Analysts Say Mortgage Woes May Worsen

Discussion in 'Money Talk$' started by KenH, Jul 29, 2007.

  1. KenH

    KenH
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    Some of the fallout from the Federal Reserve's easy money policy is coming home to roost:

    Analysts Say Mortgage Woes May Worsen
    Wednesday July 25, 7:25 pm ET
    By Alex Veiga, AP Business Writer

    Lenders' Prime Mortgage Woes Are a Sign of Even Bigger Problems to Come, Analysts Say ​


    LOS ANGELES (AP) -- Here's a scary thought about the latest bad news on housing: A surprising increase in late loan payments and defaults among home owners with good credit is so far coming from traditional woes, like divorces, job losses and unexpected medical bills.


    The next and biggest wave of problem loans could come as monthly payments soar for both prime and subprime borrowers who took out adjustable-rate loans with little or no documentation, or who used so-called piggyback loans on top of their first mortgages to make up for small down payments, analysts said.

    These exotic loans were the only way many borrowers -- even those with good incomes and sterling credit histories -- could afford to get into the housing market as home prices soared in the last decade. But now those decisions are looking suspect.
    That was one of the messages that sent a jolt through the mortgage industry and the stock market on Tuesday after Countrywide Financial Corp. reported its second-quarter profit shrank by nearly a third as softening home prices led to rising delinquencies and mortgage defaults.

    - rest at http://biz.yahoo.com/ap/070725/mortgage_woes.html?.v=4&.pf=loans
     
  2. TomVols

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    I don't have time to get into it all right now, but it goes beyond just the Fed. Private companies made strategic errors in lessening credit standards. Making 125 LTV loans and giving people 100% (OR HIGHER!) LTV purchase money with FICOs less than 600, sometimes on manufactured housing, was just stupid. This is a market correction, and maybe even a little overstated.

    More to come....
     
  3. webdog

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    As a real estate investor / hard money lender...this will be a "busy period" for me. My upswing is usually when the market falls.
     
  4. rbell

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    Yep.

    I have a couple of friends that I vehemently warned regarding stupid loans. They're about to pay some stupid tax, big time. One was in a home he had no business being in (along w/car loans & consumer debt); the other did a 125 loan to "clean up" his debt (but, as usual, he didn't fix the problem, and accumulated more debt to go with the horrendous 125 loan).

    Both of these guys are likely to lose their houses...and you all know the strife & stress that goes along with that, when you have a family. Sad.
     
  5. KenH

    KenH
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  6. TomVols

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  7. TomVols

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    One myth that people need to get away from is equating all "subprime" loans with C paper loans. For instance, you can have a FICO in the 750s but want a subprime loan to avoid PMI. Good borrowers often oft for subprime loans because they'd rather put their down payment money in their 401k paying 8% than in their home that pays 4%. So not all "subprime" borrowers are people with lousy credit.

    That said, I believe that there should be a tightening of credit standards among poor credit folks (if you can't afford to pay so much as half your closing costs, you can't afford a home). There needed to be a weeding out of mortgage companies. Far too many got in for the quick buck and subsequently these companies have damaged the economy. These "no-doc" or "lite-doc" loan regs have been relaxed too much, and this has an effect on illegal immigration as some companies refused to even try to source any down payment or rent verification. Eventually, we're going to see some real investment opportunities in these foreclosed properties, as our economy is quite resillient.

    There must be a greater responsibility on the part of consumers to make their decisions their own. And when government regulates these things, government must do so where the regs are needed, not just churning out feel good legislation (are you listening, Mr. Edwards?) that appeals to peoples' fears and biases. And despite my ill feelings towards paternalism, maybe it's time for states at least and maybe for the Federal govt to license mortgage originators just as they register stock brokers (nationally/state), realtors (state) and insurance agents (state).
     
  8. KenH

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    My liking the CFR is well known in the Politics forum. I am a subscriber to Foreign Affairs. :)
     
  9. TomVols

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    But don't you castigate Thompson, et.al., for their support of CFR, or do I have you confused with someone else?
     
  10. KenH

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    I sure hope it wasn't me.:laugh:

    I did point out that he is associated with the neo-"conservative" think tank - the American Enterprise Institute - which I don't like.
     
    #10 KenH, Jul 31, 2007
    Last edited: Jul 31, 2007
  11. TomVols

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    One of your fellow Dr. Paulites is the one grinding the CFR axe. Can't remember who it is right now. My apologies for the confusion.
     

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