Mortgage Market Reopens to Risky Borrowers • Hacker News Board

Re: Mortgage Market Reopens to Risky Borrowers

#61

Post by Finnucane » Wed, Aug 21, 2019, 8:56 PM UTC

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.…

We bought our own house in 2009, during the crash. It was risky, because I was working a temp job and there was no telling when the recession would start to get better. IN the long run, the gamble paid off for us. (There's no way we could afford it now!) But we lived in a crummy apartment for years and saved as much as we could for a downpayment. We'd been following the Great Bubble as it inflated and became clear that it would end very, very badly, so we just held on to our cash and waited.

Obviously, past results don't necessarily predict future returns, but it is starting to feel a little like 2005-2006 again.

Re: Mortgage Market Reopens to Risky Borrowers

#62

Post by kube-system » Wed, Aug 21, 2019, 9:03 PM UTC

magashna wrote: post #43

tryitnow wrote: post #26

Earlier quoted context omitted.

I think that explains only part of the problem. The other problem is that for-profit media would never have an incentive to hire journalist with quantitative skills. There's very little demand for it outside of trade and professional presses and I would bet media companies would have to pay quant journalist at least twice as much as regular ones. So why should media companies hire and publish quant journalists? There…

>So why should media companies hire and publish quant journalists? There's no good reason. So that you can take them seriously. Then again, modern journalism is such a joke I don't know if this is a worthy endeavor

Do they need you to take them seriously in order to support their revenue stream?

Re: Mortgage Market Reopens to Risky Borrowers

#63

Post by selimthegrim » Wed, Aug 21, 2019, 9:10 PM UTC

dawhizkid wrote: post #20

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:…

I didn't realize 690 was the cut off for "subprime." I thought that was generally considered "ok/good" but not really that bad.

I guess they’ve tightened the screws a bit - in principle

Re: Mortgage Market Reopens to Risky Borrowers

#64

Post by opportune » Wed, Aug 21, 2019, 9:13 PM UTC

rconti wrote: post #59

opportune wrote: post #44

Earlier quoted context omitted.

You might be able to find lists of offices for major tech companies via google maps. Off the top of my head: Google, Facebook, Apple are all expanding to Seattle, some in multiple locations Amazon is building an office in NoVa Apple is building in Austin. Looks like Amazon, Apple, and Google are too Google, Amazon, and Netflix are building in LA I'm sure there are many more expansions occurring too, anyone may feel f…

Aren't these all regions that were destinations for SV "flight" 15 years ago as well?" I'm not saying the scale isn't different, but these statements could have been uttered awhile ago.

Sure, somewhat, and it's accelerating now.

What were the locations of small, nascent local software industries perhaps bootstrapped by some ancient incumbents are now becoming real hubs. The cycle will continue as the cities with small/no local software industries grow and those in turn become hubs. What's clear is that the more stable, hyper-profitable software companies are not expanding as much in the bay area as they used to

Re: Mortgage Market Reopens to Risky Borrowers

#65

Post by throwaway_law » Wed, Aug 21, 2019, 9:16 PM UTC

dragonwriter wrote: post #48

throwaway_law wrote: post #10

Earlier quoted context omitted.

>Also, this is a TERRIBLE example of a pending subprime crisis. A guy borrows $675K on a $1.1 million property. Well isn't the point that you/they are making that determination on equity alone? As we saw in 2008 all that equity can disappear in a blink of an eye. Equity has no bearing on ability to repay. So before deciding if this is a good or bad loan wouldn't we need to know his outstanding debt to income ratio? A…

> Subprime generally means enticing debtors with interest rates below prime No, subprime lending refers to riskier loans, usually with commensurately worse terms, offered to people with less-than-prime credit status. It has nothing to do with the prime rate , and I have no idea where you got that idea. I mean, as folk etymology goes it's superficially plausible, but it's one of those things that I think wouldn't surv…

>It has nothing to do with the prime rate, and I have no idea where you got that idea.

Everything you say is true, but its also true over 90% of subprime loans were ARMS (adjustable rate mortgages)[1], leading to the subprime mortgage crisis, where the interest rates started off below prime and gradually increased to over prime to compensate for the risk of the borrower.

https://en.wikipedia.org/wiki/Subprime_mortgage_crisis

Re: Mortgage Market Reopens to Risky Borrowers

#66

Post by kube-system » Wed, Aug 21, 2019, 9:18 PM UTC

JackFr wrote: post #39

ErikAugust wrote: post #3

Earlier quoted context omitted.

"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.

Yes, that's how everything is valued. This is why transaction data is used to determine valuations of just about anything.

Re: Mortgage Market Reopens to Risky Borrowers

#67

Post by kart23 » Wed, Aug 21, 2019, 9:18 PM UTC

opportune wrote: post #44

frustrated_90 wrote: post #36

Earlier quoted context omitted.

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.

You might be able to find lists of offices for major tech companies via google maps. Off the top of my head: Google, Facebook, Apple are all expanding to Seattle, some in multiple locations Amazon is building an office in NoVa Apple is building in Austin. Looks like Amazon, Apple, and Google are too Google, Amazon, and Netflix are building in LA I'm sure there are many more expansions occurring too, anyone may feel f…

Google and apple coming to San Diego with decent sized offices. Lots of biotech investment here as well.

Re: Mortgage Market Reopens to Risky Borrowers

#68

Post by TheIronYuppie » Wed, Aug 21, 2019, 9:19 PM UTC

tathougies wrote: post #37

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…

In many ways, if you can wait, this is good for you. It means at some point in the fairly near future, people will take advantage of this, the lenders will realize they made a terrible mistake, a crash will happen, and prices will deflate a lot.

Save even harder now :)

Re: Mortgage Market Reopens to Risky Borrowers

#69

Post by acdanger » Wed, Aug 21, 2019, 9:20 PM UTC

jedberg wrote: post #57

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.…

In the Bay Area prices have already started to level off. Sites like Zillow are predicting a 10% downturn in the next year in the highest priced areas. If you want to buy in the Bay Area, I'd wait a year and see what happens. I don't think the price increased will outpace your savings by very much if you hold out and continue to add to your down payment fund. But I'm just a guy on the internet, so don't blame me if I…

Interesting, have a link to the Zillow prediction?

Re: Mortgage Market Reopens to Risky Borrowers

#70

Post by throwaway_law » Wed, Aug 21, 2019, 9:21 PM UTC

rconti wrote: post #21

throwaway_law wrote: post #10

Earlier quoted context omitted.

>Also, this is a TERRIBLE example of a pending subprime crisis. A guy borrows $675K on a $1.1 million property. Well isn't the point that you/they are making that determination on equity alone? As we saw in 2008 all that equity can disappear in a blink of an eye. Equity has no bearing on ability to repay. So before deciding if this is a good or bad loan wouldn't we need to know his outstanding debt to income ratio? A…

1. SOME of the equity can disappear in the blink of an eye. The lender has a nice cushion when the buyer puts down 40%. That's hardly considered risky, which is why this is a terrible example. 2. Subprime refers to the class of borrower, typically based on their less-than-ideal credit scores. The term does not mean that the bank is offering a rate below the prime interest rate to "trick" potential borrowers into taki…

>The term does not mean that the bank is offering a rate below the prime interest rate to "trick" potential borrowers into taking on debt.

Its not a trick, just something the Borrower's en mass did not understand. They just understood the initial low payments, anyway as I replied above, leading to the mortgage crisis over 90% of subprime loans were ARMS that started off below prime and gradually increased. I did use the word "generally" because its not all, but I think 90%+ is a good use of generally.