Thursday, April 07, 2005

"This Country Believes In Redemption"

BankRate.com has a article out called "6 mortgage myths that can cost you money", which is asserting that common sense is out-of-date.

ARMs are fine for "upwardly mobile people, people who are transient, people for whom a payment increase wouldn't be the end of the world."

Being debt free is questioned. "We're not talking about finances; we're talking about psychology, or at least where the two meet. The way people deal with money and risk is often irrational, and they put much more of a premium on security and safety than they do on getting a return."

"The perception out there, that you need 10 percent down at least, maybe 20 -- that's completely incorrect. Many lenders have lots of loan programs for people who can afford to pay 5 percent down or less, including zero down." They can "afford to pay less"? I must be living in "the mortgage industry's horse-and-buggy days".

"What's called 'piggyback financing' is now almost 50 percent of home purchases," A piggyback loan lets you avoid paying for mortgage insurance." More uninsured debt, nice.

Problems with your credit? Relax. "'This is a country that believes in redemption. More and more lenders are finding ways to lend to people' with flawed credit histories." At least he got the last thing right.

15 Comments:

At 9:21 AM, Anonymous Anonymous said...

Ben,
did you see this one
http://www.msnbc.msn.com/id/7416903
one more nail in GSE's coffin?
Madhu

 
At 9:26 AM, Blogger John Law said...

"We're not talking about finances; we're talking about psychology, or at least where the two meet. The way people deal with money and risk is often irrational, and they put much more of a premium on security and safety than they do on getting a return."
hahahhahahahahahaah. I bet some of these new RE hotshots would put even the most leveraged hedge fund to shame. they probably cashed out what was left of their tech holdings and bought a house or a rental property. it went up so they bought a 2nd one(or 3rd and 4th), and now they are leveraging like crazy and playing the game because "RE always goes up." these mini-Trumps already learned stocks don't always go up in the long run, now they'll learn about it in RE. my god, so many people are going to be crushed for life. they aren't going to trust stocks, they aren't going to trust RE and in the end they might not have a job or any networth. these people are going to be ruined.

this whole redemption biz is garbage is crazy. lenders just want to originate loans, if their moeny was on the line they'd probably not be so far down in subprime.

 
At 9:48 AM, Blogger Ben Jones said...

Madhu,
Thanks for the link!

(in the end they might not have a job or any networth)

The net may be negative. Thanks John

Ben

 
At 9:52 AM, Blogger John Law said...

in Rothbard's book on the GD he talks about violence during the GD over housing foreclosures...imagine when this generation has loses on stocks and is upside down on their "homes" to the tune of tens of thousands of dollars! yikes.

like fleckenstein said- this will only end in tears.

not sure if this link has been posted yet

Why The Dollar Could Demolish Your Home
Oxford Analytica, 04.07.05, 6:00 AM ET

http://www.forbes.com/home/markets/2005/04/07/cz_0407oxan_housing.html

 
At 10:00 AM, Anonymous Anonymous said...

The Asians must think we are NUTS ! They sit back saving and saving, buying more of our companies and EARNING interest.

I've got this stinking feeling that China WILL revalue its currency, when our stock market falls. They will buy our good assets, ie our companies for dimes on the dollar.

Americans are FOOLS. We are borrowing and borrowing and paying interest against assets that don't create any output. How much housing does this country need ? When was the last time a house built a anything or did any research ? Housing has no output other than comfy occupants !

I just can't see this ending nicely. Everyone is running around financing real estate and selling each other real estate. It is a fools game. In the mean time our jobs are going offshore, we are becoming over leveraged and our economy is becoming stagnant. WAKE UP PEOPLE !

I just want to run down the block and scream "SELL, SELL, SELL" !

 
At 10:07 AM, Blogger John Law said...

just remember, the whole world is buying our gov't bonds, our mortgages, extending us CC debt and buying every alphabet soup of a debt instrument we can come up with. we don't have savings, but they will happily loan us it. they will surely suffer loses too. only by then they will have taken our manufacturing base and have enough dollars savings to survive(hopefully), but it will hurt. I think I saw that Japan has almost a trillion of US dollars...think they won't be hurting when that's worth only $700B?

 
At 10:14 AM, Anonymous Anonymous said...

700B is still going to buy a lot. Remember that when things fall, Americans are going to be BROKE. We have debt, they have savings. When things go bad we sell at a loss. They buy bargains. See the difference ?

 
At 10:17 AM, Blogger John Law said...

that's true, but will they want to buy the chaos?

 
At 10:19 AM, Blogger Ben Jones said...

(Why The Dollar Could Demolish Your Home)

Yeah, I had a post not that long ago with an economist that pointed out all the RE financing must come from overseas, inflating the CA deficit and pushing the $ down.

(We are borrowing and borrowing and paying interest against assets that don't create any output)

Excellent point. The bubble is distorting our economy and draining capital.

 
At 10:31 AM, Anonymous Anonymous said...

(that's true, but will they want to buy the chaos?)

They'll be picky. For one, they won't touch a company that makes its money on paper. GE, GM, Ford, stock brokers, etc. are out of favor. Tech companies, mining companies, oil companies, real estate, etc. will be in favor.

 
At 11:36 AM, Blogger John Law said...

They'll probably be picking at the bones of American corporations- maybe buying physical assets when companies go into bankruptcy- only they'll be acquiring on the cheap.

 
At 11:39 AM, Anonymous Anonymous said...

I often go to bankrate.com to see what the prevailing interest rates are.

That guy who writes the articules on their front page is an idiot. Reading what he writes makes me want to pull my hair out.

 
At 2:28 PM, Anonymous Anonymous said...

China tells the US to fix its problems:

http://www.nytimes.com/auth/login?URI=http://www.nytimes.com/reuters/business/business-china-usa-currency.html&OP=65b3728e/s/Q3BNsoQ513Q5C2Q51Q51hvs2Q3BQ27hQ3B2Q5CsNQ27Q5C@rQ3BQ5CQ5CsNQ27Q5C@rQ3BQ5CQ5CE3p@rQ25EQ27Q5CQ25E3Q2722Q3Br3nyphwQ23

What I would like to know is what is going to happen when China stops warning us and stops buying our dollar.

China is right here. The US has deficits, paper profits, over consumption and tons of consumer debt. The party is over.

 
At 2:48 PM, Anonymous Anonymous said...

$1M homes are getting popular.

http://www.usatoday.com/money/perfi/housing/2005-04-06-one-million-usat_x.htm

 
At 5:58 PM, Anonymous Anonymous said...

Speaking of if/when things start to fall apart, will "W" blame Bill Clinton?

 

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