Posts Tagged Mortgage Bankers Association

It’s the jobs, stupid

Reading the Delinquencies and Foreclosure Starts Decrease in Latest MBA National Delinquency Survey posted on the Mortgage Bankers Association website on August 26, 2010, one statement stood out at me:

The causes are likely two-fold.  First, 30-day delinquencies are very closely tied to first-time claims for unemployment insurance.  The number of first-time claims fell through most of 2009 but leveled off in 2010 and have started to rise again.  This increase in unemployment directly impacts mortgage delinquencies.  Second, some percentage of the loans modified over the last several years have become delinquent again because those borrowers, by definition, have weak credit.

“Ultimately the housing story, whether it is delinquencies, homes sales or housing starts, is an employment story.  Only when we see a consistent increase in employment will we see an increase in sales and starts, and a sustained improvement in the delinquency numbers.  Until we see the increase in the number of households that comes with an increase in the number of paychecks, all measures of the health of the housing industry will continue to be weak,” Brinkmann said (the MBA’s Chief Economist)

This echos what I said in a November 7, 2008 post on this blog:

…the number one reason for the mortgage and credit crisis is not Adjustable Rate Mortgages (ARM) resetting, or loans being made to lower FICO score borrowers (I don’t think anyone buys a primary residence with the intention of not making payments and having to move again in a year), it’s the loss of jobs that has caused the current problems.

Why has it taken this long for people to admit this?  There has been so much finger-pointing by our government, banks, regulators, GSE’s (Fannie Mae and Freddie Mac) and HUD, and most of those fingers pointing at the loan officers that took people’s loan applications.

Here’s the low-down as I see it:  Jobs traditionally held by the middle or working-class (which make-up 95% of the U.S. adult population) have been “outsourced” to cheaper labor countries as CEO’s of large corporations look to increase profits by a few percentage points and thus justify their annual bonuses which are 400% more than the annual income of of the workers they laid-off.

95% of the U.S. makes less than $150,000 a year.  80% of the U.S. makes less than $85,000 a year.  Let’s face it, the richest 5% of Americans can’t buy 100% of the cars, houses, TV’s, clothes, ATV’s, boats, fishing poles, etc.  Until middle and working-class residents of the United States start making money again, the economy will remain stagnant and the default and foreclosure rates aren’t going to change.

I read an interesting article recently drawing comparisons between 1928 right before The Great Depression and 2007, right before The Great Repression.  Here is the Reader’s Digest version of it:

In 1928 the richest 1% of Americans earned 23.9% of the nation’s total income.  In 2007 the richest 1% of Americans earned 23.5% of the nation’s income.  During the most prosperous era of America’s history, from right after WWII through the late 1970’s when households lived well with just one wage earner in the home, the richest 1% of Americans earned just 8% to 9% of the nation’s total income.  As it said in the article:

Each of America’s two biggest economic crashes occurred in the year immediately following these twin peaks—in 1929 and 2008. This is no mere coincidence. When most of the gains from economic growth go to a small sliver of Americans at the top, the rest don’t have enough purchasing power to buy what the economy is capable of producing.

The real question is how are we going to get our government (who has allowed and even rewarded companies for sending our jobs overseas) and the large corporations who profit from sending our jobs overseas to change this?  Until We the People stand-up to them and say “enough is enough” nothing is going to change, no matter what politicians say and promise us.  We the People need to take it into our own hands and fix the problem ourselves.  There’s 310 million people in the United States and only 535 Congressmen. 95% of the United States are being negatively affected by the decisions of 5% of the population.  Where does the power really lie?

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Jumbo loans get cheaper

Here’s an interesting blog post in the Wall Street Journal today about Jumbo loans (loans over $417,000).  The general consensus is that rates will come down on Jumbo loans, helping to move homes in the $417,000 plus range. Although credit will be extended to those only with at least 20% down up to $1 million and 30% down up to $2 million and required credit scores will be higher.

The problem I foresee is that most people that can afford homes in that price range are signing the front of people’s paychecks, not the back, and therefore don’t have traditional documentation such as paycheck stubs and W2’s to provide income documentation for the Full Doc loans, which pretty much is all there is these days.

Here is what the author of the blog post has to say:

“The average rate on the 30-year fixed-rate jumbo loan reached 5.76% at the end of April, according to, a financial publisher.  That’s near the previous record low of 5.55% from 2003.  Mortgage bankers say that five-year adjustable-rate mortgages are available at rates nearly a percentage point lower. (Meanwhile, average rates on conforming loans fell to 5.02% last week, from 5.08% one week earlier, according to the Mortgage Bankers Association).

“More lenders are starting to ‘get it’ and are coming to the table with more aggressive pricing,” says Alan Rosenbaum, chief executive of New York City brokerage Guardhill Financial Corp. He says that both prices and product offerings have improved from one year ago.”

Read the full blog post here.

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