The Mortgage Manifesto!

More on the Real Estate Boom and Bust...

So, if one in five is subprime loans to borrowers with less than perfect credit, then how about the rest? It is estimated that 2 of the remaining 4 are in a category known as non-prime loans. These are the interest only loans, No-income or lower documentation loans, and the very popular optional-payment Negative amortization loans. The default on the non-prime loans is also up substantially; to the point that the Feds and Wall Street are very concerned. Consider this…

Until about 10 to 15 years ago, most homebuyers got a mortgage the old-fashioned way, by going to a bank or savings and loan to apply. Lenders typically wanted 20% of the value of the home as a down payment. People with less than stellar credit often were denied.

Borrowers that didn’t have 20% down had only 2 choices: FHA or VA (HUD) loans, and these had caps in price, income or qualifications.

Beginning in the 1990s, several trends changed that picture. Entrepreneurs saw a niche in serving the so-called subprime and non-prime market of customers who had been denied loans by banks or for whatever reason, couldn’t qualify under the conventional means. At the same time,

More on a Real Estate Boom and Bust...

With the housing market in a slump and foreclosures on the rise, is it time to tighten regulations on the mortgage-lending industry… or by doing so, do we hurt the marketplace even more? Huge question!
Mortgage lenders don't get all, or even most, of the blame for the problems in the various real estate markets. But should they at least be held partially responsible?

A steady, but not booming economy could be some of the cause for the demoralizing drop in home sales and home prices, but personally, I don’t think so at all.

First off, if you look at GDP, inflation numbers and unemployment numbers, they are a strong and steady as they have been for nearly 15+ years. Yes, there is movement up and down, but no real recessionary-like valleys at all.

That said, nearly one in five recent mortgages made to buyers with sub-par credit expected

What will happen with the Real Estate Market?

A question I keep getting is what will happen with the market? Like I have a crystal ball ;-)

That said, here are some thoughts for discussion:
1. There are over $1 Trillion in interest-only and adjustable rate mortgages all coming due for their payment adjustments in 2007! The FED estimates that the payment increases will be between 25% and 35% or more. What affect will that have on the economy nationally?
2. Foreclosures are already up over 43% in the last quarter of 2006! Those percentages are expected to go up another 10-15% as well.
3. Subprime and conventional lenders are closing their doors right and left already. There is anticipated that as many as 35% of the lenders in business in 2006 won't be by the end of 2007.
4. Average marketing time in most major markets across the country has gone from under 30 days to over 100 days in the beginning of 2007.

So what will all this mean for the economy from here on out? What will that do for the REO inventory due to foreclosures and delinquencies in the coming months and years?

Here is a big and even risky question: Are the lenders at least partially liable for the financial ruin for so many families in the coming months and years? We saw class action suits in the tobacco and drug companies... might we possibly see the same thing happen in the mortgage banking business? Hmmmm...