Posted by PJM/MI on 2/25/09 6:10am
Msg #278666

Goodbye & Good riddance to the subprimes

And hello and so sorry to the rise in foreclosures.
My work has slowed down ALOT since the shake up with the subprime lenders, but the closings I am doing are really decent loans with really decent people.
I'm not sad to see the ARM's and IO's go by the way side. Every ARM had a hand at the end of it, and it reached up and choked the borrowers.
Eventually, this entire mess will get cleaned up and houses will start selling again.
Did anyone else see CNBC's "House of Cards"? Told the story as it truly was, and the truth is mighty sad.

Reply by PAW on 2/25/09 6:25am
Msg #278670

ARMs and IOs are alive and well

Though they have been terribly abused in recent memory, the adjustable and interest only loans are very much alive and becoming available again. However, whether a borrower qualifies for these types of loans is much more restrictive than in the past. Lenders are not as free with our money as they were in the past.

Imo, the SISA (as we know them) and NINJA loans may be history. Self-employed business people can still get loans, but the stated income and expenses must be verified in a much more intense process.

Reply by CopperheadVA on 2/25/09 6:47am
Msg #278672

Re: ARMs and IOs are alive and well

I did an ARM last night - fixed for 40 months and then adjusts yearly after that. It was a VA Streamline loan.

Reply by sue_pa on 2/25/09 8:18am
Msg #278683

Re: ARMs and IOs are alive and well

I agree with Paul. I see ARMs several times a week. I just did an 80/20 on Friday. I still stated income with the magical $1000 a month bonus - and that is from one of the largest lenders out there . Yesterday I did a second with NO costs or fees to the borrowers. Almost every product we've seen in the past still exists (although I haven't seen a 50-year term or a negative amort for quite a while).

Stating that ARMs across the board are choking people is a gross misstatement. When used for the correct purpose, they are a great product for many.

Reply by John_NorCal on 2/25/09 1:19pm
Msg #278699

Re: ARMs and IOs are alive and well

**Stating that ARMs across the board are choking people is a gross misstatement. When used for the correct purpose, they are a great product for many. **

So true. As with any financial product or obligation a consumer has to do their homework, make use of their recission period in the case of a refi, and keep their eyes and ears open. In my career I have seen too many people blindly following the advice of the wrong people at the wrong time and making bad decisions because of that. I have a client right now who is about to go into the fire. He bought a house at the height of the market, got into it by the skin of his teeth, went into credit card debt to upgrade it because "friends" told him he would make it up in appreciation. Meanwhile he had a business "partnership" fall through, lost a lot of money and owes everyone. He went to his bank (B of A) for some kind of relief and was told that as long as his home loan was not in default there was nothing they could or would do for him. So his next step is to default on his loan so that he can make good on his credit card and personal debts and then hope for some kind of relief. Sad case because he really is a decent guy who just wants to do the right thing.

Reply by MW/VA on 2/25/09 2:57pm
Msg #278711

I have a hunch they're still around. I had a borrower telling me that some of his neighbors are in foreclosure because of taking 80/20 loans. That was pretty popular for a while, and people were being convinced to "cash out" their equity. Now that the "equity" has disappeared, we can do the math as to what will happen.

Reply by LKT/CA on 2/25/09 3:26pm
Msg #278713

<<<I had a borrower telling me that some of his neighbors are in foreclosure because of taking 80/20 loans.>>>

I disagree as 80/20 loans were for the purpose of getting around paying PMI when you didn't have at least 20% in equity.

I agree with Sue/PA....ARMS are great products for some and those that understand them. Pay Option Arms were not designed for people to only pay the minimum payment forever. Those loans were designed to give one the "option" of choosing any of the 4 payments that met one's needs for any given month. If one's doing well and finances are fine, then pay either the 15 year or 30 year payment option. If one got in a cash crunch and needed extra cash for whatever reason or their business receivables were low then they had the "option" to drop to the minimum payment and use the extra cash to cover expenses. Of course, if the minimum payment is made it doesn't even cover the full interest so that difference is added to the principle balance. If one is only doing that for a couple of months, so what. When qualifying for those loans people should be qualified at the 30 year amortized payment, not the minimum payment - which I believe happened in the subprime mess to get people into overpriced homes they wouldn't otherwise qualify for income-wise.

Reply by Shoshana Roller on 2/25/09 4:36pm
Msg #278717

With the World Savings option arms (I can't speak for other lenders) borrowers were qualified by the fully amortized interest rate, not the minimum payment rate. The issue was really the stated income loans.
The problem started in the Carter administration with the Community Reinvestment Act. Gov't set up quotas for homeownership. That's why LOs have to complete the ethnicity questionnaire on the 1003.

Reply by Todd/OH on 2/25/09 7:37pm
Msg #278727

I agree with the others - subprimes are still around. This time, the borrower will put the LO to the fire and ask more questions. Maybe the borrower will actually read the paperwork.

I still say Attorneys General all over need to follow the paper trail right back to the broker. Some of these guys need jail time.

Reply by MW/VA on 2/25/09 8:15pm
Msg #278741

This was on "60 Minutes" last week--a whistle-blower, former employee, exposing the lending practices they got into. It will be interesting to see what, if anything, will happen. This apparently happened before they sold to Wachovia.