From the NYT:
Borrowers who opened home-equity lines of credit at the height of the housing bubble should brace for stiff increases in their monthly payments.
Helocs, as they’re known, were aggressively marketed from 2004 to 2007, and now the bills are coming due. These equity lines typically have a 10-year period during which the borrower can use the line of credit and pay only interest. At the end of 10 years, the borrower must begin paying both interest and principal on the outstanding balance, which could add up to hundreds of dollars more a month.
The bulk of the resets are expected from 2015 to 2017, but about $30 billion in outstanding Helocs will reach the end of the interest-only period this year, according to the Office of the Comptroller of the Currency, which regulates banks. Balances due to reset will rise to an estimated $52 billion in 2015, $62 billion in 2016, and $68 billion in 2017.
A recent report from Moody’s Investors Service offered an example of the coming payment shock for borrowers: A homeowner with a $40,000 Heloc balance and a $210,000 mortgage at 4 percent will see a monthly increase of nearly $300 — to $1,389 from $1,103 — when the equity line converts into a 10-year amortizing loan, assuming an interest rate of 3 percent.
The shock will be even worse for borrowers with equity lines that require balloon payments after the interest-only period; they will owe the balance in full.
Fearing another wave of delinquencies, the comptroller’s office is prodding lenders to assess their level of Heloc risk and be proactive about reaching out to these borrowers.
Homeowners with equity lines nearing the end of their interest-only period shouldn’t wait around in the meantime. “Borrowers should raise their hand very early and expect to be helped,” said Allen J. Jones, a managing director of RiskSpan, a mortgage consulting firm in Washington.
Article completely ignores the fact HELOCs are easily refinanced. In many cases, those who refinance will actually see lower HELOC payments as a result. I won’t go so far as to say making a lower IO payment is saving money, but it sure is spending less.
I suspect 2004 vintages will have zero problems refinancing.
I suspect that those who used HELOCs for home improvements (increasing the value of their homes) will have fewer problems refinancing.
Anyone who purchased in the early 2000s, but took out a HELOC for whatever reason in 2004-2007 would also have no problems at all refinancing.
Suspect that HELOC lenders would gladly refinance their own loans if there is even a remote hint of financial stress for the borrower. What’s a HELOC worth in foreclosure? Probably close to zero. Second lien is first loss.
This isn’t a tidal wave, it’s barely a ripple in a pond.
From the Star Ledger:
Whitney Houston’s NJ mansion back on the market
The custom-built Mendham mansion owned by Whitney Houston for 20 years is back on the market for $1.5 million.
The estate on North Gate Road in Morris County — which Houston bought in 1987 for $2.7 million and which sits on a little more than five acres — boasts five bedrooms and four bathrooms, according to Realtor.com. It was built for the pop icon in 1992 and includes a music studio, media room, pool and patio area, as well as three fireplaces and an intricate interior, complete with stained glass. The 13,000-square-foot home is still owned by the late singer’s estate.
The property — where Houston married Bobby Brown in 1992 — was originally listed for $2.5 million and was publicly listed for $1.75 million in early 2012. In July of that year, a real estate agent told The Star-Ledger Houston’s family had seen a wave of interest since the singer’s passing, but had not accepted any offers.
“Despite generating a great deal of interest from the general public over the years, offers from qualified buyers have failed to materialize,” reads the listing on Realtor.com.
Lender faces declining mortgage volume – what to do to fix the numbers? Make more mortgages. Is anyone surprised?
From HousingWire:
Is Wells Fargo setting the new FICO standard?
Although mega bank Wells Fargo (WFC) recorded a significant drop in originations in its fourth quarter earnings, it is still staying competitive.
The bank most recently made the decision to move its minimum FICO requirement on Federal Housing Administration-backed mortgage loans to 600 from 640 for retail purchase customers, Vickee Adams, a spokesperson for Wells Fargo, said.
“We also grew both net interest income and noninterest income during the quarter, despite a challenging rate environment and the expected decline in mortgage originations. Wells Fargo’s diversified model was again able to produce solid results for our shareholders,” said Wells Fargo Chief Financial Officer Tim Sloan.
We are all branch davidians.
Article completely ignores the fact HELOCs are easily refinanced.
Of course. Is there ever a point in time when someone needs to be qualified? In my honest opinion, if a person needs to HELOC for whatever reason, they can’t afford it and should be looking to move to Indiana. That’s another discussion.
But yes, let’s just refinance, rollover, do back flips, push the loan out another 140 years, package it up, re-sell it, sell it to another lender and on and on and on. The debt is forever, no matter what shade of lipstick you try and the number of layers applied.
I understand the unemployment rate is now down to what… 6.6% or something? And I notice now the muppet media is now adding the phrase, “The unemployment rate is down but it’s because people are falling out of the census or no longer looking for work… blah, blah.”
And I also understand that the participation rate is the lowest it’s been since 1978? What color wool would you like pulled over your eyes today?
I love starting my weekend search with Woodcliff Lake for hearty, opening laughter. Ever since I was told by a battle axe of a realtor that Woodcliff Lake prices are “warranted” and their school system is the best in the State, I can’t help but chuckle that a buyer victim may be holding onto her every word. I wish I would have remembered that hag’s name.
Here we have the infamous Clairmont Avenue, where the Parkway noise in your backyard is the same decibel level as Slayer on a good night:
http://www.njmls.com/listings/index.cfm?action=dsp.info&mlsnum=1403193&dayssince=&countysearch=false
This one is $100,000 overpriced. It states that “SALE IS SUBJECT TO THE SELLERS FINALIZING THEIR PURCHASE.” Ok, I’m sure the sellers will finalize their purchase but why are they asking someone else to finance it?
http://www.njmls.com/listings/index.cfm?action=dsp.info&mlsnum=1402577&dayssince=&countysearch=false
Still for sale, still overpriced and still in denial. At least they switched from the summer pictures to the winter pictures. In a month or two, it will be easier for the next agent to re-list it:
http://www.njmls.com/listings/index.cfm?action=dsp.info&mlsnum=1400283&dayssince=&countysearch=false
Can you imagine the cost to heat and cool this monster with just under $20,000 a year in taxes to boot? Holy sh1t, talk about hawking a bottle of Johnny Black every week!
http://www.trulia.com/property/3133894518-35-Karen-Ln-Emerson-NJ-07630#photo-1
Lis Pendens must be a very popular girl because she is all over the place!
Why is it that every house I look at have half the rooms empty? I’ll tell you why; because when the stone is turned over and ten thousand worms appear, even a potential buyer with low IQ realizes they’re potentially a victim of a ruse.
The deer head alone is worth the price of this one. Is the dog part of the transaction as well?
http://www.trulia.com/property/3142369540-107-Sherwood-Ave-Mahwah-NJ-07430#photo-1
Isn’t this the purpose of businesses and lenders, to keep you forever in debt (slave) and at their mercy?
For example, a big thank you to Steve Jobs. Your genius has created a product that has made the majority of the population a slave to your company. Every month they work to send a portion of their labor in exchange for a device that they didn’t need till you invented it. Best part, this divice not only makes people monthly monetary slaves for life, it also takes away their privacy.
This sums up what life is like in the almighty 21st century. More slave owners than you can count on your fingers, fighting each other to make you their b:tch!
“The debt is forever, no matter what shade of lipstick you try and the number of layers applied.”
14- device=smart phone
Michael [14],
No argument here. People are easily influenced… nothing more than infants and will be convinced of anything when presented well.
A Keller-Williams listing which makes me want to wretch. A sh1t bi-level with nothing done and few pictures to show that nothing has been done. I’ll give you 430K to take it off your hands:
http://www.trulia.com/property/3136948674-10-Skytop-Dr-Mahwah-NJ-07430
10- I don’t know too much about Emerson, but this house seems priced right. Emerson a good area?
18 – Someone may also agree with you and buy it for close to that price. Then, when they add up the monthly PITI, the monthly PSE&G bill and the maintenance, they may toss themselves out the window. Gee, I hope they can afford the Bomma care deductible.
17- I do not agree with you often on housing prices, but this house is def overpriced. Maybe, it’s in a good section of mahwah?
20 – The Fardale section I believe. Still, the “Keller-Williams” tag alone makes me want to look the other way. They had a line sh1t that was borderline insulating on more than one occasion.
21- lol that KW tag means it is prestigious
10. Is it me or do all tan granite countertops look like throw up?
–Outofstater (the autocomplete gave me Outfox tater and I kind of like it)
The house at 107 Sherwood in Mahwah comes w/ a case of Keystone Light!! Also when your basement is nicer than your upstairs your in the hillbillie area!
” “I can understand something like cigarettes and people believe that there’s too much smoking, so we put a tax on cigarettes, so people smoke less, and we say that’s a good thing. OK. But are we saying we were working too much before? Is that the new argument? I mean make up your mind. ”
The Economist Who Exposed ObamaCare
The Chicago professor examined the law’s incentives for the poor not to get a job or work harder, and this week Beltway budgeteers agreed.
By JOSEPH RAGO
In September, two weeks before the Affordable Care Act was due to launch, President Obama declared that “there’s no serious evidence that the law . . . is holding back economic growth.” As for repealing ObamaCare, he added, “That’s not an agenda for economic growth. You’re not going to meet an economist who says that that’s a number-one priority in terms of boosting growth and jobs in this country—at least not a serious economist.”
In a way, Mr. Obama had a point: “Never met him,” says economist Casey Mulligan. If the unfamiliarity is mutual, the confusion is all presidential. Mr. Mulligan studies how government choices influence the incentives and rewards for work—and many more people may recognize the University of Chicago professor as a serious economist after this week. That’s because, more than anyone, Mr. Mulligan is responsible for the still-raging furor over the Congressional Budget Office’s conclusion that ObamaCare will, in fact, harm growth and jobs.
Rarely are political tempers so raw over an 11-page appendix to a dense budget projection for the next decade. But then the CBO—Congress’s official fiscal scorekeeper, widely revered by Democrats and Republicans alike as the gold standard of economic analysis—reported that by 2024 the equivalent of 2.5 million Americans who were otherwise willing and able to work before ObamaCare will work less or not at all as a result of ObamaCare.
As the CBO admits, that’s a “substantially larger” and “considerably higher” subtraction to the labor force than the mere 800,000 the budget office estimated in 2010. The overall level of labor will fall by 1.5% to 2% over the decade, the CBO figures.
Mr. Mulligan’s empirical research puts the best estimate of the contraction at 3%. The CBO still has some of the economics wrong, he said in a phone interview Thursday, “but, boy, it’s a lot better to be off by a factor of two than a factor of six.”
The CBO’s intellectual conversion is all the more notable for accepting Mr. Mulligan’s premise, which is that what economists call “implicit marginal tax rates” in ObamaCare make work less financially valuable for lower-income Americans. Because the insurance subsidies are tied to income and phase out as cash wages rise, some people will have the incentive to remain poorer in order to continue capturing higher benefits.
Another way of putting it is that taking away benefits has the same effect as a direct tax, so lower-income workers are discouraged from climbing the income ladder by working harder, logging extra hours, taking a promotion or investing in their future earnings through job training or education.
The CBO works in mysterious ways, but its commentary and a footnote suggest that two National Bureau of Economic Research papers Mr. Mulligan published last August were “roughly” the most important drivers of this revision to its model. In short, the CBO has pulled this economist’s arguments and analysis from the fringes to center of the health-care debate.
For his part, Mr. Mulligan declines to take too much credit. “I’m not an expert in that town, Washington,” he says, “but I showed them my work and I know they listened, carefully.”
At a February 2013 hearing he pointed out several discrepancies between the CBO’s marginal-tax-rate work and its health-care work, and, he says, “That couldn’t persist forever. There would have to be a time where they would reconcile those two approaches somehow.” More to the point, “I knew eventually it would be acknowledged that when you pay people for being low income you are going to have more low-income people.”
Mr. Mulligan thinks the CBO deserves particular credit for learning and then revising the old 800,000 number, not least because so many liberals cited it to dispute the claims of ObamaCare’s critics. The new finding might have prompted a debate about the marginal tax rates confronting the poor, but—well, it didn’t.
Instead, liberals have turned to claiming that ObamaCare’s missing workers will be a gift to society. Since employers aren’t cutting jobs per se through layoffs or hourly take-backs, people are merely choosing rationally to supply less labor. Thanks to ObamaCare, we’re told, Americans can finally quit the salt mines and blacking factories and retire early, or spend more time with the children, or become artists.
Mr. Mulligan reserves particular scorn for the economists making this “eliminated from the drudgery of labor market” argument, which he views as a form of trahison des clercs. “I don’t know what their intentions are,” he says, choosing his words carefully, “but it looks like they’re trying to leverage the lack of economic education in their audience by making these sorts of points.”
A job, Mr. Mulligan explains, “is a transaction between buyers and sellers. When a transaction doesn’t happen, it doesn’t happen. We know that it doesn’t matter on which side of the market you put the disincentives, the results are the same. . . . In this case you’re putting an implicit tax on work for households, and employers aren’t willing to compensate the households enough so they’ll still work.” Jobs can be destroyed by sellers (workers) as much as buyers (businesses).
He adds: “I can understand something like cigarettes and people believe that there’s too much smoking, so we put a tax on cigarettes, so people smoke less, and we say that’s a good thing. OK. But are we saying we were working too much before? Is that the new argument? I mean make up your mind. We’ve been complaining for six years now that there’s not enough work being done. . . . Even before the recession there was too little work in the economy. Now all of a sudden we wake up and say we’re glad that people are working less? We’re pursuing our dreams?”
The larger betrayal, Mr. Mulligan argues, is that the same economists now praising the great shrinking workforce used to claim that ObamaCare would expand the labor market.
He points to a 2011 letter organized by Harvard’s David Cutler and the University of Chicago’s Harold Pollack, signed by dozens of left-leaning economists including Nobel laureates, stating “our strong conclusion” that ObamaCare will strengthen the economy and create 250,000 to 400,000 jobs annually. (Mr. Cutler has since qualified and walked back some of his claims.)
“Why didn’t they say, no, we didn’t mean the labor market’s going to get bigger. We mean it’s going to get smaller in a good way,” Mr. Mulligan wonders. “I’m unhappy with that, to be honest, as an American, as an economist. Those kind of conclusions are tarnishing the field of economics, which is a great, maybe the greatest, field. They’re sure not making it look good by doing stuff like that.”
Mr. Mulligan’s investigation into the Affordable Care Act builds on his earlier work studying the 2009 Recovery and Reinvestment Act, aka the stimulus.
The Keynesian economists who dominate Mr. Obama’s Washington are preoccupied by demand, and their explanation for persistently high post-recession unemployment is weak demand for goods and thus demand for labor. Mr. Mulligan, by contrast, studies the supply of labor and attributes the state of the economy in large part to the expansion of the entitlement and welfare state, such as the surge in food stamps, unemployment benefits, Medicaid and other safety-net programs. As these benefits were enriched and extended to more people by the stimulus, he argues in his 2012 book “The Redistribution Recession,” they were responsible for about half the drop in work hours since 2007, and possibly more.
The nearby chart tracks marginal tax rates over time for nonelderly household heads and spouses with median earnings. This index is a population-weighted average over various ages, jobs, employment decisions like full-time versus part-time. Basically, the chart shows the extra taxes paid and government benefits foregone as a result of earning an extra dollar of income.
The stimulus caused a spike in marginal rates, but at least it was temporary. ObamaCare will bring them permanently into the 47% range, or seven percentage points higher than in early 2007. Mr. Mulligan says the main response to his calculations is that people “didn’t realize the cumulative effect of these things together as a package to discourage work.”
Mr. Mulligan is uncomfortable speculating about whether the benefits of this shift outweigh the costs. Perhaps the public was willing to trade market efficiency for more income security after the 2008 crisis. “As an economist I can’t argue with that,” he says. “The thing that I argue with is the denial that there is a trade-off. I argue with the denial that if you pay unemployed people you’re going to get more unemployed people. There are consequences of that. That doesn’t mean the consequences aren’t worth paying. But you can’t deny the consequences for the labor market.”
One major risk is slower economic growth over time as people leave the workforce and contribute less to national prosperity. Another is that social programs with high marginal rates end up perpetuating the problems they’re supposed to be alleviating.
So amid the current wave of liberal ObamaCare denial about these realities, how did Mr. Mulligan end up conducting such “unconventional” research?
“Unconventional?” he asks with more than a little disbelief. “It’s not unconventional at all. The critique I get is that it’s not complicated enough.”
Well, then how come the CBO’s adoption of his insights is causing such a ruckus?
“I would phrase the question a little differently,” Mr. Mulligan responds, “which is: Why didn’t conventional economic analysis make its way to Washington? Why was I the only delivery boy? Why wasn’t there a laundry list?” The charitable explanation, he says, is that there was “a general lack of awareness” and economists simply didn’t realize everything that government was doing to undermine incentives for work. “You have to dig into it and see it,” he explains. “The Affordable Care Act’s not going to come and shake you out of your bed and say, ‘Look what’s in me.’ ”
Judging by their reaction to the CBO report, the less charitable explanation is that liberals would have preferred that the public never found out.
Mr. Rago is a member of the Journal’s editorial board.
This is the f-ing genius who argued with me that cell/smart phones are a life necessity.
Michael says:
February 8, 2014 at 9:57 am
Isn’t this the purpose of businesses and lenders, to keep you forever in debt (slave) and at their mercy?
For example, a big thank you to Steve Jobs. Your genius has created a product that has made the majority of the population a slave to your company. Every month they work to send a portion of their labor in exchange for a device that they didn’t need till you invented it. Best part, this divice not only makes people monthly monetary slaves for life, it also takes away their privacy.
This sums up what life is like in the almighty 21st century. More slave owners than you can count on your fingers, fighting each other to make you their b:tch!
“The debt is forever, no matter what shade of lipstick you try and the number of layers applied.”
[26] “This is the f-ing genius who argued with me that cell/smart phones are a life necessity.”
Give it a few days, he’ll be arguing that smart phones are a “basic human right” under some UN principle.
The kids treat a smart phone like a necessity. I was behind a couple that had a kid and was paying for the baby food with some type of food stamp check. These kids couldn’t have been more than 19. This was right around the time that the iphone 5 came out. The female had it and a hot pink expensive case to go with it. It was obvious to me that the iphone trumps the baby’s diet.
chi [25]
As long as the unemployment rate exceeds NAIRU, minimum wage laws exist, and the number of actual jobs stays the same, what’s the fuss about a somewhat smaller labor pool? Maybe Mulligan thinks that when the R president shows up the economy will suddenly boom and create labor shortage – I sorta doubt it.
[29] cobbler,
Actually, the administration hasn’t denied that it wants some people out of the pool in order to make room for other, younger, job seekers. As we’ve often observed, these obamacare effects aren’t defects, they’re features.
And the happy coincidence for them is that those leaving the workforce tend to be more conservative, white, and male than those coming in.
About half of the decline in the participation rate had been widely expected, before the recession, due to the demographics related to the baby boomers starting to retire. In fact, some of the studies I’ve seen had the participation rate declining out to about 2020, before it flattened off. Plausible that this is being driven higher by unemployed boomers deciding to retire early (or when UE wears off).
Boomers being able to retire at 62 not worrying about getting Health Insurance is a good thing. Workers staying at a current job because of fear of losing Health Insurance is not healthy for the economy. Now they can be mobile and buy Health Insurance until they find a job. Jobs that are being vacated by this people will be filled by job hunters. I dont understand what is the problem here. The only problem I see is the complaint on the subsidy by the TP which we pay alraedy in different ways
The point is that in the vast majority of cases, people should work until they are fully social security eligible…..most people are going to live well into their 80’s…what is the rush to sit on your a%% and be bored…..most people have no clue how to be retired….take it from me…
yome says:
February 9, 2014 at 9:09 am
Boomers being able to retire at 62 not worrying about getting Health Insurance is a good thing. Workers staying at a current job because of fear of losing Health Insurance is not healthy for the economy. Now they can be mobile and buy Health Insurance until they find a job. Jobs that are being vacated by this people will be filled by job hunters. I dont understand what is the problem here. The only problem I see is the complaint on the subsidy by the TP which we pay alraedy in different ways
this is GOPs dream, upward redistribution
@ianbremmer: Over 1/3 of Russia’s household wealth is held by 110 people
In other words, .0000007% of Russians own 35% of the country
#Sochi2014
i hope they are not being taxed.
@patcaval: @ianbremmer in Brazil 124 people hold 10% of wealth
hope they are not being taxed
@patcaval: @ianbremmer in Brazil 124 people hold 10% of wealth
not fair comparison because US includes conservative states. without them, US vastly outranks the world
@ianbremmer: Olympic Countries w higher literacy rate than US that you might not expect:
Armenia
Azerbaijan
Croatia
Estonia
Latvia
Uzbekistan
chi [33]
You, I and many other posters here enjoy what we are doing for living, and (if the job is still there) will love working as long as we are physically and mentally able to – whether 67 or 75. OTOH, there are many people doing extremely unsatisfying (or way too strenuous physically for them) work, for whom waiting say 5 years from 62 to 67 to finally quit feels like a daily torture. While most of them are aware of the reduced quality of life that will result from the lower SS payments (and less time to build up other savings as well), many will go for it if they are sure that they’ll be able to bridge their health coverage and not go bust till Medicare kicks in.
I’ve got another 10 years ahead. After that point I would welcome retirement.
Keller-Williams is a cult, masquerading as a real estate company.
It’s also internally structured as a Ponzi.
At least none of you is going to top the Boss’s property taxes…..
$145,901.53
US economy may be stuck in slow lane for long run
http://news.yahoo.com/us-economy-may-stuck-slow-lane-long-run-160408168.html