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The Crisis Circle Is Complete: Wells Fargo Returns To Subprime

Tyler Durden's picture





 

Those of our readers focused on the state of the housing market will undoubtedly remember this chart we compiled using the data from the largest mortgage originator in the US, Wells Fargo. In case there is some confusion, as a result of rising interet rates (meaning the Fed is stuck in its attempts to push rates higher), the inability of the US consumer to purchase houses at artificially investor-inflated levels (meaning housing is now merely a hot potato flipfest between institutional investors A and B), and the end of the fourth dead-cat bounce in housing (meaning, well, self-explanatory), the bank's primary business line - offering mortgages - is cratering.

So what is a bank with a limited target audience for its primary product to do? Why expand the audience of course. And in a move that is very much overdue considering all the other deranged aspects of the centrally-planned New Normal, in which all the mistakes of the last credit bubble are being repeated one after another, Reuters now reports that the California bank "is tiptoeing back into subprime home loans again."

And so the circle is complete.

For those  who may have forgotten the joys of a subprime lending bubble, here is a reminder from Reuters.

The bank is looking for opportunities to stem its revenue decline as overall mortgage lending volume plunges. It believes it has worked through enough of its crisis-era mortgage problems, particularly with U.S. home loan agencies, to be comfortable extending credit to some borrowers with higher credit risks.

 

The small steps from Wells Fargo could amount to a big change for the mortgage market. After the subprime mortgage bust brought the banking system to the brink of collapse in the financial crisis, banks have shied away from making home loans to anyone but the safest of consumers.

 

Any loosening of credit standards could boost housing demand from borrowers who have been forced to sit out the recovery in home prices in the past couple of years, but could also stoke fears that U.S. lenders will make the same mistakes that had triggered the crisis.

And in a world in which the new Wells Fargo is the old Wells Fargo, surely there will be companies willing to be the new New Century. Sure enough:

So far few other big banks seem poised to follow Wells Fargo's lead, but some smaller companies outside the banking system, such as Citadel Servicing Corp, are already ramping up their subprime lending. To avoid the taint associated with the word "subprime," lenders are calling their loans "another chance mortgages" or "alternative mortgage programs."

Also, remember when lenders swore they were very conservative with who they make loans to, and their strict loan standards? Yup: that particular lie is also back.

Lenders say they are much stricter about the loans than before the crisis, when lending standards were so lax that many borrowers did not have to provide any proof of income. Borrowers must often make high down payments and provide detailed information about income, work histories and bill payments. Wells Fargo in recent weeks started targeting customers that can meet strict criteria, including demonstrating their ability to repay the loan and having a documented and reasonable explanation for why their credit scores are subprime.

Uh, there is a reason those borrowers are subprime. And it is: because they traditionally do not pay back their loans! But this appears to be one of those rocket surgery things that a strapped C-Suite has no choice but to confuse as it scrambles to compensate for structural revenue losses, and is willing to boost short-term revenues by offering anyone "who can fog a mirror" a mortgage. Surely, by the time the bank's balance sheet implodes, it will be some other CEO's problem.

It is looking at customers with credit scores as low as 600. Its prior limit was 640, which is often seen as the cutoff point between prime and subprime borrowers. U.S. credit scores range from 300 to 850.

But don't worry, this time it's different. Really

Subprime mortgages were at the center of the financial crisis, but many lenders believe that done with proper controls, the risks can be managed and the business can generate big profits.

Naturally, once Wells opens the floodgates, every other bank will promptly follow:

With Wells Fargo looking at loans to borrowers with weaker credit, "we believe the wall has begun to come down," wrote Paul Miller, a bank analyst at FBR Capital Markets, in a research note.

 

Lenders have an ample incentive to try reaching further down the credit spectrum now. Rising mortgage rates since the middle of last year are expected to reduce total U.S. mortgage lending in 2014 by 36 percent to $1.12 trillion, the Mortgage Bankers Association forecasts, due to a big drop in refinancings.

The only missing pillar of the next subprime crisis is the spin that makes subprime lending seem not only ok, but in fact, necessary.

Some subprime lending can help banks, but it may also help the economy. In September 2012, then Federal Reserve Chairman Ben Bernanke said housing had been the missing piston in the U.S. recovery.

 

A recent report from think tank the Urban Institute and Moody's Analytics argued that a full recovery in the housing market "will only happen if there is stronger demand from first-time homebuyers. And we will not see the demand needed among this group if access to mortgage credit remains as tight as it is today."

The straw on the camel's back: just like last time, when this subprime bubble bursts, it will once again drag down Fannie and Freddie. Because humans apparently have a genetic inability to recall any historical lessons older than five years.

Wells Fargo isn't just opening up the spigots. The bank is looking to lend to borrowers with weaker credit, but only if those mortgages can be guaranteed by the FHA, Codel said. Because the loans are backed by the government, Wells Fargo can package them into bonds and sell them to investors.

 

The funding of the loans is a key difference between Wells Fargo and other lenders: the big bank is packaging them into bonds and selling them to investors, but many of the smaller, nonbank lenders are making mortgages known as "nonqualified loans" that they are often holding on their books.

And not only the GSE: any and all idiots who buy subprime exposure direct, deserve all they get:

Citadel Servicing Corp, the country's biggest subprime lender, is trying to change that. It plans to package the loans it has made into bonds and sell them to investors.

 

Citadel has lent money to people with credit scores as low as 490 - though they have to pay interest rates above 10 percent, far above the roughly 4.3 percent that prime borrowers pay now.

No story about subprime would be complete without the human touch, and one person's story.

As conditions ease, borrowers are taking notice. Gary Goldberg, a 63-year-old automotive detailer, was denied loans to buy a house near Rancho Cucamonga, California. Last summer he was forced to move into a trailer park in Las Vegas.

 

Going from 2,000 square feet to 200 - along with his wife and two German shepherd dogs - was tough. He longed to buy a house. But a post-crash bankruptcy of his detailing business had torched his credit, taking his score from the 800s to the 500s.

 

"There was no way I was going to get a mortgage," said Goldberg. "No bank would touch me."

 

But in December, he moved into a 1,000-square-foot one-story home that he paid $205,000 for. His lender, Premiere Mortgage Lending, did not care about his bankruptcy or his subprime credit score. That is because Goldberg had a 30 percent down payment and was willing to pay an 8.9 percent interest rate.

Brilliant - an 8.9% interest rate for a person who can barely make ends meet: what can possibly go wrong. Oh wait, we know: maybe the fact that Wells picked the absolutely worst moment to return subprime - just as the broader housing market is about to take yet another steep plunge for the worse, as the recent foreclosure report from RealtyTrac confirmed, when it reported a dramatic 57% increase in California foreclosure starts from a year ago.

From RealtyTrac:

“The monthly increase in January foreclosure activity was somewhat expected after a holiday lull, but the sharp annual increases in some states shows that many states are not completely out of the woods when it comes to cleaning up the wreckage of the housing bust,” said Daren Blomquist, vice president at RealtyTrac. “The foreclosure rebound pattern is not only showing up in judicial states like New Jersey, where foreclosure activity reached a 40-month high in January, but also some non-judicial states like California, where foreclosure starts jumped 57 percent from a year ago, following 17 consecutive months of annual decreases.”

In short - the party is over, and the banks are once again scrambling to delay the day of reckoning as much as possible.

 


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Fri, 02/14/2014 - 12:48 | Link to Comment Meat Hammer
Meat Hammer's picture

It's different this time, like last time.

Fri, 02/14/2014 - 12:51 | Link to Comment Spastica Rex
Spastica Rex's picture

Watch what you say - you might destroy it, and they'll have to build the Matrix all over again.

Fri, 02/14/2014 - 12:53 | Link to Comment Martial
Martial's picture

"Fed is stuck in its attempts to push rats higher"...yea that sounds about right. Time to jump ship.

Fri, 02/14/2014 - 12:57 | Link to Comment knukles
knukles's picture

"There's always money in the banana stand."
               
-Linda Green

Fri, 02/14/2014 - 13:10 | Link to Comment Son of Loki
Son of Loki's picture

"It's only Fair that I am given a Big House with a zero-down, no job verification, 4%, never-pay-back mortgage."

Fri, 02/14/2014 - 13:21 | Link to Comment Troll Magnet
Troll Magnet's picture

One of the less discussed aspects of this Fed-driven housing bubble is how they are enabling the broke ass counties to steal more from "homeowners" via rising property taxes.

Fuckers rape you in many ways, don't they?

Fri, 02/14/2014 - 13:25 | Link to Comment zaphod
zaphod's picture

Why shouldn't they? I'm going to pay for it again in the end not them. 

Fri, 02/14/2014 - 13:35 | Link to Comment redpill
redpill's picture

Exactly they have no reason not to.  Does anyone doubt they would get bailed out again?

 

Also, that RealtyTrac statistic looks pretty suspicious.  Expect revisions.

 

 

Fri, 02/14/2014 - 13:51 | Link to Comment bobola
bobola's picture

How does a guy with a failed business and a credit score in the 500's come up with $60,000 cash to buy a house..??

Heisenberged his way into the house..???

Fri, 02/14/2014 - 14:47 | Link to Comment 0b1knob
0b1knob's picture

"As a dog returns to its vomit, so fools repeat their folly."    Some book...

Fri, 02/14/2014 - 15:01 | Link to Comment Occident Mortal
Occident Mortal's picture

They're not calling it subprime, this time it's called non-prime.

Totally different.

Fri, 02/14/2014 - 23:26 | Link to Comment StychoKiller
StychoKiller's picture

Shoulda went with "prime-challenged."

Fri, 02/14/2014 - 14:41 | Link to Comment TheReplacement
TheReplacement's picture

If the seller is a big bank, why not?  Fair is fair.

Fri, 02/14/2014 - 15:27 | Link to Comment RaceToTheBottom
RaceToTheBottom's picture

But wait, we can get all the Chinese buyers that Canada is no longer taking.  They can buy all our houses......

Fri, 02/14/2014 - 14:47 | Link to Comment Wahooo
Wahooo's picture

Well, our government and its banker friends during the past 5 years has certainly increased the supply of broke people who will qualify for these loans.  Government has become quite efficient at certain things.

Fri, 02/14/2014 - 12:56 | Link to Comment Divided States ...
Divided States of America's picture

Well the difference between mid 2000s and now is that the subprime population nowadays was the middle class population back then....the middle class of America is getting squeezed....one day there will be nobody left to squeeze and the cheespopes will be fighting among themselves. fuckers

Fri, 02/14/2014 - 12:57 | Link to Comment Canadian Dirtlump
Canadian Dirtlump's picture

I hope it's different in Canada this time finally and some fuckers get their faces melted off and I can go dumpster diving for a crib.

Fri, 02/14/2014 - 13:02 | Link to Comment Grande Tetons
Grande Tetons's picture

I lived in Montreal for a stint in 1995, during the time Quebec wanted to separate. I was close to buying a house in Westmont for 300k. I convinced myself that it was a shitty investment. The same house today is north of a million.  Yep, je suis tres stupid. 

 

Fri, 02/14/2014 - 15:34 | Link to Comment Catch-22
Catch-22's picture

It could have gone both ways… big gamble. 

 

20 years earlier, with the first referendum that failed by a margin of 1%, hundreds of companies left for other parts of Canada (especially Toronto) and slaughtered the local economy/employment. Main commercial arteries were boarded up for miles on end. It’s not an exaggeration to say they experienced a full-blown depression.  The few jobs advertised in the newspaper required 15 years experience minimum…  Had they managed to separate in the following years it would have been a disaster. Anglophones, which are by far the biggest group in Westmount, would have certainly left in droves for English speaking Canada. Your investment would have taken a major hit.

 

By the way, Montréal was a kick ass City in the 70s and 80s…  not so much anymore.

Fri, 02/14/2014 - 15:43 | Link to Comment thamnosma
thamnosma's picture

I loved visiting there in the 80's when I lived in the Northeast.   Haven't been back since moving out of the region.   What happened to it?

Fri, 02/14/2014 - 16:06 | Link to Comment Catch-22
Catch-22's picture

 

 

They let their infrastructure go to hell…

They still talk about separation, freaking out Anglophones and potential investors…

The best bar “Thursday’s” on Crescent street (a 30 year institution) has closed…

The “Cirque du soleil” (which was born there) can be seen in Vegas…

Etc.

Etc.

Etc.

 

It’s really not the place it used to be.

Fri, 02/14/2014 - 16:17 | Link to Comment Joe A
Joe A's picture

Perhaps the French can invest in Quebec...oh wait.

Anyway, Montreal and and especially Quebec are lovely cities

Fri, 02/14/2014 - 13:01 | Link to Comment Divided States ...
Divided States of America's picture

Oh...yes...while immigration is being restricted thx to the Conservative govt, CAD weakening as immigrants pull out their money from Canada, financial sector job losses mounting, the fuckin cold weather making it less attractive, unlimited supply of condos propping up in major cities, many people in debt and levered to the moon via multiple mortgages via the own to rent model in a rising rate environment from ultra low rates. Yeah its different this time....the outcome will be different than in the subsequent rebound after 2008.

Fri, 02/14/2014 - 12:58 | Link to Comment Unprepared
Unprepared's picture

I'll baptise it the "Post-Modern Normal"

May you live in circular times!

Fri, 02/14/2014 - 13:44 | Link to Comment Jumbotron
Jumbotron's picture

Proverbs 26:11

"As a dog returns to its vomit, so fools repeat their folly."

 

Fri, 02/14/2014 - 14:55 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

I don't disagree at all, but... the problem I have with all religious texts -- especially with the Bible, which I'm most familiar with -- is that they have these clever one-liners that are great for giving us a little bit of enlightenment and a nice dose of hubris which allows us to look down at others (as yet 'unenlightened' people).  Proverbs 26:11 is a good example of this.

What would be FAR more helpful for religious texts (including the Bible), is for them to offer a vision and a plan for personal development.  Alas, they don't.  I submit that a book like "The 7 Habits of Highly Effective People" does FAR more to growth, than some smart-ass lines from long dead sheep-herders.  Sheep-herders of limited education and questionable hygiene, BTW. 

And while I'm at it... I've got a bone to pick with this alleged 'Deity' (who is either a Space Alien or a figment of a fertile imagination of an ancient shaman), who clearly is either Co(s)mically insecure or a Galactic Über-Bully -- to have some camel/sheep-herding, semi-literate and smelly primitives slavishly obey and grovel at his invisible/imaginary Feet.  If it were me, I'd ask for some "ID".  And note that the Shock & Awe tricks that worked on Moses et al, will not work on me.  This 'Deity' had better impress me with the powers of 'Q' (for example), to prove that he is both real and 'Divine', i.e. on a Level II or Level III on the Kardashev* scale.  Whiz-bang phasers, space-shuttles and beaming-up/down won't impress me.

* https://en.wikipedia.org/wiki/Kardashev_scale

Fri, 02/14/2014 - 15:03 | Link to Comment Spastica Rex
Spastica Rex's picture

Carl Sagan wrote an interesting novel called Contact that explores the second subject of your comment.

Fri, 02/14/2014 - 15:18 | Link to Comment Overfed
Overfed's picture

Slightly O/T. I have never understood why so many sci-fi authors posit that having a world government would be any kind of advancement. If anything, humans would have reached the pinnacle of social evolution if they were to have no need of government at all.

Fri, 02/14/2014 - 15:40 | Link to Comment Spastica Rex
Spastica Rex's picture

I'm not thinking of any world-government utopias, as envisioned by sci-fi writers. Likely there are, but I'm sure not thinking of any.

edit: Gene Roddenberry (The Federation/multi-world government) not withstanding. I think Roddenberry was a Republican.

Fri, 02/14/2014 - 18:04 | Link to Comment css1971
css1971's picture

Who was god?

http://www.youtube.com/watch?v=kE2w1AJWXGo

Bible scholars have known for a fair old time that the Jewish and therefore Christian (and muslim) god is actually just the same god as the Canaanites and just one of a pantheon of gods worshipped at the time. Specifically he was the head of the pantheon, and called El (as in IsraEl, and Alah). Also, they studied the sky  where these gods appeared, El was Saturn. So to the ancient Israelites, Caananites, Philestines, pretty much everyone living in the region, Saturn was El, was God.

So If you get a telescope or even binoculars you can have a good old shufty at god.

Fri, 02/14/2014 - 14:15 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

"People do not believe lies because they have to, but because they want to." - Malcolm Muggeridge

Lest we get too arrogant and self-righteous, remember... NO one is exempt or immune from this basic human trait.

It takes dedicated practice to truth-seeking, and determination to not tolerate BS even within ourselves or our social or religious brainwashing, to minimize/mitigate this reality.

/ We now resume our regular scheduled programs of stand-up comics. / ;-)

Fri, 02/14/2014 - 14:48 | Link to Comment TheReplacement
TheReplacement's picture

Kirk, did you burn up another Enterprise?

 

Fireball in the sky!

Fri, 02/14/2014 - 14:58 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

LOL.  No, I can't take credit for that.  Maybe I pissed off one of the crew.  Again.

I seem to do a lot of that lately, as I get older and crankier, and less tolerant of BS.  ;-)

Fri, 02/14/2014 - 15:38 | Link to Comment caShOnlY
caShOnlY's picture

maybe the fact that Wells picked the absolutely worst moment to return subprime

take a look at the California Foreclosure Starts again - drastic?   Did they really pick a bad time? or is the ship starting to sink(emerging markets, China, Europe, etc.)?  I don't believe Wells Fargo timing is bad at all, "THE ONE BANK" obviously has an emergency plan to forestall the inevitable - again.  You will see the same players in the game as the music is starting to play. 

The key here is who will bear the counterparty risk?  I doubt foreign investors will be calling Goldman for some great investment products this time around.

So who is going to hold the bag of shit this time?

Who?(MyRA)Who? again,(MyRA) who will be the counter party(MyRA)?

 

Fri, 02/14/2014 - 12:50 | Link to Comment Jason T
Jason T's picture

history repeats because the nature of..um, greed.. of man never changes.

 

predictable like the seasons.

Fri, 02/14/2014 - 13:05 | Link to Comment Unprepared
Unprepared's picture

History doesn't repeat,

It rhymes with defeat

Waiiiit a minute,

I think I just lost count of my feet

Fri, 02/14/2014 - 12:50 | Link to Comment Grande Tetons
Grande Tetons's picture

Mortgage underwriting toolkit. 

1. Mirror

Mr. Johnson, this is how it works...if you can breath on this mirror and I can see fog....your loan will be approved. 

Fri, 02/14/2014 - 13:04 | Link to Comment BandGap
BandGap's picture

My wife and I are building a home (I know, please spare me the crap) and we had a helluva time getting funding last fall. My credit score is 809, hers was 792. It was a construction loan, so maybe that was the problem.

After all the shit they put us through, and they got down to some nitty-gritty shit, I have a hard time understanding how some people get money so easily.

Fri, 02/14/2014 - 13:31 | Link to Comment Excursionist
Excursionist's picture

I think you correctly diagnosed the difference.  Small construction loans are one-offs that require lenders to work, whereas productized subprime loans are akin to stacks of inventory waiting on shelves.

Side Note:  The article mentions Gary Goldberg having $60k for a downpayment.  Either his business snapped back smartly (see?  QE works!), or something doesn't add up with his tale of woe.

Fri, 02/14/2014 - 15:09 | Link to Comment tiwimon
tiwimon's picture

More likely - he siphoned off the cash from the business then let the business fail - walked away with the cash

 

Known plenty of people who owned a business and know its imminent death so they siphon cash, then BK the business

Fri, 02/14/2014 - 16:47 | Link to Comment Panafrican Funk...
Panafrican Funktron Robot's picture

I'm guessing he figured out a way to borrow the $60K, and then used that money to leverage the house buy.

Fri, 02/14/2014 - 13:59 | Link to Comment Son of Loki
Son of Loki's picture

Band, I don't pretend to understand. Here's a tale of two men; one a yong plastic surgeon down the block who wants to buy an $780k house and is having his balls wrung out jumping thru hoops, he said.....then there's my 26 y.o. lawn guy who just bought a $440k house in the next area, a Master Planned new homes area. The lawn guy said, "it was easy...just had to sign some papers and got a no money down loan." He said they "packaged it all together" whatever the heck that means.

This stuff is going on all over again even with Saturday morning adds for those "No Money Down" mortgages.

Fri, 02/14/2014 - 14:17 | Link to Comment Blankenstein
Blankenstein's picture

It seems there are more shady financing options available from builders when you are buying a new home.   

Fri, 02/14/2014 - 14:11 | Link to Comment redpill
redpill's picture

You can't bundle construction loans.

Fri, 02/14/2014 - 19:35 | Link to Comment Apeman
Apeman's picture

.

Fri, 02/14/2014 - 12:54 | Link to Comment JPM Hater001
JPM Hater001's picture

Top notch coverage.

Fri, 02/14/2014 - 12:55 | Link to Comment Smiley
Smiley's picture

Meet the new bullshit; same as the old bullshit.

Fri, 02/14/2014 - 12:53 | Link to Comment thamnosma
thamnosma's picture

Great news!  We're going for broke here.

Fri, 02/14/2014 - 14:50 | Link to Comment Wahooo
Wahooo's picture

No longer e pluribus unum, but rather "We go for broke".

Nos vado pro infractus.

Fri, 02/14/2014 - 12:55 | Link to Comment Flounder
Flounder's picture

aw shaddup the stock market is going up

Fri, 02/14/2014 - 12:57 | Link to Comment denverdolomte
denverdolomte's picture

Fuck it. I'm applying for wealth is only fair, I mean welfare and then walking straight into WF and getting a loan on a $350k house. What have I got to lose? 

 

At least this time is not like last time or the time before that or whatever.

 

/sarc/

Fri, 02/14/2014 - 13:19 | Link to Comment BandGap
BandGap's picture

Talk to your proctologist to see if you are ready.

Oh wait, welfare..........nevermind.

Fri, 02/14/2014 - 13:20 | Link to Comment denverdolomte
denverdolomte's picture

I was wondering why vasoline was on sale this week. 

 

I am actually glad to hear the banks are doing this again. Everything needs to collapse already. 

Fri, 02/14/2014 - 12:56 | Link to Comment fxrxexexdxoxmx
fxrxexexdxoxmx's picture

A credit score is your first chain of slavery. 

Fri, 02/14/2014 - 14:05 | Link to Comment El Vaquero
El Vaquero's picture

Not only that, they aren't exactly the most accurate things on earth.  Those fuckers work for the banks, for the most part.  I was sued by a bank, won, and the bank was still reporting the shit on my credit report.  I sent the credit reporting agencies letters disputing the debt that included certified court documents.  Two took the tradeline off immediatly.  The third claimed that some of the info that I had sent them conflicted with the info that they had on record, after I had already proven my identity to them once before (i.e. they don't update their records when they have info that they should use to update their records,) and it wound up getting taken off their report when word got back to the bank via a lawsuit that I filed.  In a matter of about a month, my credit score went up 200 points over this.  Last I checked, my credit score was ~750.  This was, in part due to having no negative lines on it, and in part because the information from another person with my first and last name made it onto my report for a loan that was paid in full.  So maybe it should be 700.  Or whatever.  I don't give a shit anymore.  You should manage your debt, not your credit score. 

Fri, 02/14/2014 - 15:34 | Link to Comment RaceToTheBottom
RaceToTheBottom's picture

I also think suing at first hardship also helps.

It has gotten to the point that a Lawyer on retainer is more important than a drivers license....

Fri, 02/14/2014 - 15:50 | Link to Comment El Vaquero
El Vaquero's picture

I didn't sue at the first hardship.  I sued after they sued me, after their lawyers jerked me around, after I won, after they were still reporting to the credit reporting agencies, and after they sent another collection agency after me despite me having an order in my hand dismissing the case with prejudice.  I could not afford an attorney.  I can tell you that, having faced people who I thought I was going to have to shoot to ensure my own well being, I would take that kind of situation any day over what that first walk into the courthouse felt like.  I can deal with violent people, but I was alone in this and I did not know how to do anything in a court setting. 

Fri, 02/14/2014 - 12:57 | Link to Comment q99x2
q99x2's picture

U.S. lenders will make the same mistakes

What mistakes. The money changers took over the United States of America.

I'm still waiting to take my student loans and apply them to the purchase of my dream home. The day is getting closer.

YeeeeeeeHaaaaaaaa.


Fri, 02/14/2014 - 13:32 | Link to Comment chunga
chunga's picture

The black hats didn't make mistakes, it was premeditated and deliberate.

I've said this many times before, so one more time won't hurt.

The simplest way to steal money from people who don't have any is to just give it to them.

When they don't pay it back, blame them, and then have the cronies at the fed print it right back to them, and then some.

Fri, 02/14/2014 - 14:35 | Link to Comment LMAOLORI
LMAOLORI's picture

 

 

Same old, same old CRONY CAPITALIST Warren BUFFOON outlived any sense of decency years and years ago and he has friends in high places!

New Mortgage Rules Another Empty Obama Promise  

snip



About the only thing the new rules require is income documentation and debt limits for borrowers.

 

But they at the same time let borrowers count welfare payments as qualifying income and exceed the 43% debt-to-income threshold if they get their loan guaranteed through a government mortgage agency.

 

Since Fannie, Freddie and FHA now control 90% of the mortgage market, that won't be hard to do.


Buffett’s Betrayal
Fri, 02/14/2014 - 13:00 | Link to Comment Debt Slave
Debt Slave's picture

"another chance mortgage".

 

Very euphemistic. Sometimes you just need another chance to prove what a dirtbag you are.

A fellow I know is declaring bankruptcy for a second time and thinks nothing of it. Thinks nothing of the fact that he has purchased things he didn't need and can't pay for. When I was growing up, they called it "stealing". Today it's called a "second chance".

Fri, 02/14/2014 - 17:26 | Link to Comment css1971
css1971's picture

How can it be stealing when they magicked the money they gave him into existence from nothing? He didn't steal anything from anyone.

Fri, 02/14/2014 - 12:58 | Link to Comment skwid vacuous
skwid vacuous's picture

Subprime is so pejorative, can't we come up with a better adjective?

Fri, 02/14/2014 - 13:05 | Link to Comment NotApplicable
NotApplicable's picture

"Exploding ARMS" is pretty cool.

Fri, 02/14/2014 - 13:34 | Link to Comment Dollarmedes
Dollarmedes's picture

You can't hug a child with "Exploding ARMS."

Fri, 02/14/2014 - 13:52 | Link to Comment Cannon Fodder
Cannon Fodder's picture

But it's all about the children...

 

Fri, 02/14/2014 - 13:02 | Link to Comment devo
devo's picture

BAAAHAHAH. Who didn't see this coming?

And social parasite, Warren Buffet, basically owns that bank.

Fri, 02/14/2014 - 13:08 | Link to Comment thamnosma
thamnosma's picture

You mean the Warren Buffet who wants us all to pay our "fair share"?

Fri, 02/14/2014 - 15:05 | Link to Comment LMAOLORI
LMAOLORI's picture

 

 

Yes the same while the old creep is the master of tax avoidance himself

Implementing Warren's Gift

The foundation must continue to satisfy the legal requirements qualifying Warren’s gift as charitable, exempt from gift or other taxes.

Warren Buffett Is A Punk

snip

Meanwhile, Buffett has given each of his kids a charitable foundation with billions each to manage. If a foundation has $3bb in it, then something like $90mm can go to salaries.

How Buffett Saves Billions On His Tax Return

Buffett’s 30% charity tax deduction offsets his entire ordinary income, and next it offsets his lower long-term capital gains income

No prosecutions and he had his cake and ate it too because he also owned the majority of the ratings agency Moody's 

Fri, 02/14/2014 - 18:30 | Link to Comment steelhead23
steelhead23's picture

Good, let the old bastard guarantee those loans.  I got no problem at all with idiots taking whatever risks they want ala Evil Kneivel.  But, if you are going to try to jump the Grand Canyon, don't be counting on the rest of us to pick up the pieces.  Y'know what really grabs my groin?  WE don't get a choice.  Wells is systemically important - if it blows up, it would be rescued - BY US.  DAMN, DAMN, DAMN, DAMN, DAMN.

Fri, 02/14/2014 - 13:02 | Link to Comment lordylord
lordylord's picture

We're in a state of arrested development. 

Fri, 02/14/2014 - 12:59 | Link to Comment Seasmoke
Seasmoke's picture

So that's why they stole my house with robo signed documents. Post dated documents. Incorrect balance figures. At least I feel better knowing that. Still not sure why the courts allowed them to steal the house. But I'm sure we find out that answer shortly as well. THE TRUTH WILL ALWAYS WIN

Fri, 02/14/2014 - 13:54 | Link to Comment serog
serog's picture

Might have something to do with you not paying what you promised.

Fri, 02/14/2014 - 13:00 | Link to Comment boeing747
boeing747's picture

Only lower lending standards can attract more 'no brainers' all-in, but this time back by .gov as I expected.

Fri, 02/14/2014 - 13:02 | Link to Comment Dollarmedes
Dollarmedes's picture

"...in which all the mistakes of the last credit bubble are being repeated one after another..."

 

Why wouldn't they make the same mistakes again? They never paid a price for it the first time!

Fri, 02/14/2014 - 13:05 | Link to Comment bigrooster
bigrooster's picture

Is today groundhog day?  I swear that I have heard this story before.  I even seem to remember how it ends.

Fri, 02/14/2014 - 13:57 | Link to Comment Grande Tetons
Grande Tetons's picture

Punxsutawney Schiff. 

Fri, 02/14/2014 - 13:03 | Link to Comment Rising Sun
Rising Sun's picture

So here's how to capitalize:  sell the house you have and rent if you haven't already, sell all your investments as they are probably close to max, stay in cash or short term bills (3-6 months), pick your favorite things to short and get ready

 

this is how Buffet makes his billions - shorting the crash

Fri, 02/14/2014 - 13:07 | Link to Comment MagicMoney
MagicMoney's picture

Well that's the general story of cheap credit, and squeezing interest rates out of lenders. If lenders are squeezed in rates, they search for junk borrowers. Not to disparage the people that are least credit worthy, but that's just the story of squeezing interest rates. The Federal Reserve wants excess credit, with that you get lower rates, with lower rates, you have to find more "losers", again not to disparage them, but trying to make the point clearer, that's what happens. This goes for all things such as high risk junk bonds.

 

People willing to save puts a regulatory cap on excess credit. The Fed doesnt want to save, they want them to go out, and speculate for more profits. Without savings, things can't be built.

Fri, 02/14/2014 - 13:09 | Link to Comment devo
devo's picture

Right on.

This needs to blow up the fed this time. That is the only thing that will make it worth it. Our responsibility is to tell everyone we know what is going on, encourage them not to buy homes, encourage them to keep their eye on the prize (implosion and audit of the Fed). It is blatently clear they're they cause this time...and more people know about QE and the rate manipulation. ZHs-- inform everyone, audit the FED, fuck Yellen.

Fri, 02/14/2014 - 14:06 | Link to Comment novictim
novictim's picture

Savings are going into speculation and not into productive investments because world producion capacity is >20% higher than demand.

 

Savings are not going into housing starts as wages are low and dropping and there is now a very tight margin for profit.  Home flippers are hurting right now.

 

ZIRP  is providing lenders with easy means for making a profit.  If you can't make money by loanding our free money then you are doing something wrong.  But the greed is for MOAR profit than is safe and hence we have the banks restarting the Liar Loan ARM cycle because they can rely on the private profits to remain theirs and can expect the eventual collapse losses to be socialized as before.  Nothing has changed.  History repeats.

Fri, 02/14/2014 - 13:04 | Link to Comment MrVincent
MrVincent's picture

The mortgage market has been drying up so they need new suckers to lend to. Yes, just like last time.

The final blow-off bubble is getting closer.

The pattern is set. Five by five.

Fri, 02/14/2014 - 13:42 | Link to Comment viahj
viahj's picture

yep, new purchases are down (other than cash), the refi boom is gone but there are still way too many players in the market (who got in in the golden days of easy money).  the TBTF fuckers are getting desperate for flow.

FHA is the new subprime.  GNMA will be the death of it all.

Fri, 02/14/2014 - 13:04 | Link to Comment rosiescenario
rosiescenario's picture

The bank's current management knows they'll be long gone by the time this newly hatched black swan flies home to roost. They will have made their money, the shareholders will have lost theirs, and the tax payers will be asked, yet once again, to bailout an institution that we just cannot live without.

Fri, 02/14/2014 - 15:11 | Link to Comment RaceToTheBottom
RaceToTheBottom's picture

In the mean time they roll out Warren Buffett to cackle and play his ukulele and drink cherry coke.

Asshat enabler and bailout bitch

Fri, 02/14/2014 - 13:09 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

[sing-along] "The wheels on the bus go round & round, round & round..."

What goes around comes around.  Plan & live accordingly.

Fri, 02/14/2014 - 13:09 | Link to Comment GolfHatesMe
GolfHatesMe's picture

Of course they are going into subprime.  Derivatives problem for the banks cleared last month.  Game on. Only about 2 years before Hank Tanks in the street.

Fri, 02/14/2014 - 13:11 | Link to Comment dbTX
dbTX's picture

Yup, midterm's coming up

Fri, 02/14/2014 - 13:10 | Link to Comment thamnosma
thamnosma's picture

What's the friggin' problem here?   It's a great opportunity to move into a nice but overpriced house, default on the loan, enjoy 2-3 years before the bank criminals even attempt to kick you out and by then some other gig will come along.

Fri, 02/14/2014 - 13:12 | Link to Comment fijisailor
fijisailor's picture

This is why I invest in PMs.  This shit will never stop until it all falls apart.

Fri, 02/14/2014 - 13:13 | Link to Comment Son of Loki
Son of Loki's picture

Get the Biggest Fattest Mortgage and Finest McMansion you can...move in...they don't pay....live for free for years on OPM.......

...seems like the trend.

Fri, 02/14/2014 - 13:26 | Link to Comment Seasmoke
Seasmoke's picture

That's so 2009.....

 

Buy 2 !!!!! Rent the second house..use That rent to pay your mortgage on the 1st house.....foreclosure on rental should take 3+ years.....then stop paying 1st mortgage when rental dries up.....should take another 3+ years to foreclose on the first......6+ years of good living. 

Fri, 02/14/2014 - 13:14 | Link to Comment creeko
creeko's picture

now I can buy the bundled security I've always dreamed of!

Fri, 02/14/2014 - 13:18 | Link to Comment Colonel Klink
Colonel Klink's picture

I left Wells Fraudco 5 years ago and retired.  I refuse to work for any of the majors again.

Hope they crash and burn, motherfuckers!

Fri, 02/14/2014 - 13:18 | Link to Comment Spungo
Spungo's picture

I guess it's time to start keeping an eye on one of those inverse ETFs. 

Fri, 02/14/2014 - 13:19 | Link to Comment Cornholiovanderbilt
Cornholiovanderbilt's picture

I believe all people outside DC and NYC are considered sub prime borrowers now.  I may be wrong

Fri, 02/14/2014 - 13:24 | Link to Comment LawsofPhysics
LawsofPhysics's picture

ignore what these TBTF banks say and watch the reverse repos...

tick tock motherfuckers...

Fri, 02/14/2014 - 14:54 | Link to Comment forwardho
forwardho's picture

About those Reverse Repos.

Well over 800 billion in the last 10 biz days.

Not a f-cking word about it, anywhere. This is a bell weather event, if you are in the know, look it up and get out of dodge.

Fri, 02/14/2014 - 13:22 | Link to Comment viator
viator's picture

That sure is good news. Congress should get the bailout money ready.

Fri, 02/14/2014 - 13:26 | Link to Comment knowshitsurelock
knowshitsurelock's picture

Keep stacking, cause houses are about to get really cheap.  If you are stuck in a McMansion, best sell it now while you still have a chance.  The next leg down in housing is going to make 2008 look like a church picnic.

Fri, 02/14/2014 - 13:31 | Link to Comment Sufiy
Sufiy's picture

Bubbles are everywhere:

 


Bubble Chronicles: Drug Site Silk Road Wiped Out By Bitcoin Glitch


  So much for the store of value and "Gold 2.0": Bitcoin continues its troubles now related not only to the herd mentality chasing the bubbles, but to the fatal flaw in the core of it praised crypto-currency architecture. Meanwhile the real and one only Gold is breaking out with topping $1,322 intraday. Realisation that there is no substitutes for Gold will be another factor to ignite this new Gold Bull leg. China was first here again and bought record amount of 247 tons of Gold in January. http://sufiy.blogspot.co.uk/2014/02/bubble-chronicles-drug-site-silk-roa...

Fri, 02/14/2014 - 13:32 | Link to Comment Saratoga
Saratoga's picture

How are they going to do this with Basel III?

Fri, 02/14/2014 - 13:50 | Link to Comment viahj
viahj's picture

Basel III won't be enforced on TBTF, it's for all the little competition...just like Dodd/Frank and all the countless other regulations TBTF break but don't get anything but a slap on the wrist fine. 

Fri, 02/14/2014 - 15:37 | Link to Comment RaceToTheBottom
RaceToTheBottom's picture

Accounting was so debased there is no way to determine value.  Still is that way.....

 

Time for an escape cause everything is going to happen again...

Fri, 02/14/2014 - 13:43 | Link to Comment joego1
joego1's picture

New recipie for bundled security Flambe; Add 50 parts of subprime mortgages (Well Fargo brand if available) boil in Fukushima brand spring water. (There is no need to light it on fire when served) Sheeple enjoy! 

Fri, 02/14/2014 - 13:43 | Link to Comment corporatewhore
corporatewhore's picture

but is wells doing any nothing down?  let's see if i can make this work--i want a new home.  will they make me document income?  No? Then I make  over $100,000 working at McDonalds.  Do I need seasoning?  If not, then I just started there.  Debt to Income?  WTF is that? :)  What's my middle FICO--is that like a middle finger?

If it doesn't work out then ch 13 to stall and delay, eventually converting to a 7.  Credit gets dinged but at that point the entire system has crashed.

Alfred E Newman Masters in Business Candidate

Count me in.  I want to play roulette one more time

Fri, 02/14/2014 - 14:30 | Link to Comment Emergency Ward
Emergency Ward's picture

No income, no documentation, no money down, Fair Isaac doesn't even know me.  What, me worry?  I'll take that one, the one that says $992,000.

Fri, 02/14/2014 - 13:43 | Link to Comment starman
starman's picture

8.9% ?! band over Gary it aint gonna hurt!

Fri, 02/14/2014 - 13:49 | Link to Comment joego1
joego1's picture

"Because humans apparently have a genetic inability to recall any historical lessons older than five years."

I noticed this when we went into Afghanistan. I think that they are putting up signs there now "Welcome imperialists, please leave weapons here when leaving Afghanistan, thanks!"

Fri, 02/14/2014 - 13:47 | Link to Comment novictim
novictim's picture

Consider that all the dead beats from 2006-2008 are credit-recovered now and back on track to buy a new home to foreclose on yet again... driving up the numbers of offers YOU will be competing with in buying that property making you pay a premium...

 

And now all the feckless wage slaves are being offered ARMs and liar loans from an industry that managed to avoid being regulated after the last catastrophe.

 

And now we also hear that California foreclosure starts are up 57% year over year.  

Coincidence?  No way.

Fri, 02/14/2014 - 13:48 | Link to Comment ThisIsBob
ThisIsBob's picture

Who are they going to sell that junk to?  Mayors of small towns in Norway?

Fri, 02/14/2014 - 13:54 | Link to Comment Max Cynical
Max Cynical's picture

I don't consider the Gary Goldburg loan a subprime loan.

30% cash ($61.5K) down on a $205K house with a loan balance of $143,500 @ 8.9%. As the lender, you're almost routing for him to default, which he won't because he's got $61.5K skin in the game.

I'm considering offering seller financing on a property I have in the Las Vegas area under the same terms. And it's not because the house won't sell to a buyer with a traditional loan, it's because seller financing offers me a reasonable return without much risk...compared to the alternative of having the money sit in a bank.

Fri, 02/14/2014 - 14:03 | Link to Comment RaiZH
RaiZH's picture

Oh but it's different in London for sure!

Fri, 02/14/2014 - 14:07 | Link to Comment Fix It Again Timmy
Fix It Again Timmy's picture

If you threw these assholes in jail the first time, this would not be happening...  Give them a license to steal and guess wbat.......

Fri, 02/14/2014 - 14:09 | Link to Comment Atomizer
Atomizer's picture

Insanity: doing the same thing over and over again and expecting different results.

-Albert Einstein

Fri, 02/14/2014 - 14:09 | Link to Comment Silver Sativa
Silver Sativa's picture

Whenever I read these articles about the sub-prime train-wreck that swept the world, I always love the image of the goddamn McMansion House that sits in the middle of nowhere, in the middle of a desert. Yuppy douche-baggery at its finest. By 'finest,' I mean chintziest.

Fri, 02/14/2014 - 14:25 | Link to Comment Woodhippie
Woodhippie's picture

If I remember correctly, that's the Bluthe spec home from the series, "Arrested Development".

Fri, 02/14/2014 - 14:11 | Link to Comment Rockfish
Rockfish's picture

Yippee ki-yay,...........Looks like I -we will get to bail them out again. 

Fri, 02/14/2014 - 14:12 | Link to Comment Rockfish
Rockfish's picture

  NOT

Fri, 02/14/2014 - 14:27 | Link to Comment smacker
smacker's picture

Oh WOW!!!

I love the smell of bank bail-outs in the morning.

And at the weekend they treat us to bank bail-ins.

Fri, 02/14/2014 - 14:26 | Link to Comment Johnny Cocknballs
Johnny Cocknballs's picture

Good article, but the writer seems to think he knows something WF doesn't.

Or as if they're doing something they won't make a lot of money on. 

WF is executing a plan to liberate substantial cash savings from asset-poor, low income borrowers.  An army of hack foreclosure lawyers is already on retainer.  Appraisers, brokers, originators, the bank, securitizers on Wall Street will all make money, a lot of it, right now, premised on promises to pay.   The mortgage holder can foreclose and, given a large down payment, unless there is a quite substantial depreciation, can sell for well under FMV and the original borrower is out his savings, out his interest payments, living in a van down by the river.

 

I once worked, many years ago, for a subprime unit of large bank.  I saw the sausages being made.  Most of the borrowers worked their asses off at low wage jobs.  They were hard working, but frankly probably not especially smart or savvy, and bankers and lawyers and mortgage brokers were all very happy to present a complex legal and financial document as something that would "work for them."

One of the brokers we dealt with was a disbarred attorney - he routinely got like 5 front points, and the same on the back, on some of these loans, and submitted some obviously forged, absolutely raping his clients.  I finally refused to take some W2s that were just laugh out loud fake, and a guy from his office essentially threatened me.  The appraisals were jokes.  But people got paid.  The real gansters were several pay grades above, securitizing this bullshit.  No one gave a single fuck that default and foreclosure was baked in.  Home prices could only go up, after all... no obligation to sell at FMV to repay the borrower, so you could market a foreclosed house for a discount, which made it an easier sell.

 

Anyone calling these borrowers deadbeats is a fucking clueless idiot.  This is another cash grab from people who probably worked for decades and left it in a bank then thought they could finally own a home.  They weren't buying it to flip it or to launder money, and they aren't doing it as part of some clever scheme to lose their life savings and end up on welfare living in subsidized housing next to crack addicts.  Sure, they "should" know better, but they don't.

 

And the people who do make a shitload of money off them, and then later on, the rest of us get to pay for it. 

 

 

Fri, 02/14/2014 - 15:05 | Link to Comment RaceToTheBottom
RaceToTheBottom's picture

And it will continue until dead men line the street

Fri, 02/14/2014 - 14:40 | Link to Comment halfawake
halfawake's picture

if i've learned anything from the last crisis... it's that i need to lever up and get me a 750k no-down, no-doc loan asap. then just squat in the house until they get to me a few years down the road. file for bankruptcy. peace.

Fri, 02/14/2014 - 15:07 | Link to Comment corporatewhore
corporatewhore's picture

just make sure you get that home in a judical foreclosure state.  don't get screwed by living in a nonjudicial kangaroo State without due protection for citizens.  all foreclsoures based on MERS without adequate documentation, just a wink and a nod between judge and his crony lawyer friends.

Fri, 02/14/2014 - 15:52 | Link to Comment halfawake
halfawake's picture

will do, thanks

Fri, 02/14/2014 - 14:44 | Link to Comment silverserfer
silverserfer's picture

this housing bubble ain't got nutthin on the apartment building bubble thats is going on right now near all major college campuses. 

Fri, 02/14/2014 - 15:02 | Link to Comment silverserfer
silverserfer's picture

happy friday from ZH unoffical favorite band!!

https://www.youtube.com/watch?v=w211KOQ5BMI

Fri, 02/14/2014 - 14:53 | Link to Comment halfawake
halfawake's picture

what comes after a trillion?

Fri, 02/14/2014 - 14:55 | Link to Comment MrVincent
MrVincent's picture

cue the music - "You've got the greeeeeen light!"

Fri, 02/14/2014 - 14:56 | Link to Comment Atomizer
Atomizer's picture

TARP II Bank bail-out. Work in progress.

Fri, 02/14/2014 - 15:02 | Link to Comment NihilistZero
NihilistZero's picture

If you had any doubts as to whether Housing Bubble 2.0 had popped here's your confirmation.  Flip seminars being advertised on SoCal radio is icing on the sweet cake of RE sadness :-)

Fri, 02/14/2014 - 15:05 | Link to Comment Atomizer
Atomizer's picture

Can they use their EBT card for financing a new home?

/sarc

Fri, 02/14/2014 - 15:18 | Link to Comment Blano
Blano's picture

I've heard 4 different ones here in Dallas just in the past month or so.

Fri, 02/14/2014 - 17:23 | Link to Comment corporatewhore
corporatewhore's picture

midwest also.  I was almost tempted to attend but work precluded me from wasting my time.  everyone and their brother is flipping these foreclosures one last time.

 

Fri, 02/14/2014 - 15:00 | Link to Comment RaceToTheBottom
RaceToTheBottom's picture

Bullish Pier to Pier mortgages.  Down with WS Repothicators

Fri, 02/14/2014 - 15:06 | Link to Comment wmbz
wmbz's picture

The sheep will line right up for sub-prime loans. Because they are going to become RE millionairs. Just like the greasy slick talking dude on late night TV told them he did, and he will show them how. There is a never ending supply of sucker morons out there. Of course it will not be their fault when they fail, it never is. It was some evil rich guy that is at fault.

You could start an investment group tomorrow and name it  Charles Ponzi - Stamp Investments & Real Estate Co. LLC. and have zero problem hooking hundereds of "investors". Because of the simplest of all principals...Greed and the thought of easy money. Fools and their money are parted day in and day out. 

Fri, 02/14/2014 - 15:07 | Link to Comment gwar5
gwar5's picture

Full Retard. So are the European widows and orphans going to be the suckers to buy the toxic assets this time? Nope, US taxpayers, what's left of them.

Fri, 02/14/2014 - 15:47 | Link to Comment css1971
css1971's picture

I'm sure they will be MyRA eligible.

Fri, 02/14/2014 - 15:10 | Link to Comment corporatewhore
corporatewhore's picture

the thought just occurred to me that HAMP was a precursor to Obamacare.  And we all know how successful HAMP was--saving millions from being tossed out of their homes.  NOT!  We shall see what this fine piece of legislative goo ultimately develops. into

Fri, 02/14/2014 - 15:44 | Link to Comment buzzsaw99
buzzsaw99's picture

it sounds like goldberg gamed the bankruptcy system to me. what goes around comes around though because he can kiss that $60K goodbye.

Fri, 02/14/2014 - 15:47 | Link to Comment Sokhmate
Sokhmate's picture

Rocket Surgery - I ascertain that this is my new favorite term

http://www.youtube.com/watch?v=KrJYpActs7g

Fri, 02/14/2014 - 16:05 | Link to Comment 22winmag
22winmag's picture

Predatory slime strikes again!

Fri, 02/14/2014 - 16:18 | Link to Comment Joe A
Joe A's picture

Actually the circle would be complete if idiots around the world would buy up these subprimes again.

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