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Subprime 2.0: 125% LTV Loans Are Coming Back

Tyler Durden's picture




 

Yesterday we mocked China for being desperate enough to push its tumbling housing market (which directly and indirectly accounts for some 80% of Chinese GDP per SocGen estimates) no matter the cost, that at least 20 developers were offering the kinds of mortgages that resulted in the first credit bubble crack up boom and collapse, namely "Zero money down."

Little did we know that the US, never one to lag in the financial innovation department had once again one-upped China, by bringing back from the dead the company that according to Housing Wire was "once a poster child for pre-crash subprime lending" - Ditech Mortgage Corp. 

Don't remember ditech? Then you certainly were not in the housing market during the peak bubble years last time around: ditech, which hasn’t been in the news in nearly five years, will also be developing co-branded and joint-ventures with financial institutions that want to offer mortgages. Supposedly, ditech is one of the better-known brands thanks to its heavy consumer advertising in the first half of the 2000s – remember the “Lost another loan to ditech!” ads?

But best of all, ditech was known as a leader in subprime. The bulk of the mortgages were interest-only, low-documentation subprimes, and ditech was a pioneer in offering 125% loans allowing the borrower to borrow more than the sale price.

So just how does Ditech plan on making its grand (re)entrance? With a bang, of course: "Ditech Mortgage Corp. is launching a new three-pronged approach to staking out territory with direct consumer lending, retail lending and correspondent lending with their 600-plus institutional partners. (In all nonformal references, the company goes with a lower-case spelling.)

This new ditech was formed from the assets from the GMACRescap estate, purchased by Walter Investment Management Corp. (WAC)/Greentree Originations in November 2012, and sources tell HousingWire that the new ownership is going all in on taking advantage of the ditech brand and the clean slate afforded by resurrecting the company from the near-dead.

 

This puts ditech in the unique position of having a clean slate on their customer operation and experience side, while at the same time working with the benefits of an established brand.

 

According to Cook, ditech conducted extensive research around what consumers most want in a home-lending partner.

 

“The fact that the ditech brand was so recognizable and highly regarded convinced us that this was the name under which we wanted to do business,” Cook said.

 

ditech’s first focus will be on partnering with financial institutions that want to provide mortgage and refinance loans to their customers.

... and only then will it resume offering 125% LTVs again, assuming of course, that by then the second, and final (because this time the central banks themselves are all in), uber liquidity bubble hasn't popped of course.

 

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Thu, 05/15/2014 - 13:31 | 4763217 goldhedge
goldhedge's picture

Amerika Stronk!

Thu, 05/15/2014 - 13:37 | 4763236 nope-1004
nope-1004's picture

Bankster donk!

Thu, 05/15/2014 - 14:11 | 4763376 max2205
max2205's picture

Btfd!   Bubble not done yet.....short squeeze under way

Thu, 05/15/2014 - 15:13 | 4763634 New England Patriot
New England Patriot's picture

The rich rules over the poor, and the borrower is the slave of the lender.

Proverbs 22:7

Thu, 05/15/2014 - 15:20 | 4763648 BTCTalks
BTCTalks's picture

So... You're telling me I can get a 125% zero down NINJA jumbo ARM with deferred interest only payments?  Sounds like I can get some more bitcoins!

Thu, 05/15/2014 - 17:33 | 4764136 PT
PT's picture

"Good news boss!  Even though the average house price is only a million bucks, I  figured out how to lend the average schmuck $1.25 mill."
"But the average schmuck only earns $30k." 
"Yeah, I got that sorted too!"
"What about the smart people who won't spend more than they can afford?"
"Well, I guess they will just get out-bid by our custo- ... wait a minute, did you say smart people???"
All together : "HAHAHAHAHAHAHAHAHA..."

Thu, 05/15/2014 - 18:06 | 4764244 Blankenstein
Blankenstein's picture

 

"People are smart" 

 

http://www.youtube.com/watch?v=Yc7V7q5Y7Hs

Fri, 05/16/2014 - 02:20 | 4765551 Villageidiot777
Villageidiot777's picture

"People are beautiful"

-L'oréal

"People are thin"

-McDonalds

"People are active"

-NetFlix

"People are healthy"

-Johnson & Johnson

Fri, 05/16/2014 - 15:01 | 4767350 PT
PT's picture

People are easily fooled by undeserved flattery ...

Thu, 05/15/2014 - 14:42 | 4763507 ForWhomTheTollBuilds
ForWhomTheTollBuilds's picture

I find its helpful to sometimes take a step back and contemplate how wrong I was about something (since I am in the habit of only remembering the stuff I was right about).

If you had told me just before the last housing bubble popped that we would be RIGHT back here with the same idiot schemes, often being run by the exact same idiots, I never would have believed you. 

I remember saying, "Youll never see nominal house prices this high again for at least 100 years".  I was only off by 94 years.

Sometimes you just need to let yourself "feel" the clue-by-four breaking over your head. Really allow yourself to believe that, yep, we really are this dumb.

Thu, 05/15/2014 - 14:56 | 4763574 James_Cole
James_Cole's picture

Put a monkey in front of a computer and they'll pump that bubble. Housing is one of the best conduits. 

For some funny demos of this check out:

http://www.youtube.com/watch?v=fYXD-_AMstQ

46mins in is classic. 

Thu, 05/15/2014 - 16:00 | 4763816 ForWhomTheTollBuilds
ForWhomTheTollBuilds's picture

Will check it out.   The intro looks promising. 

Thu, 05/15/2014 - 16:03 | 4763833 813kml
813kml's picture

In six more years the moneychangers will be floating balloons over the tent cities offering 125% LTV on a new lean-to.

Thu, 05/15/2014 - 22:31 | 4765133 auntiesocial
auntiesocial's picture

20.99% on your house. sure! don't worry about it! you will get that raise next year and you'll be fine! 

Thu, 05/15/2014 - 13:31 | 4763222 RockRiver
RockRiver's picture

This really isn't hard math.....How can it be good to borrow more than the collateral is worth?

Thu, 05/15/2014 - 13:37 | 4763228 Major Major Major
Major Major Major's picture

The extra 25% is to remodel the kitchen for the old lady

Thu, 05/15/2014 - 14:12 | 4763390 max2205
max2205's picture

Remodel the kitchen and the old lady

 

Botox and boob job!    We are saved!

Thu, 05/15/2014 - 16:34 | 4763821 813kml
813kml's picture

And you won't have to worry about her new boobs melting while she slaves over a hot stove, that's against feminist ideals.

Thu, 05/15/2014 - 13:44 | 4763267 replaceme
replaceme's picture

It's an investment.  Repeat that until it feels true.

Thu, 05/15/2014 - 13:47 | 4763276 ShorTed
ShorTed's picture

It's always smart to borrow more than the collateral is worth.  The real question is why would you LEND more than the collateral is worth?

Thu, 05/15/2014 - 13:52 | 4763297 replaceme
replaceme's picture

I'm surprised they'd stop at 125.  What's the downside any more, having to ask for more bailout money?  Risk is so 1995.

Thu, 05/15/2014 - 14:15 | 4763406 NotApplicable
NotApplicable's picture

Takes fewer notes to make an MBS package?

Thu, 05/15/2014 - 14:08 | 4763358 homiegot
homiegot's picture

That's not hard math, but the other math the bankers use is convoluted and involves exponents.

Thu, 05/15/2014 - 14:13 | 4763393 JRobby
JRobby's picture

Just for now until the HELOC market returns.

 

 

Thu, 05/15/2014 - 14:16 | 4763417 TheReplacement
TheReplacement's picture

Depending on what you can do with the extra, maybe you make money and maybe you don't.

How can it be good to LOAN more than the collateral is worth?

Thu, 05/15/2014 - 18:16 | 4764282 Aussiekiwi
Aussiekiwi's picture

Put it all on Red, if it comes up you end up with a free house, if it doesn't you walk away.

Thu, 05/15/2014 - 13:37 | 4763237 yogibear
yogibear's picture

Borrow all you can and buy PMs. Then default.

The banksters are stuck with the loses and you have the assets.

Thu, 05/15/2014 - 13:43 | 4763256 Big Corked Boots
Big Corked Boots's picture

Y'know, when the bankruptcy judge asks you what you did with the money, what do you tell him? Boating accident? Just sayin'.

Thu, 05/15/2014 - 13:54 | 4763304 Seasmoke
Seasmoke's picture

Bankruptcy. HA HA. Just default !!! And it will take 3+ years to foreclose, plus get a renter and its the best game in town. 

Thu, 05/15/2014 - 14:33 | 4763467 N2OJoe
N2OJoe's picture

Who knew it was even possible to blow 200k on one weekend in vegas ??

Thu, 05/15/2014 - 16:18 | 4763918 SumTing Wong
SumTing Wong's picture

I spent all the extra money on hookers and drugs...shhh...don't tell my wife. 

Thu, 05/15/2014 - 14:02 | 4763329 Bill of Rights
Bill of Rights's picture

Na, to fictional, tell him you bought 50lb bags of weed and smoked it all, then smile.

 

 

Thu, 05/15/2014 - 13:43 | 4763263 deflator
deflator's picture

Boating accident.

Thu, 05/15/2014 - 13:40 | 4763247 Rainman
Rainman's picture

Makes sense. Housing never goes down !

Thu, 05/15/2014 - 13:41 | 4763252 swmnguy
swmnguy's picture

When somebody does something like this, either they're idiots or they know something.  Lately it seems in the Finance world, they know something, and what they know is that they really have no exposure to risk.  They know they'll be indemnified against anything they might do.  If I knew I wouldn't have to face any negative consequences for my actions, I'd take on all kinds of risks.  But I'm a little guy, so I know differently, and my behavior reflects it.

Thu, 05/15/2014 - 13:54 | 4763254 ebworthen
ebworthen's picture

I have an acquaintance whose Sister feigns cancer to milk her Parents for cash to buy drugs.

She even feigned pregnancy back in the day; six months of sticking her belly out and faking morning sickness - but it worked.  Then she had a "miscarriage" and needed money for "anti-depressants".

This is no different.

Thu, 05/15/2014 - 13:43 | 4763258 JustObserving
JustObserving's picture

American exceptionalism.  The Fed will bail you out along with your bankster.

Today's drop in the markets will not be allowed to stand.

Thu, 05/15/2014 - 13:44 | 4763271 ptoemmes
ptoemmes's picture

See what happens when you don't indict, prosecute, and jail criminals...not only do the old criminals come back, but new ones are emboldened too.

Thu, 05/15/2014 - 14:01 | 4763315 Gaius Frakkin' ...
Gaius Frakkin' Baltar's picture

And then old people have the audacity to wonder what's "wrong" with young people. Fraud and dependence are more profitable than real productivity, so the young choose a life of fraud and/or dependence. Pretty simple really.

Thu, 05/15/2014 - 15:48 | 4763765 Nimby
Nimby's picture

And who raised those young people?  Or didn't raise them?  Either way, the previous generation is always responsible for the next.  Best thing the Boomers could do is die before they get old(er).

Thu, 05/15/2014 - 14:18 | 4763398 Mercury
Mercury's picture

Angello is tan, rested and ready!

 

Thu, 05/15/2014 - 18:00 | 4764219 Blankenstein
Blankenstein's picture

Ah... old leather face.

Kinda wish he would get back on the scene - his orangeness would at least provide some entertainment value during this infuriating farce.  

Thu, 05/15/2014 - 14:56 | 4763575 waterhorse
waterhorse's picture

Yes, they come back.  PennyMac is run by Stanford Kurland of Countrywide infamy.  He was #2 exec (pun intended) to #1 fraudster, Tangelo Mozillo.

Its disturbing to see former Countrywide executives in the industry again. “It is sort of like the arsonist who sets fire to the house and then buys up the charred remains and resells it,” said Margot Saunders, a lawyer with the National Consumer Law Center, which for years has sought to place limits on what it calls abusive lending practices by Countrywide and other companies.  

Thu, 05/15/2014 - 13:48 | 4763282 Dr. Engali
Dr. Engali's picture

If those Iraqis, Lybians, and Ukranians we just liberated know what's good for them they will buy some bundled loans and finance our life style or we may just have to pull our support and let Vlad deprive them of their freedom. 

Thu, 05/15/2014 - 13:50 | 4763287 corporatewhore
corporatewhore's picture

thank you God!

I can now get approved and buy a home after my five year hiatus. 

Thu, 05/15/2014 - 13:53 | 4763295 medium giraffe
medium giraffe's picture

21st century economic growth cycle: lend, offload, print, repeat.

Thu, 05/15/2014 - 13:56 | 4763307 Seasmoke
Seasmoke's picture

Mr. Banker. I refuse to sign that loan , unless it's 250% LTV. 

Thu, 05/15/2014 - 14:57 | 4763580 waterhorse
waterhorse's picture

and a Liar/NINJA and a Pick-A-Pay exploding option ARM!

Thu, 05/15/2014 - 14:00 | 4763321 homiegot
homiegot's picture

Let the dumbassery begin!

Thu, 05/15/2014 - 14:02 | 4763327 Atlantis Consigliore
Atlantis Consigliore's picture

But but but but?  thats 125% is in line with worth of Millennial College Loans,  125% to 150% over value with non dischargeable debts.

How bout that 125%  loan to value Key ling, recalled Shyster cars with all the defects and recalls,  dats worth 75%  of the mortgage / car loan debt.

Seems if you load up the sheeple with debt,  dey like SLAVES...vote ur way. 

 

Thu, 05/15/2014 - 14:03 | 4763332 yogibear
yogibear's picture

Last chance to empty the ATM (house),

buy assets (PMs) and dump out the

hollowed asset called a house on the banksters.

Help in really blowing up the Federal Reserve's phony balance sheet. Yes we can make the Federal Reserve's balance sheet $20 trillion!

Zimbabwe or bust!

Thu, 05/15/2014 - 14:07 | 4763354 dirtbagger
dirtbagger's picture

Maybe it's time to up the prescription, but I cannot find any where in the article where it says that ditech is CURRENTLY offering 125% LTV loans.   Slow news day perhaps?

Thu, 05/15/2014 - 14:19 | 4763426 NotApplicable
NotApplicable's picture

That's because Tyler never said they were. Read the end again.

Thu, 05/15/2014 - 20:00 | 4764691 dirtbagger
dirtbagger's picture

Read the headline -  Idiot article and waste of time

Thu, 05/15/2014 - 14:09 | 4763362 ghostzapper
ghostzapper's picture

Put the sheeple in cutesie homes, crank up the Bieber, and let them continue to vote for the status quo since without term limits politics is a waste of time.  Then, upon reset/collapse just say fuck it and cancel all mortgages. 

Thu, 05/15/2014 - 14:09 | 4763366 22winmag
22winmag's picture

The criminal conspirators National Association of Realtors will cheer and do backflips over this!

Thu, 05/15/2014 - 14:10 | 4763377 Bastiat
Bastiat's picture

Since values always go up, where's the risk?

Thu, 05/15/2014 - 14:11 | 4763379 CheapBastard
CheapBastard's picture

 

 

I'm gonna buy 20 of them Babies this time; the Gubmint is just begg'n us to buy 'm.

 

If it doesn't work out, "Just Walk Away." Fannie and Freddie will cover ur azz.

Thu, 05/15/2014 - 14:11 | 4763381 Laughinggrizzley
Laughinggrizzley's picture

Didn't we make money from bailing out GM/UAW? Oh, I guess not. 

Thu, 05/15/2014 - 14:13 | 4763394 buzzsaw99
buzzsaw99's picture

they don't even bother to change the names anymore

Thu, 05/15/2014 - 14:58 | 4763584 waterhorse
waterhorse's picture

Yeah, they could at least change it to DIE-Tech.

Thu, 05/15/2014 - 14:40 | 4763498 Yen Cross
Yen Cross's picture

     We should just skip all the semantics, and rename the United States to 'Blackstone Northwest LTD.'

Thu, 05/15/2014 - 14:42 | 4763508 fzrkid
fzrkid's picture

We now shift into 3rd gear with max acceleration towards the proverbial cliff.... The question still remains, how many gears this thing got?!?!?!?! It could be we are looking at ~2003ish repeat, markets will continue to rise, the masses will think it is different this time and spend borrowed money not wanting to miss the boat... May be we have a new 7 speed and Auntie Yellen taking advantage of each gear..

Thu, 05/15/2014 - 14:49 | 4763543 Nimby
Nimby's picture

So I re-mortgage my house to 125%, which is around $320,000.  I pay off all my non-deductible debts, and take the remaining cash and dump it in the stock market!

What could go wrong? 

Thu, 05/15/2014 - 14:51 | 4763549 Nimby
Nimby's picture

Who needs a helicopter when you've got ditech?

Thu, 05/15/2014 - 15:29 | 4763687 Cthonic
Cthonic's picture

ditech helicopter -> lithe credit epoch -> dice pitcher hotel

Thu, 05/15/2014 - 15:36 | 4763714 Duude
Duude's picture

I would like to take this time to thank the American taxpayer for letting me ride your ass to my heart's content. You'll meet me later when I sell my artficially overpriced home to you during the next bubble. If that bubble doesn't occur I would also like to thank you for the nonrecourse loan,  up to 36 months of future mortgage-free living, and still yet another opportunity down the road to play again no matter what a POS I am.  Ciao

Thu, 05/15/2014 - 15:38 | 4763722 Spungo
Spungo's picture

If they don't check my documents, can't I just give them a fake name? I'll give a hispanic name so I can sue them for racism when they ask for proof of who I am.

Thu, 05/15/2014 - 19:05 | 4764486 StychoKiller
StychoKiller's picture

Here's some useful SSN's to help you along:

R.M.Nixon: 567-68-0515

Ed Gein: 388-28-8860

Thu, 05/15/2014 - 15:46 | 4763753 TideFighter
TideFighter's picture

Dan Marino was Di-Tech's spokesman back in the day. He was featured in a commercial where someone hiked the ball to him and he yelled, "GO LONG!!" ...(not jocking here). He then appeared in Hawaii and several other "well deserved vacation spots" and driving a new vette. Di-Tech signs were all over Joe Robbie (football) Stadium. Commercials ran 24/7 and Di-Tech had to hire an additional 400 processors for Florida volume. Di-Tech froze the housing market-nobody could close without bringing money to closing. The affects were chaotic and most people just walked away. 

Thu, 05/15/2014 - 16:09 | 4763843 Froman
Froman's picture

"You know, we're roughly $7 billion in debt. But don't worry, I've got a plan. I've decided to consolidate all of our debt with one of those debt consolidation companies. That's right. We're gonna go with Ditech. Like me, you've probably seen their commercials late at night on ESPN2. You know, the ones with the guy who says, "Lost another loan to Ditech!" It's a funny commercial! -- Pres. G.W. Bush 2007 

Thu, 05/15/2014 - 16:32 | 4763966 Kokulakai
Kokulakai's picture

This, and the fact that HECM's can now be used for purchases is beyond the pale.

Got gold?

Thu, 05/15/2014 - 16:40 | 4763990 Atlantis Consigliore
Atlantis Consigliore's picture

Bricks and Mortar;  RE is an investment;  Slop;  Realtor raising head,  dont worry honey;  Real estate 

 

have I got a house investment for you and my girlfriend cant get you a Neg Am Ninja no asset income verif loan, at 125% LTV condo  None owner occupied,

with 5%,  push head down , Slobber, its muff muff Reeel Estate......u cant slopper  Lose. 

Thu, 05/15/2014 - 17:01 | 4764048 WTFMOFO
WTFMOFO's picture

I literally am getting a mortgage for no money down on $300K.   Interest rate is at 4.27% and I do not have to pay PMI.

I was going to put down 20% then was told that I did not need to.  The home and 12 acres appraised for right at $400K and I offered $298K and they accepted.  Why would I put down 20% when I can get a loan at 4.27% with nothing down? The loan terms are that I can pay it off early with no penalty....so why put the money down when I can put it in whenever I choose?

If this fucker blows up again I can walk away with nothing invested...hell I might even be able to get the government to bail me out!

It's a business decision....finally this lower upper class tax paying x-business owner supporting all the deadbeats is retiring and joining the club.  I am gonna set it up where you fuckers will be bailing me out the next go round!

Good luck MOFO's get it while you can.

Thu, 05/15/2014 - 18:24 | 4764322 Yen Cross
Yen Cross's picture

   If it weren't for the 12 acres, I'd question your judgement.

    Take that 20% you thought you needed for the DP and use it for perimeter security, water source, crops, guns & ammo, gold & silver or other non-perishable items for bartering, reliable communications  ect...

Thu, 05/15/2014 - 19:49 | 4764656 WTFMOFO
WTFMOFO's picture

I'm a combat vet and a "stacker" of pm's..got most of your suggestions covered but thanks for the list.

No debt here either (well the new mortgage will be all)....been debt free for 3-4 years...zero debt with a family yearly income of .65 the mortage amount.

You make your money when you buy not when you sell.

Thu, 05/15/2014 - 17:08 | 4764072 Otto Zitte
Otto Zitte's picture

Why rob banks? Why not just join the IRS?

Thu, 05/15/2014 - 19:09 | 4764500 StychoKiller
StychoKiller's picture

I understand that Govt employees can get away with NOT paying income taxes, just saying.

Thu, 05/15/2014 - 18:08 | 4764251 yellowsub
yellowsub's picture

Probably shell companies operated by the FEDs.

Thu, 05/15/2014 - 19:35 | 4764602 fzrkid
fzrkid's picture

http://www.ditech.com/buy-a-home.html

 

FHA Loan

Insured by the Federal Housing Administration (FHA), an FHA loan can be one of the easier home loans for which to qualify. Advantages of a ditech FHA loan include:

  • Down payments as low as 3.5% (requires mortgage insurance – ask your Home Loan Specialist for details)
  • An allowance for less-than-perfect credit
  • * Loan limits up to $729,750 (note that loan limits vary by state and country)

An FHA loan may be right for you if you do not have the down payment required for a conventional loan or you are a first-time homebuyer.

Someone buying a ~$700,00 cannot afford a down payment..... Interesting.. Only a tax payer would be niave enough to underwrite something like this........... (AKA FORCED)

Thu, 05/15/2014 - 21:07 | 4764883 Gromit
Gromit's picture

There s one thing worse than making bad loans....falling house prices.

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