And you're still going down the toilet.

We never had crazy "interest-only" mortgages or next-to-nothing
down-payment options in Canada.

And the way your mortgages are structured is crazy. This story tells of
some boob that got a mortgage in 2008 at over 6%. **** - back in the
summer of 1999 I got my mortgage for 5.95% here in Canada. That's the
total rate - we don't add all sorts of crazy hidden costs and extra
rates that leave you scratching your head trying to figure out what your
total over-all rate is.

If you're going to reply to this post - don't be a bone-head and
full-quote the entire post (but I know some of you will because your too
stupid or lazy to figure out how to trim quoted text).

=============================================

http://www.reuters.com/article/2012/...83P12E20120426

Thu Apr 26, 2012 1:12pm EDT

More than 1 million Americans who have taken out mortgages in the past
two years now owe more on their loans than their homes are worth, and
Federal Housing Administration loans that require only a tiny down
payment are partly to blame.

That figure, provided to Reuters by tracking firm CoreLogic, represents
about one out of 10 home loans made during that period.

It is a sobering indication the U.S. housing market remains deeply
troubled, with home values still falling in many parts of the country,
and raises the question of whether low-down payment loans backed by the
FHA are putting another generation of buyers at risk.

As of December 2011, the latest figures available, 31 percent of the
U.S. home loans that were in negative equity - in which the outstanding
loan balance exceeds the value of the home - were FHA-insured mortgages,
according to CoreLogic.

Many borrowers, particularly since late 2010, thought they were buying
at the bottom of a housing market that had already suffered steep
declines, but have been caught out by a continued fall in prices in wide
swaths of America.

Even for loans taken out in December - less than four months ago and the
last month for which data is available - nearly 44,000 borrowers, or
about 7.5 percent of the total, now find themselves under water.

"The overwhelming majority of the U.S. is still seeing home prices
decline," said CoreLogic senior economist Sam Khater. "Many borrowers
continue to be quickly wiped out."

The problem is not uniform around the country. In some areas, such as
Washington, D.C., Miami and parts of northern California, prices are on
the rise. CoreLogic predicts the overall U.S. housing market will
finally bottom out this year.

And the number of homeowners falling under water each month has
decreased significantly since the peak of the financial crisis in 2008
and early 2009. Still, Khater said, since October 2010 average home
prices have fallen 7.4 percent. Overall, CoreLogic data shows that 11.1
million, or 22.8 percent, of U.S. residential properties with a mortgage
are in negative equity, unchanged from the summer of 2010.

According to the S&P/Case-Shiller 20-city composite index, which tracks
home values in 20 major U.S. metropolitan areas, U.S. home prices were
down 3.5 percent in February from a year earlier and are now at their
lowest level since late 2002. Over the past 12 months, 15 of the 20
major metropolitan areas monitored saw declines.

CoreLogic says a significant factor causing recent home loans to slide
under water has been the availability of government-insured mortgages
that require only a small down payment.

These loans, insured by the FHA, require a down payment of as little as
3.5 percent of the purchase price, providing only a small cushion of
protection against a drop in home prices that could drive a borrower
into negative equity.

"This is creating a new wave of underwater borrowers," said Gary
Shilling, a veteran financial analyst and well-known housing market
bear. "We have all three branches of government trying to keep people in
four bedroom houses who can't afford chicken coops."

The U.S. Federal Reserve, in a report delivered to Congress in January,
estimated that 12 million American homeowners had negative equity. Of
those, the Federal Reserve said, 3 million were borrowers with
FHA-insured loans.

CoreLogic's Khater said: "Low down payment lending in a weak housing
market and weak economy begs the question whether we are setting up the
FHA to have a multitude of failures down the line."

Jason Opalka took out an FHA-backed loan on his two-bedroom property in
the suburbs of Orlando, Florida, in August 2010. He was helped by
Certified Mortgage Planners of Orlando, who negotiated the FHA-backed
loan with the lender, Freedom Mortgage, based in New Jersey.

Opalka was refinancing another FHA-backed loan he had obtained in 2008,
for $196,000, then at an interest rate of over 6 percent.

Under the refinancing, he borrowed $192,278 at an interest rate of 4.5
percent. Opalka, looking at the paperwork, is still surprised at the
down payment he had to make in 2010, for a property valued at the time
for little more than the loan was worth and in which he had almost no
equity.

His down payment was just $3,000 - or about 1.5 percent of the total
loan.

Less than two years later, local real estate estimates now value
Opalka's home at no more than $110,000.

"I'm at least $80,000 under water," Opalka told Reuters. "We never
expected to go under water. We never expected prices to fall like they
have. We definitely didn't see this coming. If I'd known this, we
probably would have rented."

Florida has seen one of the greatest drops in house values since the
housing crash of 2008, 30 percent on average since October 2010 and over
50 percent since the height of the bubble in 2006, according to
Case-Shiller.

FHA-insured loans were begun during the Great Depression and have
traditionally been used to enable lower income Americans to get
mortgages.

Historically, FHA loans accounted for 8 percent to 12 percent of the
mortgage market. According to the FHA, this rose to 30 percent in late
2009 and to about 50 percent for first-time buyers at the height of the
financial crisis.

FHA officials say they are deliberately reducing their market share of
loans as the private sector increases its lending. The agency share of
home loans is today down to about 25 percent, and will continue to fall,
officials say.

Charles Coulter, a deputy assistant secretary in the U.S. Department of
Housing and Urban Development, which oversees the FHA, said it was the
FHA's mission to provide affordable housing, particularly in times of
financial crisis when private sector financing dries up.

"We are the only opportunity for borrowers who can't come up with a 5,
10 or 20 percent down payment to get a home," Coulter said.

He said the size of down payments was "an important risk parameter, it's
something we have been evaluating and a factor we will continue to
evaluate."

Coulter said beginning in 2009, FHA took a number of steps to tighten
qualification standards for the government-insured loans.

In January 2009, the minimum down payment for an FHA loan rose from 3
percent to 3.5 percent, and the upfront premium for mortgage insurance
has also been raised.

In October 2010, only borrowers with a credit score of 580 or above
could get a loan with a 3.5 percent down payment. Those with credit
scores between 500 and 579 faced a 10 percent down payment. Those with
credit scores below 500 do not qualify for an FHA loan.

FHA officials say the credit score of the agency's average borrower is
700.

A Fair Isaac Corporation score - known as FICO and the standard
evaluation of creditworthiness in the United States. - of less than 620
is usually considered sub-prime.

Manny Bongiovanni, a mortgage broker in Phoenix, who has processed
mainly FHA-backed loans in recent years, said most such loans were
issued at a 30-year, fixed low interest rate.

"Most of the people I have dealt with have ended up paying less on their
monthly mortgage payments than they were when they rented. The good
thing is, we have got lots of young families into these homes.

"And if they stay put, they will eventually get equity."

Home Guy wrote:



"Most of the people I have dealt with have ended up paying less on their
monthly mortgage payments than they were when they rented. The good
thing is, we have got lots of young families into these homes.

"And if they stay put, they will eventually get equity."

Being "underwater" is purely a theoretical thing if you have no
intention of selling any time soon.

On Apr 27, 8:48*am, "Pete C." wrote:
Home Guy wrote:

"Most of the people I have dealt with have ended up paying less on their
monthly mortgage payments than they were when they rented. The good
thing is, we have got lots of young families into these homes.

"And if they stay put, they will eventually get equity."

Being "underwater" is purely a theoretical thing if you have no
intention of selling any time soon.

and people have many reasons for moving, job loss, illness, family
troubles, divorce etc etc.

the feds should set up a 30 year 1% mortage for everyone.......

this wold bottom the housing market and encourage recovery

On Fri, 27 Apr 2012 08:05:35 -0400, Home Guy wrote:



More than 1 million Americans who have taken out mortgages in the past
two years now owe more on their loans than their homes are worth, and
Federal Housing Administration loans that require only a tiny down
payment are partly to blame.


Okay, let's see how this writer's example works.

Opalka was refinancing another FHA-backed loan he had obtained in 2008,
for $196,000, then at an interest rate of over 6 percent.

Under the refinancing, he borrowed $192,278 at an interest rate of 4.5
percent. Opalka, looking at the paperwork, is still surprised at the
down payment he had to make in 2010, for a property valued at the time
for little more than the loan was worth and in which he had almost no
equity.

His down payment was just $3,000 - or about 1.5 percent of the total
loan.

Less than two years later, local real estate estimates now value
Opalka's home at no more than $110,000.


So he could have put $80k down, and given the meager equity build-up
at the beginning of a 30 year mortgage, HE STILL WOULD BE UNDERWATER.
What the hell kind of example is this?
He just paid too much.
Of course low down payment loans led to the housing bubble in the
first place.
But this is a stupid example to argue that a low down payment has
anything to do with this guy being underwater.



"I'm at least $80,000 under water," Opalka told Reuters. "We never
expected to go under water. We never expected prices to fall like they
have. We definitely didn't see this coming. If I'd known this, we
probably would have rented."


Right. And if I could see future stock prices, I'd be wealthy beyond
imagination.




Manny Bongiovanni, a mortgage broker in Phoenix, who has processed
mainly FHA-backed loans in recent years, said most such loans were
issued at a 30-year, fixed low interest rate.

"Most of the people I have dealt with have ended up paying less on their
monthly mortgage payments than they were when they rented. The good
thing is, we have got lots of young families into these homes.

"And if they stay put, they will eventually get equity."

Exactly. My recently married son just bought a house with a low down
payment FHA mortgage.
His mortgage payment is less than the rent he was paying.
What's to lose?
Underwater means nothing if your mortgage payment is less than renting
and you don't have to sell.

--
Vic

"Pete C." wrote:

"And if they stay put, they will eventually get equity."

Being "underwater" is purely a theoretical thing if you have no
intention of selling any time soon.

Is that the new paradigm in the US?

That you can't count on the value of your home to at least not dip below
what you paid for it?

Home Guy wrote:

"Pete C." wrote:

"And if they stay put, they will eventually get equity."

Being "underwater" is purely a theoretical thing if you have no
intention of selling any time soon.

Is that the new paradigm in the US?

That you can't count on the value of your home to at least not dip below
what you paid for it?

You never could really, but since it was unusual people just came to
expect that. Probably "home value coverage" needs to be a new category
in homeowner's insurance. Just as you have insurance to cover potential
destruction of the home, you should have coverage to cover the potential
gap between mortgage balance and sales expenses vs. current market value
in the event you have to sell. Similar to other gap insurance products
currently available.

Pete C. wrote:
Home Guy wrote:

"Pete C." wrote:

"And if they stay put, they will eventually get equity."

Being "underwater" is purely a theoretical thing if you have no
intention of selling any time soon.

Is that the new paradigm in the US?

That you can't count on the value of your home to at least not dip
below what you paid for it?

You never could really, but since it was unusual people just came to
expect that. Probably "home value coverage" needs to be a new category
in homeowner's insurance. Just as you have insurance to cover
potential destruction of the home, you should have coverage to cover
the potential gap between mortgage balance and sales expenses vs.
current market value in the event you have to sell. Similar to other
gap insurance products currently available.

Interesting idea, but that could sure take down some insurance companies on a
real estate market swing.

On 4/27/2012 7:35 PM, Bob F wrote:
Pete C. wrote:
Home Guy wrote:

"Pete C." wrote:

"And if they stay put, they will eventually get equity."

Being "underwater" is purely a theoretical thing if you have no
intention of selling any time soon.

Is that the new paradigm in the US?

That you can't count on the value of your home to at least not dip
below what you paid for it?

You never could really, but since it was unusual people just came to
expect that. Probably "home value coverage" needs to be a new category
in homeowner's insurance. Just as you have insurance to cover
potential destruction of the home, you should have coverage to cover
the potential gap between mortgage balance and sales expenses vs.
current market value in the event you have to sell. Similar to other
gap insurance products currently available.

Interesting idea, but that could sure take down some insurance companies on a
real estate market swing.



It wouldn't be a problem in our "free market" . If the insurance
companies made lots of bad bets we would bail them out instead of
letting them fail....

On 4/27/2012 7:48 AM, Pete C. wrote:
Home Guy wrote:
"Most of the people I have dealt with have ended up paying less on their
monthly mortgage payments than they were when they rented. The good
thing is, we have got lots of young families into these homes.

"And if they stay put, they will eventually get equity."
Being "underwater" is purely a theoretical thing if you have no
intention of selling any time soon.

And.....It sounds like there are some great deals for new buyers if they
play their cards right. I just refinanced at 3.875% on a 30 and could
have gone with 3.00% on a 15. Life is sweet.

Very simple rule: Don't borrow what you can't pay back. It's not rocket
science.

Home Guy wrote:
And you're still going down the toilet.

We never had crazy "interest-only" mortgages or next-to-nothing
down-payment options in Canada.

And the way your mortgages are structured is crazy. This story tells
of some boob that got a mortgage in 2008 at over 6%. **** - back in
the summer of 1999 I got my mortgage for 5.95% here in Canada.
That's the total rate - we don't add all sorts of crazy hidden costs
and extra rates that leave you scratching your head trying to figure
out what your total over-all rate is.

If you're going to reply to this post - don't be a bone-head and
full-quote the entire post (but I know some of you will because your
too stupid or lazy to figure out how to trim quoted text).


The "interest only," and other forms of silliness were the direct result of
the Community Redevelopment Act (CDR) passed under the Carter administration
and greatly expanded during Clinton's tenure.

Let's start with basic philosophy. "How can we move the poor into the middle
class?" the liberals asked. Well, one of the definitions of "middle class"
is home ownership, so the next question is how do we get the poor into their
own homes? If they own their own home, they are, by definition, "middle
class." This is what the CDR tried to do.

The CDR, however, met with limited success until enforcement mechanisms were
installed during the Clinton years. Specifically, banks and mortgage
companies had to achieve a certain percentage of their loans and services to
"previously under-served" communities.*

As a result of these latter requirements, all manner of bizarre loan
mechanisms were developed. Most had very small payments for a bit, then a
"balloon" payment scheme at the end of a period of time, usually five years.
At the end of five years, the mortgage would be re-financed quite easily
inasmuch as the value of the property had increased substantially.

Eventually, everybody who could see lightning and hear thunder "owned" a
home - there was no market left.

Humpty-Dumpty came tumbling down and broke his crown.

----------
* Other services too. Take a drive through the most disreputable part of
your town. You'll see a bodega next to a pawn shop next to a Vietnamese
barber shop next to a store that rents tires. And on the corner, aside from
the street-walkers and cocaine dealers, a Bank of America branch.

On 04/28/12 08:12 pm, HeyBub wrote:

The "interest only," and other forms of silliness were the direct result of
the Community Redevelopment Act (CDR) passed under the Carter administration
and greatly expanded during Clinton's tenure.

Let's start with basic philosophy. "How can we move the poor into the middle
class?" the liberals asked. Well, one of the definitions of "middle class"
is home ownership, so the next question is how do we get the poor into their
own homes? If they own their own home, they are, by definition, "middle
class." This is what the CDR tried to do.

The CDR, however, met with limited success until enforcement mechanisms were
installed during the Clinton years. Specifically, banks and mortgage
companies had to achieve a certain percentage of their loans and services to
"previously under-served" communities.*

As a result of these latter requirements, all manner of bizarre loan
mechanisms were developed. Most had very small payments for a bit, then a
"balloon" payment scheme at the end of a period of time, usually five years.
At the end of five years, the mortgage would be re-financed quite easily
inasmuch as the value of the property had increased substantially.

Eventually, everybody who could see lightning and hear thunder "owned" a
home - there was no market left.

Humpty-Dumpty came tumbling down and broke his crown.

----------
* Other services too. Take a drive through the most disreputable part of
your town. You'll see a bodega next to a pawn shop next to a Vietnamese
barber shop next to a store that rents tires. And on the corner, aside from
the street-walkers and cocaine dealers, a Bank of America branch.

And probably a "pay-day loan" operation charging an obscenely high
interest rate.

Perce

On Fri, 27 Apr 2012 06:08:33 -0700 (PDT), bob haller wrote:

On Apr 27, 8:48*am, "Pete C." wrote:
Home Guy wrote:

"Most of the people I have dealt with have ended up paying less on their
monthly mortgage payments than they were when they rented. The good
thing is, we have got lots of young families into these homes.

"And if they stay put, they will eventually get equity."

Being "underwater" is purely a theoretical thing if you have no
intention of selling any time soon.

and people have many reasons for moving, job loss, illness, family
troubles, divorce etc etc.

the feds should set up a 30 year 1% mortage for everyone.......

this wold bottom the housing market and encourage recovery


....and the money for this is going to come from where?