Mortgage crisis??

What the hell is going on in the States guys?
I just heard on the news that about 60.000 families lost their home due to mortgage problems...?
That's plain frightening!

Can you explain it to me?
(Sometimes I think the world is really going to hell... )

Problem with mortgages is over inflated home prices due to banks and loan companies trying to get rich. They had homes way over valued so people who could not normally afford them, could then afford to get a mortgage for them through creative financing. Then the creative financing fell threw because people could not pay the new adjusted rate on their mortgage for various reasons. Now you have so many foreclosed houses flooding the market, it is screwing up the prices of everyone elses house because no one can give you an honest answer of what your house is worth, reason being your neighbors house might get foreclosed on tomorrow and the bank sells them for what ever is owed on the house. Irregaurdless of what it is worth. I think that covers the basics.

I see lots of foreclosed houses everyday. I work for several realtors that handle foreclosed houses for the banks.

It's a boom and bust cycle. We had a real estate boom in the late 1980's. In the early 90's we had a bust with 3 years of declining values, failed banks, a savings and loan bailout, and then about 5 years of flat values. Gradually the market heated up till it boomed and it has become de ja vu all over again, although it is not anywhere near as bad now as it was then. Values in Maine are flat for the most part and are not declining.

It was a perfect storm of bad government and actions of the people who were stupid enough to vote for said government.

1. Poor stock market performance starting with the tech boom made worse by bad economic decisions, terrist attack, and war. People still needed investments and moved money into real estate.

2. Fed drops interest rate longer and lower than ever before and therefore the average wage earner can afford a higher priced house with the same morgage payment. He needs to pay a higher price to compete with the "investor" class.

3. Prices go up even more because more money comes in as credit is cheap and the stock market is still flat.

4. People begin to sell houses either new built or existing simply because the price is much higher than what they paid for it. (Each sale the investors, agents, lawyers, and morgage man get a cut and the cost goes up).

5. Two sales cycles later a working guy who really needs a house to get his wife off his back looks around and finds all the houses start at 5-6 times what he makes in a year and the only way for him to afford it is to take a low interest loan that might go up (of course that hasnt happened lately) or pay the interest only and hope that the value goes up (which he is assured it always does).

6. Only now the oil companies are making good profits, and the health insurance companies are making good profits, so there go the investors to the stock market.

7. The fed only cared about the stock market anyway so they can start to raise interest rates because for some reason inflation is getting bad (maybe cause thats what happens when you leave rates historically low, start a war that increases the cost of oil 3 times, and allow health insurance companies to run the country).

8. So now the guy with the job that needs the place to live has to pay more every month for food and heat, and his local taxes are higher because he paid too much for his house, and his interest rates are going up and all he wants to do is sell his house and go back to living in a van down by the river.

Too bad the investors are gone back to the market, everyone else wants to sell thier house and nobody can afford it at the higher interest rates, and even if they could so many new houses were built as a good investment no one would want his old house anyway.

Who wins? The people who had money to begin with and invested it early then got out. Real Estate Agents. Morgage Companies (owned by investors who had money to begin with), and the Chinese whose economy was flying while we used our hard won home equitity as a credit card to buy goods to cheap to be true.

Who loses? The people that work and add to the economy.

I'm glad we bought a small house, that's all I can say.

81nautique wrote: Riley wrote: It's a boom and bust cycle. We had a real estate boom in the late 1980's. In the early 90's we had a bust with 3 years of declining values, failed banks, a savings and loan bailout, and then about 5 years of flat values. Gradually the market heated up till it boomed and it has become de ja vu all over again, although it is not anywhere near as bad now as it was then. Values in Maine are flat for the most part and are not declining. Brad, I bought my first house in 89 back east, got the opportunity to move to the midwest for a better job. Took me over 12 months to sell in that downturn and I took a 15% beating in the process. That's right about the same time I lost $12,000 in the state insured credit union bust. That was a long stretch of hard times just like we're facing now but it will turn in time. Not much fun but it is a cycle, Business is the same way, drives me crazy but it's the same wave.

People that moved into Maine 88-90 and moved out in 92-93 took a big hit. If the put 20%-30% down, they lost most of it. Values were flat for so long after that I didn't think real estate would ever be anything that people wanted again. Then came the early 2000s and it went nuts again, only so much more so.

M3Fan wrote: I'm glad we bought a small house, that's all I can say.

Joel, That's called living within your means. A noble concept that more should give a try.

What's a DW?

The same attitude about big houses came about in the early 90's when the market turned to s**t. For all the same reasons, don't need that much space, too much to heat, too much to maintian, too much to furnish, but then when the market turned around, people stated building bigger houses than before.

I like mobile homes. But, there is sure a stigma to them. One thing that gets me when I'm appraising a new one is if the buyer got all the upgrades and drove the price up so high that he could have gotten a regular house for the same money, albeit without the garden tub, built in stereo, gas fireplace or all the other junk the dealer can sell you.

You sound like you're an appraiser.

I've been an appraiser for 23 years and have not had a mortgage company for a client for the past 17 years because the relationship bewteen appraiser and mortgage company is like hostage and terrorist. You're always just one job from being taken off their list. They make a lot of money on each loan and as I or my employer have been told on many occations, they can't afford to lose one deal. Just now is the industry starting to listen to appraisers that say you can't have the guy making a commision on the loan responsible for hiring the appraiser.

eric: I thought all the places in brunstucky were Dw's. At least for the rich folks there.

john

Brad, Our market is holding its own, too, with no drop yet. Activity is slow and I've just had the worst winter since 1994.

Eric, It's manufactured, not modular.

And from my experience the people doing sub prime loans aren't living large, but poor working stiffs trying to raise a family and own a house. For whatever reason they're up against the wall and will sign anything to keep their house.

    I think part of the problem nowadays is that alot of people don't save money anymore.As soon as they get it,they spend it.It doesn't take long with a big mortgage,credit cards,high oil prices etc,to get backed into a corner if something happens.Things head downhill fast if say,you miss a week of work,etc.Alot of people took adjustable rate mortgages to pay off debt,buy new cars,"have some extra cash",etc.Then after paying off all those bills,they went out and piled them back up again.I was chatting with a customer Friday who is in the process of refinancing to get out of his adj.rate mortgage.....it hit 11.8% last month.


   Mike

Modular is a home that has been built from a kit on site out of wood framing and built on a pier and beam foundation. You typically get walls that are already framed and ready to stand up and a engineered truss system for the roof. Kinda like a log home where its built at a factory then taken down to ship. Jim Walter homes is a pretty big outfit down here. For the consumer it does not mean much. In an appraisal you need to get it right.

I have a new term that I learned from Dave Ramsey. ACT YOUR WAGE!!!

In Maine, manufactured is built to HUD specs. It is commonly referred to as a mobile home, but the correct term is manufacutred. Mobiles haven't been built since the early '70s. Modulars are built to the same codes as conventional houses, although they may arrive in the same fashion as a manufactured, two sections bolted together. Big differences is financing. Modulars are considered same as regular houses, so they qualify for the same financing. Manufactureds have their own special financing, which isn't as good as conventional financing. Some lenders won't loan on a manufactured. I can't tell you how many people have been PO'd at me over the years because I identified their house as a manufactured, when they thought they bought a modular. They are well documented that they are manufactured, but that dosen't prevent some dealers from selling them as modulars because the public is confused.

Eric, Maine is a poor state. Some do well, but most just eek out a living. Signing for a sub prime loan because that's the best you can do is better than paying rent, so long as you can make the payments.