Home buying thread

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Picasso3

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You guys remind me of hodj and tanoomba.

At face value 20% down is a threshold to ensure the person has sufficient skin in the game. To get a loan to cover the 20 negates that. If you disagree getting a downpayment loan is some iffy maneuvering I'd like to remind you of your "if you can't afford 20% down you can't afford it" mantra circa 2012
 
Cad

Cad

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Picasso_sl said:
You guys remind me of hodj and tanoomba.

At face value 20% down is a threshold to ensure the person has sufficient skin in the game. To get a loan to cover the 20 negates that. If you disagree getting a downpayment loan is some iffy maneuvering I'd like to remind you of your "if you can't afford 20% down you can't afford it" mantra circa 2012
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Oh I think it's pretty stupid on the borrower's part, but it's not a "shady business practice" unless we're saying "shady" means "inherently somewhat risky".
 
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Picasso3

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Inherently risky yes, but only the second lender may be aware of that. I'd say it's more like Bypassing safety thresholds which I think is shady. If you get money from parents to do downpayment you have to sign letter saying it's not a loan.
 
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Picasso_sl said:
Inherently risky yes, but only the second lender may be aware of that.
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What difference does that make when the first lender is going to be paid first in a foreclosure? Whether there's a second mortgage or not is immaterial to the first lender. His collateral is secured exactly the same either way.
 
Vinen

Vinen

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Cad_sl said:
What difference does that make when the first lender is going to be paid first in a foreclosure? Whether there's a second mortgage or not is immaterial to the first lender. His collateral is secured exactly the same either way.
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Shit like this is how we got into the 2008 clown-fiesta.
 
Khane

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Cad_sl said:
Proof?



Except they're still doing 80/20's today and there's no new private label securitizations since what, 2007?



How so? The first loan still has priority and will get paid off first (exactly as if the second mortgage didn't exist) and the second mortgage is known to be the second so the rate is a bit higher to compensate for that risk - the bank knows exactly what its doing when it takes on that debt or buys that mortgage. How is this shady exactly?



Except, if the person just borrowed 95% or 100% in one loan instead of 80/20 or 80/15/5 or whatever, they're still borrowing the same amount except now they're paying PMI and interest instead of just interest. How are they not created to avoid PMI?

Citations needed for your assertions, sir.
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You pick really strange things to hang your hat on sometimes. Think of it this way. Why does a bank care about getting you out of your PMI payment? Why would they create secondary loans with worse terms just to "help out their customers". These are banks we are talking about.

They use the loans to circumvent PMI and use that as a selling point but that's not why they were created. It was easier for them to package up all the other loans, both the "good" loan that was 80% LTV and seemed traditional on the surface, and also the smaller, riskier looking loans and resell them. They are shady as shit financial tools used to create more profits based on nothing by virtue of leveraging their own debt to sell to other banks. These mortgage brokers never end up servicing these loans, they just sell them. And now they have two much more attractive looking loans to sell rather than one loan that screams "DEFAULT!" to anyone who may want to pick it up to service it.
 
Cad

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Vinen_sl said:
Shit like this is how we got into the 2008 clown-fiesta.
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Eh, I don't think 80/20 loans really had anything to do with it.

Large scale collusion between arms-length originators who didn't check anything but said they did, fraudulent buyers, useless deadweight appriasers who were pressured by originators to come in at a certain value, complicit ratings agencies who slapped AAA on anything, and investors who had a lot of loose cash to buy up anything caused the 2008 clown-fiesta.

80/20 properly documented loans would not even be a blip on the radar.
 
Khane

Khane

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Cad_sl said:
Eh, I don't think 80/20 loans really had anything to do with it.

Large scale collusion between arms-length originators who didn't check anything but said they did, fraudulent buyers, useless deadweight appriasers who were pressured by originators to come in at a certain value, complicit ratings agencies who slapped AAA on anything, and investors who had a lot of loose cash to buy up anything caused the 2008 clown-fiesta.

80/20 properly documented loans would not even be a blip on the radar.
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How could you say this? They were a big part of the problem because they were tools used to give borrowers loans for 100% of the value of a home. That's all fine and dandy if the buyer has business acumen and can prove they are only taking 100% LTV on the mortgage because they can leverage their liquidity elsewhere for better profits, but that wasn't the case. They were giving them to anyone and everyone.

They were doing 80/20 loans and making one or both loans ARMs. It was ludicrous. And yes, they were even doing more than that. A friend of mine bought a house in 2006 with his father, a house neither of them could afford at all. They gave them three separate loans to cover the cost. His father had one loan taken out in his name, and my friend had an 80/20 in his name. All of the loans were ARMs. I have no idea what kind of bullshit trickery they were pulling to get that deal through but guess what. That house was foreclosed on.
 
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Picasso3

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"Increasing Risk in the Past Few Years. A recent study by the Federal Reserve Bank of New York tracked a number of the changes in the quality of Alt-A and subprime loans that originated from 1999 through 2006 and were packaged in MBSs. In the Alt-A market, the loan-to-value ratio increased from 76 percent in 2002 to 80 percent in 2006, and the share of loans with silent seconds increased from 2.4 percent to 38.9 percent. Over the same period, loans with full documentation declined from 36 percent to only 16.4 percent.

For subprime mortgages, the loan-to-value ratio increased from 80.7 percent in 2002 to 85.5 percent in 2006, and the share of loans with silent seconds increased from 2.9 percent to 27.5 percent. Over the same period, subprime loans with full documentation declined from 65.9 percent to 57.7 percent"

Silent second is what we're talking about.
 
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Picasso3

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"The term "silent second" is used most frequently to describe self-serving or perhaps fraudulent schemes where house sellers accept second mortgages as part of a sale transaction, without the full knowledge of the first mortgage lender. The "silence" refers to the absence of full disclosure to the first mortgage lender."
 
Khane

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Well I guess that's how they were getting them through then. By just not telling anyone. I guess since the title search happens before any new liens are put on a house nobody would know until after everything had already gone through.
 
Cad

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Silent seconds are blatant fraud, so, yea... that is not what I'm referring to. The terms of a first mortgage almost always require you to disclose if you leverage any further. If you don't its fraud.
 
Khane

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Do you have a link to that information about the silent seconds Big P? That way Cad can stop being a mortgage climate denier.
 
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Picasso3

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"If you don't disclose it it's blatant fraud but if you do it's perfectly fine and not shady, only ill advised and similarly susceptible to the same crisis as previously discussed but not so much as to prove any argumentative Internet users wrong" - US Mortgage Bureau of investigations
 
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The Ancient_sl

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Piggyback loans are fine. Banks learned from their mistakes and would never mis-categorize risk knowing they can repackage it for a 3rd party like they did last decade. Furthermore, because of significant reforms passed since the last crisis they are unable to.

Wait, none of that is true.
 
Hoss

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Khane_sl said:
80/20 loans weren't loans for more than a house was worth necessarily. They were loans created for people who would get denied a mortgage for the sale price of the home, even if it was a foreclosure that was selling for 15% less than appraisal value. They were made to give people mortgages on houses they would not otherwise get approved for traditionally.
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I don't know the full history of how the loans were invented, but I honestly think you're confusing 80/20 loans with something else. As I said, I've gotten 2 of those (if you inclide the 80/10/10) and I would not have been denied a single loan for the full sales price either time. The first time, when I got an 80/20, I qualified for a 100%+ loan, but I had enough for closing costs so I didn't want it. I just didn't want to pay PMI because it's bullshit and pissed me off to think about it. It protects only the lender, it doesn't help me keep my house if something happens and I can't pay, so the fucking lender should be paying for that shit if they want it.

Like cad said, it was all transparent, at least as far as I know. A single mortgage broker arranged both loans and I signed all the paperwork at the same time with the same title company. They also required like a years worth of bank statements and pay stubbs to see where my money came from and questioned anything they considered to be a large deposit. I had to get a letter to explain a Christmas gift from my parents.
 
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Tenks

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They're testing the radon levels in my house and I'm kind of surprised they put it on my first floor instead of down in the crawl space. This whole radon thing feels like a scam, though.
 
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