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The last crisis was also heavily related to sub-prime mortgages. How much has sub-prime lending been mitigated? Before the last crash, you could get "no paperw

by ssharp 10y ago

The last crisis was also heavily related to sub-prime mortgages. How much has sub-prime lending been mitigated? Before the last crash, you could get "no paperwork" mortgages, you'd just to have a little higher interest rate. Lenders would also squeeze people into ARMs so their initial rates were really low and then would go up after the adjustment period. And nobody cared about things like PMI because prices were going up so quickly. You'd have enough equity in your house if a few years and the PMI would go away. The general consensus was that if you were in the market to buy, you should buy as soon as possible before prices went up much more. Thankfully, I live in an area that didn't see the enormous run up of house values. The crash affected our housing and we still had the normal negative effects of a big recession. Housing prices have certainly recovered by now and I do wonder how much of it is still smoke and mirrors. But in markets like Florida and Arizona where house prices got really out of control, have those areas also recovered? That would be more shocking to me.

fweespeech 10y ago
> The last crisis was also heavily related to sub-prime mortgages. How much has sub-prime lending been mitigated? http://www.qualifiedhomeloans.com/campaigns/statedincomeloans/?gclid=CKG0g4ity84CFUGSfgoduV0GvA http://www.qualifiedhomeloans.com/campaigns/statedincomeloan... http://www.forbes.com/2010/07/02/return-liar-loans-personal-finance-no-doc.html http://www.forbes.com/2010/07/02/return-liar-loans-personal-... No. Its still essentially the same with no paperwork mortgages with higher interest rates and ARMs. Very little changed other than a few regulations that might stop a systemic collapse of large banks. > Thankfully, I live in an area that didn't see the enormous run up of house values. The crash affected our housing and we still had the normal negative effects of a big recession. Housing prices have certainly recovered by now and I do wonder how much of it is still smoke and mirrors. But in markets like Florida and Arizona where house prices got really out of control, have those areas also recovered? That would be more shocking to me. http://www.tradingeconomics.com/united-states/case-shiller-home-price-index/forecast http://www.tradingeconomics.com/united-states/case-shiller-h... The market as a whole is almost back to where it was in 2008.
- Domenic_S 10y ago
  You can't read that Forbes link and say "no" if you know a little bit about finance: > Wall Street Funding of America [...] circulating offers to make low-doc loans to borrowers with credit scores as low as 660 FICO, as long as the borrower was self-employed, seeking no more than 60% of the value of a home and had six months of mortgage payments in reserve. 660 FICO is not sub-prime by any standard, and it requires 40% down AND substantial reserves. That risk profile is great, and 180 degrees away from the old stated-income loans. Anecdata: I've opened 4 mortgages since the crash, 1 with a big bank and 3 with smaller lenders. Every one of them required substantial and verified documentation, and my FICO is just under 800. Lending is nowhere close to the craziness it used to be!
  - sokoloff 10y ago
    > 660 FICO is not sub-prime by any standard Experian buckets 740-830 as "super prime" and 680-739 as "prime". I'm not aware of any credit agency that buckets 660 as "prime" (or better). Some mortgage originators consider 670-690 and no 30-day lates in the last year as "near prime". 660 is indeed "sub-prime", IMO.
  - fweespeech 10y ago
    You do realize the other link is a stated income / no doc loan right? http://www.bloomberg.com/news/articles/2015-01-28/get-ready-for-the-return-of-risky-mortgage-bonds-credit-markets http://www.bloomberg.com/news/articles/2015-01-28/get-ready-... > Angel Oak is willing to buy loans with credit scores as low as 500, though the average has been about 670, just below the 680 level some use as a cut-off for subprime on a scale of 300 to 850, Hsu said. The company makes sure borrowers can afford the payments and requires at least 20 percent down payments, he said. 660 is subprime.
    - Domenic_S 10y ago
      That is not a no doc loan. You conveniently left out the very next sentence: > The company makes sure borrowers can afford the payments and requires at least 20 percent down payments, he said. "makes sure borrowers can afford the payments" is code for "documentation required". What's more, 20% down gives good capitalization and is hardly sub-prime (as a loan product). Low-score low-down FHA loans have existed for a long time and are not a cause for concern -- mortgage insurance is required and offsets the risk, unlike the crazy balloon ARM products of the bubble.
pessimizer 10y ago
As far as I know, the last crisis wasn't heavily related to sub-prime mortgages. The primary predictors of default were the amount of money down and the numeracy of the borrower, not the borrower's credit score. Plenty of people with excellent credit scores spent too much money on a house and ended up defaulting, and even people who could afford the payments ended up severely underwater; houses became very expensive very quickly, you couldn't buy one without spending too much. Blaming subprime is largely a right-wing narrative. The worst thing that happened in subprime is that a lot of people (especially minorities) who could have qualified for mortgages on better terms were steered into subprime and ARMs because of their worth in high-growth (and ostensibly low-risk) CDOs.
- talmand 10y ago
  I'm really curious about the things you are saying since they are so different than what people regularly say on the subject. Especially the right-wing narrative part. Can you suggest any sources on all this?

by ssharp 10y ago

fweespeech 10y ago

> The last crisis was also heavily related to sub-prime mortgages. How much has sub-prime lending been mitigated? http://www.qualifiedhomeloans.com/campaigns/statedincomeloans/?gclid=CKG0g4ity84CFUGSfgoduV0GvA http://www.qualifiedhomeloans.com/campaigns/statedincomeloan... http://www.forbes.com/2010/07/02/return-liar-loans-personal-finance-no-doc.html http://www.forbes.com/2010/07/02/return-liar-loans-personal-... No. Its still essentially the same with no paperwork mortgages with higher interest rates and ARMs. Very little changed other than a few regulations that might stop a systemic collapse of large banks. > Thankfully, I live in an area that didn't see the enormous run up of house values. The crash affected our housing and we still had the normal negative effects of a big recession. Housing prices have certainly recovered by now and I do wonder how much of it is still smoke and mirrors. But in markets like Florida and Arizona where house prices got really out of control, have those areas also recovered? That would be more shocking to me. http://www.tradingeconomics.com/united-states/case-shiller-home-price-index/forecast http://www.tradingeconomics.com/united-states/case-shiller-h... The market as a whole is almost back to where it was in 2008.

Domenic_S 10y ago
You can't read that Forbes link and say "no" if you know a little bit about finance: > Wall Street Funding of America [...] circulating offers to make low-doc loans to borrowers with credit scores as low as 660 FICO, as long as the borrower was self-employed, seeking no more than 60% of the value of a home and had six months of mortgage payments in reserve. 660 FICO is not sub-prime by any standard, and it requires 40% down AND substantial reserves. That risk profile is great, and 180 degrees away from the old stated-income loans. Anecdata: I've opened 4 mortgages since the crash, 1 with a big bank and 3 with smaller lenders. Every one of them required substantial and verified documentation, and my FICO is just under 800. Lending is nowhere close to the craziness it used to be!
- sokoloff 10y ago
  > 660 FICO is not sub-prime by any standard Experian buckets 740-830 as "super prime" and 680-739 as "prime". I'm not aware of any credit agency that buckets 660 as "prime" (or better). Some mortgage originators consider 670-690 and no 30-day lates in the last year as "near prime". 660 is indeed "sub-prime", IMO.
- fweespeech 10y ago
  You do realize the other link is a stated income / no doc loan right? http://www.bloomberg.com/news/articles/2015-01-28/get-ready-for-the-return-of-risky-mortgage-bonds-credit-markets http://www.bloomberg.com/news/articles/2015-01-28/get-ready-... > Angel Oak is willing to buy loans with credit scores as low as 500, though the average has been about 670, just below the 680 level some use as a cut-off for subprime on a scale of 300 to 850, Hsu said. The company makes sure borrowers can afford the payments and requires at least 20 percent down payments, he said. 660 is subprime.
  - Domenic_S 10y ago
    That is not a no doc loan. You conveniently left out the very next sentence: > The company makes sure borrowers can afford the payments and requires at least 20 percent down payments, he said. "makes sure borrowers can afford the payments" is code for "documentation required". What's more, 20% down gives good capitalization and is hardly sub-prime (as a loan product). Low-score low-down FHA loans have existed for a long time and are not a cause for concern -- mortgage insurance is required and offsets the risk, unlike the crazy balloon ARM products of the bubble.

pessimizer 10y ago

As far as I know, the last crisis wasn't heavily related to sub-prime mortgages. The primary predictors of default were the amount of money down and the numeracy of the borrower, not the borrower's credit score. Plenty of people with excellent credit scores spent too much money on a house and ended up defaulting, and even people who could afford the payments ended up severely underwater; houses became very expensive very quickly, you couldn't buy one without spending too much. Blaming subprime is largely a right-wing narrative. The worst thing that happened in subprime is that a lot of people (especially minorities) who could have qualified for mortgages on better terms were steered into subprime and ARMs because of their worth in high-growth (and ostensibly low-risk) CDOs.

talmand 10y ago
I'm really curious about the things you are saying since they are so different than what people regularly say on the subject. Especially the right-wing narrative part. Can you suggest any sources on all this?