America’s housing system still has not been properly reformed • Hacker News Board

Re: America’s housing system still has not been properly reformed

#51

Post by Domenic_S » Thu, Aug 18, 2016, 6:30 PM UTC

fweespeech wrote: post #33

Domenic_S wrote: post #27

Earlier quoted context omitted.

You can't read that Forbes link and say "no" if you know a little bit about finance: > Wall Street Funding of America [...] circulating offers to make low-doc loans to borrowers with credit scores as low as 660 FICO, as long as the borrower was self-employed, seeking no more than 60% of the value of a home and had six months of mortgage payments in reserve. 660 FICO is not sub-prime by any standard, and it requires 4…

You do realize the other link is a stated income / no doc loan right? http://www.bloomberg.com/news/articles/2015-01-28/get-ready-... > Angel Oak is willing to buy loans with credit scores as low as 500, though the average has been about 670, just below the 680 level some use as a cut-off for subprime on a scale of 300 to 850, Hsu said. The company makes sure borrowers can afford the payments and requires at least 20…

That is not a no doc loan. You conveniently left out the very next sentence:

> The company makes sure borrowers can afford the payments and requires at least 20 percent down payments, he said.

"makes sure borrowers can afford the payments" is code for "documentation required". What's more, 20% down gives good capitalization and is hardly sub-prime (as a loan product).

Low-score low-down FHA loans have existed for a long time and are not a cause for concern -- mortgage insurance is required and offsets the risk, unlike the crazy balloon ARM products of the bubble.

Re: America’s housing system still has not been properly reformed

#52

Post by JimboOmega » Thu, Aug 18, 2016, 6:30 PM UTC

soperj wrote: post #40

chollida1 wrote: post #4

I'd agree that the US housing and derivatives markets are in a much better position than in 2007-2008. Atleast people who are getting mortgages now have some form of documentation, and risk manages are being asked to do their jobs. The crisis now is that, and this is just my opinion, low rates are here to stay. with the amount of money in the system, people are being priced out of homes and as time goes on the amount…

Pretty much everyone is saying that interest rates are going up in the US and are going to go up soon. Alan Greenspan just came out today saying people are going to be surprised how quickly they go up.

I think everyone would like for them to go up, but I haven't seen any real reason why it might happen. The rich world has been stuck in very low interest rates for a long time.

(Edit since I'm fixing a typo: Look at the treasury yield curve. Has it gotten steeper, which would indicate an expectation of rising rates? No. The 30 year rate has been falling the last few years.)

Re: America’s housing system still has not been properly reformed

#53

Post by fweespeech » Thu, Aug 18, 2016, 6:31 PM UTC

Domenic_S wrote: post #51

fweespeech wrote: post #33

Earlier quoted context omitted.

You do realize the other link is a stated income / no doc loan right? http://www.bloomberg.com/news/articles/2015-01-28/get-ready-... > Angel Oak is willing to buy loans with credit scores as low as 500, though the average has been about 670, just below the 680 level some use as a cut-off for subprime on a scale of 300 to 850, Hsu said. The company makes sure borrowers can afford the payments and requires at least 20…

That is not a no doc loan. You conveniently left out the very next sentence: > The company makes sure borrowers can afford the payments and requires at least 20 percent down payments, he said. "makes sure borrowers can afford the payments" is code for "documentation required". What's more, 20% down gives good capitalization and is hardly sub-prime (as a loan product). Low-score low-down FHA loans have existed for a l…

http://www.qualifiedhomeloans.com/campaigns/statedincomeloan...

Did you really not read the first link I gave you which is a stated income loan?

You are very interested in convincing me you are right when I know these no doc places exist and know people who have loans with them.

I was simply correcting your belief that 660 was not "subprime".

Re: America’s housing system still has not been properly reformed

#54

Post by s_q_b » Thu, Aug 18, 2016, 6:32 PM UTC

chollida1 wrote: post #4

I'd agree that the US housing and derivatives markets are in a much better position than in 2007-2008. Atleast people who are getting mortgages now have some form of documentation, and risk manages are being asked to do their jobs. The crisis now is that, and this is just my opinion, low rates are here to stay. with the amount of money in the system, people are being priced out of homes and as time goes on the amount…

The MIT Blackjack team wrote a good piece on the housing crash, paying particular attention to the market distortion caused by short-term rewards.

https://yourmortgageoryourlife.wordpress.com/2009/01/15/the-...

Re: America’s housing system still has not been properly reformed

#55

Post by Domenic_S » Thu, Aug 18, 2016, 6:32 PM UTC

Domenic_S wrote: post #27

fweespeech wrote: post #22

Earlier quoted context omitted.

> The last crisis was also heavily related to sub-prime mortgages. How much has sub-prime lending been mitigated? http://www.qualifiedhomeloans.com/campaigns/statedincomeloan... http://www.forbes.com/2010/07/02/return-liar-loans-personal-... No. Its still essentially the same with no paperwork mortgages with higher interest rates and ARMs. Very little changed other than a few regulations that might stop a systemic co…

You can't read that Forbes link and say "no" if you know a little bit about finance: > Wall Street Funding of America [...] circulating offers to make low-doc loans to borrowers with credit scores as low as 660 FICO, as long as the borrower was self-employed, seeking no more than 60% of the value of a home and had six months of mortgage payments in reserve. 660 FICO is not sub-prime by any standard, and it requires 4…

For those confused on what sub-prime fico scores are:

"Historically, subprime borrowers were defined as having FICO scores below 640" -- https://en.wikipedia.org/wiki/Subprime_lending#cite_note-Lo-...

"550-620: Subprime." -- http://www.credit.org/what-is-a-good-credit-score-infographi...

Re: America’s housing system still has not been properly reformed

#56

Post by pessimizer » Thu, Aug 18, 2016, 6:34 PM UTC

soperj wrote: post #40

chollida1 wrote: post #4

I'd agree that the US housing and derivatives markets are in a much better position than in 2007-2008. Atleast people who are getting mortgages now have some form of documentation, and risk manages are being asked to do their jobs. The crisis now is that, and this is just my opinion, low rates are here to stay. with the amount of money in the system, people are being priced out of homes and as time goes on the amount…

Pretty much everyone is saying that interest rates are going up in the US and are going to go up soon. Alan Greenspan just came out today saying people are going to be surprised how quickly they go up.

It's important to mention that they've been saying that for 7 years now, and that Alan Greenspan has been wrong about everything.

We haven't even been able to get inflation up past 1.7%.

Re: America’s housing system still has not been properly reformed

#57

Post by soperj » Thu, Aug 18, 2016, 6:35 PM UTC

lps41 wrote: post #50

soperj wrote: post #40

Earlier quoted context omitted.

Pretty much everyone is saying that interest rates are going up in the US and are going to go up soon. Alan Greenspan just came out today saying people are going to be surprised how quickly they go up.

Why does Alan Greenspan's opinion have any weight? He is not in any kind of position to have control over rates.

No, but since he worked in that position for years, he might have some kind of insight?

Re: America’s housing system still has not been properly reformed

#58

Post by Domenic_S » Thu, Aug 18, 2016, 6:38 PM UTC

fweespeech wrote: post #53

Domenic_S wrote: post #51

Earlier quoted context omitted.

That is not a no doc loan. You conveniently left out the very next sentence: > The company makes sure borrowers can afford the payments and requires at least 20 percent down payments, he said. "makes sure borrowers can afford the payments" is code for "documentation required". What's more, 20% down gives good capitalization and is hardly sub-prime (as a loan product). Low-score low-down FHA loans have existed for a l…

http://www.qualifiedhomeloans.com/campaigns/statedincomeloan... Did you really not read the first link I gave you which is a stated income loan? You are very interested in convincing me you are right when I know these no doc places exist and know people who have loans with them. I was simply correcting your belief that 660 was not "subprime".

Dude, come on. Embedded youtube video that doesn't exist anymore, 2000s-era site -- you really had to scrape the bottom of the barrel to find that page.

See my sibling comment, most lenders don't consider 660 subprime.

Re: America’s housing system still has not been properly reformed

#59

Post by talmand » Thu, Aug 18, 2016, 6:38 PM UTC

lmm wrote: post #36

huherto wrote: post #23

Earlier quoted context omitted.

Nice comment. Food for thought. How big was the risk that they took ? Surely they knew that the market was insane. But would they have lost a lot of money if the market was insane for a long time ? I saw the movie but I don't remember a lot of the details. I was just trying to follow.

IIRC from reading the book a year or two ago, one of them's bosses were hounding him for the premiums he was paying on the insurance-like contracts he bought, which was something like $25m/year. When the crash happened they bought in ~$1b. Had there not been a crash he would have got nothing (the contracts would never have paid out) and that $25m/year would have been money down the drain.

Shorting is a risk. Shorting with big money is a big risk.

In this case though, my impression is that certain people who actually looked at the data knew it would happen. Not like "I think it will happen", it was "it will happen sometime in this month of this year" kind of thing. Because they knew when those stupid ARMs would kick in with their adjustable rates on top of the obvious number of failed mortgages. The risk wasn't that it would not happen, it was that high level people in finance and government would take steps to keep things moving along which would prevent them from cashing in. There was a great deal of fraud throughout that whole thing propping up the failed system.

Re: America’s housing system still has not been properly reformed

#60

Post by talmand » Thu, Aug 18, 2016, 6:41 PM UTC

martincmartin wrote: post #7

chollida1 wrote: post #4

I'd agree that the US housing and derivatives markets are in a much better position than in 2007-2008. Atleast people who are getting mortgages now have some form of documentation, and risk manages are being asked to do their jobs. The crisis now is that, and this is just my opinion, low rates are here to stay. with the amount of money in the system, people are being priced out of homes and as time goes on the amount…

Honest question: how many of them reverted to mean afterward [0], that is, thought they saw other things coming, bet on them and were wrong about as often as everyone else? John Paulson wasn't featured in the movie, but fit the bill. But I don't know about those in the book/film. [0] https://en.wikipedia.org/wiki/Regression_toward_the_mean

If I remember correctly one of them closed down his fund because he was stressed and tired of his clients always second guessing him through the whole thing. Then begin to second guess him again on his next decisions despite being right the first time and bringing in hundreds of millions of dollars in profit.