Government-backed liar loans

[we_are_toast]

Re: Government-backed liar loans

you guys are knocking yourselves out trying to justify the practice of selling a loan without income verification or credit checks. this practice got the banks into trouble. who cares who the letter was sent to? why offer 'no income, employment or asset verification' to anyone?

bad, bad bad. period.

this letter is a wtf, pure & simple.

Sorry MM, but it's neither pure nor simple.

This is about refinancing, not new loans. It doesn't contribute to growing a bubble, it tries to gently deflate a bubble without it exploding. These people already have the house and the loan. If they have an ARM about to reset, they had 2 choices, give up eating and hope they can make the higher payment, or default. Now they have a 3rd choice, a lower payment that might keep them in their home. It will also give some families more disposal income which will help create some much needed demand in the economy.

Just as I don't believe we should try to end deficits tomorrow, we can't simply let the housing bubble collapse.

[lsa420]

Re: Government-backed liar loans

That's from EJ's uncle Herbert Janszen who was a doctor in Austin. We scanned it and plan to use is in the new iTulip site we're working on in the section on debt, the other opiate.

Don't forget religion!:eek:

[metalman]

Re: Government-backed liar loans

Agreed the letter does not say anything about the credit check or employment verification: But you assumed I made a statement that they did those things and if you read my posts you will find I did not say those things and did not assume they did. I Called them Remember!!!!!!!!!!!!!!! I was only responding to Milton on those issues and advising him that they would be very easy things to do on an existing customer.

No Question in my mind Fifth Third is going to make some profit on this and my guess is that the guy who wrote the letter is going to get a bonus of ten times what I made last year from this.

Cindy

you guys are knocking yourselves out trying to justify the practice of selling a loan without income verification or credit checks. this practice got the banks into trouble. who cares who the letter was sent to? why offer 'no income, employment or asset verification' to anyone?

bad, bad bad. period.

this letter is a wtf, pure & simple.

[cindykimlisa]

Re: Government-backed liar loans

Thanks for doing some research into this. Often times things are not as they seem.

This sure looks like a way to make todays lower interest rates available to people who would be stuck with those higher rates without some government help. Lowering monthly payments will certainly prevent some homes from going into foreclosure. You may disagree with the policy and approach, but to claim this is going back to the days of liar loans is more than a stretch.

Thank You

Cindy

[cindykimlisa]

Re: Government-backed liar loans

On the other hand Cindy, you're making positive assumptions on behalf of 5th 3rd that they've PROBABLY done a credit and employment verification already. It doesn't say that anywhere here or on their website.

So I agree everyone is making assumptions but based on the history of banks I'm still pretty confident this is a profit making deal for the bank in some way shape or form, regardless of the potential risk they're taking on.

And I don't need to call them because I'm really not that interested in getting more details. Fred's point still rings true to me though:

"No more Fed buying blown up asset-backed securities that backed bogus sub-prime mortgages to rescue banks that should be allowed to fail.

Wait. What?"

I would have felt much better about this marketing ploy had they said you can refi subject to your credit and employment history being acceptable. Only those without acceptable credit or employment verification would quibble with that and that would demonstrate to me a bank showing more diligence.

Agreed the letter does not say anything about the credit check or employment verification: But you assumed I made a statement that they did those things and if you read my posts you will find I did not say those things and did not assume they did. I Called them Remember!!!!!!!!!!!!!!! I was only responding to Milton on those issues and advising him that they would be very easy things to do on an existing customer.

No Question in my mind Fifth Third is going to make some profit on this and my guess is that the guy who wrote the letter is going to get a bonus of ten times what I made last year from this.

Cindy

[we_are_toast]

Re: Government-backed liar loans

Today, I placed a call to the number in the letter and asked a few straightforward questions with regard to the letter. First, I found out this is for their customers only - you already must have mortgage with them. The main intent seems to be for helping homeowners keep their home: if they have a high interest rate, then they could be able to get a lower interest rate using this process.

There was also a lack of complete clarity for me about the 125%. Seems like it is 105% on a first and 125% on a combiined first and second.

On the surface this seems to be "here we go again" and yet with a little investigation it seems to me to be someone's attempt to actually do something for homeowners in trouble. If I owned home with a 7.5% mortgage with a $200,000 balance that was worth $190,000 and I could use this process to take out my $200,000 mortgage with a new $200,000 loan at 5% then I think that makes sense for everyone except 5th Third in this case - Therefore I suspect this program might be part of a process to get Fifth Third (and mortgagees) on board doing what we have all complained that noboody is doing and that is helping some of the people keep their homes. BTW I know it is 42 Billion ways this could be abused theoretically.

Furthermore, I suggest someone from itulip call them and get an update on the parameters of this type of transaction and publish it here.


Cindy

Thanks for doing some research into this. Often times things are not as they seem.

This sure looks like a way to make todays lower interest rates available to people who would be stuck with those higher rates without some government help. Lowering monthly payments will certainly prevent some homes from going into foreclosure. You may disagree with the policy and approach, but to claim this is going back to the days of liar loans is more than a stretch.

[Milton Kuo]

Re: Government-backed liar loans

So I agree everyone is making assumptions but based on the history of banks I'm still pretty confident this is a profit making deal for the bank in some way shape or form, regardless of the potential risk they're taking on.

I've dug into this a little bit more and it looks like Fifth Third is making money by doing the refinancing paperwork. They are acting as a middleman for Fannie Mae and Freddie Mac as far as I can tell. From the Making Home Affordable web site:

The Home Affordable Refinance Program gives up to 4 to 5 million homeowners with loans owned or guaranteed by Fannie Mae or Freddie Mac an opportunity to refinance into more affordable monthly payments. The Home Affordable Modification Program commits $75 billion to keep up to 3 to 4 million Americans in their homes by preventing avoidable foreclosures.

So.... If these loans are already owned or guaranteed by the GSEs, this is a way for the U.S. government to buy time and pray that housing prices rise enough to make bad paper good. In the meantime, the banks get to make some easy money (1%, perhaps?) processing the paperwork.

[CanuckinTX]

Re: Government-backed liar loans

On the other hand Cindy, you're making positive assumptions on behalf of 5th 3rd that they've PROBABLY done a credit and employment verification already. It doesn't say that anywhere here or on their website.

So I agree everyone is making assumptions but based on the history of banks I'm still pretty confident this is a profit making deal for the bank in some way shape or form, regardless of the potential risk they're taking on.

And I don't need to call them because I'm really not that interested in getting more details. Fred's point still rings true to me though:

"No more Fed buying blown up asset-backed securities that backed bogus sub-prime mortgages to rescue banks that should be allowed to fail.

Wait. What?"

I would have felt much better about this marketing ploy had they said you can refi subject to your credit and employment history being acceptable. Only those without acceptable credit or employment verification would quibble with that and that would demonstrate to me a bank showing more diligence.

[cindykimlisa]

Re: Government-backed liar loans

The use of the phrase "initial review" looks to be boilerplate text, in my eye. Being as reckless as they were, it seems highly doubtful these banks are suddenly doing the meticulous due diligence required to evaluate all of the crummy loans they've made over the past years. This is just my opinion, of course, but I am highly doubtful that the banks have all of a sudden become diligent, much less competent -- especially since the federal government is going to eat the losses on this.

The only mention of a doctor I have seen in this thread is when it was stated that the green postcard was originally addressed, during the Great Depression, to EJ's uncle. I have not seen anything to suggest that the letter from Fifth Third was originally addressed to a doctor. Depending upon the fees charged by Fifth Third for doing a refi, I can easily see the majority of their junk mortgages getting this letter.

The person who is paying 7.5% on an underwater mortgage is, in all likelihood, a bad credit risk. A buyer who was a good credit risk during the housing bubble could have easily gotten a 30-year, fixed-rate mortgage at 6% or less. A buyer who bought before the bubble may have a higher-rate mortgage but should not be upside-down on his mortgage unless a HELOC was opened in which case the buyer is a fool and a bad credit risk.

Does a real estate tax assessment provide insight into a person's employment status? If the original loan was a NINJA loan (likely being that Fifth Third is offering a NINJA refi), there is absolutely no record of the borrower's income or assets. A 125% LTV NINJA refi of a NINJA loan sounds like a sure-fire way of losing money....

I also get the impression that the refis are for borrowers who currently have mortgages with Fifth Third. However, it still doesn't change the fact that the terms of the refi are very loosey-goosey and, in my opinion (and FRED's, too, if I understand his posts correctly), are very likely to cause the government to lose money.

Sorry Milton, You're doing the same things as Fred in your opening paragraph when you say " looks to be boilerplate." You are making some big assumptions that may not be true. What is boilerplate? Also, Have you heard on itullip and elsewhere that Banks are not making loans because they have severly tightened up their underwriting so that is just the opposite of what you are assuming - Believe me and many others - banks are a lot more diligent now, You missed the point.

Your third paragraph is full of your own presuppositions which are in fact incorrect as they do not relate to everyone. Not everyone as you have spelled out is a credit risk.

A real estate tax assessment doe not provide employment data. But a credit report may or a call to the employmment office will.

I think your post is the best example of why someone from itulip needs to call these folks and find out the real deal and report it here. If you take a step back and read your post you will see how many negative assumptions you have made - assuming (ideally - your ideal) that this is about something negative the bankers are doing. You are buying in to Fred's herd mentality. I am not. I made a call for myself and found a few things different than what I may have assumed to be true by reading only this post and making assumptions. I suggest you do the same.

This plan might actually do some good for some borrowers.


Cindy

[ThePythonicCow]

Re: Government-backed liar loans

The use of the phrase "initial review" looks to be boilerplate text, in my eye. Being as reckless as they were, it seems highly doubtful these banks are suddenly doing the meticulous due diligence required to evaluate all of the crummy loans they've made over the past years.

I tend to agree that this is a relatively unfiltered solicitation to existing home mortgage customers of Fifth Third. There are more details on this program at the Fifth Third web site https://www.53.com/wps/portal/conten...ding/Mortgage/ Anyone who could find that web page could start the application process just as someone receiving that mailer. Qualification requirements include:

1. Is your first mortgage currently with Fifth Third?
2. Is this mortgage on your primary residence?
3. Are you current on your mortgage payments?
4. Do you believe that the amount you owe on your first mortgage is at or below 125% loan-to-value ratio?

On the other hand however, there seems to be many more instances of mortgages being reviewed for the Federal program than there are of mortgages actually being refinanced for any significant gain to the borrower.

[Milton Kuo]

Re: Government-backed liar loans

I am not missing the point at all. Read the letter carefully - it says they have already done an "initial review" - This is to an existing customer - what did they review before they sent this to their customer? As I said this is a "refinance" for an existing customer not a new loan for new customers.

The use of the phrase "initial review" looks to be boilerplate text, in my eye. Being as reckless as they were, it seems highly doubtful these banks are suddenly doing the meticulous due diligence required to evaluate all of the crummy loans they've made over the past years. This is just my opinion, of course, but I am highly doubtful that the banks have all of a sudden become diligent, much less competent -- especially since the federal government is going to eat the losses on this.

Think about it: this letter was sent to a Doctor. Hmmmmm. Do you really believe everybody passed the "initial review." Like Fred you have assumed a lot or are reading a lot into this which may or may not be correct.

The only mention of a doctor I have seen in this thread is when it was stated that the green postcard was originally addressed, during the Great Depression, to EJ's uncle. I have not seen anything to suggest that the letter from Fifth Third was originally addressed to a doctor. Depending upon the fees charged by Fifth Third for doing a refi, I can easily see the majority of their junk mortgages getting this letter.

To use your example about being the backstop. I would likely do the deal because I likely already am looking down the barrel of a mortgage potentially going into default at say 7.5%.

The person who is paying 7.5% on an underwater mortgage is, in all likelihood, a bad credit risk. A buyer who was a good credit risk during the housing bubble could have easily gotten a 30-year, fixed-rate mortgage at 6% or less. A buyer who bought before the bubble may have a higher-rate mortgage but should not be upside-down on his mortgage unless a HELOC was opened in which case the buyer is a fool and a bad credit risk.

It is likely I have pulled a credit report - it does not say they have not already done this in the letter and I suspect this was part of the 5th Third analysis before they sent the letter - they may have looked at the real estate tax assessment on the house also as a prelimanary. During the preliminary assessment on the people they could have easily ascertained if they were still employed still employed and they know what is going on the mortgagte and with other payments. I think therefore I would have a better shot at the new deal than the existing deal.

Does a real estate tax assessment provide insight into a person's employment status? If the original loan was a NINJA loan (likely being that Fifth Third is offering a NINJA refi), there is absolutely no record of the borrower's income or assets. A 125% LTV NINJA refi of a NINJA loan sounds like a sure-fire way of losing money....

In my opinion Fred missed the point by not doing a more careful investigation into the terms of this letter. The way I read it and understand it it only relates to current mortgagors of Fifth Third.

I also get the impression that the refis are for borrowers who currently have mortgages with Fifth Third. However, it still doesn't change the fact that the terms of the refi are very loosey-goosey and, in my opinion (and FRED's, too, if I understand his posts correctly), are very likely to cause the government to lose money.

[cindykimlisa]

Re: Government-backed liar loans

I think you're missing the point Cindy. How is this responsible banking? NO appraisal, NO income or asset verification, NO credit score required!

So rather than determining if this person should even OWN their home, or try to keep it, they're more than happy to let the owners leverage up at a lower interest rate in the hopes that maybe they can salvage the home. Fifth Third doesn't give a hoot, the government is going to take this mortgage off of their hands anyway, which means you and I are going to be on the hook.

Let me put it this way, if you were the sole taxpayer responsible to backstop one of these newly refinanced mortgages, would you be ok with them not doing a credit check, income or employment verification? And if as you suggest this letter doesn't really mean what it says, then why do they send it out to people in such enticing terms? The only fish they're going to get to bite are probably the people who are the least qualified to keep their homes.

I am not missing the point at all. Read the letter carefully - it says they have already done an "initial review" - This is to an existing customer - what did they review before they sent this to their customer? As I said this is a "refinance" for an existing customer not a new loan for new customers. Think about it: this letter was sent to a Doctor. Hmmmmm. Do you really believe everybody passed the "initial review." Like Fred you have assumed a lot or are reading a lot into this which may or may not be correct.

To use your example about being the backstop. I would likely do the deal because I likely already am looking down the barrel of a mortgage potentially going into default at say 7.5%. It is likely I have pulled a credit report - it does not say they have not already done this in the letter and I suspect this was part of the 5th Third analysis before they sent the letter - they may have looked at the real estate tax assessment on the house also as a prelimanary. During the preliminary assessment on the people they could have easily ascertained if they were still employed still employed and they know what is going on the mortgagte and with other payments. I think therefore I would have a better shot at the new deal than the existing deal.

In my opinion Fred missed the point by not doing a more careful investigation into the terms of this letter. The way I read it and understand it it only relates to current mortgagors of Fifth Third.

If it were for new loans to new customers then I believe Fred's comments would be on target.

Cindy

[Kimmons]

Re: Government-backed liar loans

It's all part of the HAMP program...only 1 in 10 temporary modifications has been made permanent. The letter you received is only for Freddie Mac serviced loans, they require very little documentation, but here's the clincher, they only allow about $2500 rolled into the loan, the rest of the closing costs have to come out of pocket , which could be challenging if one was having trouble making your payments in the first place.

The Fannie serviced loans require full income and asset documentation, but you can roll the closing costs into the loan. They both go to 125% LTV. The lenders who currently service the loans, are often the only ones who can do the modifications.

IMHO, this is just another way for the banksters to collect $$$ from people who would otherwise not be paying at all, on there upside down houses. They really don't want the houses back, do they.

[Thailandnotes]

Re: Government-backed liar loans

By his calculation, it will be about the year 2025 before he can sell his modest home for what he paid. Or maybe 2040…

Since the beginning of December, I’ve advised 60 people to walk away,” said Steve Walsh, a mortgage broker in Scottsdale, Ariz. “Everyone has lost hope. They don’t qualify for modifications, and being on the hamster wheel of paying for a property that is not worth it gets so old.”

Mr. Walsh is taking his own advice, recently defaulting on a rental property he owns. “The sun will come up tomorrow,” he said…

a growing body of research indicates that significant numbers of borrowers are declining to live under what some waggishly call “house arrest.”

http://www.nytimes.com/2010/02/03/business/03walk.html

[Chief Tomahawk]

Re: Government-backed liar loans

That's from EJ's uncle Herbert Janszen who was a doctor in Austin. We scanned it and plan to use is in the new iTulip site we're working on in the section on debt, the other opiate.

New site?! Will the "Top Investors" idea of mock portfolio investing return? Seems like just yesterday that was on the list to get fixed. Been waiting just a little while for that.

That said, will a new round of liar loan activity even catch on? One has to figure those who've defaulted have credit scores too poor to participate in debt overdose try #2. Plus, there are the educated who walk among us who know we're on the downside of a bubble bust. That basically leaves new college grads looking to scoop up real-world frat houses. If they do the MCI-WorldCom accounting fraud (move their tuition debt over to the asset side of the ledger), presumably they'd qualify, right? :eek::mad: