My original question was what happened to the underwriter in the loan process. The underwriter is supposed to be the firewall. How did they allow loans without any due diligence, checks, or balances? What was the dynamic or motivation to produce non performing loans?

Good one Ira. Gag reflex I’m assuming……..

Only for titillation though. Never any knowledge gained just pure entertainment.

Not everybody is walking from homes David. Some are, and the vast majority are not. ..YET………. But, as a famous CEO stated 3 months ago:

” If the masses continue to suffer home depreciation the home owner will leave their homes in much higher numbers, realizing the cost of renting is far better , and that will collapse our capital markets . Our entire economy will suffer unprecedented declines.”

So now we bank on Bernanke. As I said before if he pulls us out of this mess over the next 5 years I will place a poster of him in my office.

Ray Pepper
http://www.500Realty.net

Sorry, what’s not to understand? I have no income, no credit, no money, and I buy houses. I usually have to show a business license, yellow page ad, bank statements, or other security for a no doc.
Lenders make loans that make sense to them. In this arena I’m considered a fair return on a dollar because I will buy the property and sell it for a profit or loss. In the case that I quoted she has no where with all, and that’s the term used.
I do know what I’m talking about, but that’s a sad thing. In the blogosphere today there is a lot of very, very bad information so, I don’t take offense.

The courthouse foreclosure auctions are likely the LAST place good deals will be found. When the homes are worth less than the mortgage the bank just buys them back at the courthouse. It’s at this point, once the place is real-estate-owned, that buyers can start trying to negiotiate and get a good deal. Hanging out at the courthouse is pretty much pointless.

This is really the truest set of statements I have read on a blog in months.

pepper, it’s fraud. Just because everybody else is doing it does not make it different. If everybody on the corner is selling crack that does not make it any less illegal. Educate yourself.

Apartment -> Condo conversions, developers building condos instead of building apartment communities and investors who were selling their rental house/duplex/quad/etc to cash in on the bubble madness.

Can it simply happen by sale prices falling by larger amounts than rentals falling?

You nailed it on the head. This is exactly what’s been happening in other declining markets (e.g. San Diego, Miami, etc). rents have been falling but the cost of buying the actual property has been falling by even greater degrees.

I’ve been reading stories about owners of existing apartment buildings being driven to discounting since they are facing so much competition from speculators of single family homes who are now renting them out since they can’t get the sales prices they need to cover the mortgage.

Seattle’s rental market is nowhere near that of SF. Compare the density of the cities and you would need to triple Seattle’s population before it was comparable.

Miami and San Deigo are nothing like our maket

Huh? San Diego has always been lauded for having a great job market, with tech and bio-tech. In fact, they blow us away with bio-tech. They also outclass us on tourism. San Diego even has very stringent building laws, making it difficult to have a lot of expansion, just like us…

Rents are not going to go down. They have been artificially low because so many have bought instead of rented

As b mentioned earlier, Seattle area rents will undoubedtly fall as we catch up to the housing downturn. Once all the investors of condos or single family homes start realizing that no sale is going to happen anytime soon, they will rush to rent in order to staunch the bleeding. And once the foreclosures really get into gear, we will start to see old fashioned investor types start buying REOs as rentals.

This is EXACTLY what is happening in other declining bubble areas in the country. It’s no surprise that rents haven’t started to fall here yet since we haven’t seen a significant decline in house prices, or a massive rise in REOs yet. Just give it another couple years.

Hey, Miami and San Diego saw their rents rise substantially right at their bubble peak as well. But just look at them now…

Rents in every area that is further in the bubble-popping than Seattle have fallen. Why? Because rents have been artificially high recently, the destruction of rental units has far outpaced the amount of people changing from rent to ownership. And it was not just condo conversions, but many many rental homes went up for sale when the investors saw the profits they could rake in. Now that the bubble has burst, expect to see the market flooded with rentals. Condo conversions will deconvert if they havent sold enough units, regular condo towers going in right now are full of investors who never planned on moving into the unit at all but just flipping it, investors who kicked out their renters to sell will welcome them back, new landlords are created by people who cannot sell their house when they move/upgrade/etc.

This is fraud. It’s actionable and I would hope my government would jail these people for fraud. These comment seem to be made as though these people did a smart thing. In my opinion that would be promoting criminal activity. That’s illegal.

IMO over half the people in this country are criminals of the worst kind: murder & torture. Just today I read about hedge fund managers getting $billion salaries. (Yes, that’s a “b”.) Now if they generated billions in bona fide profits, that might be okay, but odds are that the gov’t (i.e. future taxpayers) will be funding a large part of that $billion. The bottom line is, at some point there’s a fine line between an honest person and a sucker. I don’t blame anyone who walks away from their house, even if other honest people suffer for it (including me).

Are foreclosures a buy?

My friends walking from house 1 into house 2 is widely evident in areas in Az, Nv, FL, and Ca. Its in the press and on the news daily. The system is broken and will take years to correct itself.

Educate yourself first on what has happened then pass judgement. Travel my friend and you will see what I have touched. We have been very sheltered up here in Washington.

Ray Pepper
Broker
http://www.500Realty.net

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I love my apartment but y’all make me so anxious to buy a house when the bottom falls out and all these foreclosures start up.

Don’t worry… When we hit bottom, buying will be the LAST thing on anyone’s mind. Sure, the cost of owning will be much more in-line with rent at the bottom, but rents will be even cheaper than they are now, so renters don’t exactly lose out.

Over the next 20 years I suspect that a renter who religiously invests his savings in bonds will do every bit as well as someone who buys at the bottom and plows their savings into the mortgage.

Anyhow, No Doc loan was designed for those that do not have the income and asset document to support the mortgage, which meets the woman you are describing. No Doc loan is pure garbage, but if you’re to offer it, it should never be offered by Subprime lender or to anyone without sufficient credit history. It makes no sense to lend someone with bad credit history and no income or asset statement. If you can find a lender to do it without 50% down payment (World Savings would used to do just about any loan given 50% down payment), then all the power to you.

Interesting idea.. buy low when everyone else is getting out of the market.

Maybe it will make up for me buying in July ‘07.

Interesting….

Dave

I already get 500+ results on my favorite redfin search, which didn’t happen a couple of months ago.

I think this has a long way to go but it just makes me all anxious to be a real estate vulture in a year or two.

Lots of ARMs resetting not only this year but well into 2009. We didn’t really slow down the horrifying lending standards that david losh mentions until we were well into the fall of 2007.

financial distress + no equity = rise in defaults.

Received a call this morning from an agent on the eastside, russian accent. “What is short sale. What is deed in lieu?” She wants to know how to learn about these things. I tell her to come to Friday’s class. She says she wants to know if I can answer her seller’s questions. Well, I told her she can bring her seller to the class with her. She says, “You don’t understand, I have many sellers.”

On the eastside…

Any home seller reading this blog, our state has FREE housing counseling available to homeowners in financial distress. Our tax dollars are paying for this. Please take advantage of this.

http://www.dfi.wa.gov/consumers/homeownership/

Patience… Seattle is just behind the curve. Give it another 2 years and the foreclosures in King County will be piling up like we’ve never seen…

The patient vulture waits in the Seattle Tree near the courthouse auctions; just knowing there will be more and more fat cats dropping; with more delicious ones to choose from too, very soon

The courthouse foreclosure auctions are likely the LAST place good deals will be found. When the homes are worth less than the mortgage the bank just buys them back at the courthouse. It’s at this point, once the place is real-estate-owned, that buyers can start trying to negiotiate and get a good deal. Hanging out at the courthouse is pretty much pointless.

“Bought the same NEW home 2 streets away for 320k as a rental on paper”

How does someone who is underwater on one mortgage get another mortgage? Have the underwriters learned absolutely nothing from this mess? I’m more inclined to think these stories are urban legends.

They’re not eligible for unemployment benefits, but when Labor Dept. does its survey, they will still show up if they are looking for work.

Mort Zuckerman, co-founder of Boston Properties, quoted by Bloomberg, March 12, 2008

Bear in mind though, the job tracking excludes most of the real estate losses:

http://www.financialsense.com/fsu/editorials/2008/0408.html States in part:

“..According to Paul Kasriel and Asha Bangalore of Northern Trust, APX. 43% Of jobs created during the “Boom” were Real Estate related (Financial professionals of all stripes and huge numbers, realtors, appraisers, self employed contractors, appliance/ carpet/ window/ door/ concrete/ frame/ roofing manufacturers, sales people and installers, architects, landscape architects etc, etc.) What many of these people have in common is that they were self employed and independent contractors (Do not show up in unemployment data)…”

I also heard unemployment statistics excludes laid off undocumented immigrants too.

I heard on the radio that Washington’s phony minimized unemployment rate still rose a horrifying 0.4%…..

WAMU is butcher axing all it mortgage workers and its stock lost 70%.

It will take about 6-18 months before this cow manure hits the foreclosure fan bargain lists. Be a patient vulture, the real bargains are coming sooner or later.

I think that the packaging of mortages into securities created a risk-assessment-firewall in the mortgage lending industry. The people creating and selling the loans did not have the proper incentives to evaluate risk. The people buying the loans were trusting the people who were estimating the risk because large returns can create blindness. It almost seems like a classic confidence game.

What laws did your friends violate when then walked away from their house?

Then the unfortunate pepper comment:

2 friends I know have already done it. Their same 3000 sq foot homes which they owed 495k on they payed current. Bought the same NEW home 2 streets away for 320k as a rental on paper. When it closed they moved all their furniture and belongings into the rental and now they own a brand new home and have much less debt, considerably lower payments, less stress, and a Foreclosure.

This is fraud. It’s actionable and I would hope my government would jail these people for fraud. These comment seem to be made as though these people did a smart thing. In my opinion that would be promoting criminal activity. That’s illegal.

Most of the last of the bad mortgages are resetting in the next 3 months (vintage summer ‘05 and ‘06) and then the sales/foreclosures/leave the keys at the bank, will hit from September on. Many will struggle and will keep making payments as long as they can (maybe into 2009). This does not equal “the bottom”; all these people are black listed for 7 years and the inventory will be huge for years to come.

On a related note, credit cards are reporting record late payments. And most of the charges on cards are gas and groceries.

What we are going through is unprecedented. Early ’80s Fed Chief Paul Volcker came out of retirement to say the U.S. faces ‘huge imbalances and risks’. And Alan Greenspan goes on tour to say “hey, don’t blame me!!!”.

Very uncertain times…

This weekend I was looking at foreclosures in Las Vegas on hotpads.com. AH-MAY-ZING! The place is loaded with foreclosures. It’s like a war zone.

Seattle has it’s bad spots, especially south Seattle. But at least Seattle ain’t no Tacoma.

The blood bath is just horrendous. Many will continue to pay as agreed but with more and more of these articles coming out educating people to stay current on their payments but buy a new home and “walk away” from their old, the carnage will continue.

All these new homes sitting and selling for 30-50% off highs makes it very difficult for a homeowner to NOT walk away. 2 friends I know have already done it. Their same 3000 sq foot homes which they owed 495k on they payed current. Bought the same NEW home 2 streets away for 320k as a rental on paper. When it closed they moved all their furniture and belongings into the rental and now they own a brand new home and have much less debt, considerably lower payments, less stress, and a Foreclosure.

I have been told this Foreclosure is easily explained away as well but as they told me. Ray, we don’t need anything. We have a Brand new home, cars, and jobs.

So there you have it. Many years of this type of behavior is what we have to look forward to. Right or wrong they are my friends and I have not lived in their shoes and will NOT judge. But, I understand it.

http://www.500Realty.net

After record price drops in California, Seattle’s median is now higher than LA county. 450k vs 440k:

http://latimesblogs.latimes.com/laland/2008/04/rewind-socal-ho.html

Im starting to see lots of articles popup about the benefit of giving the keys back to the bank. I think there will be a huge rise in forclosures in 6 months once banks can process all these houses.

The patient vulture waits in the Seattle Tree near the courthouse auctions; just knowing there will be more and more fat cats dropping; with more delicious ones to choose from too, very soon….

The crafty vulture thinks it out too, if I gorge myself on these skinny bony ones now, I’ll miss the real filet mignon later….no, just be patient and wait.

http://www.foreclosures.com/stats/

Snohomish County Pre-foreclosures
March 06: 166
March 07: 156
March 08: 254

Snohomish County REOs
March 06: 31
March 07: 37
March 08: 65