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Tight Lending And Other Urban Legends


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2015 Apr 9, 2:52pm   43,829 views  82 comments

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http://loganmohtashami.com/2015/04/09/tight-lending-and-other-urban-legends/

As many of my readers may be aware, my mantra since 2010 has been that We simply don’t have enough qualified home buyers in American, once you take away the cash buyers, to have a real economic recovery in housing . While some may be tired of this refrain, there remain a number of highly respected housing gurus who continue to profess that it is unfairly tight lending standards, not the lack of qualified buyers that are suppressing a housing recovery. The difference is not academic.

#housing

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34   _   2015 Apr 10, 3:47pm  

With applications showing 8 & 12 % year over year growth, the next existing home sales report should be positive and showing some decent YoY growth because it was a struggle last year during this time. The comps get a lot harder during the 2nd half of the year. However, YoY growth nationally early on will happen

35   lahossain   2015 Apr 10, 4:26pm  

@Strategist

You haven't thought of how to teach your daughter to fend for herself if Daddy's not around.

Can you imagine how much her roommates will resent her in the current finance picture that you laid out? That makes her a double mooch-- first, off of you, then off of them.

Not a flattering picture.

36   lahossain   2015 Apr 10, 4:28pm  

She is responsible because she is still driving the last gift you gave her? That's your evidence. Wow.

37   Strategist   2015 Apr 10, 4:29pm  

lahossain says

You haven't thought of how to teach your daughter to fend for herself if Daddy's not around.

Can you imagine how much her roommates will resent her in the current finance picture that you laid out? That makes her a double mooch-- first, off of you, then off of them.

Not a flattering picture.

Helping children is a parents job. Renting for fair rent is acceptable.

38   indigenous   2015 Apr 10, 5:07pm  

Logan Mohtashami says

I thought you fellers went to work on the weekend, like Phil Dunphy.

39   Strategist   2015 Apr 10, 6:07pm  

Call it Crazy says

Strategist says

Helping children is a parents job.

Buuzzzzzz... WRONG!!!!

Preparing your children to be responsible adults who can stand on their own two feet is the parents job!

Yeah...little brats have been mooching on us since day one. Damn freeloaders.
Wait till I foreclose on her. That'll teach her.

40   _   2015 Apr 10, 6:11pm  

indigenous says

I thought you fellers went to work on the weekend, like Phil Dunphy.

We are always working, but Joe Friday, Just the Facts Ma'am

Speaking of which I used his character in an article years ago fighting against the tight lending myth against CNBC, this one was really fun to write, but if you don't know the character you wouldn't get the sentence structure tone

Diana Olick: Just a Few Questions, Ma’am

http://loganmohtashami.com/2012/03/30/diana-olick-just-a-few-questions-maam/

indigenous says

41   indigenous   2015 Apr 10, 6:26pm  

Ok I misunderstood the meaning of Friday. Of course his dead pan questioning is a classic, the copper clapper caper e.g.

Good article.

https://www.youtube.com/embed/CFb7HfZ40NI

42   Strategist   2015 Apr 10, 7:16pm  

Logan Mohtashami says

We are always working, but Joe Friday, Just the Facts Ma'am

I hope you make a lot of money. Things are about to boom, just wait and see.

44   Strategist   2015 Apr 10, 7:48pm  

indigenous says

Oh My God!
I thought it was Pepsi.

45   _   2015 Apr 11, 7:15am  

Strategist says

Things are about to boom, just wait and see.

I make money but there is no boom!
Actually, I am in the running for top 40 under the age of 40 for housing in America for different reasons. People always ask me how are you having your best years now and not the housing bubble years.

Answer is simple.

None of my own clients ever did sup prime purchase loans and only 1 client did a option arm in 2003 and that was an extreme high income net worth buyer

46   Strategist   2015 Apr 11, 8:32am  

Logan Mohtashami says

Answer is simple.

None of my own clients ever did sup prime purchase loans and only 1 client did a option arm in 2003 and that was an extreme high income net worth buyer

1. Your outlook on US real estate stems from your experiences in OC, which may not always be comparable to the rest of the country.
2. You probably have a large Iranian American clientele, who tend to do much better than the average American.
3. The bubble era had a lot more competition with everyone including grandma scrambling to get a real estate license.
By the way, if you unnecessarily discouraged someone from taking an option arm, you could be doing them and yourself a disservice. Option Arms are perfect for many self employed who have uneven cash flow. My very first home was with an Option Arm loan, and lied through my teeth to get.

47   _   2015 Apr 11, 8:37am  

Strategist says

1. Your outlook on US real estate stems from your experiences in OC, which may not always be comparable to the rest of the country.

Actually I only talk about national data, I never use my own city or county as reference, this is why you don't here me mention it much on any work that I have done Strategist says

2. You probably have a large Iranian American clientele, who tend to do much better than the average American.

I have zero clients that are Persian

Strategist says

3. The bubble era had a lot more competition with everyone including grandma scrambling to get a real estate license.

Not really on that sense, I just simply refused to do exotic loans on my book, none of my clients have ever had their home foreclosed on

Strategist says

Option Arms are perfect for many self employed who have uneven cash flow. My very first home was with an Option Arm loan, and lied through my teeth to get.

Option arm loans had a 84% default ratio in California it was so bad that every lender had to terminate the loan and offer a 30 year fix

48   Strategist   2015 Apr 11, 8:43am  

Logan Mohtashami says

Strategist says

Option Arms are perfect for many self employed who have uneven cash flow. My very first home was with an Option Arm loan, and lied through my teeth to get.

Option arm loans had a 84% default ratio in California it was so bad that every lender had to terminate the loan and offer a 30 year fix

Not all, Only Option Arm loans made during the bubble with low downs and trashy credit. I got that home in 1986, which had a start rate of 7.95%. The minimum down was 25%, which my parents helped me with.

49   Strategist   2015 Apr 11, 8:45am  

Anyway Logan, I'm willing to bet your income will double in the next 3 years. What will you do with all that money?

50   _   2015 Apr 11, 8:46am  

Strategist says

Not all, Only Option Arm loans made during the bubble with low downs and trashy credit. I got that home in 1986, which had a start rate of 7.95%. The minimum down was 25%, which my parents helped me with.

I was 12 when that loan was done and those days were long gone,
The teaser rate of 1.25% 10% down came .. but even those who put 20% had trouble because they kept on paying the teaser rate

51   _   2015 Apr 11, 8:51am  

Strategist says

Anyway Logan, I'm willing to bet your income will double in the next 3 years. What will you do with all that money?

Invest each month, never buy another home again and pay down my home as fast as possible.

It's also impossible to triple incomes because the refinance cycle is dead. Let me give you an example

2014 was my best year ever, in the first 30 days of 2015 I got all the production I did in 2014, that was majority of refinances. A 10 year above 2.25% kills almost all refiannces in America barring a cash out or a FHA streamline. That market has ran it's course.

You would need rates to rise much higher have a duration period time and then the next recession have rates come lower.

However, we are still at Emergency Interest rate policy today and the 10 year is still below 2% in year 7 of the economic cycle

52   Strategist   2015 Apr 11, 10:07am  

Logan Mohtashami says

never buy another home again

You just lost your invite to the NAR convention.

53   _   2015 Apr 11, 12:18pm  

Strategist says

never buy another home again

2 Bedroom Condo enough for 2 people with no kids

There is a Dunkin Donuts now in the O.C.

The lines are crazy for this so I am looking at it as an investment idea

EPS 1.67
Div Yield 2.15%
Trailing 12 month 29.74%

Next leg up on west coast expansion

55   _   2015 Apr 11, 12:29pm  

indigenous says

Div Yield 2.15%

No

No? 0.265 quarterly div.

56   indigenous   2015 Apr 11, 12:31pm  

No to anything below 4%

57   _   2015 Apr 11, 12:33pm  

indigenous says

No to anything below 4%

ok, now I understand

58   anotheraccount   2015 Apr 11, 1:39pm  

Logan Mohtashami says

The lines are crazy for this so I am looking at it as an investment idea

Did you forget Krispy Cream lines in the late 90s and early 2000s? Southern Cal is the ultimate fad destination. That did not pan out so well when they expanded too fast.

I think that Krispy Cream is way better to Dunkin Donuts which is kind of like a bad McDonalds.

59   _   2015 Apr 11, 1:42pm  

tr6 says

Did you forget Krispy Cream lines in the late 90s and early 2000s? Southern Cal is the ultimate fad destination.

Those are 2 different companies, KK was small and over valued when it came public, DD is more established and 3 year run is more in line with reality. I never thought of it as an investment idea until I saw this store open up

60   Strategist   2015 Apr 11, 10:32pm  

Call it Crazy says

Logan Mohtashami says

The lines are crazy for this so I am looking at it as an investment idea

Do it!! D.D. kicks butt to any other coffee/ doughnut place out here in the East.

If you eat enough of those donuts you will kick the bucket.

61   Strategist   2015 Apr 11, 10:40pm  

Logan Mohtashami says

indigenous says

No to anything below 4%

ok, now I understand

No to donuts.

62   indigenous   2015 Apr 11, 10:44pm  

Strategist says

No to donuts.

It is spelled know your donuts, Krispy Kreme taste better. But they over saturated the market and they lost their novelty.

63   _   2015 Apr 12, 7:20am  

Strategist says

No to donuts.

70% of what I eat in my life since 1996 are protein shakes, I do allow myself to get all food on the weekends.
DD
Coffee, I liked
Donuts, not as good as my local place. However, I'm not a donut guy so I'm not an expert on this
Food items, good enough, but not good enough to wait 20 minutes for.

64   _   2015 Apr 12, 8:38am  

DAXK doing well this year,

65   _   2015 Apr 12, 9:10am  

bgamall4 says

Looks like that model could fail if the ECB buys all the debt.

Italian economic numbers look dreadful. One thing I noticed when Italian 10 year debt got to 6% Germany felt compelled to play nice. I don't believe they really fear Greece but don't want Italy or Spain to follow in their footsteps

66   anotheraccount   2015 Apr 12, 9:51am  

Logan Mohtashami says

DD is more established and 3 year run is more in line with reality

DNKN - market cap. 4.8B on on 750M in sales = 6.4 ratio. That's pretty high valuation even in comparison to Starbucks which is 72B valuation on 16B in sales. = 4.5 ratio.

DNKN has 1.8B in debt. Why? Starbucks debt is only 2B as well.

67   _   2015 Apr 12, 11:11am  

tr6 says

DNKN - market cap. 4.8B on on 750M in sales = 6.4 ratio. That's pretty high valuation even in comparison to Starbucks which is 72B valuation on 16B in sales. = 4.5 ratio.

DNKN has 1.8B in debt. Why? Starbucks debt is only 2B as well.

So the 2 1/2 year run was not justified? My only thing that I am trying to get is that if this expansion does happen and it has legs since the 3 year run in the stock price is adjusting it self would it be enough to get another leg up from here into the 60's since it's early in there expansion plan

68   _   2015 Apr 12, 12:04pm  

So does this mean that you have a banded your thesis that the actions doesn't impact an economic cycle?

69   Strategist   2015 Apr 12, 6:55pm  

Logan Mohtashami says

tr6 says

DNKN - market cap. 4.8B on on 750M in sales = 6.4 ratio. That's pretty high valuation even in comparison to Starbucks which is 72B valuation on 16B in sales. = 4.5 ratio.

DNKN has 1.8B in debt. Why? Starbucks debt is only 2B as well.

So the 2 1/2 year run was not justified? My only thing that I am trying to get is that if this expansion does happen and it has legs since the 3 year run in the stock price is adjusting it self would it be enough to get another leg up from here into the 60's since it's early in there expansion plan

But why Dunkin Donuts? I agree they taste good, the coffee is good, but why a product that the younger generations shun? It's not gonna be the next Chipotle.
I would like to see some demographics on who eats the most donuts.

70   _   2015 Apr 12, 7:03pm  

Strategist says

But why Dunkin Donuts?

lack of west coast expansion, legs for a move to the 60's on the stock, I believe this is just there first run out here

71   _   2015 Apr 12, 8:12pm  

bgamall4 says

So, Logan, what is your opinion about the shortage of treasuries? How does that impact your economic forecasting or was this a secret that should not be revealed to the masses?

The 10 year breaks 2.25% and has follow through we could test up the range scale of 2.45% then 2.66% then 3.04%
If the 10 year can break under 1.60% we can see all time low in this cycle print of 1.34%

Liquidity is being talked about now

72   _   2015 Apr 12, 8:48pm  

bgamall4 says

Ok so what is the impact of lack of liquidity?

From my eyes I see a lack of faith in bond yields really rising. Once the Fed starts raising rates I will keep an eye on this topic.

However, for now only my key numbers
2.25%
1.87%
1.64%

73   Strategist   2015 Apr 12, 9:00pm  

bgamall4 says

Strategist says

So a doubling of the total debt is no big deal. With the super low rates, it could be argued that total debt today is more affordable than in 2000.


Basically, all or most of the money printing has been absorbed by the economy.

The achilles heal to all this is a lack of pristine collateral, ie Treasury bonds. They are necessary to making the deals. I am interested how the lack of liquidity, ie the shortage of treasuries, will affect treasury bonds. My thinking is that it will drive down the yields. But I am open to other opinions.

What the hell are you talking about?
There is an excess of liquidity, and lots of Treasury Bonds. Why do you think the rates are close to zero?

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