Comments on: Condo Owners May be the Next Ones Out

By: Miami

Miami — Mon, 06 Aug 2007 13:58:51 +0000

We the industry, did this to ourselves. Mortgage brokers and owner artificially pushed values, appraisal went along and banks managed it the best they could. Now the system is correcting itself. If we are not careful the same thing will happen to small commercial loans.

By: Kate

Kate — Mon, 06 Aug 2007 05:50:40 +0000

Condos are different than a single family residence, and if someone defaulted on a condo it is a different matter when the bank goes to collect. The bank may have to deal with a board, the condo may be under assessments, the procedure may be more complicated.

In a downturn, condos are always the first to sink in value, that is probably because people value them less than an SFR!

It has absolutely nothing to do with redlining or prejudice, that is absurd.

Redlining is more like steering people toward or away from certain neighborhoods, it is rarely done these days since the penalties are SEVERE.

We are looking at a credit crunch and this is only the beginning.

Too many lenders made loans that should have really been illegal to begin with imo.

By: MD in OC

MD in OC — Sun, 05 Aug 2007 23:44:29 +0000

If Option One get’s heat on this and has to offer loans, which i highely doubt it, they will just make the guidlines so hard and rates so high that no one will take a loan from them anyway. Lenders do this all the time. if someone really wants to pay an exorbant interest rate then i am sure Option One would have an easy time finding a buyer for that loan.

By: Jefe

Jefe — Sun, 05 Aug 2007 20:29:16 +0000

I’ve read everyone’s version. Option One is not the only lender doing this. We all know this is the tip of the iceberg. Some lenders are focusing on high forclosure zip codes which is redlining. But at this point of the game lenders are less worried about state regulators slapping their hands for redlining and more concerned if they will be in business next week. If we all want to know how this is going to shake out, go back and read your history books on want triggered the great depression. e.g. bank failures. The modern day bank is your lender people don’t save money anymore but they upgrade that flooring or countertop to keep up with Jones, today’s savings account is your home. America has not felt any true financial hardship like our grandparents used to speak of and has gone out and gotten itself over extended by buying homes she can’t afford. Get ready to witness history repeat itself again.

By: jerry

jerry — Sun, 05 Aug 2007 19:46:43 +0000

You know, the decision to eliminate condo financing is a poor one, and I don’t think the majority of lenders will follow suit. The better decision would be to tighten the lending guidelines, require 5 to 10% down and review the condo projects more stringently that is done nowadays.

The condo market here in FL isn’t great, but Miami and So. Florida ARE NOT the entire state. SoFL has a glut of high price condos, which no one can afford anymore. This is due to the loss of the crap loan progarms that brought in all the investors and flippers, and the tightening of regular guidelines. The condo explosion sarted to move to other parts of FL, bit nothing like SoFL, and most of the large developments inland and elsewhere were/are conversions. Conversions can be flipped back to Apts. just as quickly.

Anyway, as I said, poor decision, as the condo market in greater FL is not as depressed as in SoFL.

By: Morgan Brown

Morgan Brown — Sun, 05 Aug 2007 18:30:04 +0000

I wasn’t saying it was redlining and I don’t think Jeff was either. I think he was saying that it may be possible to bring a non-frivolous suit against Option One under that legal statute. I don’t think it is redlining in the classic definition. But it isn’t about eliminating a property-type. You can get Option One condo loans in California (for how much longer who knows) but not in Florida – so it is more than just eliminating a property type (i.e. manufactured homes).

By: Redlining

Redlining — Sun, 05 Aug 2007 18:20:08 +0000

It’s not even close to Redlining. You people claiming “redline” must be condo owners. A better comparison would be Option One stating they aren’t going to loan money for a trailer home purchase.

Is everyone ready for the coming 2nd Great Depression?

By: Morgan Brown

Morgan Brown — Sun, 05 Aug 2007 17:15:14 +0000

Jim – For the record I would NEVER place an 800 FICO 50% LTV loan at Option One. I don’t see how you get from A to B on that one.

It was simply an example that they chose to completely eliminate the loan type instead of restricting credit guidelines; which is why I thought it was interesting.

While I have no problem being called part of the problem for my involvement in the industry I refuse to be called one for placing prime borrowers in subprime loans.

Thanks for the comment.

By: GotRocks

GotRocks — Sun, 05 Aug 2007 16:41:31 +0000

I really don’t think that Option One cares about red lining, especially if done at a state level. It would be a difficult case to prove against them.

But things in Florida are absolutely terrible, and any way that they can get out will be an improvement for them. Just so you know how bad it is there, a few months ago I was driving through SW Florida and there was a billboard for a subdivision. It was loaded with a bunch of happy people (maybe 10). So far, so good – but EVERY person in the picture was white. That is desperation. This developer did not even fear the inevitable lawsuit from Jesse Jackson’s extortionists. It’s that bad down there. I thought that I’d never live to see that day…

By: Westparker

Westparker — Sun, 05 Aug 2007 16:38:14 +0000

I doubt this will be considered Redlining. All subprime and alt-a companies limit the LTV’s allowed on condos without any problem.
If they wanted to avoid it entirely, they could do what the industry is doing to loans they don’t want to make. Simply leave the guidelines as is, just increase the the rate adjustment by 5 points. It will kill the volume without changing the guides.