patrick.net

Do you think a "financial adviser" is going to be objective? Telling people to stay out of debt and save cash generates no commissions. More likley: The economy is rebounding, buy my investment products so you can benefit from the new growth."

Headset brings up a really good point. I remember reading a friend's financial adviser's comments (emails) back in 2007. Unsurprisingly, they all said there's no bubble, everything is fine, the Bay Area is unaffected, blah blah blah. Based on this advice, they bought a $3M house in 2007. Who knows what it's worth now.

As to the original question, I just wonder why defaults continue to grow if these modifications are working. Patrick has a good link today that show defaults are not slowing down and are actually increasing.

Trust me, loan-mod market isn't hot right now. There's a lot of demand, but it's so rarely in the banks' interest to do a mod that they are dragging their heels as much as possible. And just remember the bottom line: affordability. That's what's causing prices to fall. It's not foreclosures, or job losses, or the recession or subprime, despite what the mainstream media with their little minds think. Those factors will just speed the correction along and/or cause us to overcorrect. The housing correction was going to happen regardless of the recession b/c the free money that dislodged home values from all rhyme and reason is gone. Housing has to return to longterm affordability norms. SF bay housing will go back to 2000 prices + 3%/year. The only thing that will change that is if median incomes rise in the area.

zetabeos1 says

“My financial adviser”… your first mistake.

“So she”… your second mistake.

heehee....

But lets stay on subject. i want to hear some thoughts on impending ALt-A resets... This issue is important to me, as I live in one of the overpriced housing market - San Francisco Bay Area.

I know a couple of people in my personal circle, who got these loans and now trying to frantically refinance. But no luck so far, as their 800K homes are now around 720K - and they went in with zero down.

But if rates stay low, what is their reset/recast monthly payment going to be? I've read that with rates low the change won't be that significant.

Low rates? Here's the thing(s):

Low fixed rates don't help much when you are trying to refi a ridiculous 'pick a pay' or 'pay option' or 'intro teaser'. It's simple: these loans usually allowed people to pay so little per month, like half, that's right HALF what it would take to service the debt with a fixed rate (I have seen many examples specifically in County deeds). So, for example, they borrowed $900,000 and pay $2500 a month via pick a pay (this alone should make you go, WTF?) all the while adding to the debt and approaching (or now well past) LTV. Plenty of supposedly $1 mil properties on the penninsula in this situation. Or simmilarly they have a 1.5% teaser loan that will still reset SIGNIFICANTLY even with rates down around 5%. These people might have had good credit, etc. THAT doesn't mean they didn't overbuy and overpay and use ridiculous toxic mortgage products and will therefore be, in a word, 'screwed'. Actually it's not so bad for them; they can walk away as many do.

So ok they go refinance, they can successfully do so but maybe they have to bring $200,000 cash since the house is now worth $700,000 (let's just say) AND they can't afford a $5,000/mo payment anyway so therefore it is all moot how great their credit is.

Permanent, I also live in the pricey land of SF penninsula and let me say - I am not even close to buying yet since I am quite sure the Alt-As etc. in this area will continue to fail. Prices will continue to drop until they again align with fundamentals. Unless you are looking in more remote parts of the bay area I would not get worried you are missing any opportunities. I also believe we are in for long term price stagnation but that's another matter...

But hey, don't listen to me, I am just a guy on the internet. I think the same old story applies - if you find a house you can afford long term, you like it, it suits your family - Go ahead! But please do yourself a favor though and don't rush in because some RE person says, "the market is HOT! Better buy or be priced out!" Etc. Etc. Etc.

Its completely in the bank's interest to take less % on the same principle compared to what will happen if they roll the dice and see if those people will stay.

If you can afford the reset, then no, they're not going to do it. If they can't then they will, or maybe stuff it on the back end.