Less than 20% fall in home prices will destroy the banking system?

Discussion in 'Economics' started by moo, Mar 28, 2007.

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  1. volente_00

    volente_00

    The problem is that before these buyers could not buy and once one underwriter starting doing the loans, the others followed because there was a huge untapped market to profit off of. Granted there are some shady ass mortgage brokers in the industry today. I am pretty tight with one MB and he has been known to be creative but when I went to get a loan he advised me not to get an ARM and did not try to force it. His underwriters have different ways of approving loans. I know someone who only showed $3600 total income on their last 3 1040's and this guy got them approved for 100k loan based solely on 3 years of rental history that showed they were never late paying $800 a month rent.
     
    #71     Mar 29, 2007
  2. volente_00

    volente_00




    So do you really think they are going to walk and lose the invesmtent property and their primary residence ? My guess is they might be forced to take a hit when selling the second house and end up taking years to pay the loss in that heloc.
     
    #72     Mar 29, 2007
  3. 2ez

    2ez


    Glad you didn't get offended my friend/.....


    ok so you considered the reset in monthly payments...

    now what about the property taxes increasing ?
     
    #73     Mar 29, 2007
  4. No offense, volente, but

    1) many people that used to qualify won't now because they have tightened credit

    2) many houses are no longer worth what they were when they were bought, so the lenders won't want to lend on them unless you give them the difference in cash

    3) some people took negative amortization or interest only loans, and in a declining market with higher rates and tigher credit, they are way underwater and have to live with whatever terms they have

    That's not to say that everyone is in trouble. Its mostly people that took ARM's and/or couldn't afford the home in the first place.

    Will this "destroy the banking system"? I think not. I don't think the overall foreclosure rate wil get over 5 or 10%, and I think we'll find that the banks made relatively few of these crazy loans as compared to the mortgage brokers, etc.
     
    #74     Mar 29, 2007
  5. 2ez

    2ez


    Take a hit ? That's if they can sell.......so if you sell for less that what is owed......they have to come out of pocket with the difference......Not an affordable option for many, because there is a little uncertainty on what is the difference between what is owed versus what was realized from the sale.

    my guess is that if they bought the investment property with an ARM (which I personally know many that have)...

    yes....they may have no choice but to walk away.
     
    #75     Mar 29, 2007
  6. SteveD

    SteveD

    Speculators will lease out at market price...whatever that may be....that cuts the "carrying cost" down...sit and wait it out...tax benefits also help close the gap...


    A lot of people don't realize that "walking away" has some unintended consequences....

    Loan is for $200,000.....lender forecloses, sells house for $150,000 at auction....lender sends you and IRS a 1099 for $50,000...forgiveness of debt is considered "income" for tax purposes....


    Also, for a country ready to go into a deep depression, there sure seems to be a lot of buyers at the foreclosure auctions.....

    I guess they haven't read the postings on Elite Trader, LOL


    SteveD
     
    #76     Mar 29, 2007
  7. volente_00

    volente_00

    How are taxes going to increase when you argue that the appraisal is going to drop 20% ?
     
    #77     Mar 30, 2007
  8. volente_00

    volente_00



    I agree, those that stretched themselves thin will get screwed and those in cash are going to get some great deals but this is just in select areas. It has to happen to complete the real estate cycle.
     
    #78     Mar 30, 2007
  9. volente_00

    volente_00



    Not on a house they bought on a heloc from their primary home.
     
    #79     Mar 30, 2007
  10. Your friend is a huge idiot. My buddy just rented a house for $1700 a month in san diego that is worth 600K.

    Mortgage payments are about 2X rent here in san diego, I have no idea what you are talking about.


     
    #80     Mar 30, 2007
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