Mortgage Market Reopens to Risky Borrowers • Hacker News Board

Re: Mortgage Market Reopens to Risky Borrowers

#71

Post by throwaway_law » Wed, Aug 21, 2019, 9:23 PM UTC

JackFr wrote: post #46

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…

> And neither Equity, or ability to repay (debt/income ratio) has anything to do with subprime lending or a subprime lending crisis. No, that is exactly what it means. > Subprime generally means enticing debtors with interest rates below prime, with a loan that will adjust to above prime (and many times even into a single balloon payment at the end which statistically almost no American can make). No one should quali…

>No, those are teasers with a low-fixed rate for 2,3 or 5 year,

Not "teasers" but ARMS, and 90%+ of subprime loans were ARMs leading to the mortgage crisis.

Re: Mortgage Market Reopens to Risky Borrowers

#72

Post by danieltillett » Wed, Aug 21, 2019, 9:25 PM UTC

aznpwnzor wrote: post #51

rayiner wrote: post #6

Earlier quoted context omitted.

The problem is that most journalists are innumerate. As Matt Yglesias notes, "many reporters and editors don't really understand what they're doing. Reputable colleges hand out degrees to people who have almost no understanding of quantitative methods." [1] These journalists see the numbers as garnishes on a narrative point. They're not trying to put the numbers in some sort of mathematical context to draw sound conc…

imo part of the problem is our liberal arts influenced college education system. because college has moved away from being a luxury of broadly educating landed gentry to being a signaling of "i can be employed and responsible" the train a generalist approach doesn't really work. To be specific, there are two types of journalists/writers 1. domain experts that are good writers/communicators 2. good writers/communicato…

What about the third and fourth types - paid shills/hacks without a clue and activists with an axe to grind.

Re: Mortgage Market Reopens to Risky Borrowers

#73

Post by qes » Wed, Aug 21, 2019, 9:25 PM UTC

Finnucane wrote: post #61

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 th…

We bought in 2010 and we're up 40%, but now we want to upgrade in the next 1-3 years. While we'd lose value on our current house in a downturn, I assume we'd come out better with a larger value drop on more expensive properties (we're looking to spend 2-3x what we did in 2010).

Re: Mortgage Market Reopens to Risky Borrowers

#74

Post by hinkley » Wed, Aug 21, 2019, 9:26 PM UTC

rayiner wrote: post #6

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:…

The problem is that most journalists are innumerate. As Matt Yglesias notes, "many reporters and editors don't really understand what they're doing. Reputable colleges hand out degrees to people who have almost no understanding of quantitative methods." [1] These journalists see the numbers as garnishes on a narrative point. They're not trying to put the numbers in some sort of mathematical context to draw sound conc…

Journalists, or people, some of whom are journalists?

Re: Mortgage Market Reopens to Risky Borrowers

#75

Post by tptacek » Wed, Aug 21, 2019, 9:31 PM UTC

hinkley wrote: post #74

rayiner wrote: post #6

Earlier quoted context omitted.

The problem is that most journalists are innumerate. As Matt Yglesias notes, "many reporters and editors don't really understand what they're doing. Reputable colleges hand out degrees to people who have almost no understanding of quantitative methods." [1] These journalists see the numbers as garnishes on a narrative point. They're not trying to put the numbers in some sort of mathematical context to draw sound conc…

Journalists, or people, some of whom are journalists?

The latter, obviously.

Re: Mortgage Market Reopens to Risky Borrowers

#76

Post by ryacko » Wed, Aug 21, 2019, 9:31 PM UTC

throwaway_law wrote: post #70

rconti wrote: post #21

Earlier quoted context omitted.

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…

It is safe to say that most people don’t understand algebra.

In theory the banks didn’t put a proper interest rate on the loan, since interest rates are mainly to compensate for the risk of lending to the borrower. Although it doesn’t matter since the banks bundled the mortgages together, sold them to each other, and were bailed out.

Re: Mortgage Market Reopens to Risky Borrowers

#77

Post by newguy1234 » Wed, Aug 21, 2019, 9:33 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…

The bay area is already in a downturn per california association of realtor data. La/oc/ie is mostly flat. Rural california is a mixed bag.

Re: Mortgage Market Reopens to Risky Borrowers

#78

Post by newguy1234 » Wed, Aug 21, 2019, 9:36 PM UTC

frustrated_90 wrote: post #36

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.

Nashville tn is one for sure. Apparently the downtown has been revitalized by hipster culture and 'the liberal agenda' as the locals would call it.

Re: Mortgage Market Reopens to Risky Borrowers

#79

Post by swypych » Wed, Aug 21, 2019, 9:37 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.…

I can see your perspective, I don't think you are wrong. I bought my house in 2014 and thought the very same thing.

I eventually made the decision that my house is not an investment, it's a home, which will I will use for shelter, and that I do not plan to sell for 20+ years. So long as I can afford to make the mortgage payments and not be house poor, I will be reasonably happy and this should work out.

Through that lens I figured even if the housing market were to collapse, I will have 20 years to make up the difference.

Right or wrong, this helped me frame it in a way to so I remove the timing aspect.

Re: Mortgage Market Reopens to Risky Borrowers

#80

Post by newguy1234 » Wed, Aug 21, 2019, 9:39 PM UTC

unstatusthequo wrote: post #31

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.

Same here. I have around 100k in cash that is just building up and that isnt even factoring in my gf's cash. She also has a cash stockpile for a downpayment. We are waiting for a correction to buy. Both of us live at home rent free so that helps big time. We are in a good position to buy.