{"id":1747,"date":"2007-08-05T05:28:07","date_gmt":"2007-08-05T12:28:07","guid":{"rendered":"http:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/?p=1747"},"modified":"2008-01-08T20:34:20","modified_gmt":"2008-01-09T03:34:20","slug":"the-mortgage-tax-act-of-2007","status":"publish","type":"post","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1747\/the-mortgage-tax-act-of-2007\/","title":{"rendered":"The Mortgage Tax Act of 2007"},"content":{"rendered":"

Michael Cook did an excellent job<\/a> explaining the two noteworthy debacles of last week. American Home Mortgage went belly up<\/a> and Bear Stearns may be downgraded<\/a> to a negative rating. Thursday afternoon, Angelo Mozilo of Countrywide Financial, did his best Nero impression<\/a> by muttering two words to analysts; “Don’t Worry<\/em>“.<\/p>\n

Mr. Mozilo may be parroting Bobby Mc Ferrin<\/a> but the rest of the lenders aren’t. Non-conforming lenders readjusted to what they now call “risk-adjustment” pricing. Basically, at Wall Street’s direction, the large lenders added about a 1% fee to the stated income and no income documentation loan programs. Loans that conform to FNMA or FHLMC guidelines<\/a>, with verified income and assets, remain at their original pricing. There still are 100% financing programs available to those with good credit and the ability to make the payments.<\/p>\n

Have borrowers who choose not to disclose income documentation become personae non gratae<\/a> overnight? Not really. We have always known that light documentation borrowers, who can not demonstrate an ability to repay the loans, have been a higher risk. There has always been a price adjustment for that risk. Large down payments (20-30%) used to be the norm for those programs. It wasn’t until after our country was attacked, in September of 2001, that Wall Street started reaching for yield. The easy money policy and anemic stock market of that post-attack economy left the investment bankers STARVED for business; they found that business in high risk home borrowers.<\/p>\n

This brings us to the Mortgage Tax Act of 2007<\/strong>. The way out of this mess is to originate more product. That sounds counterintuitive, doesn’t it? Well, if lenders can originate more loans, they can spread the risk across more assets. The risky loans (stated and no doc) now have a higher risk adjustment. That risk-classified pricing model is not unlike the insurance industry’s move to segregate tobacco users from non-tobacco users. Smokers are charged a higher insurance premium than non-smokers because their life expectancy is lower. That’s what the lenders Read more<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Michael Cook did an excellent job explaining the two noteworthy debacles of last week. American Home Mortgage went belly up and Bear Stearns may be downgraded to a negative rating. Thursday afternoon, Angelo Mozilo of Countrywide Financial, did his best Nero impression by muttering two words to analysts; “Don’t Worry“. Mr. Mozilo may be parroting […]<\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_crdt_document":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[29,26],"tags":[],"class_list":{"0":"post-1747","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"hentry","6":"category-group-therapy","7":"category-lending","9":"no-featured-image"},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":3151,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/3151\/so-how-does-your-lender-view-you-as-a-customer\/","url_meta":{"origin":1747,"position":0},"title":"So How Does Your Lender View You As A Customer?","author":"Doug Quance","date":"May 20, 2008","format":false,"excerpt":"If Your Lender Is Countrywide - This Telling Email Might Give You An Idea This email is being circulated on the web... I cannot verify its authenticity or content, so until it can be confirmed, take it with a grain of proverbial salt. A Real Countrywide Email From the Office\u2026","rel":"","context":"In "Dirty Laundry"","block_context":{"text":"Dirty Laundry","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/dirty-laundry\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":2229,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/2229\/what-really-caused-the-lender-meltdown-and-other-important-stuff\/","url_meta":{"origin":1747,"position":1},"title":"What REALLY Caused the Lender Meltdown and Other Important Stuff","author":"Russell Shaw","date":"November 15, 2007","format":false,"excerpt":"The Wall Street high finance folks who contrived a system to endlessly send money to lenders and reward them for making fraudulent loans got what they rewarded. Here are a few Letters to the Editor from Businessweek: The Heat On Angelo Mozilo Maria Bartiromo's interview of Angelo Mozilo (\"The heat\u2026","rel":"","context":"In "Realty Reality"","block_context":{"text":"Realty Reality","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/realty-reality\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":1250,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1250\/a-farewell-to-arms-one-less-option\/","url_meta":{"origin":1747,"position":2},"title":"A Farewell to ARMs: One Less Option","author":"Brian Brady","date":"April 1, 2007","format":false,"excerpt":"Are Option ARMs the next casualty in the non prime mortgage meltdown war? Wall Street fired the shot heard 'round the world in the mortgage default war by demanding repurchases from subprime lenders. Lenders either closed their doors or waved the white flag and allowed the conquering army to annex\u2026","rel":"","context":"In "Real Estate"","block_context":{"text":"Real Estate","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/real-estate\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":1828,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1828\/sub-prime-borrowers-got-lucky-they-didnt-pay-enough\/","url_meta":{"origin":1747,"position":3},"title":"Sub-Prime Borrowers Got Lucky- They Didn’t Pay Enough","author":"Brian Brady","date":"August 20, 2007","format":false,"excerpt":"I floated an idea about a federal bailout, along the lines of Chrysler in 1980, of Countrywide Financial Corporation. I wanted to highlight two things in this post: Countrywide is in trouble and their trouble is our trouble. My premise is that the collapse of CFC goes beyond the 55,000\u2026","rel":"","context":"In "Group Therapy"","block_context":{"text":"Group Therapy","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/group-therapy\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":2485,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/2485\/buying-countrywide-why-bank-of-america-is-the-wrong-buyer\/","url_meta":{"origin":1747,"position":4},"title":"Buying Countrywide: Why Bank of America is the WRONG Buyer","author":"Brian Brady","date":"January 11, 2008","format":false,"excerpt":"Countrywide (CFC) has been acquired by Bank of America. This should come as no surprise to Bloodhound readers; we discovered the weakness at CFC last Spring and speculated about the price last Summer. Robert Kerr, Matt Heaton, and Bob Wilson, all Bloodhound readers, tipped me off to conjecture, asked all\u2026","rel":"","context":"In "Disintermediation"","block_context":{"text":"Disintermediation","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/disintermediation\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":4484,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/4484\/bloodhound-blog-radio-hosts-matthew-padilla\/","url_meta":{"origin":1747,"position":5},"title":"Bloodhound Blog Radio Hosts Matthew Padilla","author":"Brian Brady","date":"September 17, 2008","format":false,"excerpt":"Have you been listening to Mortgage Mondays on Bloodhound Blog Radio?\u00a0 Each Monday afternoon, at 4PM, we invite\u00a0 REALTORs to listen to and participate in our 40-60 minute \"radio broadcast\". 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