Foreclosures up 100% YOY

[davidt1]

Originally Posted by Charles

You are referring to inexperienced investors. I am referring to world class corporations.

People (average joes with internet connections to schwab, etc.) who invested probably didn't employ legions of PhD statisticians and economists. I'm asking how world class companies (Countrywide, Washnigton Mutual, etc.) with huge technical staffs could get into this situation. They had to have known many people wouldn't be able to continue their payments. So far I haven't read any posts with a reasonable explanation. I know there are a lot of sharp people out there. Please chime in.


Washington Mutual



Countrywide

This was posted in the business forum. You will hear about smart people on wall street, subprime, hedge funds and the Feds here. I don't know if it will provide any answer, but it's funny and very accurate.


YouTube - The Long Johns - The Last Laugh - George Parr - Subprime

[Axiom]

Originally Posted by Charles

In the go go years of selling these wacky ARMs they made a killing on commissions and fees and they didn't care that three years later lots of these folks would default out. Yet the stock price dropped and that has to affect all of them. I would have thought that they would have realized that the price of homes would go down once all these foreclosures hit and one of the big results would be tighter lending practices = less loans = lower stock price.

You might want to check out the following article. It's a bit long and touches on some of the same things that have already been mentioned in this thread, but it's from a reliable source.

http://www.nytimes.com/2007/08/26/bu...nted=1&_r=1&hp


Let me just throw something else into the mix...

When funding for nonconventional loans started to disappear, Countrywide said they would emphasize mortgages Fannie Mae/Freddie Mac would purchase. (ie: no more junk loans)
However if you look at their normal loan stats; that would mean a huge drop in business for them, and in fact their layoff numbers seem to confirm that. So, on September 7 Countrywide put out a Press Release that stated, in part:
“Migration of the Company's residential lending business into its federally chartered thrift entity, Countrywide Bank, FSB, will continue.”
Many in the know read this to mean: Countrywide will continue funding subprime loans, but will now do so internally.

AND

Background: this is from another thread that started as a question on how bonus income is factored in when applying for a loan, but that took a turn and got a bit heated.
BTW, I take full responsibility for my part in the mele... my financially conservative tendencies come across as a bit harsh I guess.

Posted on 9/25/07

"Sorry, while lending standards have changed/tightened for some products, we can still do lots of aggressive lending. You shouldn't beleive everything (or hardly anything) you here from the biased mainstream media.
We are still doing lots of $0 down lending, high DTI lending, stated income/limited doc/no doc lending. I am closing a loan on Thursday that is a cash out refi, with stated income & stated assets, no verification of any kind on the employment on a 30 yr. 10/20 interest only fixed rate at 6.25% (1st 10 years interest only and amortizes over the last 20 years)."

(I'll post the link in case you want to verify)
http://www.city-data.com/forum/mortg...-factored.html

With the portfolio of subprime loans showing abysmal results, the profits from these loans have to be excessive for companies to continue to make them in the current environment.


Scary, if you ask me.

[sheri257]

Originally Posted by sue-z

Unfortunately I don't think we are anywhere near the bottom yet. My local paper lists real estate transactions and only 7 houses sold in my zip code. All were in the 200's except for 1 that sold for 199! One in my neighborhood that's a pretty nice 4 bedroom, on small acreage with a large shop went for 288, this one would have been at least in the upper 300's very recently...it's getting scary.Still lots of new tracts going in tho...what are they thinking?? sue-z

Sounds like you live in one of the inland areas like I do. I'm seeing the same kind of price drops, and some of them are really substantial. This is why we went out of our way to buy really cheap four years ago. We had to walk away from a lot of negotiations because people were trying to jack up the price even after we made offers at the listed price ....

So we kept hunting until we found the right house at the right price. At $150K we figured we wouldn't get into a negative equity situation but ... who knows, maybe inland area prices will get that low again.

Overall though, I think this is a good thing. If people can afford houses again, and if only the truly qualified buyers will get homes this time then, I think the economy will actually be much better off in the long run.

As for why contractors are still building ... I think it's because they've already bought the land and gotten approval for those subdivisions months ago. It wasn't that long ago that these contractors were doing ok at lower prices so ... selling the houses cheaper is still probably better than not selling them at all.