I’ve thought a lot about Rain Man over the past few months as I’ve been following the press coverage of the sub-prime mortgage crisis. The story’s been on the front page of the Wall Street Journal nearly every day. Pretty much every show on CNBC — except Kudlow & Co.and one or two others — has been obsessed with the topic. Yet no one seems to be asking the Rain Man question: “How big is the sub-prime mortgage market?”
And the answer, as Ben Stein makes clear, is not very big at all.
Currently there are about 44 million mortgages in the U.S., and less than 14 percent of them are sub-prime. And only about 13 percent of those are late on payments, with the majority of late payers working through their problems with the banks.
So, all in all, when you work through the details and get down to the number that really matters, only about 0.6 percent of U.S. mortgages are currently in foreclosure. That’s up a hair from roughly 0.5 percent last year. That’s it.
Most of the media portray "doom and gloom" because it sells. The mess is not as bad as it appears and the whole issue is just another part of the endless cycle of our industry. How long and how bad it really gets are the only issues. There are still lenders out there that are doing even the high risk loans.
The lenders that have decided to close shop for lack of liquidity got stuck with too many loans "perceived" to be high risk and their inability to get adequate money for them in the secondary market. Any lender who does not have alternative methods of generating revenues (and this does include Countrywide) is running into issues regarding the current "liquidity crisis".
Is the issue something to be paniced about? Absolutely not. Is it going to effect the industry for at least a few months? Yes. Are you still going to be able to close loans on homes? Yes, albeit you may have to switch lenders and qualify to different guidelines and/or rates.
I think a good way to measure the impact is ask how many people on AR have had an escrow or potential deal affected by it. I sure have and losing money is a BIG DEAL to me.
The media fueled the speculation and now they are fueling the fear... whatever sells to meet their advertising quotas!
It's more than a month since I commented on your post. Matt Heaton's comment is very much to the point, and I'm gearing up to work the short sales that are resulting from the general decline in values that is a direct result of these no-doc, 100% loans.
Mike in Tucson
Greg,
It's almost been a year! Come on back. (On the other hand, you finished on a high note with your feature.) LOL
Mike in Tucson
Thanks! Need more post like this and maybe the media might change their tune! Woudln't that be cool!
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