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Mortgage Market Reopens to Risky Borrowers

wsj.com

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Re: Mortgage Market Reopens to Risky Borrowers

#31

Post by unstatusthequo »

opportune wrote: post #22

Is anybody else making the supposedly foolish decision to time the housing market? I am financially ready to purchase my first home, currently living in the bay area, but I think right now just looks like a bad time. - A lot of housing price growth is seemingly "priced in" since rents for condos/apartments significantly lower than total monthly ownerships costs (mortgage+hoa+insurance+taxes+etc.), even with 20% down.…

I am staying far clear of buying until reason regains control. Feels bubbly. Winter is coming.

Re: Mortgage Market Reopens to Risky Borrowers

#32

Post by toomuchtodo »

tjr225 wrote: post #24
opportune wrote: post #22

Is anybody else making the supposedly foolish decision to time the housing market? I am financially ready to purchase my first home, currently living in the bay area, but I think right now just looks like a bad time. - A lot of housing price growth is seemingly "priced in" since rents for condos/apartments significantly lower than total monthly ownerships costs (mortgage+hoa+insurance+taxes+etc.), even with 20% down.…

I ended up buying, but in a low cost of living area. In spite of the high wages possible equity it still seems risky/unfeasible to enter Seattle's housing market right now. First I would have to get lucky that a 400k house/condo would appear on the market. Then I would have to come up with 40k for small down payment on the cheapest house/condo in the metro area. Assuming I wasn't outbid by a developer or someone with…

You made the right decision. Pickup a condo cheap when a dip happens, but you’re insulated from a downturn. Patience is an investor’s best friend. This is how I built my real estate portfolio over the last decade.

Re: Mortgage Market Reopens to Risky Borrowers

#34

Post by tathougies »

opportune wrote: post #17
whiddershins wrote: post #13

For all the negative rhetoric around subprime loans, they enabled me and others I knew who were young and self employed to own homes. They aren’t always bad, they aren’t always crazy balloon loans or predatory instruments. Sometimes they allow someone who has an alternative life circumstance to not be excluded.

Yeah, subprime lending often makes a lot of sense for the person taking out the loan. If the rents are high relative to expected mortgages/recurring costs in your area, it will pay itself off very quickly (minus the risk of default you open yourself off to). And it allows you to lock in a monthly payment for potentially decades, which has a massive amount of value by itself. It also makes a lot of sense if you have r…

> poor credit or lack of capital for a downpayment is a bad person to lend to

There is a huge gulf between those who have unconventional sources of income and those who lack capital for a downpayment or who have poor credit. Poor credit is caused by things like not paying off previous loans / carrying high balances. Not having a down payment is a sign you have not yet demonstrated an ability to save enough, or don't have enough income to save enough, both of which seem reasonable criteria off of which to base a lending decision.

The parent commenter described a circumstance -- self-employment -- that is wholly unrelated to both poor credit and an inability to save a down payment. You made the leap between the two. We need to end this kind of thinking.

> a nice buying opportunity, etc

Equal housing laws mean that -- in the absence of very particular circumstances -- any opportunity for this hypothetical student would also be available to more reliable debtors.

Re: Mortgage Market Reopens to Risky Borrowers

#35

Post by lostphilosopher »

apo wrote: post #2

> Some $2.5 billion worth of subprime loans, those with FICO credit scores below 690, ended up in mortgage bonds in the first quarter of 2019. That is more than double a year earlier and the highest level since the end of 2007, according to Inside Mortgage Finance. There was $1.9 billion worth of subprime mortgage bonds in the second quarter. Statements like this are hard to evaluate without knowing the denominator:…

> wonder to what extent it has contributed to mistrust of the traditional media.

Is anyone's experience that "non traditional media" or news sources are more mathematically rigorous?

I understand that all media has bias, lots of content is written by non experts, and presenting data (especially statistical data) is really hard and rarely done well. But any "alternative" or "non mainstream" news source I've seen is _way_ worse at those things than traditional mainstream sources like NYT, WP, Economist, Foreign Policy, NPR, 538, etc. Even while those sources still make noticeable blunders.

(Curious because I've seen this statement before.)

Re: Mortgage Market Reopens to Risky Borrowers

#36

Post by frustrated_90 »

opportune wrote: post #22

Is anybody else making the supposedly foolish decision to time the housing market? I am financially ready to purchase my first home, currently living in the bay area, but I think right now just looks like a bad time. - A lot of housing price growth is seemingly "priced in" since rents for condos/apartments significantly lower than total monthly ownerships costs (mortgage+hoa+insurance+taxes+etc.), even with 20% down.…

Do you mind shredding some light on where big tech companies are expanding to? I can't seem to find where they're going through Google search.

Re: Mortgage Market Reopens to Risky Borrowers

#37

Post by tathougies »

As someone who is interested in buying a home. This scares me. We have lots of money saved for our down payment, but I don't want to end up in a bidding war with someone who isn't as good financially, and then end up purchasing for more than the house is really worth. Also, cheap money inflates the prices of homes anyway.

Grumble grumble... we will have to stay disciplined and be honest with ourselves as to what the home is truly worth to us.

Re: Mortgage Market Reopens to Risky Borrowers

#38

Post by darawk »

qroshan wrote: post #15
js2 wrote: post #7

Earlier quoted context omitted.

I don't understand this criticism of the article. The point of the article is that lending standards are starting to loosen. The article provided a handful of numbers and one anecdote. The article title and first sentence are: Mortgage Market Reopens to Risky Borrowers. Strict lending requirements that were put in place after financial crisis are starting to erode. The risky mortgage is making a comeback. Supporting…

"The most in a decade" is where all the shenanigans of the article lie. Let's say Peak 2006, Sub-Prime Loan was $600B Let's say the average, natural Sub-Prime Loan is $100B After the crash, may be the market over-corrected way to much and slowly crawling back to it's natural $100B. With this perspective, the narrative becomes totally different. The lending standard is still too tight and still way below what the natu…

I'll also throw in there that it could be simply that mortgages are increasing overall, and that the sub-prime share of the mortgage pie isn't increasing at all.

Re: Mortgage Market Reopens to Risky Borrowers

#39

Post by JackFr »

ErikAugust wrote: post #3
apo wrote: post #2

> Some $2.5 billion worth of subprime loans, those with FICO credit scores below 690, ended up in mortgage bonds in the first quarter of 2019. That is more than double a year earlier and the highest level since the end of 2007, according to Inside Mortgage Finance. There was $1.9 billion worth of subprime mortgage bonds in the second quarter. Statements like this are hard to evaluate without knowing the denominator:…

"That made him an appealing borrower to an unconventional lender, according to Tom Jessop, a loan consultant at New American Funding. Mr. Jessop arranged a $675,000 loan on the $1.1 million property, leaving the lender with a significant buffer should Mr. Licht default." Also, this is a TERRIBLE example of a pending subprime crisis. A guy borrows $675K on a $1.1 million property.

It's only worth $1.1 million when someone pays that.

Re: Mortgage Market Reopens to Risky Borrowers

#40

Post by rco8786 »

lostphilosopher wrote: post #35
apo wrote: post #2

> Some $2.5 billion worth of subprime loans, those with FICO credit scores below 690, ended up in mortgage bonds in the first quarter of 2019. That is more than double a year earlier and the highest level since the end of 2007, according to Inside Mortgage Finance. There was $1.9 billion worth of subprime mortgage bonds in the second quarter. Statements like this are hard to evaluate without knowing the denominator:…

> wonder to what extent it has contributed to mistrust of the traditional media. Is anyone's experience that "non traditional media" or news sources are more mathematically rigorous? I understand that all media has bias, lots of content is written by non experts, and presenting data (especially statistical data) is really hard and rarely done well. But any "alternative" or "non mainstream" news source I've seen is _w…

Yea agreed. It’s almost a straw man of sorts where there’s this proverbial “they” that gets it right and uses rigorous standards that the traditional media falls short of. But I’ve yet to find these sources of information in the wild.
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