Subprime
By Charles TurnerI found this article on subprime lending interesting. It defines a lot of the terms that we hear. Note that the link at the bottom of the article discloses his relationship with the lending industry. There are also more definitions there.
In a different news article on subprime, AIG has agreed with regulators to talk to their clients regarding the loans they received from the bank. Washington Mutual has already had a similar conversation with the Feds. Also in the article:
Earlier this week, Federal Reserve Board Chairman Ben Bernanke said the Fed will meet with mortgage lenders and consumer advocates on Thursday to discuss whether so-called low-doc or no-doc loans marketed to subprime borrowers should be prohibited.
The changes in the subprime market have not done away with below 20% down financing. The restrictions (lender imposed) on them have made them less common.
I skimmed the article very quickly. At least they mentioned the problem of prime borrowers getting subprime loans.
I think the issue with the below 20% down financing is that even prime borrowers are putting less than that down and while in recent years they would get a piggy-back loan to make up the diff, now that’s gotten tougher, thus encouraging some to actually save up for a real 20% down.
BTW: Inventory up another 2% last week according to housingtracker.net Inventory is now over 17K. Now well over last Fall’s inventory peak.
OOOPS to the inventory! Of course, that may not include those homes that are in-between RMLS numbers.
JJ: Consider that there are also a lot of FSBOs out there too taht aren’t counted in that number. Not a lot of REOs yet in PDX, but the number does seem to be steadily climbing.
Also, mortgage rates will likely go north of 7% for a 30 year fixed in the next few weeks. That’s not gonna help sales.
…oh, and higher mortgage rates aren’t going to help those who need to refi out of an ARM that’s adjusting upward. Those ARM adjustments really get going from June onward till the end of the year and into early 2008.
Perfect storm?
Speaking of ARM adjustments, U.S. foreclosures are up 90% YOY but Oregon foreclosures are down 50% according to Bloomberg.
http://tinyurl.com/2owfav
Interesting turn of events. On the subject of refinancing, a friend of ours just got out from underneath a 4% ARM but her interest rate is now 6.5%. I don’t know how this compares to the reset she would have experienced, but it still isn’t very good either. Sounds like it going to get worse based on TIP’s assessment.
We also know another young couple who just purchased a $267,000 townhome up on Burnside with $8000 down. It would seem the easy money machine is still rolling.
A great chart illustrating the volume of mortgage resets through 2011 can be found by following the URL below.
http://tinyurl.com/327onn
I just found some great local intel via the State of The Nation’s Housing Report produced by Joint Center for Housing Studies @ Harvard.
http://www.jchs.harvard.edu/son/
The report contains some great appendices. I downloaded their appendix tables and found a table listing “affordability products by market share 2006″.
The authors of the study define “affordability products” thusly:
“mortgage lenders looking to increase market share supplied loans to borrowers with tarnished credit records and offered ‘affordability’ products with lower initial payments to buyers anxious to get into the market.”
The table shows the total market share of “interest only” products in Oregon 2006 at 26% and “payment option” products at 9%.
So over 1/4 of the loans existing in Oregon in 2006 are “interest only”.
Wow…just wow.
How is the 26% number of Oregon compare to other states? Is it below or above average? Sorry I am too lazy to read the report myself. thanks.
We are number 7 out of 52. States with higher percentages include:
Virginia
Washington
Arizona
Colorado
California
District of Columbia
Nevada
I also have a correction to make; the total market share of “interest only” products in Oregon 2006 was 27% not 26%
Thanks, I guess that’s how we “buck the trend” to keep Portland houses overpriced…
We operate CurrentForeclosures.com, a foreclosures site and have seen a huge increase in the number of foreclosures in the past 4 months. I believe it is mostly because of sub-prime loans (and ARM mortgages). It is sad that so many people are losing their houses because of this-statistics are predicting that 1.1 million of people will lost their homes by 2014….sub prime loans should be outlawed (I recognize this isn’t the only reason, but it does play a huge role in many foreclosures).
I read that to mean 26% of loans MADE in 2006, not 26% of ALL existing loans. Don’t you think?
“total market share of “interest only” products in Oregon 2006 at 26% and “payment option” products at 9%.
So over 1/4 of the loans existing in Oregon in 2006 are “interest only”.”
Pool Loan Lender
Let me explain: after Citibank won the competitive bid process