October 25, 2008

No Money Down!



The middle column of this graph lifted from Dr. Housing Bubble is the interesting one -- it shows by year what percentage of first-time home buyers in California got a mortgage with no down payment.

In the last three years of the Clinton Administration, it was only about 7%. In 2002, Bush started making speeches denouncing down payments as the primary barrier to minority home ownership. By 2003, 20% were getting their first house with zero money down. By 2006 it was 41%. Think about the quality of debtor who was left to buy his first home in 2006 with no money down after two years in which one-third of all home purchases were no money down. Does the term "scraping the bottom of the barrel" come to mind?

Was it different in the rest of the country? I don't know, but California is more or less what mattered. Remember the old John Prine song about a smack addict, "Daddy Has a Hole in His Arm Where All the Money Goes"? Well, California is the hole where all (or about half) of the defaulted mortgage money went. Similarly, if Bush's plan to add 5.5 million minority homeowners by 2010 was going to happen, it had to happen most of all in California, which has 20 million minority residents.

If Bush was a cynical bastard like Richard Nixon, he could have told his people right after he got re-elected in late 2004 to turn off the money machine. Think of how much less damage there would have been without all the idiotic loans of 2005-2007. But, no, Bush drank the Kool-Aid. No soft bigotry of low expectations for him!

19 comments:

Big Bill said...

I keep asking myself, "what happens to all the Mexicans that California housebuilders brought in to build those McMansions?"

I kept hearing what a benefit they were to the economy, how the economy wouldn't have boomed without them, etc.

So where do they go now?

tommy shanks said...

Whatever happened to private mortgage insurance (PMI)? Used to be, any mortgage with less than 20% down had to carry PMI.

I put 10% down on home in 2000, and I had to pay PMI each month. It wasn't insignificant either -- something like $50. Enough to motivate me (along with lower rates) to refinance 2.5 yrs later and put more equity in the home.

Does anyone know what happened to PMI? Was it being waived, or has the system been overwhelmed by the number of defaults?

Anonymous said...

Conservatives- Get Drunk and Vote Obama!
The British colonies had Stupid Party governors and Crooked Party Legislatures; the worst of both worlds. Tories and Whigs, Reps and Dems- still stupid and crooked.
Since both parties get some pork, neither will clean house. It just gets dumber and crookeder all the way down.
Knock back a few, hit the polls, vote for the slick hustler who's probably no more loyal to Marxism or Black Nationalism than to his pastor, his political associates, or his grandmother.

bob said...

Pretty notable how the 0 downpayment scheme was a low and stable 3.8-3.9% when Clinton was in office, but Bush's term in office sees in go to 21.1%.

AMac said...

"What happens to all the Mexicans that California housebuilders brought in to build those McMansions?"

Armies of the Blight: Men Seeking Work. Anything Accepted. Cash Only. Illegal Not a Problem.

I looked ahead and around and in the rear view mirror. Standing there, many of them looking at me and waving their hands to signal their availability, was a small battalion of around 300 out-of-work Mexican males, mostly young. I thought, "Well, they may be here to 'do the jobs Americans won't do,' but there is clearly not enough work."

daveg said...

Two data points:

1) We are doing some interior house painting and getting bids. A mexican painter just underbid a white painter by a factor of 10 for taking down wallpaper and painting two rooms. When we run the numbers I think he will make about half the minimum wage (3.50/hour) unless he paints like The Flash. Times are tough for illegal and quasi-illegal labour.

2) Our waiter tonight was a ex-mortgage broker. I know because we got to talking and he told us what his "day" job was. He said used to be a full time waiter, but left for the mortgage broker job about five years ago. Now he is back waiting tables, but still doing brokering "on the side."

Don't fell bad for him though. It was a nice restaurant and he probably pulls in $200-300 a night cash.

Anonymous said...

'So where do they (Mexican illegals) go now?'

We know damn well where they will go:

ILLEGAL ALIENS WILL GO STRAIGHT TO THE NEAREST NEW NEW DEAL FEDERAL GOVERNMENT INFRASTRUCTURE JOBS PROGRAM.

That's right. Illegal aliens will be the main benefactors of Obama's OR McCain's mega New Deal II infrastructure jobs party.

And at the same time most working class American citizens will stand in soup lines. Especially white male American citizens. They will be last in the new Federal Government pecking order JUST AS THEY HAVE BEEN LAST FOR THE PAST 40 YEARS.

Got foreign citizenship? You go ahead of Whitey.

Got African-American credentials? You go ahead of Whitey.

Got La Raza credentials? You go ahead of Whitey.

Got Asian credentials? You go ahead of Whitey.

Got Middle Eastern credentials? You go ahead of Whitey.

Got 'Indegenous Peoples' credentials? You go ahead of Whitey.

Got any non-white heritage at all? You go ahead of Whitey.

Got any non-Christian religion? You go ahead of Whitey.

Got a vagina? You go ahead of the White Man.

THE ENTIRE FEDERAL SYSTEM IS NOW SET UP TO DISEMPOWER WORKING CLASS (NON-ELITE) WHITE MEN.

But elite white men will be tolerated for another twenty years or so. Because it's dangerous to attack them at this point. They have too much money and power. So split them from the lower class whites (isolate them) and then deal with them later.

Meanwhile the new government infrastructure spending (or alternative energy spending) is just another great opportunity to marginalize and impoverish working white men and reduce their earning potential. Reducing the earnings of white men is the best way to disconnect white women from white men en masse.

Vernunft said...

Bush is just the head of one branch of government - and the federal government, at that. It's convenient to place the blame on him (he's an awesome strawman) but come on. Really?

That doesn't work. Heck, why not "blame" the stable housing market during the Clinton years on the Republican Congress! Or on Chief Justice Rehnquist?

mnuez said...

Totally OT but I thought I'd share with the opilum a comment I just posted (awaiting moderation) on bill Ayers' blog. On my rereading of it I realize that of course other conclusions can be drawn from the facts than the one that I currently prefer but I believe that my current personal moral preferences are in no way negatively influenced by the facts. Anyway, here's the (as yet unpublished) comment:

Well, since you’ve been in the news as of late I’ve been doing some reading up on you and the first thing that I have to say is - dude! this comment box that I’m writing in so amazingly messed up! Get a blogger account or something because this arbitrary spacing between the letters makes comments almost unwriteable…

Beyond that though (and believe me, it’s a challenge to get beyond that) pretty much all that I’ve read about you is rather positive - to my eyes at least. I wish you lots of success and happiness and all that and I hope that you’re doing well.

mnuez

P.S. Because I just can’t leave well-enough alone I’ll give you reason to hate me by pointing out that I believe it’s more likely than not that there actually IS such a thing as differences in racial averages when it comes to certain abilities or proclivities and that the almost certain fact of this so self-evident that to deny it one would have to be willfully blind. At the same time though, these minor inherent differences in the innate mathematical abilities of Nigerians and Jews says not a whit about the inherent VALUE of people and IN NO WAY WHATSOEVER contradicts the social preferences of either Jesus Christ or Karl Marx. So I goddamn wish our (humane) side of this great moral struggle would stop motherfuckin denying the clear truth of the thing and appearing to all the world like troglodytes.

Anonymous said...

At the same time though, these minor inherent differences in the innate mathematical abilities of Nigerians and Jews says not a whit about the inherent VALUE of people and IN NO WAY WHATSOEVER contradicts the social preferences of either Jesus Christ or Karl Marx.

Speak for yourself mnuez.

Differences, genetic or otherwise, always justify unequal treatment. The dispute is about the degree of different treatment. I would never have wished to be "integrated" with blacks, or to have Mexicans flood my country even had I believed them 100% equal.

I'm neither a Christian nor a Marxist, so I'm not particularly interested in their "social preferences."

Anonymous said...

Conservatives- Get Drunk and Vote Obama!.

Noooooo. From what remedial prison school did you get your GED?

What would be the point of a conservative voting for Obama? Your vote would just get lost amongst all the other Obama voters. Instead, pick a 3rd party candidate from a right wing party and vote for him. It shows the GOP how much support they're losing with nominees like McCain. The Republicans need to know there's support to be won by standing on principle rather than drifting to the left.

It was a nice restaurant and he probably pulls in $200-300 a night cash.

Pray that the restaurant industry is the next victim of the recession and people start brown bagging. 20% of illegals work(ed) in construction - but 23% work in the restaurant industry.

but Bush's term in office sees in go to 21.1%.

If Bush had deliberately set out to destroy the GOP he could not have done a better job, which makes me actually wonder whether that was his goal.

Illegal aliens will be the main benefactors of Obama's OR McCain's mega New Deal II infrastructure jobs party.

One word: riots.

miss marple said...

"ILLEGAL ALIENS WILL GO STRAIGHT TO THE NEAREST NEW NEW DEAL FEDERAL GOVERNMENT INFRASTRUCTURE JOBS PROGRAM."

But wait, won't they be able to go home where the cost of living is much lower because of welfare payments to their citizen children?

Mr. Anon said...

"tommy shanks said...

Whatever happened to private mortgage insurance (PMI)? Used to be, any mortgage with less than 20% down had to carry PMI."

I bought my house on a zero-down basis with a 20/80 mortgage. You take out one mortgage for 20% - which is in effect the down payment, although it's a matter of semantics at that point, and another mortage for the remaining 80%. Essentially, you are instantly taking out a second mortgage to cover the down payment. This second mortgage comes with a much higher interest rate (3 1/4 points higher in my case). However, it allows you to buy with nothing down (other than earnest money) and avoid PMI, which is advantageous as you only pay interest which is tax deductable, versus PMI which is not.

Ronduck said...

THE ENTIRE FEDERAL SYSTEM IS NOW SET UP TO DISEMPOWER WORKING CLASS (NON-ELITE) WHITE MEN.

You could say that the entire welfare state is now a giant minority feeding and breeding program.

none of the above said...

If the economy gets seriously ugly, we will see substantial pressure to send a lot more of the illegal immigrants home, along with a lot of them going home themselves because they can't find work.

This will probably have interesting effects in a lot of countries. I wonder whether we'll see big political upheavals in Mexico, El Salvador, Guatemala, and other large sources of cheap US labor, if US politics and the economy contrive to send a lot of ambitious, hard-working guys home where they've no way to feed their families. You could imagine an economic boom in those countries, too, but I think I'd bet on revolution instead.

American Goy said...

bush is a retarded man who needs psychological help.

his handlers and the shadow cabinet decided that they could make BIG money in the bubble.

to keep the bubble going they needed to keep the ponzi scheme going - the loans, more loans and even more loans to less and less qualified debtors.

it wasn't done to combat racism per se (pshaw, man) but really was a plan to keep the bubble going... till after the election.

timing is off by a few days but meh... close enough.

yes, tinfoil hat time, but you gotta admit... this makes sense... as opposed to "the ni*gers did it".

pshaw, indeed.

Mr. Anon said...

"American Goy said...

yes, tinfoil hat time, but you gotta admit... this makes sense... as opposed to "the ni*gers did it"."

Try a few more layers of Reynolds wrap - what you're using obviously isn't enough.

Noone here has said that blacks did it. The wave of mortgage defaults is largely due to minorities, not that minorities colluded to do this - just that the financial system (largely white) focussed on them as a market.

And even then, the minorities in question were mostly mexicans, not blacks. Why is it that when you hear the word "minority" you think black? That may have been true 20 years ago, but no longer. Mexicans are the new minority, and will marginalize blacks even further.

Sebastian said...

The Mexicans were a boon. But when the bubble burst, they're now either going back home, or looking for cash jobs elsewhere.

My bet is they're going home, or soon will go home.

Recession may work better than a fence, an increase in ICE's budget or any other cockamamie scheme thought up the the wingers.

During recession, it may be a good idea to come up with immigration policy that's not based on "brown people are taking over" rhetoric.

Because if Americans were willing to do anything for a job. Appalachia would have and should have been empty.

Anonymous said...

Gold is expected to skyrocket soon, what impact do you think this will have on housing prices?