Down payments in style again

From Bloomberg:

Subprime Loan Meltdown Engulfs Even Borrowers With Good Credit

The subprime credit crunch is beginning to ensnare even borrowers with good credit.

Lenders are increasingly refusing to lend to homebuyers who can’t make a down payment of more than 5 percent, especially if they won’t document their income. Until recently such borrowers qualified for so-called Alt A mortgages, which rank between prime and subprime in terms of risk. Last year the category accounted for about 20 percent of the $3 trillion of U.S. mortgages, about the same as subprime loans, according to Credit Suisse Group.

“It’s going to be very difficult, if not impossible, to do a no-money-down loan at any credit score,” said Alex Gemici, president of Parsippany, New Jersey-based mortgage bank Montgomery Mortgage Capital Corp. Companies that buy the loans “are all saying if they haven’t eliminated them yet, they’ll eliminate them shortly.”

Tighter lending standards may slash subprime mortgage sales in half this year and Alt A mortgages by a quarter, according to Ivy Zelman, a Credit Suisse analyst in New York who covers homebuilders. The new requirements will force some prospective homebuyers to save more money for a down payment or risk being denied credit.

Bear Stearns Cos., General Electric Co.’s WMC Mortgage, Countrywide Financial Corp., IndyMac Bancorp Inc., Goldman Sachs Group Inc., Lehman Brothers Holdings Inc. and Credit Suisse have all said in the last two weeks they’re pulling back from buying Alt A mortgages sold with no down payment or in a refinancing of the house’s entire value. Such companies facilitate the mortgage market by buying loans and repackaging them for sale as bonds to buyers such as insurers and hedge funds.

“We’ve been warned,” said Cheryl Hand, manager of Prudential New Jersey Properties’ office in Manalapan, New Jersey. She said she’s hoping a client of her realty brokerage who’s been approved to buy a home with nothing down won’t have the loan quashed before the closing.
Late payments of at least 60 days and defaults on Alt A mortgages have risen about as fast as on subprime ones, to about 2.4 percent, according to bond analysts at UBS AG. Loans in the category made to borrowers with low credit scores, equity and documentation are doing about as badly as subprime loans, according to Citigroup Inc. and Bear Stearns analysts.

“If you couldn’t sell something, you wouldn’t do it either,” UBS analyst David Liu in New York said. Part of the problem is falling demand for “piggyback” home-equity loans used to make down payments, he said.

New York-based Citigroup will no longer buy home-equity loans made to borrowers who won’t prove their incomes and want more than 95 percent of their home’s value, according to e-mails from salespeople. Mark Rogers, a spokesman, declined to comment.

New York-based Bear Stearns, the third-largest Alt A lender according to newsletter National Mortgage News, last week stopped buying such loans without down payments of at least 5 percent. For borrowers not fully documenting incomes or assets, the maximum loan-to-value ratio will be 90 percent.

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104 Responses to Down payments in style again

  1. Pat says:

    Question for any mortgage gurus:

    Why do ratings on the sheets stop at a ceiling in the low 700’s for FICO?

    Relative to negotiating rates, are there lenders who specialize in the higher?

  2. thatbigwindow says:

    Interesting, I saw a new 2-family listing in Bergenfield on the MLS. The comments section states that the seller is looking for buyers with at least 10% to put down. Amazing how quickly attitudes change.

  3. James Bednar says:

    Some great news for the Japanese property market from Bloomberg. Has Japan finally “hit the bottom”? Amazing that a real estate market can decline almost continually for 16 years. At this rate it will be many years before they regain the peaks set during the bubble period.

    Japan Land Prices Rise for First Time in 16 Years

    Land prices in Japan rose for the first time in 16 years as overseas and domestic investors competed to acquire properties in the country’s three biggest cities.

    Gains in Tokyo, Osaka and Nagoya compensated for a drop in regional areas. Average commercial land prices in the three cities rose 8.9 percent and residential 2.8 percent in the year ending Dec. 31, the Ministry of Land, Infrastructure and Transport said in report released today.

    “Japan is becoming a country of cities, and those companies leveraged to urban real estate will do best,” said Eric Starr, a Japanese stock portfolio manager at Connecticut-based Forest Investment Management LLC, which manages about $820 million in assets. “I see real estate as a multi-year trade in Japan.”

    Land values are still recovering from the collapse of an asset bubble at the start of the 1990s and the ensuing decade of declines. Overseas investors continue to pour money into Japanese real estate, attracted by low interest rates, economic growth and new securitization deals. The investment rush has sparked fears that a new land bubble may emerge in certain areas.

  4. Pat says:

    tbw, it is stunning how the music stopped, and I keep thinking about it with wonder.

    But why are we (some of us, like you and I) so amazed at the speed and almost instant change in the wind?

    I suppose people are attracted to opposites..attracted in the sense that we appreciate differences when two things are so close. A more gradual change is less stunning, and for some reason, we don’t get the same shock value.

  5. James Bednar says:

    Why do ratings on the sheets stop at a ceiling in the low 700’s for FICO?

    During the FICO discussion we had a few days (week?) back, we briefly talked about 720 being the lower bound for the highest bracket. I don’t why this number was picked (I recall this being the average FICO in the U.S. at one point), it seems a bit arbitrary. I do agree, many rate sheets I’ve read list this “720” figure as the lower bound on the highest bracket.

    Seems a bit low to me, but based on the good ol’ normal distribution, any higher probably starts to thin the ranks considerably. So why develop a “program” that only a very limited few will qualify for.


  6. James Bednar says:

    Mr. Guttentag (The Mortgage Professor) has (what I think is) the best resource for unbiased mortgage information on the web:

  7. James Bednar says:

    From the AP:

    Congress to Press Regulators on Mortgages

    Congress will press federal regulators on whether they were lax as high-risk mortgages proliferated during the housing boom and even contributed to the spike in delinquent payments and foreclosures.

    On Wednesday, the committee’s chairman blamed the Fed and other regulators for setting off the crisis in subprime loans, which are higher-priced home loans for people with tarnished credit or low incomes who are considered at greater risk of default.

    Sen. Christopher Dodd, D-Conn., accused the regulatory agencies of a “pattern of neglect” as banks and other lenders loosened their standards for making subprime mortgage loans during the housing market boom in late 2003 and early 2004.

    The regulators’ conduct, including encouraging the development of unconventional mortgages that afford low initial payments but balloon later on, “precipitated the subprime mortgage crisis that could cause 2.2 million homeowners to lose their homes in the next few years,” said Dodd, who is a candidate for the Democratic presidential nomination in 2008.

  8. James Bednar says:

    From MarketWatch:

    Goodbye easy mortgage money

    The era of easy mortgage money has disappeared in the wake of problems in loans made to some of the riskiest borrowers at the height of the housing boom, with lenders now asking for more financial documents, bigger down payments and proof of greater credit responsibility from would-be borrowers.

  9. Pat says:

    Oh, that’s a great way to reward conservative behavior including “above and beyond” value. Way to make conscientious people feel valued.

    I mean, you do your job, plus try to add extra value year after year. You handle whatever comes your way, and then get spanked because somebody decides that there really is no incremental value above a certain point.

    130 points is a big spread above max.

  10. x-underwriter says:

    Pat Says:
    Question for any mortgage gurus:
    Why do ratings on the sheets stop at a ceiling in the low 700’s for FICO?

    Once you get into the 700’s you generally have excellent credit with no late payments. Going much higher really doesn’t make a difference. It’s like the difference between Bill Gates owning $20 billion or $30 billion. He’s still rich. After 720, they’re not worried about it

  11. James Bednar says:


    Guttentag nails it, from the link above:

    “There is one situation, however, where having an exceptional credit score, as opposed to merely a good one, might pay off. Your transaction might not meet all the other specifications of a loan that commands the best pricing.”

    “In short, an exceptionally high credit score is a great thing to have if you lack one of the other requirements for the lowest possible price.”

  12. HEHEHE says:

    Good article, that development will kill the speculators.

  13. BC Bob says:

    Sorry to be repetitive; Everything that dies someday comes back [The Boss].


    I think you once asked about options. Go to, they are offering free options materials/guides to members. It’s also free to sign up as a member. I have not looked at this, don’t know much about their offer. However, this may be a good starting point. The info focuses on;

    -Basic info on market analysis, trading strategies, and order execution
    -Complete trading course
    -A complete database of essential market information-
    -Two trading manuals

  14. x-underwriter says:

    There is one situation, however, where having an exceptional credit score, as opposed to merely a good one, might pay off.

    All mortgages nowadays are run through a decision engine like FNMA DU. It might be possible that it will allow a higher debt/income or lower reserves with an 800 as opposed to a 720. That’s a rare scenario however. Loan to value guidelines probably won’t be affected though. Lenders set bars which you have to be able to jump over to get to the next credit level. Once you can jump over the highest bar they have, they don’t care how much you clear it by.

  15. BC Bob says:

    Subprime contained??

    “San Jose mortgage lender stops funding loans”

    “Privately owned LoanCity, founded in 1999, funded about $6 billion in mortgages in 2006, Soukoulis said. It mostly loaned to borrowers with good credit – those known “A” and “Alt-A” customers, he said. These borrowers have good credit scores, but some apply for loans without providing full documentation of their income or assets.”

  16. BC Bob says:


    “Corruption in Chinese Banks to Go On for Decades, Auditor Says ”

  17. James Bednar says:

    From BusinessWire:

    KB Home Reports First Quarter 2007 Results

    “Our 2007 first quarter results reflect the sharp downturn in the housing market that began in 2006 and that continues to pressure the sales and profit margins of domestic homebuilders today,” said Jeffrey Mezger, president and chief executive officer. “We entered 2007 with a backlog substantially lower than the year-earlier level and consequently delivered fewer homes in the first quarter than in the same period of 2006. In addition, profit margins on our 2007 first quarter deliveries were constricted due to the persistent imbalance in housing supply and demand that is fueling intense competition and pricing pressure among homebuilders and other participants in the new home and resale markets. We believe these conditions will likely continue for at least the remainder of 2007, reducing our quarterly and full-year revenues and earnings compared to 2006 results.”

    Despite the recent improvement in our first quarter net order experience and a lower cancellation rate, these trends should be viewed with caution,” said Mezger. “Having now entered the spring selling season, we continue to observe instability in the marketplace. Moreover, recent problems in the subprime mortgage market combined with tightening credit requirements could exacerbate the already difficult conditions in the homebuilding industry. The rise in delinquency and foreclosure rates may increase the supply of homes on the market, generating additional downward pressure on prices. Under these conditions, it is hard to predict when the housing markets will stabilize. However, we believe that our build-to-order operating model with limited speculative production and the knowledge and experience we have gained from more than five decades of homebuilding will help us to continue to execute through these challenging times and put us in a position to capitalize on the housing market’s eventual recovery.”

  18. BC Bob says:

    “Under these conditions, it is hard to predict when the housing markets will stabilize.”



  19. mifune says:

    I also noticed KB described the cancellation rate as a “historically normal” 31%. I was under the impression (possibly wrong) that the normal cancel rate was under 10%. Is this just frantic spin or is the cancellation rate normally that high ?

    Also, their revenue is down 84% in Q1 – at 27 mil from 173, OUCH.

  20. bergenbubbleburst says:

    Down payments, WOW, everything old is new again.

    Off topic, but after reading the Fed’s statement yesterday, and reading it gain, and yet a 3rd time, I cannot possibly see how any one believes the Fed has changed its stance.

    If any thing their statement this time was more sobering than the last one.

    Speaking of Ben, I was watching On the Money on Tuesday night, and an economist from Mesirow & Co, gave a heart warming talk on Ben.

    She said that although he did not grow up in the dperession, he was surrounded by people who did, and he heard all the stories of people losing their homes etc.

    Becasue of this she saud that Ben will nto allow the housing market to crash.

    To which I say what a bunch of crp.

  21. RentL0rd says:

    kool. downpayment is so phat.

    Does anyone have any inside view on how Fair Isac & Co.’s (FICO) software works?
    Maybe an algorithm posted somewhere?

    Am I asking for too much transparency?

  22. RentL0rd says:

    When I switched to PSE&G (due to a move), they demanded that I make a deposit of about $400. I said I had excellent credit and they can get a letter from my previous gas/electric company if they like. They said, their software found “something” in my credit report so they need the money. I got my credit report, and found nothing bad.

    When I went back to PSEG, they said “Oh, we look at the Utility credit report” – whatever that meant. I was put on hold to speak to a manager for an HOUR (not kidding! i just put it on speaker and did other stuff).

    Long story short, after a lot of back and forth, and me demanding WHY and proof that my report is tainted, they finally agreed to waive it.

    I actually had to call them multiple times because they were not holding their promise to waive the fee (when my bills arrived).

    I never got an answer to what they meant by Utility credit report, and where I can get that! Were they just bluffing?

  23. Rich In NNJ says:

    From The Record (the paper with the slowest web site)

    Fair Lawn residents split on town house proposal

    FAIR LAWN — A divided public spoke out recently on the controversial project to build 178 townhouses on the polluted site of a former chemical factory along the Passaic River.

    Despite concerns about toxic chemicals that remain on the 13-acre site, the message from all parties was clear: The developer won’t build until the DEP signs off and deems it safe.

    But many residents were unconvinced. More than a dozen members of the grassroots group Concerned Citizens Reclaiming Fair Lawn spoke out against the project, asking council members to hold off on a zoning change until the cleanup is complete.

    Others, including several residents who live near the Clariant site, said they felt the project would remove an eyesore that is riddled with old factory buildings.

    This along with the possible development near the Nabisco plant (best smelling discharge from a factory ever) will only increase rush hour traffic tie ups on Route 208. More at link above, Rich

  24. James Bednar says:


    Bank economist tells business owners that ability to adapt critical to success

    A nationally recognized economist addressed Medford business owners yesterday and urged them to adapt to changes in the national and local economies.

    “Conditions change, circumstances change and adapting to them is critical,” said Joel Naroff, chief economist for Commerce Bank.

    “We can’t close a 20-percent (state) budget deficit overnight,” Naroff said. “It takes time and it takes sacrifice and it takes pain. It put us in a straightjacket and we’ll only get rid of it if we’re willing to accept the fact that you have to cut spending and raise revenues.”

    “The New Jersey economy is slowing and it has been slowing for over a year now,” Naroff added. “The biggest problem facing New Jersey is that for 20 years, we’ve been running huge budget deficits. We’ve just been unwilling to admit it. Every governor has made believe they balanced the budget and they didn’t.”

    “We’ll continue to see a slowdown in the housing market in this country,” he said. “We haven’t dropped as much in prices. There are twice as many homes on the market this year than in a normal year.”

    “There aren’t a lot of people who are rushing out to buy homes,” Naroff said. “What we haven’t seen yet is a decline in the price. We have to get more realistic pricing. We’ve had a lot of price increases that have put a lot of homes out of people’s reach.”

    “We’re giving mortgages to the people who can’t afford mortgages,” Naroff said. “That’s the root of the problem…And they suddenly discovered that their incomes didn’t go up, so they couldn’t pay the higher rates.”

    “It’s really important that as a business person, you understand how conditions change,” Naroff said. “It’s easy to run a business if everything goes along smoothly, but you have to understand how conditions change.”

  25. Rich In NNJ says:

    From the Herald News (same slow web site)

    Passaic County looking at layoffs to balance budget

    County officials say that the government has only two options to make up for a $33 million budget shortfall this year.

    Option 1: Lay off 700 employees.

    Option 2: Sell the county golf course and lay off between 250 and 300 workers.

    Either way, taxes will likely go up by about $18 million, or roughly 7.7 percent.

    Emphasis added
    How about options 1 AND 2?! More at link above, Rich

  26. James Bednar says:

    Thanks Rich.

  27. mifune says:

    As far as I know the FICO algorithm has never been available to the general public and is entirely the intellectual property of the Fair Isaac company.
    From what I underdtand the algorithm/model gets updated on a somehwat regular basis as Fair Isaac refines things.

  28. dg says:

    After we moved out of the house we were renting, the same PSE&G used an ESTIMATED reading for our final bill. Took nearly 2 hours to convince several layers of bureaucracy why that didn’t make sense and finally wrangle a partial credit.

    No issues with JCP&L…yet.

  29. James Bednar says:

    Cole’s testimony before Congress:

    Testimony of Roger T. Cole – Mortgage markets

  30. James Bednar says:

    From Bloomberg:

    U.S. Leading Economic Indicators Index Fell 0.5% in February

    A closely watched gauge of the future direction of the U.S. economy fell by the most in a year last month, pulled lower by a decline in a measure of consumer sentiment and an increase in jobless claims.

    The Conference Board’s index of leading economic indicators fell 0.5 percent after a 0.3 percent drop in January that was initially reported as a gain, the New York-based group said today. The gauge points to the direction of the economy over the next three to six months.

  31. James Bednar says:

    Hot off the presses and I mean hot!

    From Reuters:

    US states oppose bailout to subprime lenders

    Congress should not bail out subprime lenders and brokers who made risky mortgage loans to borrowers with bad credit, but lawmakers can take several steps to protect consumers going forward, a representative of the Conference of State Bank Supervisors said on Thursday.

    “I strongly encourage Congress to avoid using taxpayer funds to bail out the subprime lenders, brokers and investors that generated our current problem,” Joseph Smith, the North Carolina Commissioner of Banks, said in remarks prepared for a Senate hearing.

    Brown said subprime borrowers with home equity and incomes to support reasonable mortgages can refinance their loans. But borrowers with no-money-down loans and little income are in an “unsustainable” situation, he said. “Without a massive government bail-out, these mortgage loans will likely result in foreclosure.”

    Brown also urged Congress to require lenders to set a default loan for subprime borrowers at a 30-year fixed rate, and to modernize the Federal Housing Administration (FHA) so that it can lend to some subprime borrowers. Lawmakers should also take the step of requiring lenders to consider a borrower’s ability to repay a loan before making one, he said.

  32. James Bednar says:

    What a day!

    From Bloomberg:

    Comptroller Says Abusive Lending, Fraud Fueled Subprime Crisis

    The Office of the Comptroller of the Currency, regulator of the biggest American banks, said “abusive” lending and fraud helped fuel a surge in subprime lending.

    Emory Rushton, the agency’s senior deputy comptroller, told the Senate Banking Committee in Washington today that the OCC is working to correct lending standards that have slipped. He warned against a heavy-handed response to the borrowing binge between 2004 and 2006 that’s now turned to bust.

    “It is clear that some subprime lenders have engaged in abusive practices and we share the committee’s strong concerns about them,” Rushton said in prepared remarks. “We are now confronting adverse conditions in the subprime mortgage market, including disturbing but not unpredictable increases in the rates of mortgage delinquencies and foreclosures.”

  33. Jase Rion says:

    I know that this had been posted, but I really like this headline.

    “KB Home profits plummet 84 percent”

  34. BC Bob says:

    Rich [25],

    Sell the Passaic river. Convert all the s*it and body parts into alternative energy. I still can’t believe that my grandfather used to swim in that river.

  35. Home Seller says:


    In regards to the golf course, passaic county’s red and blue course are the biggest POS courses in the area. They charge an arm and a leg, don’t have automated tee times….totally awful.

    Get rid of them and build new ones up in West Milford

  36. nwbergen says:

    Rich in NNJ (25)

    WOW, government Job Layoffs?? Did you check your source, or is this article fiction (LOL)? I am so tempted to attend this meeting tonight if it is open to the public, just to watch the fireworks.

    Anybody having problems with their utility company for any reason, just tell them that you will be opening a case with the NJ BPU. Your problem in most cases will be moved up the food chain for readdress. If you file the complaint with the BPU the utility Co gets a copied almost immediately.

    BPU link below.

  37. scribe says:

    Ahead of the Bell: Subprime Mortgages
    Thursday March 22, 8:55 am ET
    Senate Committee to Hold Hearings on Turmoil in Subprime Mortgage Market

    NEW YORK (AP) — A variety of mortgage banking executives, federal and state banking regulators, attorneys, and consumers will testify before a Senate committee Thursday at a hearing looking into the turmoil in the mortgage market and what the consequences could be.

    HSBC Finance Corp. Chief Executive Brendan McDonagh and Sandy Samuels, executing managing director of Countrywide Financial Corp., are among the witnesses slated to testify before the Senate Committee on Banking, Housing, and Urban Affairs at 10 a.m. EDT.

    The hearing comes as the “subprime” mortgage industry — the area of banking aimed at borrowers with poor credit — is in a freefall. During the housing boom, mortgage banks crafted loan terms for people who likely otherwise couldn’t afford to buy a house. Now, many are defaulting on their mortgages, driving some subprime lenders to the verge of bankruptcy.

    Lehman Brothers analyst Charles Marr said lawmakers will probably focus on two areas. First, they want to figure out a way to prevent people who can’t pay their mortgages from losing their homes. They also want to heighten regulatory scrutiny of predatory lending practices.

    Marr said that probably means focusing on adjustable-rate mortgages. Many borrowers having trouble paying their mortgages began with low teaser interest rates, which reset higher after two years.

    Lawmakers will try to establish regulatory guidance for these loans, requiring lenders to better evaluate how likely a borrower is to repay a loan.

    Marr thinks the likelihood of Congress passing legislation on subprime mortgage lending is better than half.

  38. RentL0rd says:

    this site has been pretty slow to respond since yesterday. Anyone else reporting it, or is it just me?

  39. James Bednar says:

    Has been slow, and I’ve been looking into it.


  40. chicagofinance says:

    BC Bob Says:
    March 22nd, 2007 at 8:30 am
    Chi,“Corruption in Chinese Banks to Go On for Decades, Auditor Says ”

    Bost: way down in the article is this little tidbit…oh no biggie….also…where do you think NJ ranks in the “bribe index”?

    No. 2 in Bribes

    Graft is so bad it could even destabilize China’s 58-year-old communist regime, says Steve Vickers, CEO of International Risk Ltd., a Hong Kong-based consulting firm. “If corruption continues unchecked, it’s going to bring the roof down on this government,” Vickers says.

    Transparency International, a Berlin-based advocacy group, ranks China as second only to India in its annual bribe payers’ index. Almost 100,000 party members were disciplined last year for bribe taking and other rule breaches, the party announced in February.

  41. JohnSS says:

    Fom the AP Wire: “Bernacke: “Credit key to Healthy Economy”….

    Notice he didn’t say “savings” or “exports”
    or “deficit reduction”. These clowns still
    think the “key” is to gey more “hocked-up”
    at every level: consumer, gov’t, etc. In a nutshell, that’s why the present situation is doomed. This economy is a train wreck in slow motion. We are witnessing the greatest dismemberment of the standard of living in modern industrial history.

  42. JohnSS says:

    Fom the AP Wire: “Bernacke: “Credit key to Healthy Economy”….

    Notice he didn’t say “savings” or “exports”
    or “deficit reduction”. These clowns still
    think the “key” is to get more “hocked-up”
    at every level: consumer, gov’t, etc. In a nutshell, that’s why the present situation is doomed. This economy is a train wreck in slow motion. We are witnessing the greatest dismemberment of the standard of living in modern industrial history.

  43. James Bednar says:

    From Bloomberg:

    Bernanke to testify on Capitol Hill next week

    Federal Reserve Chairman Ben Bernanke will testify at the Joint Economic Committee next Wednesday, Committee Chairman Sen. Charles Schumer, D-N.Y., announced Thursday. The committee will seek Bernanke’s views on the subprime mortgage market, inflation and growth, Schumer said. The testimony would come just a week following the Federal Open Market Committee’s two-day meeting, which concluded with no change in interest rates and a statement that “showed greater uncertainty about the future direction of the economy and Fed policy than previous statements but without specifically mentioning the subprime mortgage market,” according to Schumer.

  44. chicagofinance says:

    RentL0rd Says:
    March 22nd, 2007 at 9:25 am
    Does anyone have any inside view on how Fair Isac & Co.’s (FICO) software works?
    Maybe an algorithm posted somewhere?
    Am I asking for too much transparency?

    Rent: yes….the intention is that actors can not overtly game the system

    There a few consultancies that have vetted opinions about the “ever changing” algorithm.

    Consider your FICO score like a temperature check. It is dynamic and changes with activity posting to the file. You can check at 11AM and the number could be different at 12PM.

  45. RentL0rd says:

    Thanks chifi.

    Do you know (empirically) if just making a move can specifically cause the score to drop a few points?

  46. dreamtheaterr says:

    I just don’t get it….what’s with spending all the time? The govt is way overboard with spending….deficits galore. Individuals go overboard and rack up credit card and revolving debt. This a cultural epidemic with only a painful cure as a remedy…no massaging economic data, etc will help.

    It’s like everyone wants instant gratification. FInancial prudence should be basic stuff taught at home by parents and in school, etc that there is a reward for deferred gratification. You don’t HAVE to have the latest Nike sneakers every year, or lease a BMW out of college.

    I am not saying that everyone should go out and be a Mr. Scrooge but it seems this country is becoming addicted to debt like a drug. And there will be nasty withdrawal symptoms for many down the road.

    Scraping enough money for a down payment……umm, what is a down payment Mr. Broker? Tightening mortgage lending standards means no more free lunches for marginal buyers to get into a house.

  47. chicagofinance says:

    I would guess yes, but you can never be absolutely sure. After a several months, if nothing else changed dramatically, it would likely revert.

  48. chicagofinance says:

    Is there any chance that the site is experiencig “denial of service” attacks? or is reading too heavily into site speed an improper diagnosis. I’m sure there has to be some combination of real estate investors/tech geeks that could sabotage your site given sufficient motivation.

  49. James Bednar says:

    From Marketwatch:

    Regulators grilled over subprime mortgage woes

    ‘Perfect storm’

    Cole and other banking regulators were under attack Thursday by Banking Committee Chairman Christopher Dodd, D-Conn., who said a deterioration of lending standards in 2003 and 2004 combined with higher interest rates on alternative mortgages like ARMs led to “a perfect storm” resulting in hardship for millions of homeowners.

    “It just seems to me that you all were asleep at the switch,” said Sen. Robert Menendez, D-N.J.

    Cole acknowledged that regulators could have acted quicker to address problems in the industry.

    “Yes, we could have done more sooner,” he said.
    “Our nation’s financial regulators were supposed to be the cops on the beat, protecting hard-working Americans from unscrupulous financial actors,” said Dodd, who is seeking his party’s nomination for the White House. “Yet, they were spectators for far too long.

    “The fact that the country’s financial regulators could allow these loans to be made for years after warning flags appeared is…unconscionable,” Dodd said. Dodd also said he’s planning to introduce legislation to combat predatory lending.

  50. twice shy says:

    Today the 30-yr T-bill yield is at 4.79%, oil has cleared $60 and is moving inexorably toward $65, and the naughty lenders are getting scolded, resulting in tightened lending standards that may even require actual downpayments. I’m thinking the result of the above is that late spring/summer housing prices will get spanked.

  51. Sally's Evil Twin Realtor Sister says:

    Companies that buy the loans “are all saying if they haven’t eliminated [no money down loans] yet, they’ll eliminate them shortly.”

    Better buy now before you get priced out forever…prices only go up, up up!

    Better buy now before interest rates go up and you can’t afford the payment!!!

    Better buy now before lending standards tighten and you don’t qualify for a loan anymore!!!!

  52. James Bednar says:

    Is there any chance that the site is experiencig “denial of service” attacks?

    Possibly, but I’m not sure I’d be able to tell. My best guess is that we’re getting hit by a particularly active spambot or poorly designed crawler and it’s resulting in a massive amount of database traffic.


  53. Sally's Evil Twin Realtor Sister says:

    okay…lines 1 & 2 were supposed to be striked out…guess it didn’t work

  54. BC Bob says:


    Better buy before the vultures attack.

    Dream [46],

    Who teaches the parents, municipalities, state and fed govt financial prudence??

  55. Jersey4Life says:

    In New Jersey, what is the “point of no return” for a home sale? Attorney Review? Closing? The reason I ask is because I currently have a house to sell, and I have priced it below current market for it to move quickly. However, I do not want to get stuck with two mortgages, so I refuse to offer a contract on a new home until mine is out of my hands.

  56. James Bednar says:

    Fixed the strikethru for you.


  57. mifune says:

    RentL0rd – From what I remember from when I worked in the mortgage industry (about 10 yrs ago) a single move wouldn’t have any adverse affect on your score. However, a large number of addresses showing on a report in a short period of time might.
    Likewise a large (and I do mean large here, think 30 +) inquiries on a report with no credit granted will also drag a FICO down.

  58. RentL0rd says:

    “point of no return” – isn’t that when you have the money in your bank?

  59. nwbergen says:

    Want your children to learn financial prudence. Tell them to get a paper route and don’t buy them everthing they want.

  60. RentL0rd says:

    Thanks mifune.

    I avoid any credit inquiries like crazy.

  61. dreamtheaterr says:

    A Marketwatch article from today titled Many Americans say middle class faces impossible savings task

    Dream on .

  62. dreamtheaterr says:

    For anyone shopping for a loan, always bunch your numerous credit enquiries within a 14 day period. It is considered one enquiry by FICO against your score whether 1 enquiry is done or 30 enquiries.

  63. Richard says:

    >>point of no return?

    depends on what you mean. if you sign all the documents a.k.a. close and the sellers have your down payment in their bank account. that’s the point of no return. anything before that you can get out of the contract. sure you might lose your some or all of your deposit. sure you might get sued for additional damages but you never closed so you don’t own the house. not sure if a court can force you to buy the house.

    to give yourself maximum options for backing out of a contract put in as many contingencies as you can. the best one is a home inspection where if ‘major defects’ are found you have the right to terminate the contract. make sure the sellers attorney doesn’t change the language to say the sellers have the right to fix defects without you having a cancellation clause.

  64. James Bednar says:

    From BizJournals:

    Reports: Countrywide says 2006 subprime defaults may be new worst

    An executive of Countrywide Financial Corp. told a government panel that the company’s subprime mortgage defaults in 2006 may top the company’s 2000 results where foreclosure rate was 9.89 percent, according to Reuters reports.

  65. New Today! An Hour with Professor Roubini!

    What can you say? An excellent discussion with one of the best. Run time is actually roughly 18 minutes as the original broadcast has had the breaks removed.

    Originally aired on: 3/21/2007 on Bloomberg

    Running Time: 17 minutes 25 seconds

    New Today! Tale of Three Cities (Part 2)

    The Nightly Business Report takes a look at a series of nutty Florida markets where things are truly miserable. Buyers and Sellers sewing each other for specific performance, huge glut of inventory, continued building, sharply declining prices… next up “mass foreclosure”.

    Originally aired on: 3/21/2007 on Nightly Business Reports

  66. BC Bob says:

    “Want your children to learn financial prudence. Tell them to get a paper route and don’t buy them everthing they want.”


    I had a paper route for 8 years, saved and used this for my first options trade. I guess I was lucky, the trade worked and I bought a condoshack. I don’t know where I would be if I did not have that paper route, maybe working for JC painting schools for 90K.

    By the way, you don’t see kids delivering paper anymore. It’s strictly adults throwing the paper from a car.

  67. chicagofinance says:

    March 22nd, 2007 at 2:07 pm
    New Today! An Hour with Professor Roubini!
    What can you say? An excellent discussion with one of the best. Run time is actually roughly 18 minutes as the original broadcast has had the breaks removed.

    Card: just because his opinion supports yours does not mean he is “one of the best”

    Please keep objective.

  68. Richie says:

    An hour in 18 minutes? Wow, we surely solved that whole time-space-continuum thing rather quickly…

  69. RentinginNJ says:

    An executive of Countrywide Financial Corp. told a government panel that the company’s subprime mortgage defaults in 2006 may top the company’s 2000 results where foreclosure rate was 9.89 percent

    Don’t know for sure, but I’ll bet using a “default rate” understates the problem. I would be willing to bet that subprime loans are a much bigger part of Countrywide’s portfolio today compared with 2000.

    I wonder what the difference is in terms of dollars.

  70. nwbergen says:

    BC BOB

    I agree paper routes and mowing lawns in now part of the service sector.
    It is unfortunate that children are growing up with out these experiences. Part time jobs teach children about the value of money and instill a work ethic.

  71. BC Bob says:


    I always loved Friday/Saturday, collection day.

  72. BC Bob says:


    OK, 40% of mortgages in 2006 were a combination of subprime and Alt A. Basically, 40% in the same category. Just an incredible amount, the last of the herd crashing thru the door, the blow off top. That slow leak in the bubble just became a bit more pronunced. HISS.

  73. jill says:

    Being “nickled and dimed” by PSE&G is due to their $201.3 million loss from a bet the utility made with Lehman Brothers Holdings Inc. for which the customers are being charged.

  74. jill says:

    “It just seems to me that you all were asleep at the switch,” said Sen. Robert Menendez, D-N.J.

    How about sending some of that grant money our way!

  75. Clotpoll says:

    Why bother watching Dodd, Menendez, et al? Demagogues of the worst kind. 30-40 years ago, the best these guys could’ve done was maybe own a liquor store. Drone along at a dump like that until they retire.

    Now, nincompoops like this can be US Senators.

    What’s guaranteed to happen here? Absolutely nothing. No bailout, no new programs, no punishments…nothing. Once the campaign value of the issue has been determined- then drained dry- that’ll be it.

  76. James Bednar says:

    I didn’t quote Menendez because I thought his comments had any merit. You’ve got to give me more credit than that.


  77. Clotpoll says:

    Grim (76)-

    Not pointing fingers your way. You’re just passing on information.

    However, the whole proceeding by Dodd and his trained chimps are a waste of time, money and ink.

  78. James Bednar says:

    Let me clarify, I meant that I didn’t quote him because I thought his comments were in any way sincere or genuine. This fiasco has all the makings of a CBS miniseries. Evil Bankers, predatory mortgage brokers, and a whole host of low income and innocent borrowers hoping to get their piece of the American Dream, only to find it ripped away after they’ve gotten their first taste of “the good life”. This is a political bonanza.


  79. chicagofinance says:

    jill Says:
    March 22nd, 2007 at 5:26 pm
    Being “nickled and dimed” by PSE&G is due to their $201.3 million loss from a bet the utility made with Lehman Brothers Holdings Inc. for which the customers are being charged.

    jill: sorry, but these complaints are specious garbage…totally reasonable thing to do, and these chowderheads are just pissed that it didn’t work out……case closed

  80. James Bednar says:

    However, the whole proceeding by Dodd and his trained chimps are a waste of time, money and ink.

    I’m not so sure about that, these guys are looking for blood here. I don’t think they’ll settle for anything less than a complete overhaul of mortage lending practices.

    Of course, we all know that when governments meddle in regulation, things tend to go horribly wrong. It’s going to be tough to argue with these folks that the best thing to do would be to do nothing. Restricting lending practices now is going to cut back the already thin pool of buyers. God forbid they clamp down tightly, we’ll be in for one hell of a crash.


  81. BC Bob says:

    “In sum, barring upward revisions in the LEI and KRWI and sharp increases in the immediate months ahead, both of these indicators will be sending a signal that a recession is on the horizon. Perhaps this will be the first time in over 45 years that the KRWI will emit a false signal and only the second time that the LEI emits a false signal. Perhaps.”

  82. chicagofinance says:

    see, these creeps blow-up and he is already back in the driver’s seat with effectively a call option on his salary – this guy doesn’t even have the grace to take his personal fortune and slither into obscurity – its about the power, not the money – investor beware

    Trader in Amaranth Failure Starts New Hedge Fund
    March 22, 2007 3:02 p.m.

    Brian Hunter, the energy trader whose risky bets triggered the largest hedge fund failure in history, has formed a new fund only six months after Amaranth Advisors’ dramatic collapse.

    Solengo Capital, of Calgary, Alberta, and Greenwich, Conn., is hiring traders and seeking money for “a series of funds across the commodities space,” according to a preliminary marketing document circulating among potential backers.

    Mr. Hunter, as leader of the effort, is seeking hundreds of millions of dollars from overseas investors, potentially in Europe and the Middle East, people familiar with the matter say.

    Although Amaranth’s recent loss of more than $6 billion makes it unlikely that he can raise capital from U.S. institutions such as pension funds, he could benefit from the willingness of cash-flush investors elsewhere to take risk in the volatile commodities markets. Investors also can invest in Solengo funds that are separate from the portfolio that the 32-year-old Mr. Hunter will manage.

    “We’re building a platform that allows an investor to tailor his investment to a specific commodity or portfolio manager,” Shondell Sabad, chief operating and financial officer for Solengo, said when asked about the fund Thursday.

    Two energy traders who worked for Mr. Hunter at his Calgary trading outpost at Amaranth, Shane Lee and Matthew Calhoun, are among the portfolio managers. A former Amaranth quantitative analyst for risk-management, Karl Koster, is also listed as part of the team.

    A person familiar with Mr. Hunter’s new fund says a launch could come by mid-summer. Solengo is the name of an Italian wine, but the organizers declined to elaborate on how they selected the name.

    Mr. Sabad, a Calgary energy trader who worked with Mr. Hunter at a previous company, said the fund has imposed restrictions on the size of individual portfolios and how much money each can have at risk. A trader’s violation of maximum capital restrictions “eliminates ALL capital locks for investors,” enabling them to withdraw funds without penalty, the marketing document states. Says Mr. Sabad: “We’ve given a lot of thought to risk management and how we can prevent what happened at Amaranth.”


  83. crossroads says:

    Jjb said
    “Restricting lending practices now is going to cut back the already thin pool of buyers”

    it’s needed to correct the prices and bring them back to historical ratios of median income to median price. it should have never gone this far to begin with.

    not only does the govenment overreact it reacts too late as well. They should have been doing this 2 1/2 years ago

  84. Pat says:

    Very rarely does Congress act in a farsighted, proactive manner.

    There’s a current bill pending that is fairly proactive on genetic discrimination.

    Who knows why some issues are handled properly…only the shadow knows.

    But maybe it has something to do with
    the squeeky wheel syndrome?

  85. Cultural Infidel says:

    Sorry to go off topic here, but I was wondering if any renters/former renters could possibly give any advice:

    Is rent in an apartment complex negotiable? I mean, if there are quite a few vacancies popping up (and there doesn’t seem to be a waiting list) is there much of a chance that the rent will be flexible?

    Thanks in advance!

  86. still_looking says:

    Can anyone help me with an address for gsmls# 2362649 As always….thanks in advance!!


  87. Richie says:

    RE #85

    Anything is negotiable. Make an offer of what you’re willing to pay and present it to the landlord/agency. Won’t hurt.


  88. James Bednar says:

    77 Black River Rd


  89. rhymingrealtor says:

    Still looking

    MLS# 2362649 77 black river road.

    I couldnt get this site for at least a half hour today around 1pm kept getting a weird denial.

    I had a paper route I delivered the Jersey Journal an afternoon route,at 14 and had a real job at 16, however my work ethic did not help me with fiscal responsibility, I don’t think anything could, poor money management is in my blood. I was raised by a parent and step parent that were very financially conservative, but my biological father ( who I did not know while growing up) perfected the art of bankruptcy. Did you know many years ago in Texas you could throw your mortgage in the bankruptcy pile and not actually have to give up the home.. he did. I think that one was the 2nd of his many belly-ups.


  90. BC Bob says:


    Compare the NBA to those two games tonight.

    The Bruins and Panthers will give a new meaning to the word UGLY. By the way, what will the Vol [not volatility] State be like on Sat if they upset the Buckeyes tonight?? Will it be the guns/ghetto of Memphis vs Jack Daniels/burbs of Knoxville?? Get your order of ribs in now!!

  91. BC Bob says:


    My route was the Herald News. Great lesson in customer service, bad debts and learning %’s. If the customer was 2 weeks behind in payments, I used to charge them interest. It was a blast, except when the dogs were chasimg me. No mace in those days.

  92. Zhang Fei says:

    JB: Amazing that a real estate market can decline almost continually for 16 years.

    Japan had a real estate bubble the likes of which no one will probably ever see again. At its peak, the land on which the Imperial Palace stands (in a section of Tokyo) was worth more than all the land in California. At the peak, Japanese households were doing 100-year mortgages. The land on which Gracie Mansion stands (in Manhattan) is still lower than a comparable piece of land in Tokyo. We have a bubble situation stateside, but it’s not in the same universe as Japan’s real estate bubble.

    JB: At this rate it will be many years before they regain the peaks set during the bubble period.

    Think decades. Many decades. Maybe a century.

  93. Pat says:

    Is there a rib tour anywhere in NY/NJ/PA?

    Like now? Before midnight?

  94. Jay says:

    Senator Dodd actually seems to have a good handle on the situation. I think he’s on the right track. Check out this video press conference from today on Bloomberg:

  95. Jay says:

    moderation on [94}

  96. rhymingrealtor says:

    (((Great lesson in customer service, bad debts and learning %’s. If the customer was 2 weeks behind in payments, I used to charge them interest)))


    I believe as I said, its in the blood.
    Type $$ vs type 0$


  97. WickedOrange says:

    Why the debt bubble hasn’t burst — yet
    I believe the bubble is going to get worse before it explodes. Here’s why, and what it means for retirement saving for you and me.

    With a shout out to NJ:

    Look across the country
    To understand why the bubble isn’t over and why it will have such a long life, look not to Wall Street but to the thousands of state capitals, city halls, insurance companies and retirement funds around the world — in short, anyone who is trying to manage money now for the huge increase in retirees that an aging world is about to witness. It’s places like these that are providing the hot gases that will keep the debt bubble growing.

    Trenton, the state capital of New Jersey, is typical of the global forces inflating the debt market bubble.

    New Jersey’s finances are a mess. Gov. Jon Corzine and the state Legislature are trying to close a $2 billion budget gap for the current year without adding to the state’s whopping $30 billion debt. At the same time, Trenton faces a tax revolt by state property owners, who pay some of the highest local property taxes in the country. That has put tax relief on the agenda, no matter how hard-pressed the state is.

  98. Jay says:

    (repost of 94 with tinyurl)

    Senator Dodd actually seems to have a good handle on the situation. I think he’s on the right track. Check out this video press conference from today on Bloomberg:

  99. Pat says:

    Uh, is there any pressure being put on the Fed there?

    He’s saying Fed had not just the authority, but the mandate to control this.

    Does this type of political pressure, backed by banking, have enough force to change inflation stance?

  100. still_looking says:

    thank you jb and KL!

    I realize I’m a truly conservative throwback with a mentality from the depression era. I started work at 11 with my dad doing appliance installation. He was a cop who couldn’t raise 4 girls on a cop’s salary and needed a second income. I learned so much about electrical work, carpentry and plumbing!!

    My dad paid me cash which got socked away in an account. He taught us to save as much as possible 30-60% when it was feasible. Years later I always remember working through HS and college – saving all the way.

    He taught us to budget and how to save and invest. I hope to teach our son the same things.

    I don’t see kids today growing up with the same kind of principles, but then times changed I suppose.

    My dad’s parents and family were financially poor. He used to tell me about sitting a crate outside a neighbor’s apartment door to listen to the baseball game on their radio. When food was scarce they spread a tablecloth on the apartment floor and had a “picnic” rather than a formal dinner. The togetherness was the main dish of those meals – they shared what scarce food items they had together.

    We really live in such different times today. Better in many respects but wanting in many others.


  101. UnRealtor says:

    CNN main page headline:

    “Mortgage crisis overwhelming credit counselors”

    Remember, perception created the buyer mania/bubble, and it will continue bringing it down as well.

  102. WickedOrange says:

    BC Bob,

    Game on…

    It’s been out there for some time that Syracuse and Boston College had agreed to a long-term football series. Now, there are dates.

    At Syracuse: 2010, 2012, 2014, 2016

    At Boston College: 2011, 2013, 2015, 2017

    Wonder if SU fans will make it rain with dollar bills when the Eagles hit the Dome in four seasons … or maybe Diamond Ferri will be invited back to handle the coin flip … as Daryl Gross often says, “it’s all good.”

  103. chicagofinance says:

    Wick: the thesis in the Jubak article is dead-on…thank you for a good read

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