Realty Check

Mortgage "Crisis" And Your Email Replies


I'm out of the office for a few days this week (have to take the time off--or lose it) but I will be posting some of your email replies to my recent posts. Here goes then.

From Daniel D. in Illinois:
Everyone seems to concentrate on the defaults and foreclosures. The real threat I see are the loans that reset that don't result in defaults. The new terms will be higher than the old terms, maybe not enough to cause a default, but the increase will come right out of disposable income. This will happen across all classes, sub-prime, alt-a and prime. This will hurt consumer spending, but how much? Do you have any idea how much monthly mortgage payments will have to increase to avoid defaults?

Reed says:
What is to be said about me…locked in a prepay for 3 years on a neg-am pay option arm loan from a lender that lied to me at closing and a day later sold my note to Bear Stearns who in 5 days sold my note to IndyMac who won’t help me for nothing. Federal ½ pt reduction in rate isn’t making a refi look interesting to me with a 12K prepay +closing costs looming over my head to transact it. What makes me think a rate reduction is going to help? Fortunately I pay the I/O because I can afford it and no matter what, I’m stuck as I see things. Your perception? Perhaps the Feds get credit for lowering rates, but it doesn’t help me; and I’m the one who pays Wall Street. Someone is to blame for not throttling when they should have. Now Credit Card companies are capitalizing…raising rates on hard-working Americans who must result to quickly available borrowed funds to make ends meet. I’m sure they see a great opportunity to cash-in and I highly doubt the OCC will do nothing more than send a “letter of recommendation” to the big credit banks. Our country seems so jacked up at times; especially when the big wheel starts squeekin’.

I’m usually a strong proponent of people making their own decisions as I did mine. But I’m a smart guy, own my own business, and I got hooked by a swift Loan professional. Mortgage lingo, terms, etc. are as foreign as Chinese to every blue-collar American fighting to keep their heads above the standard living waters right now. How is any average American expected to read and understand 75 legal pages in a one hour signing? The greed won’t stop here, and that’s why this isn’t going to get any better anytime soon. The next big business will run its course and make its money while everyone sits and argues about how to fix this. As much as I love, support, and adore my freedom, our country is so reactive.

Down here in the trenches…I just wish good ‘ol Sam would just throw me a freakin helmet at least.

Daniel P wrote in:
This unraveling shows the dark side of so many of our fellow citizens who care little or not at all.we hope countrywide makes it through ,we hope and pray that the fed takes more steps to heal the wounds.

Bob B. writes:
I'm a Realtor. I have never trusted that NAR data. I wish somebody would get some specifics on the composition of the data, or that they give you RAW data. I can try and help you get some local data if you want.

Your theory about lower priced homes is decent. They should be able to give you a breakdown of the # of homes in certain price points. Along the lines of your theory, I believe NAR's numbers don't track just resales. Well NEW homes are always higher priced. So all you need is for 10 resale homes to sell for $500k and one new home to sell for $600k and the average becomes $510k or 2% higher! Also NAR's numbers dont account for seller subsidies. In Virginia they skyrocketed from 0% to 2% in 2 years.

Also I doubt that NAR's numbers count foreclosures since they aren't listed on the MLS. Have you seen this blog (not mine) it has some great data on example of people losing their shirts selling homes for 30% under what they paid.

And finally from Bob in Reading Ma.:
I've enjoyed reading your recent comments about the difficulties in the mortgage market. Trouble is, sometimes it is hard to concentrate because of all the 'easy money' mortgage advertising on your web site.

Thanks to all of you who wrote in. Keep the emails coming.

Questions?  Comments?