The government actually has a good chance to get paid back on a lot of the $ that they are using for the bailout. If the banking system,insurance,financial companies fail you would have a worldwide crisis and you would have problems in every aspect of business thus everyone would feel it. Unemployment at historic levels, etc. I don't like government stepping in and taking care of businesses issues any more than the next guy, but the ramifications of not doing something at this point would be devastating. If you would like a good chuckle on the mortgage crisis pm your email and I can send you a nice power point on the mortgage crisis.

[dalakhani]

Originally Posted by SCUDSBROTHER

Let me ask you people something. This money they want our taxpayers to inject into the financial system? I don't get why we have to do that. This money didn't go into a fireplace. People have this money already. It just not in the hands of people that sell loans. It's in the hands of speculators that sold their homes to people that got bad loans. They need to basically sell these homes back to these same speculators at low prices. They will then have money to loan again, but the financial companies will have to take a loss. You know what that is? Tough s-h-i-t. Don't be such greedy fkrs next time. I say no to the bail out, and yes to selling these homes right now to the highest bidders(people who have the loan companies money right now.) That is capitalism. The way I see this is the loan companies fkd up, and are refusing to take the responsibility that anybody else has to take for fkn up at capitalism. Bailing these people out is bullshit. They can get money in the next 30 days if forced to sell these homes for bargain prices to those people that kicked their a-s-s in the 1st place. People that sold high have this money. Don't come to us for it. Get it back from the sellers you gave the money to. FK OFF.

Scuds-

You are attempting to simplify something that is infinitely more complex. This isnt about "selling homes back". You are viewing loans with the "george bailey/mr potter" mentality and mortgages arent done like that anymore. They are pooled, packaged and sold as securities...or were.

Loans that are "on the shelf" and being held for investment cant be sold. That is the issue. There arent many buyers or Sellers out there for a number of reasons:

1. Who wants to buy an asset backed security when you arent sure of the rating but more importantly backed by a declining asset?

2. If you sell an asset backed security at a firesale price you have to "mark to market" the other loans in your portfolio. Basically, you are devaluing everything to sell a little bit.

3. No one knows what the next step is going to be for the govt.



Individual mortgage companies ARE buying back fraudulent investments sold to unwitting investors. What do you think happened to countrywide and AHM? The problem i, what are they going to do next? Go after the broker? He is out of business and probably snorted the profit anyway.

You want to know what happened to the money? Well, some of it filtered into other segments of the economy. Beyond that? Read up on deflation.