#580529 - 02/11/10 12:48 PM
Banking and Mortgage Crisis...new info about banks
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ISO Chrome
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Ever consider a foreclosure or short sale? Take a look at the video about how the politicians and bankers are managing to make billions more off short-sale and foreclosure properties. Watch the video...it's worth your 5 min. http://www.thinkbigworksmall.com/mypage/player/tbws/23088/1287086I'm no financial wizard, and am honestly interested in the thoughts (intelligent ones) of others on this. ISO
Edited by ISO Chrome (02/11/10 12:51 PM)
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#580536 - 02/11/10 01:10 PM
Re: Banking and Mortgage Crisis...new info about banks
[Re: ]
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Repeat Spawner
Registered: 12/12/09
Posts: 1025
Loc: Termite Country
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I once read a description of Goldman Sachs as a giant vampire squid, wrapping itself around the face of, and sucking the life out of anything that smells like money. They are without a doubt in my mind, the most corrupt organization on Wall Street.
That being said, take what this video says with a grain of salt. As one poster pointed out that in the master agreement between One West and the FDIC, OW is required to cover the first 20% of losses. Also those losses are not for individual loans, but for the portfolio in general. I haven't read the master agreement and I'm not going to. Either way you cut it's a sweetheart deal for Goldman.
The same poster points out that the FDIC is funded by premiums paid into the coffers by member banks and that the public at large does not pay for these things. That's a bit misleading, which tells me that poster has something to prove, or hide. While the general public may not pay directly into the FDIC they certainly do as customers of member banks. The cost is simply passed down. There's also zero reassurance that the money the FDIC borrows from the Treasury will be paid back at all, if ever.
We will probably see around another 800 bank failures within the next two years, if not this year. The FDIC doesn't have anywhere near the amount of money needed to cover all those deposits. The monetary base will just continue to expand as it has done for decades. Only now at a much more accelerated pace.
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On a long enough timeline the survival rate for everyone drops to zero.
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#580558 - 02/11/10 02:31 PM
Re: Banking and Mortgage Crisis...new info about banks
[Re: StinkingWaters]
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Dude, where's my boat?
Registered: 11/05/00
Posts: 2354
Loc: Seattle
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Didnt get into the video but just my 2c from the retail level is the short sales are a disaster and the bank owned properties are much more desirable for my clients.
Hoping to pick up a Fannie owned home today in Sno County for about 90k under an inflated assessment but still a bargain and they actually respond to offers within 2-3 days vs 2-4 months in many short sales.
Next fun step will be fighting Sno County on the property taxes as they should be about 30% lower than current amount. It will be interesting to see the new assessments come out over the next few years as the counties sure cant afford to give up this revenue but have no choice but to drop these values and the tax revenue base that they are tied to.
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#580561 - 02/11/10 02:39 PM
Re: Banking and Mortgage Crisis...new info about banks
[Re: StinkingWaters]
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Poodle Smolt
Registered: 05/03/01
Posts: 10878
Loc: McCleary, WA
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A few years ago we paid $200,000 in FDIC insurance. Last year, $1,000,000+. Same size bank, essentially. This year we get to prepay 3 years of FDIC insurance. Goody!
SW is partially correct. Clients end up paying for the FDIC insurance in part. Commercial clients are directly charged, consumers through other fees and charges, but not directly. Our bank has eaten a number of these charges directly but we hope to recoup a portion of it over time.
The FDIC pool of money is not a static amount of money. Money flows in and out as needed. The increased line of credit will help smooth out any funding issues caused by large failures.
Didn't watch the video, but from what I get there is a loss sharing agreement involved. This is SOP nowadays. Lennar, a large home builder based in Florida, just purchase 40% of a $3.1B loan portfolio, with the aid of a loss share agreement and a loan for 80% of the purchase price at 0.00%.
Lots of big dollar folks with money on the sidelines stand to become rich if they buy right. Little guys, not so much, but there is opportunity.
_________________________
"Give me the anger, fish! Give me the anger!"
They call me POODLE SMOLT!
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#580565 - 02/11/10 02:49 PM
Re: Banking and Mortgage Crisis...new info about banks
[Re: Dogfish]
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Repeat Spawner
Registered: 12/12/09
Posts: 1025
Loc: Termite Country
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Dogfish don't you just love paying for the failures and misdeads of the mega banks?? I would expect more of the same to come as the FDIC struggles to cover deposits of even more failed institutions.
summerrun,
I wouldn't hold your breath on those taxes being reassessed.
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On a long enough timeline the survival rate for everyone drops to zero.
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#580590 - 02/11/10 04:14 PM
Re: Banking and Mortgage Crisis...new info about banks
[Re: ]
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Repeat Spawner
Registered: 12/12/09
Posts: 1025
Loc: Termite Country
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In a sense, yes, the statements in the article are correct. The government through entities like the FHA, Fannie, Freddie, and Ginnie are now the sole purchaser of mortgage securities in the secondary marketplace. For those that afford to drop 20% down on a home, then their bank may or may not carry the note depending on available capital at the bank for such loans and their appetite for the collateral.
Since the beginning of the mortgage crisis the government has taken nearly every step, imaginable and un-imaginable, to hold a float the housing market. The reason for this is simple. Mega banks and the GSE's themselves were so overweighted in the underlying securities that if home prices were to drop precipitously, the whole house of cards would come crashing down. Values of securities would have to be valued in reality, as opposed to the Alice in Wonderland values they hold now.
Tax credits, secondary market purchases, re-works, FHA, and the like won't stop the downfall. Bottom line is that exotic financing allowed home prices to outpace real income by a large margin. Now that the financing is gone the only thing that will restart the housing market is for prices to come back into line. The gov't can waste all the time and money they wish but there will be no stopping price decline. What's next $20k tax credits for home buyers? How bout $30k? Do I hear $40k? Anybody?
What may happen (since so many have short memories) is a return to exotic mortgage products sponsored by the gov't. Although that would really suprise me,........and then again it wouldn't.
More foreclosure records on the way this year with the maturity of a large number of Option ARM mortgages. Although those problems will be limited to certain markets they do end up affecting lending as a whole. Which in turn put more downward pressure on prices nationally.
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On a long enough timeline the survival rate for everyone drops to zero.
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#580602 - 02/11/10 05:01 PM
Re: Banking and Mortgage Crisis...new info about banks
[Re: StinkingWaters]
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River Nutrients
Registered: 02/14/06
Posts: 2533
Loc: Elma
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Tax credits, secondary market purchases, re-works, FHA, and the like won't stop the downfall. Bottom line is that exotic financing allowed home prices to outpace real income by a large margin. Now that the financing is gone the only thing that will restart the housing market is for prices to come back into line. The gov't can waste all the time and money they wish but there will be no stopping price decline. What's next $20k tax credits for home buyers? How bout $30k? Do I hear $40k? Anybody?
This to me, as someone who is trying to sell a house right now. Is the crux of the issue. We (as people in this country who own real estate), have to get used to the fact that our holdings are not worth what they were 2 years ago. We need to get used to this new reality, and realize that it ain't coming back, at least not in the way we grew used to it for the last 7 years (up until 2009). Everyone out there who is thinking that their next big thing is going to be bankrolled by their equity line (and they haven't applied yet), need to start thinking seriously about their expectation for that line. I lecture my wife almost weekly, that the best asset we could get a hold of right now, is one of these really low interest rates for primary residences. I am going to lower my house price again at the end of this month, in a effort to make sure we get into one for the new place. I keep telling her "There is a new reality, the faster we get used to it the better of we are."
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WDFW - Turning outdoorsmen into golfers since 1994.
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#580615 - 02/11/10 05:39 PM
Re: Banking and Mortgage Crisis...new info about banks
[Re: Rocket Red]
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Repeat Spawner
Registered: 12/12/09
Posts: 1025
Loc: Termite Country
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You hit the nail on the head RocketRed. It's too bad more sellers don't see it the same way you do. Unfortunately having to sell your home in this kind of market puts you in a pinch. You can lower your price in order to find a buyer, but how low is too low? As low as you can afford IMHO.
Buyers are also pinched right now. Do they take advantage of low interest rates and federal tax credits and run the risk of owning a depreciated assett down the line? Or, do they wait it out and see if prices adjust? Me personally, I was lucky enough to get out from underneath my home in Kirkland in late 2008. I'm just fine with renting until things look more stable.
If you are set on buying again though you're correct in wanting to take advantage of the low rates being offered. Mark my words,.......these rates won't last forever. Sooner or later federal debt loads and attractive investments other than US treasury bonds will force the Feds to raise interest rates, and they won't be small hikes. This will put further downward pressure on home prices exacerbating the problem even more.
It's a tough situtation for everyone around. We would all have been served much better if the gov't hadn't intervened the way they had. Sure, things would have been terrible for a little while, but the recovery would have come much sooner and swifter.
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On a long enough timeline the survival rate for everyone drops to zero.
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#580620 - 02/11/10 05:49 PM
Re: Banking and Mortgage Crisis...new info about banks
[Re: StinkingWaters]
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Dude, where's my boat?
Registered: 11/05/00
Posts: 2354
Loc: Seattle
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We are fully expecting a rate jump of 1/2 to 1% by the end of 2010 and it should start in earnest around the 2nd quarter when the Fed pulls out of their $1.4 trillion buying spree of Mortgage Backed Securities.
Everything keeping the housing market going is artificial and alot of this will be going away by the end of April unless another extension of tax credit/something else is enacted.
We are already seeing rates slowly but steadily going up from late 09 record lows and UW guidelines tightening up even further on automated engines from Fannie and Freddie.
Edited by summerrun (02/11/10 05:50 PM)
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#580623 - 02/11/10 06:01 PM
Re: Banking and Mortgage Crisis...new info about banks
[Re: summerrun]
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River Nutrients
Registered: 02/14/06
Posts: 2533
Loc: Elma
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I am in a situation where I have 2 homes currently. Scary right? I just plugged about $130k into a turn of the century we bought in 2008. I am servicing 2 loans on it, and my regular mortgage. Just brutal. The only light I see is the good interest rate, and I want it locked up by the middle of April.
Carpet is going in on the 18th, we are going to probably move at the end of this month, and I will drop price on my current home again. The thing is I am at a good price (probably the best one) compared to all the other homes on the market in my area, except the short sales and foreclosures. (Anyone want 2 acres, 2300sf, built in 2006 within walking distance of a stellar salmon hole, and top rated steelhead plunking lane?)
I wish banks made short sales so hard, that realtors wouldn't even consider them. I guess if you got bailed out a short sale is better than a foreclosure.
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WDFW - Turning outdoorsmen into golfers since 1994.
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#580626 - 02/11/10 06:06 PM
Re: Banking and Mortgage Crisis...new info about banks
[Re: summerrun]
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River Nutrients
Registered: 03/07/00
Posts: 2955
Loc: Lynnwood, WA
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I got lucky and was able to re-fi my primary residence at %4.75 on a 30 year fixed last month. I had to suck a lot of the equity out of it to buy my ex-wife out a few years back, but it held it's value well enough that I still managed to come in below 80%... so no PMI.
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#580633 - 02/11/10 06:19 PM
Re: Banking and Mortgage Crisis...new info about banks
[Re: summerrun]
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Repeat Spawner
Registered: 12/12/09
Posts: 1025
Loc: Termite Country
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Ahh thanks for adding summerrun. Lest I forget that the Fed is pulling out of their purchase program. Yet to be seen as to what "creative" lending facility will be implemented as a replacement. The absolute last thing the Feds want to see is another home price crash (this time for real). Although, part of me thinks that the players at the Fed may actually want this to happen.
Haven't wrote or packaged loans in a couple of years but it's hard to imagine AUS engines tightening guidelines anymore than they were when I left the industry.
We're a long ways away from being out of the woods. Like Rocket said,.......prepare for a new reality.
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On a long enough timeline the survival rate for everyone drops to zero.
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#580637 - 02/11/10 06:29 PM
Re: Banking and Mortgage Crisis...new info about banks
[Re: Rocket Red]
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Repeat Spawner
Registered: 12/12/09
Posts: 1025
Loc: Termite Country
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I am in a situation where I have 2 homes currently. Scary right? I just plugged about $130k into a turn of the century we bought in 2008. I am servicing 2 loans on it, and my regular mortgage. Just brutal. The only light I see is the good interest rate, and I want it locked up by the middle of April.
Carpet is going in on the 18th, we are going to probably move at the end of this month, and I will drop price on my current home again. The thing is I am at a good price (probably the best one) compared to all the other homes on the market in my area, except the short sales and foreclosures. (Anyone want 2 acres, 2300sf, built in 2006 within walking distance of a stellar salmon hole, and top rated steelhead plunking lane?)
I wish banks made short sales so hard, that realtors wouldn't even consider them. I guess if you got bailed out a short sale is better than a foreclosure.
Not so scary as long as you can manage them both. Scary only if you're facing a deadline. Sounds like you've done your research and priced accordingly. If the price is right then someone will buy. (PM me the listing actually. I'd like to take a look.) Banks do make short sales hard,......usually. In this market they don't have much of a choice when faced with the costs of foreclosure,.......add to that the moratorium that was in place. Maybe we'll see a change in the policy, who knows. If you want to buy a short sale or need to sell as a short sale you better have two agents on either side of the transaction who know their $hit and never give the bank a moment to breathe. Although, the way the market is now most buyers are looking to get into distressed property so every agent out there is proclaiming to be an "expert" in handling short sales. If anyone out there needs to short sell a home I do happen to know a real bulldog who knows how to get things done.
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On a long enough timeline the survival rate for everyone drops to zero.
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#580665 - 02/11/10 07:46 PM
Re: Banking and Mortgage Crisis...new info about banks
[Re: StinkingWaters]
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Poodle Smolt
Registered: 05/03/01
Posts: 10878
Loc: McCleary, WA
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We're in the same boat, new house, old house, 2 mortgages. Luckily we are renting the old house to someone we know, so it lessens the burden, as they cover the note payment and taxes.
_________________________
"Give me the anger, fish! Give me the anger!"
They call me POODLE SMOLT!
The Discover Pass is brought to you by your friends at the CCA.
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#580668 - 02/11/10 07:54 PM
Re: Banking and Mortgage Crisis...new info about banks
[Re: Dogfish]
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River Nutrients
Registered: 02/14/06
Posts: 2533
Loc: Elma
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I've thought about renting, but I really just want to be done with it. Plus I don't think I could get a good rate for the second mortgage.
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WDFW - Turning outdoorsmen into golfers since 1994.
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#580690 - 02/11/10 09:15 PM
Re: Banking and Mortgage Crisis...new info about banks
[Re: Rocket Red]
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Poodle Smolt
Registered: 05/03/01
Posts: 10878
Loc: McCleary, WA
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My new mortgage is 4.5%. Didn't hamper us.
_________________________
"Give me the anger, fish! Give me the anger!"
They call me POODLE SMOLT!
The Discover Pass is brought to you by your friends at the CCA.
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#580784 - 02/12/10 11:29 AM
Re: Banking and Mortgage Crisis...new info about banks
[Re: ]
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Poodle Smolt
Registered: 05/03/01
Posts: 10878
Loc: McCleary, WA
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#1. Goldman Sachs IS the blood sucking vampire of the financial world. Granted. #2. The failure of Indy Mac Bank was set in motion by Chuck Schumer. They were well capitalized, meaning they should have been able to weather some downside on their profits, which they were experiencing. http://www.bloomberg.com/apps/news?pid=20601103&sid=aAYLeK3YAie4 Schumer should be looked at, with his ties to Goldman Sachs. Both from New York, etc. Indy Mac's failure was one that didn't have to happen. Schumer was teh cause. Can't find the New Yorker magazine article just yet, but it describes in detail his roll in the failure of Indy Mac. Schumer orchestrated a run on the bank. Schumer needs to be investigated. #3. Goldman Sachs got a sweetheart deal, but Indy Mac was the first of the large banks to go down, so FDIC didn't know how many willing buyers there were, and had just started ramping up their bank closure operations. Current banks that are being sold are now having their assets (loans) sold at par (100%), or with a slight discount. Indy Mac's portfolio of Alt A loans held a higher risk, so some discount was appropriate, but I'm not sure that the steep discount was appropriate. #4 Loss share agreements are S.O.P. nowadays. It usually only applies to a portion of the loan portfolio purchased, and with the elimination of the steep discounts, fewer of the abomination type deals are out there. #5. The video only shows one example. They don't discuss the transactions where Goldman Sachs took it on the chin. You need to look at the portfolio performance as a whole, not just one single transaction. I don't know if that data is available. As far as that homeowner is concerned, they signed a contract to pay the debt, they defaulted, and their loss was soley based on the front end of eth transaction. While it sucks that GS made money on the short sale, they had essentially hedged that short sale in a SEPARATE transaction. Had they not defaulted, it wouldn't have occured. #6. The FDIC is funded by member banks, not by taxpayers directly. The fund for failed banks is not a static amount. Money flows in as assessments are collected from member banks, and flows out as bank failures occur. Look for a few more to be announced today after 5pm tonight. They close banks on Fridays. The line of credit will help smooth out the inflows and outflows if assessments aren't collected in a timely manner. Corporate clients are charged directly for FDIC insurance. Consumers receive no direct charge for the service, it is a service because it protects them. The consumer portion is collected through other fees, etc.
_________________________
"Give me the anger, fish! Give me the anger!"
They call me POODLE SMOLT!
The Discover Pass is brought to you by your friends at the CCA.
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#580788 - 02/12/10 11:49 AM
Re: Banking and Mortgage Crisis...new info about banks
[Re: Dogfish]
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Dude, where's my boat?
Registered: 11/05/00
Posts: 2354
Loc: Seattle
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Andy, what is your perspective on commercial over the next few years? On the residential side I personally see 2010 and early 2011 as the bottom and most of the "bad" paper will have worked its way through the system in the next year or so once the Option Arm resets are completed.
From what I understand most if not all commercial loans are written with a short term maturation and there is a huge underwater portfolio just waiting to explode over the next few years?
BTW I worked at IndyMac during their last 6 months in business. It was the first and last big box bank I will ever work for. An unreal mess from top to bottom in that company from what I saw.
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#580803 - 02/12/10 12:46 PM
Re: Banking and Mortgage Crisis...new info about banks
[Re: Dogfish]
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Repeat Spawner
Registered: 12/12/09
Posts: 1025
Loc: Termite Country
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#1. Goldman Sachs IS the blood sucking vampire of the financial world. Granted. #2. The failure of Indy Mac Bank was set in motion by Chuck Schumer. They were well capitalized, meaning they should have been able to weather some downside on their profits, which they were experiencing. http://www.bloomberg.com/apps/news?pid=20601103&sid=aAYLeK3YAie4 Schumer should be looked at, with his ties to Goldman Sachs. Both from New York, etc. Indy Mac's failure was one that didn't have to happen. Schumer was teh cause. Can't find the New Yorker magazine article just yet, but it describes in detail his roll in the failure of Indy Mac. Schumer orchestrated a run on the bank. Schumer needs to be investigated. #3. Goldman Sachs got a sweetheart deal, but Indy Mac was the first of the large banks to go down, so FDIC didn't know how many willing buyers there were, and had just started ramping up their bank closure operations. Current banks that are being sold are now having their assets (loans) sold at par (100%), or with a slight discount. Indy Mac's portfolio of Alt A loans held a higher risk, so some discount was appropriate, but I'm not sure that the steep discount was appropriate. #4 Loss share agreements are S.O.P. nowadays. It usually only applies to a portion of the loan portfolio purchased, and with the elimination of the steep discounts, fewer of the abomination type deals are out there. #5. The video only shows one example. They don't discuss the transactions where Goldman Sachs took it on the chin. You need to look at the portfolio performance as a whole, not just one single transaction. I don't know if that data is available. As far as that homeowner is concerned, they signed a contract to pay the debt, they defaulted, and their loss was soley based on the front end of eth transaction. While it sucks that GS made money on the short sale, they had essentially hedged that short sale in a SEPARATE transaction. Had they not defaulted, it wouldn't have occured. #6. The FDIC is funded by member banks, not by taxpayers directly. The fund for failed banks is not a static amount. Money flows in as assessments are collected from member banks, and flows out as bank failures occur. Look for a few more to be announced today after 5pm tonight. They close banks on Fridays. The line of credit will help smooth out the inflows and outflows if assessments aren't collected in a timely manner. Corporate clients are charged directly for FDIC insurance. Consumers receive no direct charge for the service, it is a service because it protects them. The consumer portion is collected through other fees, etc. Blood sucking vampire squid  IndyMac would have eventually folded under their own weight. Their construction lending portfolio was almost exclusively CA properties and the value of the Alt-A business would have tanked just like everyone else's did. Despite all this it does not clear Chuck Shumer from his actions and responsibility for creating a run on that institution. Chuck Schumer is crooked enough to sleep in a trombone and deserves to be in jail. I'm not sure how much he was, if at all, involved in the passing of the CRA, but I know his buddy Barney Fwank was. It's ironnic Schumer cites that the OTS should have been doing their job in controlling IndyMac's irresponsible lending practices. When it was those lending practices that were satisfiyiing CRA requirements in the form of MBS's bought by Fannie and Freddie. The video is misleading (the first video anyway, I didn't watch this latest one) in that the examples cited are of individual transactions,.......and yes I'm sure there were a couple where Goldman or OW took it on the chin. If I had to guess I'd say the probably made out better than alright on the portfolio as a whole. I don't have a problem with Goldman making money, everyone should have the opportunity. What I have a problem with is their undue influence in the market itself,.......often times accomplished by placing former employees in top gov't positions. During the run up in subprime mortgage loans Goldman Sachs provided the bulk of warehouse line credit for more than a few of the top subprime origination firms. When they pulled their line that comprised of more than 50% of New Century's funding capability in early 2007 it precipitated a larger crisis. Immediately Goldman began betting on the other side of transactions they had spent the last decade funding. Your analysis of FDIC premiums is what I was basically saying earlier in the thread although I would still argue that consumers of member banks pay for increased premiums one way or another. If a member bank has to raise associated fees to cover the cost of increased premiums it's still a direct cost to the consumer even if they pay for it indirectly through an increased fee.
Edited by StinkingWaters (02/12/10 12:49 PM)
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