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Second Half Of 2019 In Review

This is the selection of posts from the second half of 2019. I’ve focused on lending, US markets only and there’s much more at each link to read. I’ll have more in the comments below later. Thanks for dropping by.

July 1, 2019 “Chris Birk, a spokesman for Veterans United, the nation’s largest VA lender, said the program is as popular now as it’s ever been. Before the 2007-08 housing market crash, VA loans accounted for just 2% of all mortgages. Now they account for 12%. ‘VA loans are not one-time-only deals; veterans can get multiple loans over their lifetime, provided they don’t default on the loan. The only difference is that the closing-cost fee veterans are charged increases on the second and subsequent mortgage. Many simply roll the cost into their loan amount and can use the no-money-down strategy to build a small portfolio of income-producing rental homes. It’s a vehicle for wealth creation,’ Birk said.”

July 2, 2019 “Jeff Duffey, who runs a real estate firm that handles both existing and new home sales in Dallas, thinks that too many sellers believe Dallas is experiencing a boom market that gives them total control over pricing. ‘For example,’ he says, ‘two to three years ago, it was hard to find many homes in North Dallas that were listed between $400,000 and $600,000. Now I can show someone homes for five straight weekends and still not go through all of the active listings in that price range. Sellers who have overpriced their homes or who think they don’t need to go through the trouble to fix up their homes for sale are watching their properties sit on the market. Buyers don’t want those homes and they don’t need them.'”

July 10, 2019 “Auction.com’s first Client Summit Survey reported that 40% of its respondents revealed the western region of the U.S. is expected to see the largest rise of distressed properties in the second half of 2019. The west region posted a 10% quarter-over-quarter increase in foreclosure starts in Q1 2019, higher than the nationwide 7% increase and tied with the south for the largest regional increase. ‘Additionally, several bellwether markets in the West region posted year-over-year increases in foreclosure starts, including San Diego County, California, (up 16%); Salt Lake County, Utah, (up 11%); Denver County, Colorado, (up 20%); Snohomish County/Seattle, Washington, (up 36%); and Multnomah County/Portland, Oregon, (up 48%),’ the report states.”

July 11, 2019 “Christopher Cunningham, a Senior Loan Officer with Guild Mortgage Company, says there are programs to help buyers, even in a tough housing market. ‘Fannie Mae and Freddie Mac have gotten creative recently with higher debt-to-income ratios allowable,’ Cunningham said. ‘Guild offers a first-time homebuyer program. The State of Nevada and Rural Housing have tons of down payment programs that can help with down payments and closing costs. You see a lot of realtors asking the seller to cover closing costs these days, so the affordability is there if you can get creative.'”

“He says a lot of clients are surprised when they find out what they qualify for. ‘Every day I find someone who is scared to even start the process leave my office and is ecstatic to look for homes,’ Cunningham said. ‘And who doesn’t want to buy a home? It’s so exciting!'”

July 15, 2019 “While Hispanics comprise only 18% of the U.S. population, the group accounted for nearly 63% of new U.S. homeowner gains over the past decade, according to the National Association of Hispanic Real Estate Professionals. Jason Madiedo, chief executive of Las Vegas-based Alterra Home Loans, said 80% of his company’s loans are to Hispanic buyers and 70% are to first-time buyers who are fearful that if they don’t buy a home now they won’t ever be able to afford one. ‘The FOMO—the fear of missing out—has sort of set in,’ he said.”

“Lenders are also targeting Hispanics. Eva Angelina Romero, a real-estate agent in Nashville, said that more small lenders are offering programs geared to Hispanic buyers. One uses a tax identification number instead of a social security number, which a buyer wouldn’t have if undocumented. She said that while most of her clients used to be non-Hispanic, now 80% are Latino. ‘Mortgage companies are looking at that segment even more so now than before because refinances are not as plentiful [and saying] this is an opportunity we can no longer wait on,’ Mr. Madiedo said.”

July 17, 2019 “Foreign purchases of U.S. homes have dropped by half over the last two years. Real-estate agents said the pain from the foreign pullback is palpable when they try to sell high-end condos in Miami and New York or mansions in southern California and Seattle. ‘Generally speaking, we are in the largest market correction since the Great Recession in New York City,’ said Martin Eiden, a real-estate agent who has had to cut prices on listings from Midtown Manhattan to Brooklyn in the last year. ‘The foreign buyers have pretty much all but disappeared,’ he added. ‘I’m helping a lot of foreign buyers get their money out of this country as fast as possible.’”

“Glenn Phillips finds himself explaining to sellers the reasons why they might have to take a loss on their homes. Phillips and the agents at his company, Lake Homes Realty, have learned that to sell a high-end property, they may need to be brutally honest with homeowners whose asking price is way above what the market will bring. That’s a tactic brokers didn’t need to use before the housing crash.”

July 19, 2019 “Plano home prices have started to cool over the past year, according to industry experts. One particularly high-value Plano home Realtor Cassandra Stahl had been trying to sell recently has been sitting on the market for longer than usual. Her client, after buying the home for $630,000 two years ago, was still having trouble selling it recently after bringing the asking price down to $599,000. ‘It’s frustrating for the seller, and frustrating for me too because it’s got great schools, so it would seem that it should move very quickly,’ Stahl said. ‘But it hasn’t.'”

July 23, 2019 “Michael Borella, the sales manager at Movement Mortgage, said if you’re looking to buy a new home, now is a good time to do so. There are options out there whether you have 20 percent to put down or zero. ‘THDA is a great option there are a lot of 0% down loans. I always tell people, be prepared to spend $1,000. So where do you begin? Find a loan officer and bring important documents with you. ‘Bank statements, W2’s tax returns and tax returns aren’t always needed but they’re good to have,’ he said.”

July 24, 2019 “More Central Floridians are taking out zero-down loans to buy a home. ‘We didn’t have to put $30,000 down on a house, but you still get the house you want,’ said Christina Martinez, whose family bought a home in Kissimmee a few months ago with a zero-down loan through Veterans Affairs. ‘We could have put (something) down, but since we didn’t have to, we just didn’t.'”

“‘As people have recovered, now banks are becoming a little bit looser with their lending standards,’ said Jason Martin, a financial adviser with Allgen Financial. Stacy Luna, a lender with Atlantic Bay Mortgage Group, says buyers who don’t make much of a down payment are more likely to lose their homes to their lenders. ‘Unfortunately, what we do find with people with less skin in the game, those are the people who end up in foreclosure,’ Luna said. ‘Maybe they lose their job, or maybe they had a roommate and now the roommate’s gone, something breaks on the house. All they know is I only had $1,000 in it so why should I stay?’”

“For Dana Signore, a single mother who recently bought a house in Clermont, the only way she could afford to buy a home was if she didn’t put anything down. She qualified for a zero-down loan through the USDA for her $230,000 home. ‘That was really the only option,’ Signore said. ‘The money wasn’t there.'”

July 25, 2019 “Shanan Shepherd is co-owner of Shepherd Nelson Realty, based in Leander. Q: What should you tell your Realtor when you first meet? A: If you’re behind on your payments, tell your agent. It’s going to come out, and the agent can be proactive with your mortgage company to prevent foreclosure. But they can’t help you if they don’t know. Q: How long should a homeowner keep his or her home on the market before reconsidering selling? A: If your home hasn’t sold within 60-90 days, then you need to re-evaluate a lot of things. Is your house overpriced? Ninety percent of the time that is the problem.'”

July 27, 2019 “Alan Wang, an agent based in Santa Clara, has seen buyers avoiding townhomes and condos in favor of single-family homes, even if they have to stretch their budgets and mow their own lawns. Wang sold a two-bedroom townhome in Campbell last year for $915,000. This year, a neighbor in the townhome community asked him to sell a similar unit. Wang listed the property at $899,000 and had little interest for months, he said. Finally, they advertised the property at a below-market ‘teaser price’ of $499,000, designed to ignite a bidding war. The price drew plenty of interest, but only 2 of 18 offers came in over $700,000. The property sold for $722,000.”

July 28, 2019 “Obviously King County’s ‘Balanced Market’ is not somewhere between 4 and 6 months. As we can see in the chart above, the median price in King County fell from $650,000 in June of 2018, to $565,000 in January of 2019. The average months of inventory during that time period was 2.0475 months, with the highest month of inventory in September of 2018, at 2.83 months. Thus, at just an average of 2 months of inventory, it was very much a buyer’s market based on the drastic median price decline.”

“We have a dataset above that shows drastically declining AND increasing median prices when inventory is right around 2 months. Further, we have a dataset above that shows a higher percentage increase in median price with inventory at 1.938 months in the first half of 2019, than when inventory was at .9966 months during the first half of 2018. Are you confused, because I’m confused. Months of Inventory is not the stat to reference when discussing what Puget Sound’s balanced market is.”

July 29, 2019 “‘From an investor perspective, Brickell is a no-go zone, simply because of the amount of oversupply that exists,’ said Peter Zalewski, a principal with CondoVultures.com. ‘The cost of a condo there is so rich that landlords are having to subsidize their tenants, because the rents won’t cover the monthly costs. Before there was no alternative if you wanted to live in downtown. Suddenly there are a lot of alternatives and they are more competitive, too. The days of the Brickell landlords ruling over all are gone, just like the Spanish conquistadors.'”

August 6, 2019 “So if school is out, the University is expanding and Bay Area buyers have cash – is it time for everyone to go into debt and buy Merced real estate again? Pretend you are a home builder and you finally pay for permits on 100 new homes. In this environment, the builder might want to extend their own financing — especially if they can get a 20+% premium for their product — rather than relying upon an outside bank to finish the job. This ‘in-house’ finance practice is supported by piles of money available from hedge funds, money market managers and the like — all offering terms competitive or ‘faster and better’ than a buyer’s traditional commercial bank. In time though, underwriting can become lax as the builder and financier both want ‘a sale’ on their books by any means necessary — increasing risks for everyone long-term.”

August 6, 2019 “The July glut in the resale market is sparked, in part, by sellers who are finding ‘it’s harder to be a landlord in Seattle than it used to be’ because of regulatory changes and pressure from falling rents, said Seattle Redfin agent Jessie Culbert, who specializes in condos.”

August 16, 2019 “It’s getting harder and harder to buy a home in San Diego. But according to Veterans United Home Loans, VA loans in California are surging, and they’re up 15 percent this year in San Diego. VA purchase loans in California are up 66 percent from 2013 to 2018. Chris Birk, Director of Education at Veterans United Home Loan, says in some cases veterans and service members, if they qualify, can get a VA loan for no money down. ‘They don’t have to build pristine credit,’ adds Birk.”

August 23, 2019 “Foreign investors purchased $77.9 billion in residential property in the 12 months ending in March, down 36% from the previous 12-month period, the National Association of Realtors said. Meanwhile, more Chinese homeowners have been selling their American houses and condos because they can’t pay the maintenance costs with their money trapped in China, says Jeff Lu, vice president of Fidelity National Title Insurance Company. In Irvine, population 280,000, ‘There are 65,000 houses… and 21,000 of them are owned by Chinese.’ Lu says.”

August 24, 2019 “The next time you buy a house, your lender might deploy a drone and a computer algorithm to size up the property instead of a tape-measure-toting human appraiser. Federal regulators are moving to allow a majority of U.S. homes to be bought and sold without the involvement of licensed appraisers, by increasing from $250,000 to $400,000 the value of homes exempt from a human evaluation.”

September 5, 2019 “The Trump administration said it would support returning mortgage-finance giants Fannie Mae and Freddie Mac to private hands. ‘Our view is that the government footprint has become too big,’ Treasury Secretary Steven Mnuchin said. ‘There are people in Washington who are happy to leave this the way it is for another 10 or 20 years, and that’s not us. We feel an obligation to try to fix this.’”

“Figuring out how to refashion the companies remains the largest single piece of unfinished business from the financial crisis. ‘Investors will be much pickier and charge more for the loans they are willing to invest in,’ said Jim Parrott a former Obama administration housing adviser who is now an industry consultant. ‘That’s not to say we shouldn’t consider reducing the government’s role in places, but we should be honest about its impact.’”

September 10, 2019 “The U.S. housing finance system is worse off today than it was on the cusp of the 2008 financial crisis, Republican lawmakers and Trump administration officials warned on Tuesday. Fannie Mae and Freddie Mac, the two government-controlled enterprises that stand behind half the country’s mortgages, are way too undercapitalized, and lending standards have actually deteriorated since the housing crash, the officials said.”

“‘I will tell you as a safety-and-soundness regulator, when I look at a $3 trillion institution that is leveraged 1,000 to 1, it keeps me up at night,’ Federal Housing Finance Agency Director Mark Calabria, the companies’ regulator, told the committee. ‘If we do nothing, this is going to end very badly.’ What’s more, Fannie and Freddie are less equipped for a downturn now than they were before the crisis, Senate Banking Chairman Mike Crapo (R-Idaho) said. Before 2008, he said, the companies held 45 cents in capital for every $100 in mortgages; today that figure is 19 cents.”

“As it stands, underwriting standards at Fannie and Freddie have ‘gotten worse, not better,’ Calabria said, pointing to a ‘massive expansion’ of loans with high debt-to-income ratios in recent years. Efforts to reduce risk, though, would inevitably result in fewer people getting mortgages — a point Democrats on the committee made repeatedly. When Sen. Jack Reed (D-R.I.) pressed the officials to identify people who would not be able to get mortgages under the plan, Mnuchin said ‘there may be certain people today who really shouldn’t get a mortgage because they can’t afford them.”

September 14, 2019 “What’s up with mortgage rates? Jeff Lazerson of Mortgage Grader in Laguna Niguel gives us his take. The case touches on the rare issue of ‘business purpose’ loans, when borrowers use their own homes as collateral ‘to finance their dreams,’ as one of the law firms in the case put it. But this obscure case could have outsized implications by allowing ‘fog the mirror’ mortgages if the loan is for ‘a business purpose.’ But there is so much money to be made by every lender licensed in California (not just the private money lenders). Count California as ground zero for the next mortgage meltdown.”

October 4, 2019 “The federal government has dramatically expanded its exposure to risky mortgages. In 2019, there is more government-backed housing debt than at any other point in U.S. history, according to the Urban Institute. A growing number of homeowners faces debt payments that amount to nearly half of their monthly income. ‘There is a point here where, in an effort to create access to homeownership, you may actually be doing it in a manner that isn’t sustainable and it’s putting more people at risk,’ said David Stevens, a former commissioner of the Federal Housing Administration. ‘Competition, particularly in certain market conditions, can lead to a false narrative, like ‘housing will never go down’ or ‘you will never lose on mortgages.’”

“The Federal Housing Finance Agency, at the time under Director Mel Watt, began working on plans to direct Fannie Mae to purchase loans with higher debt-to-income thresholds, Watt said. ‘It is intuitive – you think the higher somebody’s debt-to-income ratio, the more problems they are going to have,’ he said from his home in North Carolina, where he is now retired. ‘But that’s just not the best criteria to apply to be quite honest.’”

October 8, 2019 “‘There’s another,’ said ‘Mary Jo,’ an Orange County realtor who did not want her name used, pointing at another of the large houses, this one advertising over 4,000 square feet. All of this has spiraled to a large number of hard-to-sell homes that are overvalued, expensive, that the owners don’t want to take a loss on, and younger people don’t want to buy. It’s difficult to estimate the average number of unsold McMansions, but real estate agents have reported that McMansions are hard to turn around. So much so that some neighborhoods are estimated to have half of their McMansions unsold or in foreclosure.”

“‘Some of our buyers only hang on to them for a year,’ said Mary Jo. ‘It’s the crisis hitting us. People can’t afford these, raise the money for a decent down payment, but then after a job loss or plain can’t affording it do to other higher costs, they foreclose or they sell the house. I can’t say how many are unsold in California, especially since many of them go in and out of being sold or on the market. But in Orange County it’s at least 10 to 15 percent of McMansions in states of not being sold in some developments, like if it’s in foreclosure or escrow. But it depends, become some neighborhoods have a much higher rate,’ Mary Jo explained, motioning to the row of houses with signs in front of them down the street.”

October 10, 2019 “Suastegui and Espinar are not the only Rise preconstruction buyers to take a beating in Miami’s resale market. The Real Deal found that 12 units at the 43-story building were resold between January 2018 and June 2019, at a time when the developer was also unloading more than 100 remaining units. Eleven of those resellers flipped their units at prices way below what they paid during the project’s preconstruction ramp-up. The spokesperson said some of the 12 Rise resellers were distressed buyers who needed to cash out. ‘We’ve been seeing incidences like this across Miami lately,’ the spokesperson said.”

October 15, 2019 “In Orlando, more than 1 in 10 people who applied for a loan were denied. Having bad credit and too much debt were the main reasons for denials. Daniel Betancourt, an agent in Orlando, said he hasn’t had any problems with clients getting approved, and pointed out that lending standards have actually loosened In the last few years. Brad Siebert, branch manager for The Mortgage Firm in Maitland said he was ‘shocked’ by the report. ‘I will tell you that it’s been years since I submitted a loan that hasn’t gotten approved,’ he said. ‘I’ve had more loans approved every year going back since I can remember. I don’t answer the phone and say, ‘Oh boy, it’s a Florida loan.'”

October 23, 2019 “A side comment made by a regulator during a congressional hearing Tuesday shows how little is settled when it comes to the fates of the two companies that underpin much of the housing finance market in the United States. ‘If the circumstances present itself to where we have to wipe out the shareholders, we will,’ Federal Housing Finance Agency director Mark Calabria said during a hearing before the House Financial Service Committee, referring to Fannie Mae and Freddie Mac’s shareholders.”

“Calabria frequently noted that Fannie and Freddie were operating at leverage ratios of 500 to 1, while most major banks are only allowed to maintain leverage ratios of 10 to 1. ‘Even if every single loan Fannie and Freddie made were pristine, they would still fail at that level of leverage’ in the event of a downturn, Calabria said.”

November 4, 2019 “The subprime mortgage-backed bond may be dead in America a decade after it helped trigger the global financial crisis, but a security with some of the same high-risk characteristics is starting to take off. It’s called the non-qualified mortgage — basically a loan granted to borrowers whose checkered financial record made them ineligible for conventional mortgages. This surge in issuance of non-QM bonds, as they’re called, comes just as some initial indications of delinquency rates on the loans are starting to emerge. The short answer: They’re high. About 3% to 5% in some bonds, according to Barclays Plc.”

“Fund managers’ willingness to plow money into these securities shows how the intense suspicion that met mortgage bonds after the housing bubble burst last decade is starting to slowly fade. ‘It’s obviously disturbing this late in the cycle to see originations for these loans at the kind of level they’ve kicked up to,’ said Daniel Alpert, managing partner at Westwood Capital. ‘The housing market is not quite ready for a big infusion of this product.'”

November 5, 2019 “Behind the concern aired recently at the Financial Stability Oversight Council headed by Secretary Mnuchin: the rapid growth of so-called shadow banks in the origination and servicing of home loans, especially riskier ones. ‘There is a real weakness here,’ said University of California, Berkeley professor Nancy Wallace, who co-wrote a 2018 paper titled ‘Liquidity Crises in the Mortgage Market’ with a fellow academic and three Fed economists. ‘Many of these firms are financially fragile.’ That’s because they’re dependent on short-term bank credit lines that could be pulled at times of financial stress.”

“Unlike conventional banks, the independent mortgage companies are generally monoline operations, dependent on one business to make money. Of the dozen or so evaluated by Moody’s none have an investment-grade rating on their debt. They’re not regulated by the Fed or the Federal Deposit Insurance Corp. And they lack the deposit base and access to emergency Fed financing that commercial banks enjoy.”

November 19, 2019 “A new study indicates that first-time home buyers are having more mortgage delinquency problems than they have since 2010. Black Knight’s most recent Mortgage Monitor report had some alarming findings: Nearly 1% of mortgage loan originations in the first quarter of 2019 were delinquent six months after origination. That’s a 60% increase over the past two years and the highest since 2010.”

“The rise in early-stage purchase loan delinquencies was higher for first-time buyer loans than repeat buyer loans. So why are first-time home buyers struggling to make mortgage payments? According to Black Knight, it’s largely because credit scores are down, homes are more expensive, and debt-to-income ratios are rising as a result. ‘Many first-time buyers feel pressure to compete and try and win an offer on a home. This can cause issues later when finally having to deal with new debt and repayment liability,’ notes Andy Harris, president of Vantage Mortgage Group.”

December 10, 2019 “Fannie Mae and Freddie Mac are pulling back on some mortgages meant to make homeownership more affordable, their latest effort to rein in risk at the behest of their regulator. David Battany, executive vice president for capital markets for Guild Mortgage Co., a San Diego-based lender, said Fannie and Freddie are rejecting some of his firm’s loans that they once would have agreed to back. Fannie and Freddie have now shrunk the share of these loans in their businesses for three straight quarters, according to industry research group Inside Mortgage Finance.”

“Mr. Calabria said he wants to make sure the companies won’t require another bailout. He said he also wants Fannie and Freddie to avoid making loans that may go bad during a downturn. ‘I think there’s a lot of evidence that we’re near the top of this cycle,’ Mr. Calabria said. ‘It would be counter to their mission where we get borrowers into loan products that would leave them vulnerable in a downturn.'”

December 12, 2019 “Foreclosure auction inflow data points to a third wave of post-recession distress building in late 2019 and early 2020. A total of 43,232 residential properties nationwide were referred to Auction.com in Q3 2019 for a potential future foreclosure auction, up from the previous quarter and a year ago to the highest level since Q1 2017. The characteristics of the increasing foreclosure auction inflow are distinct enough to label it a third wave of distress emerging in the wake of the Great Recession.”

“The emerging third wave of distress is primarily driven by a rising undercurrent of defaults among government-insured loans and privately held loans. Two sub-categories within the overall government-insured space stand out: VA-backed loans with a 31% increase and FHA-backed loans serviced by mid-market lenders—many of them so-called nonbank lenders and servicers—with a 17% increase.”

“The Black Knight report shows that the delinquency rate at six months after origination is trending higher for loans originated in 2018 and 2019, with a more extreme upward trend among Ginnie Mae-securitized loans—primarily comprising VA- and FHA-backed loans. The report shows that 3.3% of Ginnie Mae-securitized loans originated over the past 12 months were delinquent at six months, up from 3.1% for loans originated in 2018 to the highest level since 2009.”

“Among all loan originations, the delinquency rate six months after origination was 1% for loans originated in the first quarter of 2019, up from 0.9% for loans originated in 2018 to the highest level since 2010.”

“Among 2,410 counties with foreclosure auction inflow into Auction.com in Q3 2019, 870 counties (36%) posted a year-over-year increase in foreclosure auction inflow, including Maricopa County (Phoenix), Arizona; Miami-Dade County, Florida; Los Angeles County, California; and Bexar County (San Antonio), Texas. Also posting year-over-year increases in foreclosure auction inflow in Q3 were all three counties in the Seattle metro area: King, Pierce, and Snohomish; and three counties in the Denver metro area: Denver, Arapahoe, and Adams.”

“‘Some of the markets with the biggest inflow increases in the third quarter may be surprising given they have been rock stars of the real estate recovery of the last seven years,’ said Jesse Roth, SVP of Strategic Partnerships and Business Development at Auction.com. ‘But those markets may now be victims of their own success, with an unsustainable run-up in home prices pushing the limits of affordability for many homebuyers in recent years. Those financially stretched borrowers now have less equity cushion to protect against foreclosure, particularly if they are in a government-insured loan that came with a low down payment and down payment assistance.'”

December 14, 2019 “What might make delinquencies rise a long decline into historically low levels after the Great Recession? Mike Rawls, EVP of Servicing for Mr. Cooper points to slowdowns in home prices across the country. ‘Home price appreciation has slowed across the country and we are starting to see early stage delinquencies rising from historic lows,’ Rawls told DS News.”

“A consumer-led recession is unlikely, Kurt Johnson, Chief Credit Officer for Mr. Cooper noted, as incomes have risen steadily through 2019, while unemployment has stayed historically low. This was offset, he noted, by slow home price appreciation. ‘This should increase delinquency rates, particularly with low-down-payment, first-time homebuyers in FHA products—an historically more labor-intensive product to service,’ Johnson said.”

This Post Has 71 Comments
  1. Targeting Hispanics, targeting Veterans, many of whom come from poor backgrounds, targeting anything that moves to be the greater fool.

      1. ‘80% of his company’s loans are to Hispanic buyers and 70% are to first-time buyers who are fearful that if they don’t buy a home now they won’t ever be able to afford one. ‘The FOMO—the fear of missing out—has sort of set in’

        Check!

        ‘Lenders are also targeting Hispanics. Eva Angelina Romero, a real-estate agent in Nashville, said that more small lenders are offering programs geared to Hispanic buyers. One uses a tax identification number instead of a social security number, which a buyer wouldn’t have if undocumented. She said that while most of her clients used to be non-Hispanic, now 80% are Latino. ‘Mortgage companies are looking at that segment even more so now than before because refinances are not as plentiful [and saying] this is an opportunity we can no longer wait on’

        Running out of borrowers, no problem. Just scrape the bottom of the barrel. We have seen this movie before!

        ‘looking at that segment even more so now than before because refinances are not as plentiful’

        They don’t even hide it.

        1. I don’t believe the Hispanic mortgage holders are living on the financial edge. It sounds more like wealthy Hispanics are buying the houses and renting them out to multiple Hispanic families. That would explain the multitudes of beater vehicles filling up the streets in my neighborhood.

          1. I work on loan details for sales coming up to auction in Arizona. The Hispanic surnames are all over them, are most often primary residences. The dates of the loans are wide. There’s not a lot of wealthy people in the whole state.

          2. IIUC, Arizona has a much larger American citizen population of Hispanic (Mexican?) descent. But the DC area area is different. Almost all of the Hispanics here (over the age of, say, 20) are relative newcomers in the past 20 years, much more Central American.

    1. There’s a reason you see so many pawn shops and payday lenders clustered around military bases. They may be “heroes” each and every one, but a high percentage junior enlisted troops are terrible when it comes to managing their finances.

      1. I remember when I got to Fort Hood for the first time. One of the divisions was over in Europe on a Reforged exercise and a pawn shop outside the gates in Waco had a big “Wives get money while your husband is out of town” sign out front.

          1. Down in San Diego on Coronado there was (is?) an EM club on the Amphibious Base across the highway from the Navy’s UDT-BUD/S training center. That place was the Golden Corral (all-you-can-eat) of military wives. You just know the Chaplain Corps were desperate…trying to “hold back the tide with a broom.”

  2. I’ve never done reviews like this before and have found it very instructive. So much happened in 2019, I felt like this was necessary:

    ‘is it time for everyone to go into debt and buy Merced real estate again? Pretend you are a home builder and you finally pay for permits on 100 new homes. In this environment, the builder might want to extend their own financing — especially if they can get a 20+% premium for their product — rather than relying upon an outside bank to finish the job. This ‘in-house’ finance practice is supported by piles of money available from hedge funds, money market managers and the like — all offering terms competitive or ‘faster and better’ than a buyer’s traditional commercial bank. In time though, underwriting can become lax as the builder and financier both want ‘a sale’ on their books by any means necessary’

    This alone shows how sorry the state of lending is today. The MSM didn’t pick up on this obscure article. Long time readers may remember the first subprime blow-up last decade was builder loans.

    Former Beazer Homes exec Michael Rand sentenced to 10 …
    https://www.bizjournals.com › charlotte › blog › morning-edition › 2015/05
    Former Beazer executive sentenced to 10 years | Charlotte …
    https://www.charlotteobserver.com › news › business › article19954404
    Apr 30, 2015 – Former Beazer executive sentenced to 10 years. A federal judge in Charlotte sentenced a former Beazer Homes USA executive to 10 years in prison on Thursday for his role in a long-running accounting scheme at the Atlanta-based homebuilder.
    Imprisoned Beazer executive wants conviction thrown out …
    https://www.charlotteobserver.com › news › business › article186882498
    Nov 28, 2017 – Michael Rand was sentenced in federal court in Charlotte in 2015 following a legal drama that began with his indictment in 2007 and included two jury trials. The federal investigation into the company followed a series of Observer stories focusing on Beazer practices that broke …
    May 1, 2015 – 10-year prison sentence for former Beazer Homes exec A federal judge in Charlotte on Thursday sentenced Michael Rand, formerly the chief accounting officer for Beazer Homes USA Inc. (NYSE:BZH), to 10 years in prison and three years of supervised release after he was convicted of conspiracy and obstruction of justice.

    Former Beazer Homes Chief Accounting Officer Loses Stay of …
    Sep 30, 2019 – Charlotte Jury Finds Former Chief Accounting Officer For Beazer Homes … On April 30, 2015, Rand was sentenced to 120 months in prison … Still — ya gotta admire this guy’s chutzpah when it comes to … SEC Charges Hologram Company and Its CEO with Fraud and Registration Violations (SEC Release).
    Federal Judge Hands Down 10-Year Sentence To Former …
    https://www.justice.gov › … › Western District of North Carolina › News
    Apr 30, 2015 – Rand, who was the former Chief Accounting Officer for Beazer, was … He will be ordered to report to the Federal Bureau of Prisons upon …

      1. “They said it looks like leveling off to me.”

        Every REIC bull sees a permanently high plateau at the onset of a crash.

    1. “So much happened in 2019, I felt like this was necessary.”

      I showed it to someone, and told them this guy things the bubble is about to burst. They said it looks like leveling off to me.

      The question is, how long can they keep cashing in the future to support asset prices?

      Moreover, as a result of our long term current account deficit we are now renting from the Chinese, Arabs, etc. The question is, will they end up hosed like the Japanese in the early 1990s after they reinvested their trade surplus here?

      1. It popped a long time ago:

        ‘A total of 43,232 residential properties nationwide were referred to Auction.com in Q3 2019 for a potential future foreclosure auction’

        I go to these auctions, spend time reviewing the documentation behind them. Some of them are shadow inventory, some are loans made earlier this year. But here’s the kicker: the GSE’s are claiming waaay lower numbers of pre or post foreclosure. (Defaults are another thing, but they purposefully hide those numbers under the auspices of “helping people stay in their home”).

        So just where the heck did 43,000 foreclosures come from? It’s not easy to say, sometimes the name on it will be a servicer, not the real lender. Often even title documentation is misleading or a waste of time. But whatever the case, 43k shacks just shot over the official numbers and landed at auctions all over the country.

        1. “the name on it will be a servicer”

          Could this be evidence of a cash crunch at the shadow banks? If I understand it correctly, they sell the loan but often keep the servicing contract? So if the borrower defaults, and the GSE is slow pay up on the guarantee, would QuickLendTree be on the hook to pay the loan owner right away while waiting for the gov’t agency to pay them? I.e., the loan owner may not care to foreclose, but the servicer has so many defaulted loans piling up they are advancing cash on that they need a chunk of money from the foreclosure to keep the churn going?

          Not my area of expertise, but I think we’ll all have a big learning curve this time when it comes to the impact of shadow banks and gov’t guarantees.

      2. We’re renting from a Vietnamese guy who has owned the place we rent for over two decades. It’s in bad need of upgrades to make it competitive against newer homes, especially if the incipient crash gains force.

        It’s all good from my standpoint, as I don’t mind antiquated appliances, provided they run, I can withstand the bathroom smells due to the lack of fans or open the window, if all these factors reduce the chance the owner will sell before we are ready to move (like the last ones did)…

        1. I think the high tech crash led by Tesla is starting. It should do some major damage to California real estate.

          1. Hyperinflated asset prices on shrinking transactions volume have preceded every bubble collapse since the dawning of the modern financial era.

          2. I’m no fan of Tesla, but at least they are producing a real thing.
            Instead, the tech crash is being led by failed disrupters like Uber and WeWork, who are just incrementally repackaging existing industries. Granted, there is some value to companies who use the Internet to accumulate cottage piecework, equipment rental, and delivery services into a single critical mass. But not $45 billion worth! And

            (That said, I DO like Musk’s Boring Company. IMO he should spend more time on that.)

  3. From the October 4 post:

    ‘An American developer is looking to attract the international buyers who would have previously looked to Vancouver. The Spire was originally going to be a rental tower, which has been the trend for years in Seattle. But the developer switched to condos last year, pricing the units at US$1,200 a square foot. ‘Everybody was doing rental,’ says long-time developer Bob Kagan. ‘The condo market dried up around the recession and is just now coming back. In real estate timing is everything. We call it the real estate casino – that’s really what it is.’

  4. Here’s more that I didn’t include above:

    November 2, 2019

    ‘In Manhattan’s flagging real estate market, that was the median sale price of a two-bedroom apartment last quarter — an 8 percent drop from the same period last year, and the largest discount among studio to three-bedroom co-ops and condos, according to the brokerage Douglas Elliman. Only the four-bedroom-and-up market fell further, with a 17 percent drop.’

    ‘After years of softness at the top, it is finally becoming a buyers’ market for people who intend to actually live and work in New York. Case in point: deep bargains across the wide spectrum of two-bedrooms, the most common apartment for sale in the city. Many look to the glut of new high-rise, luxury condos for what ails the city’s real estate market, but ambitious pricing at the top also set unrealistic expectations in the comparatively modest co-op market.’

    ‘Sooner or later what was happening in the luxury market was likely to catch up with the two-bed market,’ said Frederick Warburg Peters, the chief executive of Warburg Realty, who added that one-beds and small two-bedrooms have ‘sunk into the doldrums’ since about four months ago.’

    ‘Frances Katzen, an agent with Douglas Elliman, recently listed in Sutton Place, on the east side of Manhattan, a two-bedroom, one-bathroom apartment with plenty of natural light and prewar bona fides for $599,000 — a 20 percent markdown from its previous price of $750,000. Two years ago, it listed and languished on the market with another brokerage for $995,000.’

    ‘People are cannibalizing each other, to usurp a buyer from one another,’ said Ms. Katzen, who believes the true value of the apartment is around $625,000 — but she listed lower in the hopes of standing out from a growing number of co-ops for sale.’

    ‘I can’t count how many times I’ve heard a client say ‘O.K., if I drop the price, can you guarantee me a quick sale?’ And my response is no,’ said. ‘All I can guarantee you is no sale, if you don’t,’ said Mr. Peters of Warburg Realty.’

    http://housingbubble.blog/?p=2569

    1. “Only the four-bedroom-and-up market fell further, with a 17 percent drop.”

      Are they running out of four-bedroom buyers in
      Manhattan?

      Knifecatchers there be hurtin’…

    2. “on the east side of Manhattan, a two-bedroom, one-bathroom apartment with plenty of natural light and prewar bona fides for $599,000”

      I don’t know much about East side/West side, but $600K for a condo in Manhattan sounds low. Prices are higher near Dupont Circle in DC.

  5. November 23, 2019

    ‘Real estate doesn’t appear to be the sector where we are taking risks that won’t pay off,’ says Sam Chandan, an associate dean of New York University’s Schack Institute of Real Estate. ‘By and large, we have been fairly reserved in our development activity, in our investment activity.’

    ‘That said, Chandan does worry about some loans made to apartment properties. ‘Commercial real estate has been much more reserved in the expansion of its debt with the exception of multifamily,’ he says. Lenders had $1.4 billion in loans outstanding to apartment properties. That’s twice the volume of apartment loans outstanding just before the financial crisis, he says.’

    ‘In the rush to make those loans, some lenders may have lent too much. The average apartment borrower carried $13.95 of debt for every $1 of net operating income in the second quarter of 2019, up from an average of less than $10 of debt in 2010, according to Chandan. ‘Not all of that debt is going to have been structured in a way that is going to survive maturing in a downturn,’ says Chandan.’

    ‘Chandan also sees a mismatch in the housing markets: ‘The bulk of development that we have seen has been that class A, urban, high-rise building that is well amenitized and is in the top decile of the asking-rent distribution, if not even higher.’ That creates a glut of housing for upper-income people, and an expensive shortage for everyone else.’

    http://housingbubble.blog/?p=2641

  6. September 22, 2019

    ‘The Inland Empire has seen a 243% surge in the construction of large apartment complexes this year. Chris Tourtellotte, managing director of acquisitions for a Los Angeles-based builder of higher-end apartments, said his company and others who build in the L.A. metro region face constant challenges.’

    ‘Tourtellotte acknowledged that more affordable housing units are needed in Los Angeles. But developers are given no financial incentive to build them, he said, and with rents in those units being so low, the projects provide virtually no revenue for builders. ‘It’s a pure giveaway,’ he said.’

    http://housingbubble.blog/?p=2386

  7. October 1, 2019

    From Summit Daily in Colorado. “One price that is going down is the average cost of vacant land, which has decreased as much as 62% so far this year. ‘Vacant land is the first to be affected and the last to take off,’ said Summit Association of Realtors President Thomas Coolidge in reference to how vacant land sales are impacted by the local housing market.”

    “Since vacant land is more of a long-term project for a buyer than purchasing a home, Coolidge said people want to have a solid plan when they buy vacant real estate. People don’t want to be sitting on vacant land if there does happen to be a downturn in the economy, he said.”

    http://housingbubble.blog/?p=2439

    1. I’m thinking that the only people who can afford a vacation home in the ski resort areas are too old to ski. So it’s either purchased for speculation or as an “investment”, and I really wonder just how well a rental pencils out in those kind of places.

  8. September 13, 2019

    ‘In an analysis of seven luxury towers on and around Billionaires’ Row, including pending sales, almost 40 percent of units remain unsold, said Jonathan J. Miller, the president of Miller Samuel Real Estate Appraisers & Consultants.’

    ‘The last time similar offers were made was in the late 2000s, ‘when the bottom dropped out,’ said Simon Bacon, a senior vice president with Douglas Elliman. ‘It’s a troubling sign.’ ‘People don’t realize this is already as bad as it was after Lehman, purely from a supply standpoint,’ said Mark Chin, the chief executive of Keller Williams TriBeCa. ‘I can smell it from here, I just can’t figure out yet where the stench is coming from. But it’s guaranteed to be happening.’

    ‘But among new projects, developers do not suffer equally, said Donna Olshan, Olshan Realty ’s president. The developers who bought at peak land costs and who promised lenders overly ambitious returns are less able to reduce their pricing now that the market has softened. ‘Some of them are caught between the devil and the deep blue sea,’ Ms. Olshan said.’

    http://housingbubble.blog/?p=2351

    1. Billionaire’s row is quite a sight if you live in metro NY. Those towers are still going up, pencil thin. They look like a mere wind might blow them over, onto the buildings of the mere millionaires below them.

      And though they are not technically higher than the Empire State Building and One World Trade, that is only because the ground they sit on is higher. So they look taller from afar.

      What a monument to this era they might turn out to be! I just hope those on the upper floors are required to keep the lights on so aircraft don’t fly right into them.

        1. ‘Suastegui and Espinar are not the only Rise preconstruction buyers to take a beating in Miami’s resale market. The Real Deal found that 12 units at the 43-story building were resold between January 2018 and June 2019, at a time when the developer was also unloading more than 100 remaining units. Eleven of those resellers flipped their units at prices way below what they paid during the project’s preconstruction ramp-up. The spokesperson said some of the 12 Rise resellers were distressed buyers who needed to cash out. ‘We’ve been seeing incidences like this across Miami lately’

          Minting new FBs with every sale:

          ’12 units at the 43-story building were resold between January 2018 and June 2019, at a time when the developer was also unloading more than 100 remaining units’

    2. “In an analysis of seven luxury towers on and around Billionaires’ Row, including pending sales, almost 40 percent of units remain unsold, said Jonathan J. Miller, the president of Miller Samuel Real Estate Appraisers & Consultants.”

      What happened to the appetite for investment properties that go up in value by over 10% a year? Are they running out of billionaires now?

  9. September 11, 2019

    ‘When sales began at the Westlight condo building in November 2016, people lined up overnight to sign the first contracts. Now nearly three years later, 30% of the units in the building are unsold, and its developer says it will be his last condo project.Eastbanc founder and CEO Anthony Lanier, who has been one of D.C.’s most prominent condo developers for the last 30 years, said he is no longer bullish on the for-sale market and is shifting his focus to apartments.’

    ‘This will definitely be my last condo project,’ Lanier told Bisnow . ‘I said, ‘Shoot me if I build another one.’ I just think it’s an overvalued business model and the D.C. market doesn’t provide enough margins for the condo developer.’

    ‘Westlight Sales Director Mei-Mei Venners said the high-end condo market has slowed down in D.C. and across the country. ‘Everything over $1.5M, which is a lot of the Washington luxury inventory, has quieted,’ Venners said. ‘People are sitting in the wings and not pulling the trigger as quickly. They don’t have to purchase. Maybe they rent for a period of time until we figure out what the stock market is doing and what the economy is doing.’

    ‘George Mason University economist Stephen Fuller said there has been an oversupply of luxury residential properties in the D.C. region and not enough demand to match it. ‘In the McLean, D.C., Bethesda or Arlington markets for condos or single-family detached homes over $2M, there aren’t enough customers,’ Fuller said. ‘There are condos waiting to be built and they’re still waiting to get enough buyers to build them.’

    http://housingbubble.blog/?p=2341

  10. From the July 19 post:

    ‘Consider a few of these recent headlines from major newspapers around the state: ‘Bay Area home prices fall 1.7% in May, biggest year-on-year drop in 7-plus years,’ said the San Francisco Chronicle on June 27, 2019; ‘Sluggish sales suggest peak has come and gone,’ said the Mercury News on June 27, 2019; and ‘Southern California home prices are flat in May as sales fall,’ said the Los Angeles Times on June 26, 2019.’

    ‘And it is no secret that statewide real estate trends can be reflected in the Davis micro-market. Broker Cory Gold added that ‘With the buyers that I am working with, there seems to be no urgency. They find a house they like and they don’t immediately put in an offer. They take their time with their decisions and have the sense that if this one sells, there will be another one.’

    ‘It’s just absolutely critical to price the property correctly, and by that I mean don’t overprice it or you’re going to be following the market down. The price strategies that worked in the market in 2017 don’t work in the market in 2019,’ said California Association of Realtors chief economist Leslie Appleton-Young.’

  11. From the July 23 post:

    ‘Columbus has been named one of the hottest housing markets in the country, but just how hot? When it comes to the city’s housing market, there’s a lot of misconceptions. ‘I think there is that misconception for sellers that anything will sell at any price because they’ve heard it’s a sellers market,’ said Realtor Sara Walsh.’

    ‘She said only certain homes are selling under the 30-day mark. Mostly, it’s homes within the $200,000-$300,000 range. ‘What we realize is if you get above $600,000-$750,000, it takes about four months to sell a home on average. We don’t always give that data to the marketplace,’ she said.’

  12. From the August 16 post:

    ‘Look around Phoenix and you see cranes and construction sites, new buildings everywhere. New home construction in Phoenix largely came to a halt during the recession, but land speculation continued. ‘In the early 2000s, a property would be priced at about $10 a square foot for a completely vacant piece of land and near downtown Phoenix. And often after being bought and sold about six times in the span of two years, these properties went up to over a hundred dollars a square foot. So in many times these properties went up tenfold and value without any, any improvement whatsoever being done to the property itself,’ said Ben Stanley is a postdoctoral researcher at ASU’s School of Sustainability.’

    ‘It doesn’t seem especially sustainable, not just for actual environmental reasons, but just for economic reasons that how do you have an economy that it constantly requires more people to move to the, so the area is constant, requires unending construction and so on?’ Stanley asked.’

    Still no bubble?

  13. From the September 14 post:

    ‘The Chief Economist for Windermere Real Estate, Matthew Gardner, made a stop in the Snoqualmie Valley. Gardner said the Puget Sound real estate market is ‘well and above’ many other U.S. markets, but the currently it is a ‘more rationale housing market.’ Gone are the years of 15-20% price increases. So are we in another bubble? Gardner says no, noting the credit worthiness of buyers. Gardner said, ‘Overpriced homes doesn’t mean we’re in a bubble. It just means overpriced.’

  14. ‘Thus, at just an average of 2 months of inventory, it was very much a buyer’s market based on the drastic median price decline’

    ‘we have a dataset above that shows a higher percentage increase in median price with inventory at 1.938 months in the first half of 2019, than when inventory was at .9966 months during the first half of 2018. Are you confused, because I’m confused. Months of Inventory is not the stat to reference when discussing what Puget Sound’s balanced market is’

    The REIC is full of fudging liars who would sell their grandmothers for one more month of commissions.

    1. ‘The Federal Housing Finance Agency, at the time under Director Mel Watt, began working on plans to direct Fannie Mae to purchase loans with higher debt-to-income thresholds, Watt said. ‘It is intuitive – you think the higher somebody’s debt-to-income ratio, the more problems they are going to have,’ he said from his home in North Carolina, where he is now retired. ‘But that’s just not the best criteria to apply to be quite honest.’

        1. As many people are learning by experience these days, taking on massive debt to gamble in the housing casino is risky.

  15. “He says a lot of clients are surprised when they find out what they qualify for. ‘Every day I find someone who …”

    … is possessed with common sense? …

    “… is scared to even start the process …”

    (close enough)

    “… leave my office and is ecstatic to look for homes,’ Cunningham said. ‘And who doesn’t want to buy a home? It’s so exciting!’”

    Bahahahaha … and these so excited and ecstatic pukes are the ones who descend enmass into homes offered up for sale and engage in bidding wars with other excited and ecstatic pukes which results in the rise in the PRICE for THAT house which ends up raising the VALUES for ALL OF THE COMPS.

    Raising values for comps creates enormous quantities of equity wealth, equity wealth for many that is generated by the actions of a few pukes who have become excited and ecstatic and thus decide to look to buy homes with money they do not have.

    A nation of dummies.

    1. “A nation of dummies.”

      Exhibit A:

      Global warming skeptics as knowledgeable about science as climate change believers, study says | Fox News
      https://www.foxnews.com/science/global-warming-skeptics-as-knowledgeable-about-science-as-climate-change-believers-study-says

      From the link, here are three questions from the 22 that were asked.

      “Electrons are smaller than atoms — true or false?”

      “How long does it take the Earth to go around the Sun? One day, one month, or one year?”

      “Lasers work by focusing sound waves — true or false?”

      And here is part of what the article says …

      “The quiz, containing 22 questions about both science and statistics, was given to 1,540 representative Americans. Respondents who were relatively less worried about global warming got 57 percent of them right, on average, just barely outscoring those whose who saw global warming as a bigger threat. They got 56 percent of the questions correct.”

      IMO these are some very dumbed-down questions and it astounds me that such a low percentage of the population can answer them correctly.

  16. Seattletimes is peddling fake population gains again. Please go to seattletimes article and upvote my comments, write comments and participate on twitter (username linked). Seattle has some of the most extreme REIC propaganda you will find anywhere. Lies upon lies upon lies.

    https://www.seattletimes.com/seattle-news/data/the-decade-in-demographics-seattles-top-5-changes/

    The population numbers for Seattle and King County are massively exaggerated because they are based on counting new housing units rather than actual people. How many times do I have to point this out before ST gets the memo and starts doing real journalism instead of just printing sensationalist numbers?

    Here are the proper survey-based numbers for net migration (in minus out) for King County, WA from 2009 to 2017

    2009:21298, 2010:21577, 2011:-3345, 2012:2016, 2013:2843, 2014:4738, 2015:5471, 2016:5932, 2017:458

    These are survey-based ACS numbers, not pie-in-the-sky numbers based on counting new construction that is sitting empty. Do these numbers look like it is is even remotely possible for there to be a 136k increase in Seattle population from 2010-2019, as the article claims? The 136k number is pure bunk. The ACS number add up to 39690 from
    2010-2017, or 40k . And that 40k is for ALL of King County, not just Seatttle. 40k (KC) for 2010-to-2017 versus a (claimed) 136k (Seattle proper) for 2010-2019. Something is very wrong, and what is wrong is the methodology used by the non-census non-ACS numbers peddled in the article.

  17. “He says a lot of clients are surprised when they find out what they qualify for. ‘Every day I find someone who is scared to even start the process leave my office and is ecstatic to look for homes,’ Cunningham said. ‘And who doesn’t want to buy a home? It’s so exciting!’”

    Like lambs to the slaughter….

  18. “Many simply roll the cost into their loan amount and can use the no-money-down strategy to build a small portfolio of income-producing rental homes. It’s a vehicle for wealth creation,…”

    Has anyone on high ever considered what might happen if falling home prices send lots of these small portfolios of income-producing rental homes deeply underwater? Or is it safe to assume that real estate will keep going up at a rapid pace forever, thanks to the Fed’s steadfast support?

  19. “‘The foreign buyers have pretty much all but disappeared,’ he added. ‘I’m helping a lot of foreign buyers get their money out of this country as fast as possible.’”

    Cut bait now, or ride the falling knife to the bottom of the sea.

    1. “…I’m helping a lot of foreign buyers get their money out of this country as fast as possible….”

      At least here in So-Cal Orange County, not a good year for those in the money laundry business.

  20. – So what do we call these entities? “Non-banks”? “Shadow banks”?, “Accident-waiting-to-happen”? Is there any oversight from the Consumer Financial Protection Bureau (CFPB) / Dodd-Frank Act, or are we in “let-it-ride” mode again, hoping for the best? What could go wrong? Senator Running Deer. Paging Senator Running Deer.

    https://www.americanbanker.com/articles/11-trillion-us-mortgage-market-has-a-shadowy-new-player
    $11 trillion U.S. mortgage market has a shadowy new player
    Published November 05 2019, 8:33am EST
    Bloomberg News

    November 5, 2019 “Behind the concern aired recently at the Financial Stability Oversight Council headed by Secretary Mnuchin: the rapid growth of so-called shadow banks in the origination and servicing of home loans, especially riskier ones. ‘There is a real weakness here,’ said University of California, Berkeley professor Nancy Wallace, who co-wrote a 2018 paper titled ‘Liquidity Crises in the Mortgage Market’ with a fellow academic and three Fed economists. ‘Many of these firms are financially fragile.’ That’s because they’re dependent on short-term bank credit lines that could be pulled at times of financial stress.”

    “Unlike conventional banks, the independent mortgage companies are generally monoline operations, dependent on one business to make money. Of the dozen or so evaluated by Moody’s none have an investment-grade rating on their debt. They’re not regulated by the Fed or the Federal Deposit Insurance Corp. And they lack the deposit base and access to emergency Fed financing that commercial banks enjoy.

    Mortgage originations

    “It’s unclear how the regulators reacted to the presentation, but the fact that the issue came up at all underscores that the risk is on the radar screen. There’s no indication though that the council is considering singling out the business as a risk to financial stability. In fact, mortgage originations surged in the second quarter as lower interest rates enticed home owners to refinance their loans.”

    A Treasury Department spokesman declined to comment.

    As conventional banks pulled back from the mortgage market due to limited profit opportunities and increased regulation after the financial crisis, the independent mortgage companies flooded in.

    They currently originate around 70% of agency-supported residential home mortgages and about 90% of the riskier loans backed by the Government National Mortgage Association, or Ginnie Mae. Six of the top ten originators of home mortgages in 2018 were independent mortgage lenders, with Quicken Loans Inc. as No. 1.

    and finally,

    We’re not Chicken Little saying the sky is falling,” Cross said. “But history has taught us that when we’re not paying attention to growing risks, bad things can happen.”

    1. May 25, 2018

      “In his corner of American finance, where hard selling meets hard luck, Angelo Christian is a star. Each time Christian sells a home loan, the company he works for, American Financial Network Inc., takes as much as 5 percent. Many of Christian’s customers have no savings, poor credit, or low income—sometimes all three. Some are like Joseph Taylor, a corrections officer who saw Christian’s roadside billboard touting zero-down mortgages. Taylor had recently filed for bankruptcy because of his $25,000 in credit card debt. But he just bought his first home for $120,000 with a zero-down loan from Christian’s company. Monthly debt payments now eat up half his take-home pay. ‘If he can help me, he can help anyone,’ Taylor says. ‘My credit history was just horrible.’”

      “Christian can do this kind of deal because he is, in effect, making the loan on behalf of the federal government through its most important affordable housing program. It’s a sweet deal: He gets his nearly risk-free commission. Taylor puts no money down. If things go south, the government ultimately bears the risk. Many borrowers ‘are living paycheck to paycheck and, if they lose their jobs, they go into default immediately,’ says John Burns, a housing consultant.”

      “One reason more borrowers may be stretching: Real estate prices are soaring again.”

      http://thehousingbubbleblog.com/?p=10443

  21. ‘I don’t like what you’re doing to California’ – Nancy Pelosi confronted at football game

    Posted December 28, 2019

    Speaker Nancy Pelosi was all giggles at the football game on Saturday. Until a fan told her off on Tik Tok. Mike told Pelosi: “I don’t like what you’re doing to California.” Mike Roman posted this after he confronted the far left speaker on Friday. Pelosi looked like she had a few too many vodka tonics at the time.

    Source: THE GATEWAY PUNDIT

    https://deepclips.com/clip/3400/buzz-i-don-t-like-what-you-re-doing-to-california-nancy-pelosi-confronted-at-football-game/r/c

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