Housing Links I

Mortgage servicers & loan modifications:


A good overview of how mortgage servicers work in happier times.

http://www.federalreserve.gov/pubs/feds/2008/200846/200846pap.pdf (170 KB pdf)

Helpful in understanding why loan modifications are harder to get nowadays.

[Incidentally, Tanta’s “Compleat UberNerd” series is a very good intro to the world of mortgages, MBS, etc.]

More on Mortgage Servicers & Mods:



Phrase to remember:  “Never attribute to malice what can be adequately explained by incompetence”.

Crap Mortgages:

Option ARMs:  http://online.wsj.com/article/SB123327627377631359.html

Jumbos:  http://s.wsj.net/article/SB123310421416822271.html

More crap mortgages, as explained by Tanta:

Subprime:  http://calculatedrisk.blogspot.com/2007/11/what-is-subprime.html

Stated income:  http://www.calculatedriskblog.com/2007/08/just-say-no-to-stated-income.html

Stated income II:  http://www.calculatedriskblog.com/2007/09/whats-really-wrong-with-stated-income.html

Alt-A:  http://www.calculatedriskblog.com/2008/08/reflections-on-alt.html

Alt-A v. Conforming loans:  http://www.calculatedriskblog.com/2007/03/tanta-makes-argument-for-conformism-and.html

Balloons:  http://www.calculatedriskblog.com/2007/12/mud-luscious-balloons-for-ubernerds.html

The latter, although rare in recent years, may soon see a resurgence thanks to the “principal forbearance” of the new Frannie “Streamlined Modification Program”.  In delaying payment of a portion of principal ’till the house is sold, such “forbearance” bears a striking resemblance to a balloon.

Alt-A dangers:


Apparently, unlike with subprimes, banks have held on to most of the Alt-A’s.

More Option ARMs:





(FYI, the above was among my Christmas break reading.)

A brief history of adjustable-rate mortgages:


A brief history of crap mortgages & the housing bubble:


Securitization credit ratings & the “Great Depression standard”:


Fixing Mortgage Securitization:


(Short version:  investors shouldn’t be stupid.)

#’s of Underwater Homeowners:



…Which are important for two reasons:

1) An underwater homeowner who experiences cash-flow difficulties (e.g., job loss, divorce) cannot easily pay off his mortgage simply by selling his house, since the house is worth less than he owes.  (Short sales are possible, but can be difficult to arrange.)  As such, ceteris paribus, an underwater homeowner is more likely to default than one with positive equity.  (Note also, however, that while some predict most of these underwater homeowners will default, such fears may be exaggerated.  For more on “walkaways”, see Tanta here and here.)

2) Given the aforementioned elevated default risk, an underwater homeowner also less likely to be able to refinance out of a potentially-troublesome loan.

Foreclosures & the Rental Markethttp://www.calculatedriskblog.com/2009/01/residential-rental-market.html

Apparently many foreclosures may get turned into rentals, thus decreasing rents (as well as the price at which buying becomes more cost-effective than renting).

…And apropos the buy-vs-rent decisionhttp://www.portfolio.com/views/blogs/market-movers/2009/01/09/why-mortgage-payments-should-be-lower-than-rents

Minimizing Foreclosure Costs:


About halfway down.  The acknowledgement that some foreclosures aren’t “preventable” (whatever that means) was a notable contrast to the “foreclosure-prevention-uber-alles” mentality I’ve seen over the last year or so.  See also here:  apparently cities are encouraging neighborhood “adoptions” of vacant foreclosures.

Tanta on Short Sales:


Apropos the above link.


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