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Mortgages are a manufactured product (2022)

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Re: Mortgages are a manufactured product (2022)

#111

Post by refurb »

scarface_74 wrote: post #73
refurb wrote: post #29

Earlier quoted context omitted.

I’ll tell you why - because the government promoted it. Fannie and Freddie were complicit.

This is another widespread misconception. The mortgages that got the economy in trouble were the no-doc, no income verification type mortgages - ie “non conforming”. By definition, a non conforming loan isn’t backed by Fannie and Freddie. I had multiple non conforming loans I got before the crash. Yes they ended up just like you suspect.

Then why did they need a quarter trillion dollar bail out?

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

This is a delicious ironic quote from a from 2007 article.

After Sept. 1, Freddie will no longer invest in subprime mortgages that have a "high likelihood" of payment shock and foreclosure, the company announced on Tuesday.

https://www.reuters.com/article/idUSN27376399/

Re: Mortgages are a manufactured product (2022)

#112

Post by forgetfreeman »

scarface_74 wrote: post #86
forgetfreeman wrote: post #83

Earlier quoted context omitted.

I have news for you... Source: worked briefly in mortgage underwriting before the crash.

Are you denying the fact that a “non conforming loan” by definition means it isn’t eligible for Freddie and Fannie backing? I’ve had 5 first mortgages in my lifetime and only one was “conforming”. My latest one was a unit in a condotel where I live the majority of the year. No government institution would ever back and no income verification loan on a mixed use commercial/personal secondary home.

I'm reporting observed reality homeboy. I watched thousands of loans a week get pumped through the system with everything from income verification fields left blank to literally fraudulent (as in the loan officer got tech support on the phone to help them generate random numbers) information get pushed through with zero pushback. A point for you to consider: "non conforming loan" is only a meaningful phrase when the criteria for non conforming loans is actually being verified.

Re: Mortgages are a manufactured product (2022)

#113

Post by Joel_Mckay »

astrange wrote: post #110
Joel_Mckay wrote: post #105

Earlier quoted context omitted.

"None of the actual empirical economic data in the US resembles your statement" Who told you that? My opinions are actually not that relevant here. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3529638/ https://www150.statcan.gc.ca/n1/pub/11-008-x/2007004/10311-e... https://fortune.com/2023/01/12/millennials-broken-economy-de... https://www.nytimes.com/2023/02/15/opinion/fertility-decline... https://www.theatlantic.co…

All of those articles are about economic performance before 2019, which was bad, but now we live in 2024, which is a different year where the economy is good. In fact it's as good as it's been in decades in the US. (Not so good in other countries partly because we caused inflation in their currencies.) https://www.redfin.com/news/gen-z-millennial-homeownership-r... https://www.theatlantic.com/magazine/archive/2023/05…

In 25 years, maybe current trends will change things... maybe...

But don't cite people playing games with market valuations, and having vested interest in naive buyers... It makes you sound less credible and silly.

https://www.youtube.com/watch?v=aNSHZG9blQQ

Re: Mortgages are a manufactured product (2022)

#114

Post by Joel_Mckay »

jjav wrote: post #93
maxerickson wrote: post #72

Earlier quoted context omitted.

Adding leverage to the housing market probably isn't a net good thing. Especially when you have a mismatch between demand for desirable housing and the available supply. It is interesting that when you look at the US, some of our most expensive markets (housing, healthcare, education) have tight regulations on supply and federal policy response focused on subsidizing buyers (rather than addressing the structural supp…

> Adding leverage to the housing market probably isn't a net good thing. The leverage part isn't necessarily a good thing as it increases house prices to some extent (how much, I don't know). But what would be an alternative? Even if buying a house all-cash was the only choice, a house would still be very expensive because it does take a lot of real materials and labor. If we complain today that raising a 20% down pa…

"mortgages are a wonderful thing"

If you are still seeing negative amortization for 15% of buyers (will rise with interest rates).

Indeed, repurchasing your defaulted mortgage for equity liquidation is a very profitable posture to take for some folks. Have a nice day =)

Re: Mortgages are a manufactured product (2022)

#115

Post by eddd-ddde »

ramchip wrote: post #80
sanxiyn wrote: post #22

I know this post is about money, but I want to talk about electronic flow meters than money so I will. The description of "Japanese company making the best electronic flow meters" strongly suggests it is Keyence. They are the best indeed. Keyence is the 3rd largest Japanese company by market capitalization, next to Toyota and Japan's largest bank (Mitsubishi). Larger than Sony, larger than Nintendo, larger than Honda…

Very tangential, but as a worker in Japan I find it depressing how Keyence's recruiting material proudly shows a software engineer's typical day that starts at 8:30AM and ends around 8:00PM. No wonder it's so hard to raise kids. https://www.keyence.co.jp/jobs/software-engineer/

> Because we emphasize a clear distinction between work and private life, we strictly prohibit employees from taking their work home with them.

Wow thank you so much Keyence! I won't have to think about work in the 15 minutes of free time I get!

Re: Mortgages are a manufactured product (2022)

#116

Post by JumpCrisscross »

Joel_Mckay wrote: post #106
JumpCrisscross wrote: post #54

Earlier quoted context omitted.

You’re both wrong. I’ve worked with some of the people who invented these products and still had to double check your reference to make sure I was correct. I was—Milken didn’t popularise mortgage securitisation. Ranieri did.

If you actually read the posted article it describes Lewis Ranieri's role in detail. There is no right or wrong here in my opinion... just history and documented facts validated through a vetted jury conviction. I wish it was an ill informed opinion kid... I really do... I'd feel much less guilty seeing families growing up in Condos the size of a garden shed.

> There is no right or wrong here in my opinion

You said “Michael Milken is the man that popularized mortgage securitization on wall-street.” That is wrong.

Re: Mortgages are a manufactured product (2022)

#117

Post by Joel_Mckay »

JumpCrisscross wrote: post #116
Joel_Mckay wrote: post #106

Earlier quoted context omitted.

If you actually read the posted article it describes Lewis Ranieri's role in detail. There is no right or wrong here in my opinion... just history and documented facts validated through a vetted jury conviction. I wish it was an ill informed opinion kid... I really do... I'd feel much less guilty seeing families growing up in Condos the size of a garden shed.

> There is no right or wrong here in my opinion You said “Michael Milken is the man that popularized mortgage securitization on wall-street.” That is wrong.

He founded the risk market investment mechanism, and went to jail for what he tried next.

Perhaps you personally need a finer granularity of assigned responsibility, but the product relationship is very clear for most observers.

Best of luck =)

Re: Mortgages are a manufactured product (2022)

#118

Post by JumpCrisscross »

Joel_Mckay wrote: post #117
JumpCrisscross wrote: post #116

Earlier quoted context omitted.

> There is no right or wrong here in my opinion You said “Michael Milken is the man that popularized mortgage securitization on wall-street.” That is wrong.

He founded the risk market investment mechanism, and went to jail for what he tried next. Perhaps you personally need a finer granularity of assigned responsibility, but the product relationship is very clear for most observers. Best of luck =)

> He founded the risk market investment mechanism

“Risk market investment mechanism” is gibberish.

Milken did not ”[popularize] mortgage securitization”. Ranieri was at best his contemporary; he was not inspired by Milken. Your own article is a good source on this.

> read the article

I recommend Fabozzi’s Fixed Income as an introductory text if you’re drawing the (incorrect) conclusions that you are from that FT article.

Re: Mortgages are a manufactured product (2022)

#119

Post by Panzer04 »

rsynnott wrote: post #98
Panzer04 wrote: post #64

Earlier quoted context omitted.

The government is almost never the right provider of a commodity service. What possible benefit is derived from having the government manage the making of loans, already a competitive market? Mind that the US is somewhat unique in its subsidy of early-prepay 30y fixed mortgages - they exist nowhere else, because no sensible private lender would offer such a product otherwise (or a huge markup).

Eh, I think that’s a slight exaggeration. In Ireland you can get a 3.8% 30 year fix which allowed overpayment of up to 10% of balance/year, and redemption penalties capped at 2% of balance. This is, in practice, cheaper than virtually any US mortgage today, unless you’re only planning to keep the mortgage a few months. Granted, that’s kind a _weird_ product; I think only one lender provides it, and the market norm is…

Its hard to believe a 30y fixed bond wouldn't cost a ton of money to break, depending on the point you sell it.

Imagine a 30y yielding 3% with new loans yielding 6%. That bond would be priced at half its face value in order to make up for the yield difference - and in theory the debtor would have to pay that difference to buy it back.

The only way loans like that can be cheaper is an option/insurance (which costs money) in the loan to cover that risk.

Re: Mortgages are a manufactured product (2022)

#120

Post by Panzer04 »

formerly_proven wrote: post #96
Panzer04 wrote: post #64

Earlier quoted context omitted.

The government is almost never the right provider of a commodity service. What possible benefit is derived from having the government manage the making of loans, already a competitive market? Mind that the US is somewhat unique in its subsidy of early-prepay 30y fixed mortgages - they exist nowhere else, because no sensible private lender would offer such a product otherwise (or a huge markup).

Maybe that’s because Americans move around more and can’t be nailed to a house for 15-30 years like every european homeowner is (where you can neither refinance nor pay back early without paying essentially all future interest payments at once - US mortgage conditions are insanely good).

In AU the standard is a floating rate mortgage, with most fixed alternatives capping out at 5 years (which obviously has much more limited up and downside than a longer duration 30y equivalent). Those fixed loans can be more or less expensive than the variable rate, depending on market conditions.
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