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Relevant points: >Stanley Middleman, chief executive officer of Freedom Mortgage Corp., one of the nation’s biggest home-lending companies[:] >“Whether the as
by SilasX 7y ago
Relevant points:
>Stanley Middleman, chief executive officer of Freedom Mortgage Corp., one of the nation’s biggest home-lending companies[:]
>“Whether the assets are good or not good is irrelevant because there’s no liquidity to buy them,”...
>Wealthier buyers are proving to be just as likely to stop paying their mortgages. Approximately 5.5% of jumbo loans -- 131,000 borrowers -- have asked to postpone payments due to a loss of income, compared with 6% of all loans, according to Black Knight Inc.
- neltnerb 7y agoI think the bigger point is that the jumbo loans aren't backed by Fannie and Freddie so if the risk of default is similar then it does make sense to prefer to lend to people who need conforming (under the jumbo limit) loans. Of course, if you consider "wealthier buyers" they may have quite a few properties, and are more likely to have the resources legally to "go bankrupt" without it impacting them personally. See our POTUS for an obvious example. So they may be more likely to default by choice because it won't ruin their lives and increase the relative risk of lending to them.
- bradleyjg 7y ago> I think the bigger point is that the jumbo loans aren't backed by Fannie and Freddie so if the risk of default is similar then it does make sense to prefer to lend to people who need conforming (under the jumbo limit) loans. In the case of conforming mortgages the banks aren’t lending at all. They are filing out paperwork and skimming off the top.
- tempsy 7y agoThis is what the Fed has done for both recessions. It’s a bailout.
- tempsy 7y agoThis has nothing to do with actual credit risk. It has to do with the Fed’s decision as part of the stimulus package to buy mortgage backed securities backed by conventional loans but not jumbo loans. So banks have an out to sell bad conventional loans off their balance sheet to the Fed but have to take all the credit risk for jumbo loans even though those borrowers are more credit worthy and wealthier than your typical borrower. It’s creating a distortion in the mortgage market.
- perl4ever 7y agoDistortion is a value judgement based on some probably arbitrary idea of baseline fairness. Is there anything substantive you could say about why this is distortion - i.e. is a bad thing?
- tempsy 7y agoNo. What’s happening is that poorer, less creditworthy people are getting better rates and more likely to be approved than more creditworthy and wealthier people. That is a distortion.
- perl4ever 7y agoThat's based on arbitrary anchoring. If you disconnect anyone from resources to back up their borrowing, they are less creditworthy. There's no absolute objective arbiter of what sources of credit are legitimate and what aren't.
- jjeaff 7y agoA distortion is a distortion. Whether that distortion is a good thing or not, is a value judgement.
- perl4ever 7y agoNo, people express values by insisting that definitions include their values implicitly. That's because they think it's a clever trick to force other people to accept their values, but I think it's overrated. You know how in 1984, they controlled thought through language? I always thought that was dumb. But everyone certainly tries.