As I crawled out of bed this morning and turned on the news I was amazed to here that "50% of all home owners with loan modification agreements are delinquent". Assuming the report is true, I was wondering what this tells us about the current situation in which we find ourselves.
I can only assume that the majority of the delinquencies are home owners who purchased with little down, had very high loan to value ratios, and qualified for loans under the very loose underwriting guidelines in vogue a few years back. I heard an industry insider speak a couple of weeks ago, and he posed a question, "What do you call someone living in a home, that put no money into the home?" Answer a renter.
Housing is the single biggest line item (if there is a line item) in our gross domestic product. I applaud all the efforts the government is making to jump start the housing industry. The first step in this process is to let market forces work, as compassionately as possible, the issue with these types of distressed properties. Once we rid the market of these we will begin to see some "normalization" of the market. As I learned in college, a big party leads to a big hangover, and the only cure is time.
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