The Collected Works of Author and Blogger Larry Roberts

Archive for February, 2013

HELOCs are making a comeback. Banks are offering those willing to become loanowners free money at very low rates, so borrowers are taking the money. Last time around, this was an open invitation to theft as borrowers extracted over a trillion dollars in mortgage equity withdrawal which they didn't pay back. For now, banks are being more conservative in their lending, but since lenders will become more aggressive as they become more confident in rising house prices, there is a risk that rampant HELOC abuse may return. If it does, it could easily reignite the same desires that inflated the housing bubble leading to a painful crash and more taxpayer bailouts. Everyone who doesn't want to subsidize their neighbors reckless…[READ MORE]

I was very hesitant posting a press release from a political office as this FHA problem was caused by banksters and politicians.  However, the press release had some very good descriptions on what happened to FHA in the past 6 years.   In a nutshell, some of the functions of the subprime private mortgage insurance industry were taken over by the FHA.  That's explains the reference to Countrywide Mortgage by Chairman Hensarling. Last week I posted discussing the affect of low mortgage rates and the increase in purchasing power.  Larry Roberts discussed the role of the US in subprime lending or even whether should there be a role.  FHA helps to facilitate credit to borrowers that normally shouldn't be qualified to…[READ MORE]

Despite the fact that house prices crashed, wiped out millions of loanowners, and wiped out the illusory equity of an entire generation, people persist in believing owner-occupied housing is a good investment. Most people believe house prices appreciate 5% to 10% or more each year and by simply owning real estate they can become wealthy. It doesn't work that way. Over the long term, house values increase with wage inflation as buyers bid up prices with their increasing incomes. An amortizing loan is a forced savings account -- assuming the owner doesn't refinance or HELOC this money out and piss it away -- so houses can serve as a retirement savings vehicle, but only if the owner is disciplined. The…[READ MORE]

Banks have been allowing delinquent mortgage holders to squat while prices rebound because rising prices allows them to recover more on their bad loans. In many cases, the delinquent borrower moves on with their lives and leaves the property vacant with the assumption that the bank will finally foreclose and resell the property. However, banks are under no obligation to foreclose; it's merely a contractual right. In cases where the house is in a bad neighborhood or in need of extensive repair, it is more cost effective for banks to write the loan down to zero and leave the property alone. When that happens, title remains with the delinquent owner, and even though they may have long since moved away,…[READ MORE]

The government needs to get out of housing finance. The losses at the GSEs apporach $150 billion, and the FHA needs its own bailout. These are losses all of us who didn't participate in the madness get to pay. And as long as the government continues to back 90% or more of loans for residential real estate, the very real possibility of another even larger bailout looms. Given these realities, government policy makers have been and should be focused on reducing the government's exposure and minimizing taxpayer bailout dollars. However, in a stunningly stupid proposal, some housing advocates idiots are proposing the government back a new type of subprime loan. Unbelievable! Housing advocates push for new type of subprime loan…[READ MORE]

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