Interesting info toward the end of today's LA Times Real Estate on mortgages.
And an excuse to reuse the cute photo of Jumbo the elephant. Or to push metaphors even farther, mortgages have certainly been the elephant in the room on real estate prices.
But whatta they mean by their second page title, "A small silver lining amid all the gloom"? Gloom for prudent buyers is if prices don't fall.
Under the Economic Stimulus Act ... boosted conforming loan limits in higher-cost areas, such as Los Angeles and Orange counties, to as much as $729,750, until Dec. 31. The goal was to get more borrowers under the "conforming rate" umbrella and out purchasing homes.
The plan hasn't elicited the anticipated enthusiasm.
"They're a useless proposition by the government, a joke," said Mark Cohen, owner of Cohen Financial Group in Beverly Hills, echoing a number of brokers. "I've done only one of those loans so far."
The reason brokers and many borrowers are turned off by these so-called "jumbo conforming" loans -- between $417,000 and $729,750 -- is that they require a ream of documentation and high FICO scores, and they offer only 15- and 30-year fixed terms, currently at 6.625% with one point. No interest-payment-only loans are available.
Moans and complaints they actually require documentation and don't offer interest-only? Someone's actually doing what they should have been doing all along!
Update: See the "Mr. Mortgage" video on Housing Doom also saying the new jumbos from Fannie and Freddie are a bust.
And see the two letters to the editor today, in response to a Times editorial, both vividly opposing borrower bailouts.
I fail to understand the logic of bailing out mortgage borrowers who knowingly bought homes they knew they could not afford.
There are millions of financially qualified home buyers who waited for the real estate bubble to burst for the opportunity to buy at more realistic prices.
Let home prices fall to true market valuations and new buyers will move in, just as they have in every other real estate cycle.
Taxpayers should not be rewarding those who knowingly made poor financial decisions.
Glenn Bozar
Upland
... The only true victims in this fiasco are the honest, hard-working renters who did not take on more debt than they could afford and refused to lie to get a loan.
I hope members of Congress are going to feel proud of themselves explaining to the working family with three kids, living in a two-bedroom apartment with escalating rents, scrimping to save every penny for a down payment, how their tax dollars are going to be used: to keep prices artificially high and these very renters out of owning a home, while letting the cheaters and liars continue to live in nice, single-family homes.
Sara Foster
North Hollywood
5 comments:
>>>"The reason brokers and many borrowers are turned off by these so-called "jumbo conforming" loans -- between $417,000 and $729,750 -- is that they require a ream of documentation and high FICO scores, and they offer only 15- and 30-year fixed terms, currently at 6.625% with one point. No interest-payment-only loans are available."<<<
Exhibit A: I submit this piece of evidence which proves that current real estate home prices in much of California, particularly in high value communities like Santa Monica and the Westside, are the result of nonsustainable and unrealistic financing and market speculation.
All the crap in L.A. is overpriced and everyone knows it.
I think this just goes to show you that the US Gov't rewards home buyers, even if you are not prepared to actually BE a homeowner....you might as well be someone who gets bailed out rather than be the taxpayer who is paying for your bad financial planning. So it pay not to be prudent is the lesson here.
"I think this just goes to show you that the US Gov't rewards home buyers, even if you are not prepared to actually BE a homeowner"
Fully agree but of course there are logical reasons behind this. Just follow the money and look at the people (and the companies) that benefit from higher prices. The NAR, the homebuilders and the mortgage industry are some of the biggest lobbying groups in Washington. Gotta agree with Cramer on the saying that the government is "of, by, and for the corporation". Not necessarily complaining, just stating what I observe and what I believe to be the obvious. Just look at the homebuilder tax credits/breaks being worked into the "bailout" programs right now. Money buys anything you want/need on the hill.
However, the most ironic thing is that for these industries, the best thing they could have happen is for transactions to pick up - yet everything they are doing seems to be revolving around trying to keep "the game" of false appreciation going. Heaven forbid prices drop to a more sustainable level...then some sales (and commissions) might actually be generated. Pathetic.
Apparently there's just not enough of those hardworking renters who's been pinching pennys to save up for a down payment to buy in a post bubble market to make any difference. This should be obvious - despite the vocalness of a few of them, the politicians are not listening. It could be that the politicians are out of touch, but the possibility is equally good that they took the pulse and found that most of the wanna-be buyers took the plunge already when the money was flowing and there's much more of these to pander to.
I also have a question on exactly how much money the left over renters have to actually buy a place, even in a deflated market. I'm not saying that there aren't a few true penny pinchers out there, but some of them already got sucked into the easy money scam and lost their 3%, 5% or gasp 10% down. How many are left? One of the things this housing bubble has provided is a clear view about how likely any American is to spend beyond his/her means. Sure, the new house owners spent their HELOCs, but when they were renters, didn't they load up their credit cards? Once again, a few renters may be different, but too few to have an impact on the politcos.
Oh, and if what I postulated turns out to be true, this market has another 20% drop to go, maybe more.
Alright, so I have $300k in the bank for a down payment plus the $730k jumbo conforming loan. That's a million in buying power. But the house I want costs $1.2MM. By the time it comes down to $1MM these will be expired and I'll only have saved another $50k or so. Oh well, maybe in 2010.
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