Monday, July 17, 2006

Sobering Statistics

Hat tip to Marinite (of the Marin Real Estate Bubble Blog) and Jay for this link. From the Mortgage Brokers Association for Responsible Lending:

Data Collected by the Mortgage Brokers Association for Responsible Lending

Data Collected by the Mortgage Brokers Association for Responsible Lending

1. 37.2% of non-agency mortgage backed securities were no document loans in 2005.i

2. 49.3% of ARMS with interest only features originated in 2004 lacked full documentation.ii

3. As of September 2005, Adjustable rate Mortgages (ARMs) accounted for roughly 70% of the prime mortgage products originated and securitized and 80% of the subprime sector.iii

4. In 2006 97.5% of borrowers are likely to face a payment shock of at least 25% and 75% of borrowers could face a shock of 50% or more.iv These changes neglect additional shocks that would result from the repayment of principal because of current interest only payments!

5. Payments will increase on 41% of the outstanding subprime loans in 2006 alone.v

6. As of March 22, 2006 53.1% of interest only ARMS had a prepayment

7. 70% of borrowers with Option ARMs (Arms that allow negative amortization) are currently making minimum payments.vii

8. In 2004 $600 BILLION of consumers' spending power was from borrowing against home values. That is double the value of President Bush's tax cuts, as estimated by Brooking Institution scholar Peter Orzag.viii

9. 2nd homes accounted for 14% of new mortgages in 2004; in 2000 it was only 7%. Mr. Greenspan said that the fact that someone can sell a 2nd home without moving, "suggests that speculative activity may have had a greater role in generating the recent increases than it customarily has had in the past."ix

10. Residential housing now makes up 16 percent, or $1.9 trillion, of the gross domestic product and is the economy's largest single sector, slightly bigger than the industries and services that supply health care.x

11. In 2005 the FBI convicted only 170 people nationally for mortgage fraud. In 2004 that number was 172 people. According to the FBI the hot spots for Mortgage Fraud activity in 2004 (per capita) were: California, Nevada, Utah, Arizona, Colorado, Missouri, Illinois, Maryland, Georgia, and Florida.xi

12. In the San Francisco Bay Area alone, almost 75% of mortgage loans taken out last year (2005) allowed borrowers to delay the payment of principle. Negatively amortized loans jumped to 29% of the Bay Area mortgage market from less than 10% in 2004.xii

13. The following chart shows the percentage of Bay Area loans that were interest only or Option ARMs (know as negative amortization).xiii

Year Interest Only Option Arm
2005 42.6% 29.1%
2004 43.7% 9.6%
2003 20.3% 0.8%
2002 12.0% 1.7%
2001 2.9% 1.6%


Anonymous Anonymous said...

This reckless credit binge will be the demise of the housing market.

Lots of sheep in trouble....believing they deserve it now without making the sacrifice to save up first.

The Housing Bust has started!



7/17/2006 06:12:00 AM  
Anonymous Anonymous said...

That's shockingly bad. I don't think it's just "the housing bust has started!" More like "it's the end of the world as we know it!"

7/17/2006 06:46:00 AM  
Anonymous Anonymous said...

Many prices still holding very

When do the sellers begin to get
the memo?

7/17/2006 06:46:00 AM  
Anonymous Anonymous said...

The percentage of people relying on option arms in NJ is much much lower.

Also, most (but not all) loans in NJ have no prepayment penalty.

The rest of the article is fairly old news. I am not sure what the point or the relevance is - except to sensationalize an issue.



7/17/2006 07:27:00 AM  
Blogger RentinginNJ said...


The Bergen Record is running a series called “runaway pay”. It has top do with the pay and benefits of NJ State and local employees and the impact it has on state & local budgets, property taxes and the cost of living in NJ.

It may be worth topics on these articles.

7/17/2006 07:39:00 AM  
Anonymous Anonymous said...

Also, keep in mind, alot of people who bought these houses recently also tapped into their retirement accounts to come up with some money to buy a house. For example, some people either cashed in their 401(k)s to come up with money for closing costs or to get reduced points. I have heard of alot of people doing this. So, once the houses go down there are goin to be a handful of people who will literally lose it all. Kind of sad actually that no one ever gave them some type of financial counseling, instead they were seduced my the Real estate/banking complex.

On another note:
Israel briefly sends troops into Lebanon

I wonder if this escalates if we will see another oil embargo??


7/17/2006 07:43:00 AM  
Anonymous Anonymous said...

Off the wire:
Citigroup's Profit Rises 4 Percent in 2nd Quarter, Bit Below Analysts' Projections

Think the Fed is putting the squeeze play on...

Citigroup hires alot of people around here. CBH earnings tomorrow.


7/17/2006 07:51:00 AM  
Blogger Richard said...

check out this successful lowball. MLS 2251894 in Chatham on River Road. Orig asking $599.9k on 2/27, final asking price $425k sold on 6/15 for $385k for a 55% discount. LOL!

7/17/2006 08:41:00 AM  
Anonymous Anonymous said...


Did you see that? I guess you could go for the lowball on that house in Montclair with a contingency that you dump your condo first! What is the worst thing that could happen? They say no?


7/17/2006 09:10:00 AM  
Anonymous Anonymous said...

Can you believe Edison is the best place to live in NJ? [It's Number 28 on their list.]

Must be the special, bumper-car style traffic, or maybe the old Ford plant.


7/17/2006 09:14:00 AM  
Anonymous dreamtheaterr said...

Even more shocking is how New Brunswick is in the Top places to stay in NJ. What dope is Money smoking when they put out surveys like this? Just another example of financial porn in these magazines...

7/17/2006 09:22:00 AM  
Anonymous dreamtheaterr said...

Edison....maybe it is the smell of Indian curry in the air that gives it high points in the survey?

7/17/2006 09:24:00 AM  
Anonymous FactCheckLady said...

Actually, Parsippany-Troy Hills is at 17 on the Money mag list.

7/17/2006 09:37:00 AM  
Anonymous Anonymous said...

Oh, yeah, thanks, Factchecklady..missed Parsippany in my shock about Edison.


7/17/2006 09:50:00 AM  
Anonymous Anonymous said...

right, people are going to
love Edison, N.Brunswick,

What's next Linden?

7/17/2006 09:51:00 AM  
Blogger thatbigwindow said...

Ultra Luxury Condos, located in the heart of Camden City. Minutes from Philadelphia and NYC. Builder currently offering pre-construction prices starting in the mid $300,000's for 1 bedroom units and $400,000 for 2 bedroom units. Reserve yours today!

7/17/2006 09:58:00 AM  
Anonymous Anonymous said...

O.K., Dreamtheaterr..I agree. Off Topic, and BTW, if you are ever in PA.. we went to a new Indian restaurant that has a lot of Southern items, which is rare over here in Bucks County (we usually have to eat Northern). Huge buffet at lunch, many items.

Really good food, but nobody is going there. The new owners are not advertising at all, for some reason. I tried to explain to the guy about the local mid-week paper, but he really didn't understand, and his wife just smiled at me.

I think they are from the South, but the Shrimp Vindaloo was really good.

Taste of India

7/17/2006 10:03:00 AM  
Blogger grim said...

Industrial production came in very strong.

U.S. Economy: Industrial Production Rises More Than Forecast

Industrial production in the U.S. rose more than forecast last month as the second-hottest June in more than a century boosted electricity use and factories turned out more communications equipment and semiconductors.

The 0.8 percent increase in production at the nation's factories, mines and utilities last month followed a 0.1 percent rise in May that was previously reported as a decline, the Federal Reserve said in Washington. The proportion of industrial capacity in use rose to 82.4 percent, the highest in six years.

Production increased in the second quarter at an annual rate of 6.6 percent, the fastest since the final three months of 1999 and a sign corporate investment is sustaining economic growth as consumer spending slows. Higher energy costs and factories approaching production limits are inflation threats Fed policy makers are watching as they decide whether to raise interest rates next month.

7/17/2006 10:05:00 AM  
Blogger Richard said...

grim, still won't be enough to avoid the consumer led recession that's coming soon to a town near you.

7/17/2006 10:18:00 AM  
Anonymous Anonymous said...

Fools at the margin set the prices as we know from the past several years.Now the depserate fools that have to sell or go bankrupt will set the price not the seller that does not have to sell.

Housing Bust!




7/17/2006 12:08:00 PM  
Anonymous Anonymous said...

check out this successful lowball. MLS 2251894 in Chatham on River Road. Orig asking $599.9k on 2/27, final asking price $425k sold on 6/15 for $385k for a 55% discount. LOL!

7/17/2006 09:41:54 AM

Was it a push over?




7/17/2006 12:12:00 PM  
Anonymous Anonymous said...

Orig asking $599.9k on 2/27, final asking price $425k sold on 6/15 for $385k for a 55% discount. LOL!

Maybe it's just me, but this looks like a 35% discount to me.


7/17/2006 01:14:00 PM  
Anonymous Anonymous said...

Whether the discounted price paid for MLS 2251894 is indeed a "successful lowball" in the long term remains to be seen. If house prices end up crashing back to mid-90s levels, even $385K will be at least $125K too much for that house! LOL!

7/17/2006 01:18:00 PM  
Anonymous Anonymous said...

looks like 35-36% to me too...

$599-$385 = $214

$214/$599 = 35.7%

I think Richard used the final price as the base which doesn't seem correct to calculate the percentage change from the original price.

Math experts, please chime in here...


7/17/2006 01:46:00 PM  
Anonymous Anonymous said...

Wonder what Mr.Otteau is going to come out in Q2 report. He is paid by RE/builders etc.

7/17/2006 01:51:00 PM  
Blogger Space Ghost said...

You always take the starting price as the base. 35-36% is correct

7/17/2006 02:09:00 PM  
Anonymous Anonymous said...


Lot of sleepless nights ahead for desperate in over their head sellers.
Pretty soon many will be FORCED sellers.

A good time tonight to see which houses have their windows open. If you see windows open then you got the first sign of a sick pup.





7/17/2006 02:37:00 PM  
Anonymous Anonymous said...


BOOOOOOOOYcott Ripoff Home Prices

Don't be a fool and get caught holding the empty bag. Go ahead use a risky gimmicky loan to get in. Welcome to monthly slavery. You deserve the consequences.




7/17/2006 02:41:00 PM  
Anonymous Anonymous said...

Condos going to get CRUSHED!

Expect massive price drops in condos of up to 50%.



7/17/2006 02:42:00 PM  
Blogger Flop that house said...

Why do you think that condo/townhouse prices will go down sooner or quicker that single family house

-Ignorant in RE

7/17/2006 02:49:00 PM  
Anonymous Anonymous said...

Condos will go down with houses but much more downside.

This year is reality check for these greedy grubbing too late to sell at the top sellers. The Forced sellers will move this market. Not the Greedy Grubbing seller looking to get out and retire.

Spoke to the Biggest hosuing bull today. Just want to let you in on the secret. He's finally capitulated and said housing is going down, but couldn't not admit that 30-40% is possible. He just wouldn't say.
It's bad in real estate land.





BOOOOOOOOOOOOOOOYcott Ripoff House Prices


7/17/2006 02:54:00 PM  
Anonymous Anonymous said...






7/17/2006 02:59:00 PM  
Anonymous Anonymous said...

misery index climbing.

can't wait for another comical line out of Lereah soon.





7/17/2006 03:00:00 PM  
Blogger chicagofinance said...

Ph.D. said...
Why do you think that condo/townhouse prices will go down sooner or quicker that single family house
Ignorant in RE
7/17/2006 03:49:02 PM

By their very nature, they are more easily targeted by investors, hence are more quickly bought on speculation [driving prices up] and dumped in a panic [driving prices down].

7/17/2006 03:23:00 PM  
Blogger chicagofinance said...



as the case may be.

7/17/2006 03:24:00 PM  
Anonymous Anonymous said...

chicago, you must be high on Mets grand slams.


7/17/2006 03:27:00 PM  
Blogger chicagofinance said...


Not planned.

We stayed at the hotel where the Mets stayed.

The whole thing was priceless, but in true NYC fashion, I left everyone alone, and just enjoyed the moments with my friends.

I was disappointed the Mrs. wasn't there. She would have made it complete.

7/17/2006 03:34:00 PM  
Anonymous Anonymous said...

I know this is off topic, but even Grim pulled on this thread so I figured I would contribute too.

This is what they offer for $1.8 million in Spring Lake:

I wonder why they sell about 2 houses each month in that town?


7/17/2006 03:36:00 PM  
Anonymous Anonymous said...

The Mr. and I enjoyed the games in the perfectly zoned air conditioning of our private living room [We had the door open].

My poor husband will need a while to get over not being there for that 6th inning.


7/17/2006 03:45:00 PM  
Anonymous Anonymous said...


Apart from the reasons already mentioned, condos & townhomes have no land value. SFD's have associated land value, which in the light of legislation like the Highlands act, may prove to be valuable in the future.

BTW, did you take up my suggestion of brushing up on your blackjack and going to a casino ? Ph.D's and math majors do have an advantage there, you know.


7/17/2006 03:47:00 PM  
Anonymous Anonymous said...

Lindsey..a joke, isn't it. Look at the pathetic grass trying to look like a manicured lawn.

Here's a million dollar home just about 45 minutes from that one, and you can actually send your kids to the school down the street:
go to
type 4730863 on the property line.


7/17/2006 03:56:00 PM  
Blogger BergenBuyer said...


Another thing is that condo's are all alike. They become a commodity and if there are 10 condo's for sale, the seller can't differentiate themselves by claiming a better street or a great family room addition, the only difference is price. The buyer can just pick the cheapest unit. The sellers know this and may (I stress "may") be more willing to decrease their price in order to be the cheapest. They can see their competition easily. And may be more willing to actually react to supply/demand forces. Single family homes are usually diff on many more levels. This includes land size, land shape, street, house style, etc.

I believe cookie cutter single family home developments are similar to condo's, everyone's house is the same, but my shutters a maroon while yours are green. The same exact house built 50 times over in a 20 acre radius.

7/17/2006 04:00:00 PM  
Anonymous Anonymous said...

To make a point from observation
I can see that some SFHs are reducing asking price by 10-15K. The townhouses are not reducing at all.
The price pressure is more obvious at the higher ends (800-1M) where the prices are coming down faster than middle tiers. condos/townhouse are not reducing at this stage.

7/17/2006 04:12:00 PM  
Anonymous Anonymous said...

anon 5:12

That's not true for other areas. I'm not sure which ZIP you are referring to.

In Central NJ and Pa, lots of TH price reductions.

Here's one that started out at 309,900 last Fall, went to 305, then 295, and is now down to 290K.

Just reality checking on your ZIP.

7/17/2006 04:28:00 PM  
Blogger mbarl said...

My name is Steven Krystofiak, President of the Mortgage Broker Association for Responsible Lending. I have a letter in a word document form that highlights the risks of the current loan industry unrealized by regulators and economists alike, mainly due to stated income loans.
Email me at if you want me to send you a copy.

~ Steve Krystofiak
13 main points in the letter are;
1. Stated income loans are associated with fraud, and started to become popular in 2002.
2. Banks originate these loans because they are profitable and then sell them to reduce their risk.
3. Fraud is encouraged by the banks
4. Stated income loans help no one.
5. Exotic loans originated with stated income are now causing foreclosures or forcing homeowners to refinance into negatively amortized loans.
6. Stated income loans are why home prices have skyrocketed. They have caused a large demand in the US housing supply.
7. Banks have sold their loans and have already made their profit. Investors will soon realize stated income loans are too risky and stop purchasing them.
8. Almost anyone can get a stated income loan for $950,000.
9. Stated income loans cost consumers hundreds of dollars a year because of higher interest rates.
10. Stated income loans allow tax cheats to purchase homes easier.
11. Stated income loans are not always faster than fully documented loans.
12. Appraised values are often inflated. Underwriters are basing their decision on inflated home values, inflated incomes and inflated assets. The only “real” number is the FICO (credit) score. This is why underwriters have become focused on FICO scores.
13. Rules are not enough, they must be enforced.

7/17/2006 05:52:00 PM  
Anonymous Anonymous said...

mbarl..why are you trolling for email addresses when you have a Website? Just put the darn thing there. We'll find it.

Don't you think ppl on the blog search on terms?


7/17/2006 06:00:00 PM  
Blogger grim said...

Welcome Steve, I'm not sure how you found us, was it from the referring link?

If you have time, there are many of us here that would like to hear more of what you have to say.


7/17/2006 07:39:00 PM  
Anonymous Anonymous said...

4. Stated income loans help no one.

What is a stated income loan? One that is not verified? Help us out here...we're not all mortgage brokers!

7/17/2006 08:11:00 PM  
Blogger mbarl said...

If you go to and read a 4 page letter you will know more than most mortgage brokers do. This is due in large part because in many situations you do not have to be licensed to originate loans. Under the FAQ part of the website; "A stated income loan is where the income that is put on a mortgage application is not verified at all. Not by taxes or even with pay check stubs. The bank simply believes that the income that is put on the application is 100% true."

7/17/2006 08:18:00 PM  
Anonymous Anonymous said...


what are "non-agency mortgage backed securities"?

is it possible to put some hard numbers against those percentages? or can you tell use where we can look?

7/17/2006 09:27:00 PM  
Anonymous Anonymous said...

If a person incurs a debt by lying about stated income, doesn't that mean the debt was fraudulently incurred? And if so, isn't it completely nondischargeable in bankruptcy? Methinks once the banks start getting hurt, a lot of these stated income fibbers will become indentured servants for the rest of their lives.

7/17/2006 09:37:00 PM  
Anonymous MaryanneNJ said...


A lowball that significant in Chatham seems to be an exception at this point. But it is encouraging. Good reason to keep an eye on RE in that town, though. I am not looking in Montclair, though. Taxes are too high among other things.

7/17/2006 10:24:00 PM  
Anonymous Anonymous said...

Anon @ 10:27,

The agencies refer to the GSE's (Government Sponsored Enterprises) - Fannie Mae (FNMA) and Freddie Mac (FHMLC). Agency bonds have the implicit backing of these GSE's.

Non-agency bonds are those pool of loans that are put together and sold as bond instruments without the involvement of Fannie Mae or Freddie Mac. Many subprime and other specialized categories of loans fall here. This process is called securitization and usually wall street houses are involved.


7/17/2006 10:35:00 PM  
Anonymous reinvestor101 said...

BOOOOOOOOYcott Ripoff Home Prices

Don't be a fool and get caught holding the empty bag. Go ahead use a risky gimmicky loan to get in. Welcome to monthly slavery. You deserve the consequence


It's funny how one can leave here for three weeks and come back and read the same stuff. People are still giddily awaiting a housing crash. Sorry to disappoint you, but it aint gonna happen!

7/17/2006 10:48:00 PM  
Anonymous Anonymous said...


What do you think of the Realtor bubble?

7/18/2006 05:07:00 AM  
Anonymous Anonymous said...

reinvestor101 said...


Okay when you capitulate at the bottom we will know for sure.

Remember that Housing bull story I told. well he admitted for once that things are not going well in real estate land.

This was the same techBULL when sun Micro was at $96 and he held safe stuff.




7/18/2006 07:13:00 AM  
Anonymous Anonymous said...

Nothing wrong with stated income loans when someone puts down 30-40-50% LV.

It's these imbeciles buying and lying with no money down interest only ARMs stated income.

Many many problems ahead for the industry and the lying fools.




7/18/2006 07:15:00 AM  
Anonymous Anonymous said...


Missed ya!


7/18/2006 08:48:00 AM  
Blogger DebtVulture said...

Headline on National Mortgage News website that said one lender stated that a large amount of people that used stated income loans exaggerated their incomes by 50%. Don't have a login to the website so I can't get the actual article.

There is a bank in CA that did 80% their loans last year on stated income/assets. NICE.

7/18/2006 05:24:00 PM  
Anonymous Anonymous said...

It is $179 a year subscription to read that article. But it is writen by the MARI; he is an old but good article right on point with this post

7/18/2006 11:01:00 PM  
Anonymous Anonymous said...

No need for the $179... here is the link for the

It is from the Mortgage Asset Research Institute

If you print it out it is on page 12, if you read it in adobe it is page 15

7/18/2006 11:48:00 PM  
Anonymous Anonymous said...

The report says that out of a smaple of 100 audited loans that, " 90% of the stateed incomes were exaggerated by 5% or more. More disturbingly, ALMOST 60% OF THE STATED AMOUNTS WERE EXAGGERATED BY MORE THAT 50%. These suggest that the stated income loan deserves the nickname used by many in the industry; the "liar's loan."

7/18/2006 11:51:00 PM  

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