Monday, July 21, 2008 at 07:38AM
Neg-ams in Your Area?
When considering buying a house, wouldn't it be nice to know how many people around you have a neg-am loan? This isn't readily-available information, unfortunately. But if you are thinking about buying in a new or newer tract, you can judge by the builder's in-house lender.
The builders give incentives to buyers to use the in-house guy, and it's usually enough money that it's crazy to NOT use them, as long as the rates and programs are competitive.
Take Pardee Home Loans, for example. They are a joint-venture with Wells Fargo, and though Wells has had their share of write-offs lately, they weren't from neg-am loans - they've never done one.
So those of you who might consider buying in a Pardee tract around Carmel Valley, and are waiting for the resetting neg-ams to kick in, you might be disappointed. Work with a five-year and seven-year timetable instead, Wells Fargo is more of 5 and 7-year-fixed lender, for those borrowers who may have taken a loan other than a 30-year fixed.
Jim the Realtor
6 Comments
View Printer Friendly Version
Email Article to Friend
Reader Comments (6)
Jim (or JtR as you are known at CalculatedRisk) allow me a personal nit. "Wells Fargo is more of 5 and 7-year-fixed lender." That ain't "fixed" unless the loan is 5 or 7 years as well. It infuriates me when lenders say things like fixed for 5 years and such.
In this case, it was me that said it, but not to infuriate you - it's broker talk.
We haven't touched on those type of loans much - if the resetting neg-ams entertain us for the next three years, then the 5 and 7-year loans start adjusting, the mortgage fireworks will go on for another six years, roughly?
By then your one-and-done next president will be over and out, Bernanke will be a saint or a sinner, and this blog will be pushing ten years old!
Doesn't this depend on the vintage? Recent sales will take 5-7 years to reset, but older stuff is resetting sooner (i.e., 5 year resets from '03 are resetting now). As long as owners can make the payments, no problem, and if they still have equity, they can sell if needed. As prices decline, however, equity is declining even while resets pile up. No negative AMs? OK, just plain old vanilla squeeze between declining prices and rising payments. I can live with that (not being an "owner").
I'd go with that Rat. Exp., and add that I'm amazed looking at the charts on the mortgage volume of 2005-2007. I don't think I have one here, but the next time I see one I'll point it out.
Does anyone have one handy?
I think in the end we'll see that a majority of those in SoCal with loans originated from 2002-2004, refinanced in 2005-2007, especailly those with 5-year interest-only loans. Their mentality was short-term from day one, and they likely got nervous, or wanted to hit the ATM again during the 2005-2007 era (or both).
I have a "prime" 5 yr arm due for "reset" in October. The reset is 2.75% + Fed 1yr connstant maturity.
The latest quote for the 1yr bond is 2.26%
http://www.federalreserve.gov/releases/H15/Current/
So if it expired today my rate would be 5.01%. (it was 5.0%)
A new 1yr Arm is quoted at 5.375% from the same bank.
My point is that you have to know the terms of the loan to know what the payment will jump to.
The is a huge differnece between a prime ARM from a reputable bank and an interest only loan.
What is the consensus on The Bridges, and Lennar?