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This is reminding me of the Big Short. Hopefully it's a false alarm. Anecdotal hypothesis: I found it very easy to be approved for a house I could hardly affor

by r0fls 10y ago

This is reminding me of the Big Short. Hopefully it's a false alarm. Anecdotal hypothesis: I found it very easy to be approved for a house I could hardly afford, so if there is another recession on the job market, I could see a lot of mortgages defaulting again. On the flip side, that's why Mortgage insurance is there. However, will we bail out the insurers next time, instead of the banks?

slackpad 10y ago
They've got Dr. Michael Burry as one of their advisors so hopefully they won't go the way of the Big Short - https://www.peerstreet.com/about https://www.peerstreet.com/about. There's a pretty good post from MMM about how it works - http://www.mrmoneymustache.com/2016/05/02/peerstreet/ http://www.mrmoneymustache.com/2016/05/02/peerstreet/.
- zenkat 10y ago
  "The short story is that I’ll be collecting interest on this loan at a rate of 10%, until 11 months from now when the loan is suddenly repaid in a balloon payment." Sounds a whole lot like subprime. In a rising market, it's not a bad deal. In a flat/down market, expect a lot of these to crater.
  - josephpmay 10y ago
    The difference (I believe) is the people taking out these loans are professional real estate investors with good credit.
josephpmay 10y ago
Funny, I literally just finished watching The Big Short. I know absolutely nothing about the market, but I was under the impression that it is much less risky now.
- nl 10y ago
  I was under the impression that it is much less risky now What gives you that impression? (Genuinely curious)
  - josephpmay 10y ago
    To be honest I almost never comment on a HN post when I'm this uninformed, however here is my reasoning: Since the crisis, people now have a much better idea of what's in mortgage-backed CDO's than they did during the bubble. The ratings agencies are also under much more scrutiny to properly classify the risk of these vehicles. On the consumer side of things, it's much harder to get a mortgage than it was before the crisis. Adjustable rate mortgages are much less common, don't have misleading intro rates, and don't make brokers sky-high commissions. I grew up in Miami in the bubble, and I remember every other radio ad was for no-questions-asked home loans. You just don't have that kind of culture now.

by r0fls 10y ago

slackpad 10y ago

They've got Dr. Michael Burry as one of their advisors so hopefully they won't go the way of the Big Short - https://www.peerstreet.com/about https://www.peerstreet.com/about. There's a pretty good post from MMM about how it works - http://www.mrmoneymustache.com/2016/05/02/peerstreet/ http://www.mrmoneymustache.com/2016/05/02/peerstreet/.

zenkat 10y ago
"The short story is that I’ll be collecting interest on this loan at a rate of 10%, until 11 months from now when the loan is suddenly repaid in a balloon payment." Sounds a whole lot like subprime. In a rising market, it's not a bad deal. In a flat/down market, expect a lot of these to crater.
- josephpmay 10y ago
  The difference (I believe) is the people taking out these loans are professional real estate investors with good credit.

josephpmay 10y ago

Funny, I literally just finished watching The Big Short. I know absolutely nothing about the market, but I was under the impression that it is much less risky now.

nl 10y ago
I was under the impression that it is much less risky now What gives you that impression? (Genuinely curious)
- josephpmay 10y ago
  To be honest I almost never comment on a HN post when I'm this uninformed, however here is my reasoning: Since the crisis, people now have a much better idea of what's in mortgage-backed CDO's than they did during the bubble. The ratings agencies are also under much more scrutiny to properly classify the risk of these vehicles. On the consumer side of things, it's much harder to get a mortgage than it was before the crisis. Adjustable rate mortgages are much less common, don't have misleading intro rates, and don't make brokers sky-high commissions. I grew up in Miami in the bubble, and I remember every other radio ad was for no-questions-asked home loans. You just don't have that kind of culture now.