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Old 02-13-2018, 09:25 PM   #61
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I bought my home with 0% down. 20% would’ve been over $60k, which would’ve taken years of renting and scrimping, plus the cost of an additional move in my life. How awful! Perish the thought!
If the requirement was 20%, that down payment amount may have been a lot less. Prices would fall, or not rise as fast.
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Are we heading for another potential Financial Crisis?
Old 02-13-2018, 09:42 PM   #62
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Are we heading for another potential Financial Crisis?

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The next crisis probably won't be housing-related. Wall Street will have found something new to lose all of their borrowed money on.

We'll probably find out soon that AIG has been insuring trillions of dollars worth of bets on the leveraged VIX products, and is now insolvent again.


Debt, bond debt. Maybe everybody’s, maybe just corporates. Very probably corps + municipals not able to handle a rate rise shock, then the fed backstops everyone and that goes south as china rises economically.

China could darn near end us just by liquidating their bonds in a hurry, maybe with a few other emerging market cooperators. Remember, the west owns all the stock but the emerging markets own all the debt as net lenders.
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Old 02-13-2018, 11:54 PM   #63
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I bought my home with 0% down. 20% would’ve been over $60k, which would’ve taken years of renting and scrimping, plus the cost of an additional move in my life. How awful! Perish the thought!
It's anecdote but first house was 10% (5K), 2nd was 5% (7K), 3rd was 10% (11.5K), and last (current) was 85%. We paid it off 8 months later on the Reno house to avoid the bother of paying the monthly.
We climbed the ownership ladder moving from Riverside, CA to Houston and now to Reno. We were lucky to hit Houston two years after the S&L bottom and Reno about 7 years after the crisis, but probably 3-4 years after bottom. First loan was at 9.5% (would have been 16% without a subsidy from the redevelopment district) and the last was. . . . . . . . . 2.95%

I think 5-10% down for starter homes is reasonable. It got us started and we had no interest in defaulting. For 500k-2000k houses, 10-20% is perfectly reasonable. It is telling that at one point jumbo loans had a higher interest rate and higher down than smaller loans, but with the loss of wages by the middle and lower middle class, this has often reversed, in my lifetime.

My youngest only was able to buy in Seattle because he was a computer engineer for Microsoft. God help anyone with lesser income or expenses, if you're looking for a starter home there, with 20% down.
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Old 02-14-2018, 05:38 AM   #64
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There are typically a range of house prices in a city depending on commute. I think the risk with lower down payment is people trying to buy a house at the high end of their price rather than buying something more affordable but not in the hip area.
I saved 20% buying just outside the cool area but now prices have mostly caught up due to demand. Could have bought more house (was approved) but there are risks that a layoff or another downturn could put me in a bad spot with an expensive house payment.
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Old 02-14-2018, 05:43 AM   #65
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Anyone who hasn't read "The Big Short" is missing some worthwhile education. And actually the movie based on the book is both educational and entertaining. I saw it on a transpacific flight a couple of weeks ago & recommend it too.
I agree with all of that.

The book was great. And the movie was tops on my "movies based on books that I never thought could be made into a movie" list.
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Old 02-14-2018, 05:51 AM   #66
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I am just concerned that there "May" be a bunch of folks out there that can be convinced to "bite off more than they can chew" with respect to a home loan. Especially Veterans and those that are being offered 100% mortgages. It was the Phrase "Your House/Home is your Bank" That got me concerned. There are a lot of Gullible people out there, and there are plenty more than are looking to take advantage of them.
Yes, there are gullible people out there. Always have been, always will be. You may be noticing ads more now, due to the tight market for homes.

It's not really any different in recent years, although regulations that were put in place since the Great Recession are being systematically undone in the past year or so.

I don't think we are headed for a financial crisis in the near future. Of course we are always heading for a "potential" financial crisis.
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Old 02-14-2018, 10:23 AM   #67
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What concerns me more is they are definitely targeting people specifically Veterans that are already up to their neck in debt. Or at least it sounds that way to me. Using phrases like, "Pay off Credit Cards", "Pay Off Heloc" "Buy a new Car" etc..... What may you think once they have paid all their CC cards off that they will not just run them up again. What happens then after they have tapped their so called personal Bank?
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Old 02-14-2018, 12:19 PM   #68
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The issue at the original CMO level is whether mortgage defaults are correlated or not. For most of history, they have been uncorrelated and hence amenable to statistical analysis and predictions. The initial sin of the rating agencies was to continue assuming this during the bubble. If that is again the case now, then IMO there is not a lot of systemic risk.

The 2007/8 problem at its root was triggered by speculative buying and all the mortgage origination sins that have already been mentioned. Then, when the defaults started they were not statistically independent; defaults were high enough to smash home values, which triggered more defaults, smashing more home values, etc.

That said, if the "financial engineers" had not created the incredible leverage, the result would have been much less far-reaching. But 100,000 years of evolution have bred for greed and optimism, so here we are. Greedy and optimistic (self-important, too) little mammals constantly getting ourselves into trouble.
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Old 02-14-2018, 03:21 PM   #69
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"Are we heading for another potential Financial Crisis?"

No doubt. Only variable is time.
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Old 02-14-2018, 03:29 PM   #70
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What concerns me more is they are definitely targeting people specifically Veterans that are already up to their neck in debt. Or at least it sounds that way to me. Using phrases like, "Pay off Credit Cards", "Pay Off Heloc" "Buy a new Car" etc.....
The vulnerable are always targeted.

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What may you think once they have paid all their CC cards off that they will not just run them up again. What happens then after they have tapped their so called personal Bank?
They default on their loans and lose their house.

As I said, protections put in place in the past have been steadily eroded for the past year or so. That erosion will continue.
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Old 02-14-2018, 03:51 PM   #71
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However, when mortgages become "easy" ( low-to-zero down, low interest rates, balloon mortgages etc) that boosts the selling prices, by a lot. So it fuels the bubble.
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If the requirement was 20%, that down payment amount may have been a lot less. Prices would fall, or not rise as fast.
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The 2007/8 problem at its root was triggered by speculative buying and all the mortgage origination sins that have already been mentioned.
These are the factors that make me think higher down payments would be beneficial. Specifically, they would lead to lower prices and cool the over-heated market, which would reduce opportunities for runaway speculation.

I happen to believe prices are unsustainable now, as they were in 2006-7. I'm actually surprised prices didn't fall farther and stay there longer back then. When working stiffs can't afford a home, something has to give. The best way to make homes affordable is through lower prices, not by making it easier to borrow enough money for higher prices.

Obviously, there are a vested interests in keeping prices up, keeping buyers borrowing beyond their means, and keeping speculators speculating.
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Old 02-14-2018, 07:11 PM   #72
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These are the factors that make me think higher down payments would be beneficial. Specifically, they would lead to lower prices and cool the over-heated market, which would reduce opportunities for runaway speculation.

I happen to believe prices are unsustainable now, as they were in 2006-7. I'm actually surprised prices didn't fall farther and stay there longer back then. When working stiffs can't afford a home, something has to give. The best way to make homes affordable is through lower prices, not by making it easier to borrow enough money for higher prices.

Obviously, there are a vested interests in keeping prices up, keeping buyers borrowing beyond their means, and keeping speculators speculating.


Where I am at near raleigh, prices really haven’t changed all that much from before the crash and now. Sure it dipped, but not horrible, and now ten years later you could say most of the gain is just mild inflation.
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Old 02-15-2018, 07:55 AM   #73
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A good friend and retired co w@rker has been jumping through hoops to get a loan for a piece of lakefront property where he already has some lakefront property. It's been 3 months already, the bank was even questioning a monthly debit of $22.23, an amount levied to build the sewage line that was recently constructed. He is 62, and they wanted 2 letters from financial institutions each whether he had access to his assets in retirement accounts. Did they read that he was over 59.5?
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Old 02-15-2018, 08:37 AM   #74
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The vulnerable are always targeted.



They default on their loans and lose their house.

As I said, protections put in place in the past have been steadily eroded for the past year or so. That erosion will continue.
They may have eased, i wouldn't call it eroded. The underwriting pendulum had just swung to far to the left. Now getting better centered, no where near what they were in the last mortgage bubble.
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Old 02-15-2018, 08:38 AM   #75
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A good friend and retired co w@rker has been jumping through hoops to get a loan for a piece of lakefront property where he already has some lakefront property. It's been 3 months already, the bank was even questioning a monthly debit of $22.23, an amount levied to build the sewage line that was recently constructed. He is 62, and they wanted 2 letters from financial institutions each whether he had access to his assets in retirement accounts. Did they read that he was over 59.5?
And yet some people think underwriting standards have "eroded".
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Old 02-15-2018, 11:37 AM   #76
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Funny how financial institutions stake out different markets to pursue. I've heard a lot about student loans (or car loans, etc) being the impetus for the next financial crisis. Out of the blue I've started receiving emails from several credit unions that I belong to marketing student loan refi offers. The rates are about 1/2 of what my grown children are paying so I've passed them along.
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