Comments on: Couldn’t Help But Notice (082307) http://www.bizzyblog.com/2007/08/23/couldnt-help-but-notice-082307/ The Business End of the Blogosphere Thu, 04 Dec 2008 04:20:37 +0000 http://wordpress.org/?v=2.5 By: dscott http://www.bizzyblog.com/2007/08/23/couldnt-help-but-notice-082307/#comment-116517 dscott Fri, 24 Aug 2007 13:34:19 +0000 http://www.bizzyblog.com/2007/08/23/couldnt-help-but-notice-082307/#comment-116517 Here's a joke I heard on the radio this morning: What's the difference between a Los Vegas black jack table and Florida real estate? In Los Vegas they serve free drinks while you are playing. Here’s a joke I heard on the radio this morning: What’s the difference between a Los Vegas black jack table and Florida real estate? In Los Vegas they serve free drinks while you are playing.

]]> By: dscott http://www.bizzyblog.com/2007/08/23/couldnt-help-but-notice-082307/#comment-116508 dscott Thu, 23 Aug 2007 20:19:20 +0000 http://www.bizzyblog.com/2007/08/23/couldnt-help-but-notice-082307/#comment-116508 Oh pish posh, the home builders created this problem themselves by speculative building of homes. Added to that was the speculative flipping of houses. Once the interest rates went up a little and the real home buyers took a pause, the builders and flippers caught flat footed paying on loans they had no financial backing to sustain for a lengthy period of time. All the rest us who wanted to sell in the market are now caught in the squeeze play of a market housing inventory that is too high and must be sold down to reasonable levels. That's going to take a year or two, in the mean time as more builders and flippers default on their loans, the subprimes who leant to them take a bath as well. Ironically, it was Katrina which delayed the house of cards from tumbling earlier by replacement home building needed in the deep south, no one could build fast enough with a labor shortage. Oh pish posh, the home builders created this problem themselves by speculative building of homes. Added to that was the speculative flipping of houses. Once the interest rates went up a little and the real home buyers took a pause, the builders and flippers caught flat footed paying on loans they had no financial backing to sustain for a lengthy period of time. All the rest us who wanted to sell in the market are now caught in the squeeze play of a market housing inventory that is too high and must be sold down to reasonable levels. That’s going to take a year or two, in the mean time as more builders and flippers default on their loans, the subprimes who leant to them take a bath as well. Ironically, it was Katrina which delayed the house of cards from tumbling earlier by replacement home building needed in the deep south, no one could build fast enough with a labor shortage.

]]> By: spongeworthy http://www.bizzyblog.com/2007/08/23/couldnt-help-but-notice-082307/#comment-116505 spongeworthy Thu, 23 Aug 2007 16:22:02 +0000 http://www.bizzyblog.com/2007/08/23/couldnt-help-but-notice-082307/#comment-116505 I wasn't aware FNMA or FHLMC had any input in that but I'm no expert. I'm pretty sure the GSE's haven't changed their crtieria for acceptance. The way I understand it is that the sub-prime lenders securitized their own loans (bypassing the GSE's) and sold them to investors. The cash-flows were packaged into relatively secure tranches and some not-so-secure highly leveraged ones. The leveraged ones will take a real hit when defaults rise--that's what they're designed to do and that's what happened here. I think. Eh. Someone who knows for sure will check in soon. I wasn’t aware FNMA or FHLMC had any input in that but I’m no expert. I’m pretty sure the GSE’s haven’t changed their crtieria for acceptance. The way I understand it is that the sub-prime lenders securitized their own loans (bypassing the GSE’s) and sold them to investors. The cash-flows were packaged into relatively secure tranches and some not-so-secure highly leveraged ones. The leveraged ones will take a real hit when defaults rise–that’s what they’re designed to do and that’s what happened here. I think.

Eh. Someone who knows for sure will check in soon.

]]> By: TBlumer http://www.bizzyblog.com/2007/08/23/couldnt-help-but-notice-082307/#comment-116504 TBlumer Thu, 23 Aug 2007 15:35:08 +0000 http://www.bizzyblog.com/2007/08/23/couldnt-help-but-notice-082307/#comment-116504 #1, sponge, I'll take your word for it, and will modify shortly. BUT... the loan approval standards were relaxed in the loan processing models (DU and LP, I think they're called), and I believe that the GSEs either heavily influenced that or just did it on their own. I'm not clear on who owns what software, but the standards went down, and Fan and Fred were big factors in that occurring. #1, sponge, I’ll take your word for it, and will modify shortly.

BUT… the loan approval standards were relaxed in the loan processing models (DU and LP, I think they’re called), and I believe that the GSEs either heavily influenced that or just did it on their own. I’m not clear on who owns what software, but the standards went down, and Fan and Fred were big factors in that occurring.

]]> By: spongeworthy http://www.bizzyblog.com/2007/08/23/couldnt-help-but-notice-082307/#comment-116503 spongeworthy Thu, 23 Aug 2007 14:55:14 +0000 http://www.bizzyblog.com/2007/08/23/couldnt-help-but-notice-082307/#comment-116503 Fannie and Freddie don't buy sub-prime loans. Otherwise, spot-on. Fannie and Freddie don’t buy sub-prime loans. Otherwise, spot-on.

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