The Collected Works of Author and Blogger Larry Roberts

Archive for September, 2016

The wave of HELOC recasts is upon us, and lenders must cut deals with borrowers or face another wave of delinquencies and foreclosures. Since last night was the kickoff of the NFL regular season, it's only fitting that lenders prepare for another long season of can-kicking bad loans. This time, instead of first mortgages going bad, the second mortgages sitting on top are due to recast. A loan recast is different than a rate reset. When a loan resets, the payment could go up or down depending on the prevailing rate at the time. However, when a loan recasts from an interest-only payment to a fully-amortized payment, the payment will almost certainly go up -- probably quite substantially. Home equity…[READ MORE]

Some people like extra living space, others like to show off. Buying a McMansion appeals to both types of buyers. For years urban planners worked to change public attitudes toward smaller houses near public transit stops. The tiny home movement ties into the revulsion many people feel for the ostentation and excess of large houses, particularly those with little or no architectural merit. Despite the efforts of urban planners and tine-home advocates, most Americans still believe bigger is better. I recently noted that new homes over the next decade will be smaller, not because people want smaller homes, but because younger and less affluent buyers will dominate new home sales. The trend toward smaller homes isn't a reflection of changing taste,…[READ MORE]

 Until they are forced to by a crisis, it's unlikely the next president or Congress will pass meaningful housing finance reform. Between the GSEs (Fannie Mae and Freddie Mac) and the FHA, the government directly backs more than 80% of loan originations in the United States. Legislators recognize the GSEs should be eliminated because their implied government backing is now explicit. These entities are not private entities, although many private investors would like them to be so they could profit off the government guarantee. Whenever people start discussing how to reform or terminate the GSEs, invariably someone will try to scare everyone by claiming US housing finance will cease to function, the housing market will crash, or some other nonsensical…[READ MORE]

High wage growth and nimby behavior that unduly restricts housing supply is a combination that inflates house prices in major cities. For whoever has will be given more, but whoever does not have, even what he has will be taken away from him. Jesus Christ -- Mark 4:25 The rich get richer and the poor get poorer. Karl Marx considered this trend inevitable, and he even named it the Law of Increasing Poverty. The unbridled capitalism of the 19th century led to extreme concentrations of wealth as powerful individuals ruthlessly created monopolies to crush their opponents while delivering low-quality products at very high prices. On a more basic level, the rich get richer because they don't consume everything they produce. Their savings…[READ MORE]

When sellers can't get their asking price, their alternatives are not great, but if they bought below rental parity, at least they have an option that isn't financially devastating. My first job out of school was with a retirement community developer in Leesburg, Florida. Since I had the expertise, and since it was cheaper than renting, in 1997 I built my own house at 2 Weston Road. Even though I could have built it cheaper, since I was going to live there myself, I put in nicer finishes and landscaping than a builder ordinarily would have provided. The added cost wasn't a problem until about a year after I moved in when I took a job 80 miles away, and…[READ MORE]

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