Its nice to see someone actually reads the real estate numbers properly, so thank you for the article.

I don't have any specific stats, but rates are great for the "A" borrower - that's for sure... I think the whole "crisis" in everyone's mind is just that not EVERYONE can get a loan anymore

Dave Ramsey doesn't know what he's talking about.  I like Dave Ramsey because he recommends a debt free lifestyle and we need a lot more of that.

But, he doesn't know how hard it is for the average family to buy a home today. 

Well Dave Ramsey is a smart guy and is very truthful. It is tougher these days to get a loan from traditional banks due to the secondary market crisis.

Here is my blog on this topic:  http://activerain.com/blogsview/421280/How-to-solve-the

Sadly, there is a crisis of unheard proportions in the mortgage arena.  What we are seeing is akin to throwing a hand grenade into a busy storefront and then watching the ensuing chaos unfold.  We see it in the ARM market with lenders being forced to dump hybrid ARMS due to liquidity restrictions.  We now see it in the jumbo market with the same scenario.  Lenders are pricing these two products because they do not want the paper.  We have MI companies boycotting CA and we have very real confidence issues in our banking sector. 

1 in 217 homes in CA is in foreclosure.  The problem lies in the run up in equity between 2000-2006 and the subsequent refi orgy that ensued.  People borrowed for consumption and not conservation.  I 100% advise separating equity from a home for investment purposes for the disciplined person.  Problem lies in the fact that there are hundres of thousands in my state who can no longer afford to live here and as a result will walk away from their homes and start over. 

I don't see one.  We are closing loans every day getting people who have paid their bills on time, that have reserves and are responsibl for their financial well being. 

Dave

Fair enough.  That is the beauty of professionalism:  We can agree to disagree. 

With CA being the 8th largest economy in the world, we have a little bit more to say about the issue.  There are very real liquidity issues within the secondary trading for mortgage bonds.  These problems are systemic.  We can say there is no problem.  Like Bush, when say it is sunny over and over and yet we are standing in the middle of a rainstorm, we start to doubt what you are saying. 

This would be a good one to pull stats on. 

There is something I have noticed while doing BPOs.  The number of FHA loans have jumped phenomenally.  Conventional is getting rare.  FHA, VA and Cash are the new financing vehicles.

John, Jonelle, Lenn, Nathan, Mike, and Dave - Thank you for commenting!

I appreciate hearing the different perspectives and perceptions.

So, can anyone provide the numbers I asked for?  I'm happy either way they fall - whether they confirm, refute, or are ambiguous about Dave Ramsey's statement.  I'm mostly interested in getting these numbers as facts.  Once we have some facts, it seems to me there may still be discussion about what those facts mean.  And I suspect there probably will be some differences in different regions.

Can we get these facts?  Where would we look for them?  How would one go about compiling them for one's own region?  Is ANYONE tracking sales by the general category of loan used?

Renee - thank you.

Are you able to pull these stats for your region?

Reading your comment made me realize it is important to define "traditional" and "subprime/exotic" so that a true comparison could be made.  I didn't hear or see any clear distinction made by Dave Ramsey; he didn't define the dividing line - just the general categories.

The NW has been resilient to the doom and gloom of the mortgage crisis.  Hope it lasts! 

On another note.  People that pay their bills, and are fiscally savvy have NO PROBLEM qualifying for a loan.  For the most part, it is the people that are not good with money and don't pay their bills on a regular basis that are not qualifying anymore...you have to ask yourself, should they have every been able to qualify?  As we see now they are hurting themselves more than if they continued to rent.

Ok lots and lots of data on this issue: 

http://blogs.marketwatch.com/greenberg/2007/12/06/   

http://www.nytimes.com/2008/02/12/business/12credit.html?_r=1&pagewanted=2&oref=slogin

Here are some highlights:

1. 4% of prime mortgage are in some stage of default or foreclosure
2. Wells Fargo has $84 billion of worthless paper just in equity lines with an average score at loan funding of 730
3. Moody's is expecting a 15% default amoung existing second mortgages in 2008
4. Sub-prime only represents 25% of all the problem loans out there
5. The delinquency and foreclosure rate for all mortgages, 7.3 percent, is higher than at any time since the group (American International group) started tracking that data in 1979, largely as a result of the surge in subprime lending during the last few years.
6. Among default rates among prime borrowers in Florida, 25% were full doc, AA credit non-owner occupied purchases. 

There are still loans to be had, but realistically, 30% of the people that bought homes nationwide shouldn't have been in the pricepoint they purchased OR in the first time homebuyer market at all.  You can't remove 30% of of the people, even 10% of the people from the demand pool and not have it effect prices.  They will go lower. 

Mike - it appears that your highlights don't all agree.  In particular how can this problem come "largely as a result of the surge in subprime lending" and at the same time represent only "25% of all the problem loans out there?"

I'd like to see the numbers - how many homes have been sold using "traditional" loans (I think that means prime fully-amortizing fixed-rate loans) as opposed to all other loans over the past 5-6 years.  Ideally we should look at the numbers quarter by quarter and within the same region(s) because we all know that houses sell differently depending on location and time of year.

It sounds like you have (possibly out of necessity) built your business based almost exclusively on the "other" loans.  If so, it would not be at all surprising for you to have the perspective that the whole market is imploding.  Someone else may have stuck to "traditional" loans and as a result has not experienced much (if any) change in business.

I'm interested in seeing if the hard numbers of home sales (by loan type) back up or refute Dave Ramsey's claim.

Dave - I think the conversation is very interesting.  Ok here is where I am at.  I have funded over $340,000,000 since I started in 1994.  I have done every type of loan imaginable, in particular Pay Option ARMS.  Not every loan in the market was a good loan, nor good for everybody, but in particular the Pay Option ARMS as a tool for a sophisticated borrower to arbitrage and invest the difference is a great tool.  However, I wouldnt put everyone in this product.  I had a litmus test:  680 min credit score; exceptional savings habits; excellent debt management and a min of $100,000 in investments with an advisor.  These people were disciplined enough to save the difference. 

Having said that David, I think, all things being equal, that the 30 year fixed up until NOW, was a poor product type but certainly superior to a 15 year fixed.  However what the client truly felt comfortable with, regardless of my advice & empirical evidence was what I delivered.  For example, I would in 100% of the cases recommend a 30 vs. a 15 yr mortgage simply because in 99%+ of my cases a client by simply taking the net after tax payment differential and invested it in say tax free munis at say 5% would have enough money in only13.125 years to pay the mortgage off in it's entirety.  In addition, the client had access to their money for the entire 13 years in case of emergency or business opportunity. 

As for the stats David, they are not mine.  If you read the two links I provided, these #s come from the MBA and the American International Group who is the only group to divide out the #s as you had requested.  Their #s {not mine} clearly state that 25% represent sub-prime loans. 

The question is what is a sub-prime loan?  A prime loan run through Fannie Mae often asks for no income documentation, no asset documentation and I used to get appraisal waivers as well.  Sounds pretty much like a sub-prime loan to me.  But the reality is that is lumped in with prime loans. 

So, why is it ultimately wrong for Fannie/Freddie to waive income, asset, and even appraisal requirements while other lenders follow suit in their own way (stated income, stated asset) and yet they are demonized but Fannie/Freddie gets a free pass? 

This is a legitimate questions to ask.  So the reality of the #s as I interpret them is that there is a systemic confidence problem in ALL paper on the books.  How does Bear Sterns go from $60 a share to $2 in 17 days?  How about Carlye and the Thornburg group?  Out of nowhere they faced huge margin calls despite the fact that their portfolio of "AAA" rated {Moodys} mortgage backed securities were 100% current with no delinquencies.

The problem lies in the simple fact David that what once worked in terms of identifying future repayment isn't as solid as it was.  What makes a person default on a loan? 

So in my humble opine, I would simply say that the problem isn't sub-prime but rather loose lending standards by 100% of companies out there for the period of 2000-2005.  How many times did you honestly get an FHA approved underwriter to waive this or that?   How many stated income loans were funded via Fannie and Freddie?  Hell they were offering that product still up until last month.  Isn't that a "sub-prime" loan? 

I will keep digging for more facts as well.  Nice dicussion sir! 

I think this is a great story to feature.....the discussion alone will be interesting to follow.

I am working on a big project right this second, but will come back this weeked, and see what Mike, Dave, and whoever else comments comes up with.

I'm a little torn,  I agree but I disagree.  I'll have to check back and weigh all comments. 

well, you think so?

I'm a little late to this party, but here's my two cents:

You can't ignore the problems in the mortgage market because they affect everyone.  Home prices are deflating because the pool of qualified buyers is shrinking by the day, and not just because there aren't any "sub-prime" programs left.  Declining market policies have limited lending in many areas to 90% of the purchase price.  Loan level price adjustments have raised rates for people with scores as high as 739.  Stated income loans have essentially disappeared regardless of credit scores, eliminating the financing options for scores of people who have legitimate income but lack the ability to fully document their income, like employees who rely on tips, and many self-employed borrowers.  Combo loans to help borrowers buy with little down payment while avoiding PMI are also essentially gone.  All of these factors work to reduce the pool of buyers, which effects everyone.

The manner in which these factors are felt throughout the rest of the economy is simply to complex to cover here.  Howver, saying that there isn't a mortgage crisis in this country because people with great credit, a big downpayment, and stable, verifiable income can easily get a loan is quite myopic, in my opinion. 

The reason that this is being viewed as a crisis is because consumer spending makes up an enormous chunk of our economy. One of the things that consumers love to spend their money on in good times is real estate. Dave Ramsey is full of it! I've heard a whole lot of his propaganda and it seems to me that he says whatever he knows will appeal to his listening audience. It is unbelievable to me how many people listen to this guys crap... He might as well be running a cult. The fact is that yes we are in a mortgage crisis not just a "Subprime Mortgage Crisis". Not only did all subprime products which were responsible for a huge portion of consumer spending go away but many of the Alt-A and even A products have been restricted and in some cases cut out completely. I am a mortgage professional; not a real estate sales person. My volume has actually never been higher. I attribute my numbers to the fact that lenders who do not stay educated get cut from the loop and I get the business that they could've had. Still, there is no denying that the financial world has been turned upside down and the problems first became evident in the mortgage arena.

Thank you all for your contributions to this discussion.

After reading all the comments (so far) and checking out most of the supplied links to other information and commentary (Thank you for providing those!), it appears to me that Dave Ramsey over-simplified things a bit.  Here's what I now think:

(For the sake of simplification, I'll define "traditional loans" as fixed-rate loans that are fully-amortizing throughout their life.  "Non-traditional loans" then, include: ARMs, IO, and Neg-ams.)  Painting with very broad strokes, borrowers can be generally described as falling into one of four different groups:

1. Prime borrowers in low-cost traditional loans (the majority of Prime borrowers);
2. Sub-prime borrowers in high-cost, but traditional loans (relatively few);
3. Sub-prime borrowers in high-cost and/or high-risk non-traditional loans (the majority of sub-prime borrowers); and
4. Prime borrowers in low-cost non-traditional loans. 

Group 1 has not been in crisis, and is not likely to go into a crisis.  (I believe this is the group Dave Ramsey was speaking of when he said, "There is no mortgage crisis."  However, I'm fairly sure he would also limit it a bit further to exclude high-LTV loans that require MI.)  

The "sub-prime mortgage crisis" started with Group 3 and that group remains in the most significant crisis.  But it spilled over into group 4.  And, due to their own lack of skill and/or education in dealing wisely with money, group 2 is also suffering a bit of a crisis.

When the loans were made to those in Group 3, they helped increase the value of homes significantly due to the laws of supply and demand.  This turned into a feeding frenzy whereby a number of prime borrowers were tempted and encouraged to take advantage of the high-risk loans as well in order to either purchase the highly-inflating real estate or pull the money out of their "home bank" in order to invest it elsewhere.  When those loans payments started to increase (as they were inevitably going to do) and home values stagnated or dropped, those that were already over-extended due to foolish borrowing (and foolish lending) landed in a heap of financial trouble.  This has added to the decline of home values, creating a bit of a snowball effect and making it even more difficult for those who need to refinance or sell when their loan payments adjust.

Bottom line: The crisis is a HUGE problem in the sub-prime market and it's affecting the prime market noticably, but not yet to the point where I'd call it a "crisis."

Christopher - you said,

Dave Ramsey is full of it! I've heard a whole lot of his propaganda and it seems to me that he says whatever he knows will appeal to his listening audience. It is unbelievable to me how many people listen to this guys crap... He might as well be running a cult.

I've heard some of what Dave Ramsey says, and it doesn't seem to me to be "crap."  Here's the primary messages I've gotten from the times I've heard him:

1. In order to avoid having your financial life dictated by others, get out of debt.
2. "Act your wage."  (In other words: live within your means, spending less than you earn.)
3. When you're debt free, you're truly free.
4. In order to get debt free you'll need to live like no one else.  (Do without many of the luxuries of your friends, coworkers, and neighbors.)  Once you're debt-free you'll be able to live like no one else.  (You'll be able to avoid paying interest on anything you purchase when you purchase it with cash.)
5. Part of "living like no one else" while you're getting debt-free, includes eating extremely frugally.  (He recommends eating "Beans and Rice.  Rice and beans" as a very cheap way to get basic nutrition.)
6. The best way for most people to get debt free is to create a "debt snowball."  First save up $1000 for an emergency fund.  Then pay off your smallest debt first while making minimum payments on your other debts.  Then apply whatever you were paying on that first debt to the next smallest debt.  As you keep doing that, the extra payments will get bigger and bigger - just like a growing snowball.  And eventually you'll be debt-free.
7. If you must get a mortgage and want to get one with very low-stress and low-risk, and pay it off fast, get a 15 year fixed rate mortgage that puts you in no more than a 25% DTI ratio.
8. And how could I forget his show's tagline:  "The Dave Ramsey Show... where debt is dumb, cash is king, and the paid-off-home-mortgage has replaced the BMW as the symbol of status."

So, my question to you, Christopher, is: Which of these is "crap" or "propaganda?"

Perhaps you know lenders who get their loan terms from their borrowers? (#1)

Or maybe you think it's wisest to live beyond your means. (#2)

Or do you think true freedom comes only when you're indebted to others? (#3)

Or maybe you'd like to host or hear a radio show where "cash is dumb, debt is king, and the monthly luxury car payments have replaced the paid-off-home-mortgage as the symbol of status."  (#8) (LOL!)

I could go on, but you get the point.  Dave Ramsey is all about helping people find financial peace.  And, as a radio talkshow host, he has to keep things simple enough for his large listening audience.  As a result, he sometimes over-simplifies things in order to communicate the basic concept.

I would guess the majority of his first-time listeners who stick around to hear more would fall into this demographic: heavily in debt, struggling financially, losing sleep over financial issues, looking for hope.  Some stick around for a few shows, others stick around for a few years.  Those that stick around longer and do what he recommends wind up debt free and at-peace financially.

While I choose to not follow all of his advice, it's not because he's "full of crap."  No, experience shows that his advice is generally sound - even if it is simplistic.  And his opinions are no more nor less valid than anyone else's.  He states his opinions and backs them up with the facts he relied on when forming them.

So, what are the facts backing up your opinion that Dave Ramsey "is full of it?"  What is the "propaganda" that you've heard him say, and what is the truth as you see it?

David, you seem to have taken offense to what I said about Dave Ramsey. First let me apologize if I offended you. To be quite honest I have only heard his show once. I very much disagreed with his assessment of the housing market. Everything that I heard him say was incorrect. Mostly however I am referring to my experience with regard to clients who have called me up quoting things that Dave Ramsey said that were completely false which made my job of explaining the way things that they were referencing actually work. Then, I see this post. Dave Ramsey is completely incorrect. My volume is soaring as more dirty players are pushed out of the business, but conforming loan products certainly have been affected by our nations financial turmoil and more changes are in the pipeline. Many peoples qualifications have not changed but we now view and rate those qualifications differently than we have in the (recent) past. A much smaller sliver of people actually qualify for conforming loan products. So, for me; a person so heavily entrenched in the mortgage industry to read something like this... Well my first impression based on my limited dealings with Dave Ramsey is that he is "full of it"... However, if I have offended you by saying so I apologize.

Chris, because Dave Ramsey speaks to a national audience, I think that he generalizes everything...much the same way the cable news networks do.  I just met with a fantastic couple last night that are applying the Ramsey method and they have elimited 25% of their soft/bad debt in 1 year...60k of student loans to go!  But they see the whole picture, aren't cultish by any means, and are living a "act your wage" lifestyle!"  No one, absolutely no one, is going to be harmed by applying these principles.  While one can disagree with his commentary on "national economic trends" the principals he espouses are tried and true...

Proverbs, Richest Man in Babylon, Carnegie, Ramsey, are all talking the same language.  "Equity repositioning" and "leverage yourself to wealth" are foolish principles that don't work for the masses.

Rich,

 I can see your point... Maybe I should've listened more to Ramsey's message before commenting here. "Act your wage" is a great principle and I had never heard it before today right here from this post. Maybe he does have some good principles. The first and only rant that I have heard from from Dave Ramsey was him bashing Mortgage Brokers. My next experience was when a person called in telling me after we took the application that he qualifies for XYZ and that Dave Ramsey said if he cannot get XYZ from their current lender then to go to Church Hill Mortgage where he will get XYZ. This person was not even close to qualifying for what he was telling me. I tried to explain to this gentleman that Dave Ramsey was probably making certain assumptions much like Internet mortgage companies and marketing firms do. This person got upset at the prospect that Dave Ramsey might be incorrect about something and he said that he was going to go to Church Hill Mortgage... I was being 100% honest with the guy and I know for a fact that Church Hill Mortgage could not have done for this guy what he was looking for because he simply did not qualify. I guess that it is absolutely true that Dave Ramsey generalizes quite a bit... He may very well know what he is talking about, however my experiences concerning Dave Ramsey have given me a bad taste in my mouth for the guy. With regard to National Economic Trends I completely disagree with him. And closer to the point of this post... Yes this country is currently in economic turmoil and the "sub-prime crisis" has spilled over into other loan markets.

Rich ~  In almost all aspects I agree with Dav Ramsey's principles.  While I am not bringing any specific numbers at the moment (time prevents my research) I can tell you that I am handling more loans right ow than ever before.  I have maintained all form the beginning of this "meltdown" that the media is fanning the flames of a fire that never should have gotten pout of hand the way that it has...

 It sure would be interesting to see what it would dhave been without the media's interference.  :-)

Christopher - no offense taken.  It just seemed extreme to say he's "full of crap" based on what little I know from having heard his show a few times.

Hearing a bit more about your experience, I understand your frustration.

FWIW - I have never heard DR tell anyone that they are "approved" or "qualified" for any loans or any other product/service.  And I can't imagine he would ever intentionally lead someone to believe that they were qualified based on the brief synopses he's given over the phone on the air.

What I have heard him say is something along the lines of "if your Mortgage Broker tells you up front that you MUST have credit cards and/or other debt in order to qualify for a loan, then you should go to another Broker - who's willing to manually underwrite a loan.  I would suggest talking to my advertiser - CM - who are willing to go that extra mile if necessary."

That said, I'm quite confident that people hear what they want to hear and believe what they want to believe.  So, it's not at all surprising that someone came to you having "heard" that they were preapproved by DR and believing that DR knows all.

I'm relatively new to this industry, yet even I have heard of more than enough cases where borrowers insisted that their Broker never told them that their ARM payments could increase, or their IO payments would only last for x years, or that they would lose their house if they didn't make their payments.  (One RE Attorney I heard, regularly tape-recorded his closings just as a backup for when other Attorneys would call to threaten a lawsuit for failing to disclose the loan terms and potential consequences.  In most cases, as soon as he'd tell the other Attorneys that they could review the recording for themselves, the other Attorneys would apologize and hang up... end of suit.)

Finally, I think we're basically in agreement - DR is oversimplifying, and making things too black and white when he says there's no mortgage crisis, only a sub-prime one.  That sub-prime crisis has affected the rest of the market to a greater or lesser degree - in terms of home values, lending terms, qualifications of borrowers, and Lenders willing/able to make the requested loans.  The more an area was involved in sub-prime and non-traditional loans, the more that area is now impacted by an overall mortgage crisis.

Thanks again for contributing.

David,

 Relatively new to the business? Well, I give you a lot of credit for coming in at a time like this. Personally I have never had volume as high as I do right now but as I mentioned before I do not believe that it is because the market is in good shape... I believe it is because so many other mortgage companies are going under and because of the fact that I have always treated my clients with respect and as options become more limited I am getting those loans that the other mortgage companies possibly would've gotten if they'd of stuck around:)... I do think essentially that our positions are very similar with regard to the nations housing and economic crisis. Since first commenting on this post I did some research into Dave Ramsey's philosophies and I do agree with much of what he says. My initial reaction to this guy is that he is cultish and I was basing that on the fact that a lot of people seem to think that everything that he is saying is directly applicable to their current situation and that DR does know all... Now it seems kind of funny to me. Anyway, I did not like losing a deal because DR said that Church Hill Mortgage is the "all knowing lender who can do whatever they want indiscriminate of the current market conditions" (I know he didn't say that). But like you said some people just hear whatever they want, and this guy whom I dealt with probably just heard what he wanted to hear. This has been a very interesting discussion, thanks for the post.