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Mortgage Lending Problems & Foreclosure Possibilities

Sat Oct 13, 2007 10:17 pm
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Comments: 2 Views: 1201
For the last couple months there have been many articles written about the Mortgage Crisis in the United States. Poor-credit borrowers or non-traditional mortgages structures have allowed many people to purchase, but not necessarily afford their own homes.

In previous decades it would be assumed that many borrowers would not be able to acquire such mortgage packages, but with the rising availability of credit, and the lure of rising real estate prices, these “investments” seemed to be very good moves. Especially given that home ownership is perceived to be an American's destiny.

Now it is not too surprising that when the federal government fails to react fast enough state governors find it is the right time to step in with some type of appeal to their legislatures to bail out or in some way mitigate the problems their citizens might face. As Governor Mike Easley of North Carolina is doing now with his plan to limit the flexibility of brokers to charge rates that are above the market.

Given that this crisis is global, as evidenced by todays latest business section in the New York Times, apparently the United States is not the only one affected by these headlines. Chinese banks seem to be in for a few billion and Britain seems even worse off because their housing market still has rising prices. Now people in Britain are going for “buy backs”, selling their over-priced homes, only to try to buy them back from a third party. But the problem is that in some cases they are only getting 75% of the market price. Now if property prices continue to rise this seems like a good deal. But when they fall, and they will, they are going to have even more problems to show for their lust for home ownership.

So what should American state governors do to deal with this problem? Probably the best thing to do is stay out.

Comments
Fri Aug 24, 2007 2:38 pm
Name: Corvallistidbits.com | Email: joe attt corvallistidbits dottt com Comment: Relative to this "Mortgage Crisis" It is my sense that without Federal intervention this "Fiscal Crisis" will settle itself through the workings of the "Market". It was obvious to Money Lenders (and to this non-money lender) over the last 15 years that the less than qualified borrower was a greater risk. It is unreasonable to have a Federal bailout, Those (Bankers, Mortgage Brokers etc.) that made "Billions" over the last two decades should bear the difficult times as well as having reaped the rewards of their predatory lending practices.

Sat Aug 25, 2007 7:32 amThis global crisis was spurned by horrific monetary policy by the US Federal Reserve itsChairman at the time Alan Greenspan. Money was given away for free resulting in the housing bubble, record LBOs, the rise in private equity institutions, hedge funds using debt as the primary financial instrument.

What can the states do or even the US federal government in this situation? Why should they do anything?

Recently I looked at the financial data from a respected sub-prime lending bank. In 2003 they carried $0 in interest only loans but by 2005 they carrier $45B.

Everyone (on the whole) was spending money they did not have. Banks created an environment for people to spend beyond their means and people bought into with the rapid rise of housing.

What is going to happen when ARMs get reset again and their mortgage payment go up and cannot afford it. Their original plan was to flip the property but now have negative equity because of falling housing prices and cannot afford the mortgage payment. Add to that the average person in the US has app. $7,000 of credit card debt.

This global financial system is a house of cards at the moment and action like governor Mike Easley is childish at this point. The markets will work this out as they usually do. But the economic situation may not be pretty.

Last week I saw the outburst by Mad Money's Jim Cramer with regard to the Fed not taking action as the markets stock markets were tanking. Moron! Wall St. and the global economy in general needs a reality check.

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