Unlike most people I don't place the problem solely on the mortgage industry- it was mostly the secondary mortgage market.
The secondary mortgage market was not regulated and became a highly profitable financial commodity on wall street in the early 90s. The secondary mortgage market was making ungoddly amounts of money from the buying of mortgage options back a forth from each other- that is why you kept geting notices that your mortgage was sold...
May of the investors that purchased these commodities were foreign investor hoping to make a quick buck. So wall street put a lot of pressure on the mortgage industry to make more loans- the only way to do that is to lower standards. They make a lot of loans that should have never been made. Now those folks are in foreclosure.
I don't place the blame on mortgage brokers or lenders- although there are some bad ones. I think that the government should have never allowed the secondary mortgage market to be unregulated. They shouldn't have left the standards of mortgages be determined by wall street- which is driven my greed and money with little long term planning.
Okay so now what do I think. I think that the market has bottomed where I am. I think that it will be slowly rebounding throughout 2008 unless we get more knee jerk reaction from this adminstration. They are attempting to do the equavalent of the "no child left behind act" in real estate right now- meaning that they don't really understand the problem and are wanting to but a bandaid on it rather than fixing the problem.
Currently they are discussing removing the yeild spread on mortgages, the fee that mortgage brokers make. The result is that the number of mortgage brokers would be almost nonexistent- less competitors in the mortgage business, which normally always indicates higher prices in the future. Also- in order to stay in business without a yield- the mortgage brokers would have to charge orgination fees rising the closing costs- and when they have tighten up the requirements for the sub-prime loans already- this will take even more people out of the American Dream of owning a home.
Still a lot of questions, but maybe another take on the situation. It was time for the market to cool down, it could not continue the pace that we were at that was unnatural. Now it is time for the unprofessional uncommitted to go into different careers. So long!
We need smart leadership in this country to control the economy. We don't have it with the current adminstration. He is too busy promoting manifestdestnity to run the country. Is is November 2008 Yet? Republican or Democrat I don't care, As long as their last name isn't BUSH!
I am so tired of the media feeding the mis-information to the public. They just want to spread fear and get rating- the Truth is just too much work- but that is another blog!!
Alright I may be on a tear tonight! But I am interested to see what others out are thinking.
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Hi Angela: I think some of the blame for the mortgage crisis was due to the great amount of builder spec homes that were purchased as investment properties. They were often bought with very little money down, and once they were closed, the investors tried to rent them. In many new home communities, there were so many just-closed homes up for rent... that the rental market was flooded. Also, with the new spec homes in the same neighborhoods available for sale with zero down, and with the builder paying the buyer's closing costs... it became easier and much less costly to buy new rather than rent.
The flooded rental market went soft, the investors got behind in their mortgage payments due to negative cash flow due to their investment properties sitting empty for so long... and many of them just could not afford to make all those payments on their empty rental properties.