I wrote a few days ago about the sub-prime mortgage industry implosion. The free fall continues. More loans are falling apart, guidelines are changing on the lenders faster than they can blink, and fewer people can afford homes. Someone said to me 'well that doesn't affect me, I don't deal with sub-prime borrowers." Wake up people, who is a sub-prime buyer? Did you know that at this point, a borrower with a FICO under 700 going stated income may be considered sub-prime? Did you know that a W-2 wage earner going stated income may now be sub-prime? How about the cultural phenomena in some areas where families pool resources, where some income isn't documented, where there is "mattress money?" Those people are having a hard time now. Oh, and what about these move-up buyers? If no one can buy their homes now, how will they move up. Is this just the tip of the iceburg? Obviously each loan has a lot more to it than just FICO's , stated vs. full doc and much to do about LTV's, reserves, payment shock and more... but things have changed to be sure.
The mortgage lenders have now overreacted.. but it will self correct. My opinion though is that stated income loan, those originally intended for the self employed, may be gone forever, (except for those for whom they were intended)- available to anyone who could fog a mirror - may be no more. The lending industry got themselves into this mess. But you know what else is sad? CNN/Money is reporting that only 9% of sub-prime loans initiated since 1998 were given to first time home buyers... they report that many were done for refinance purposes and sometimes cash out type refinances which raised loan balances. They report that more than 2.4 MILLION homeowners will lose their homes in foreclosure - directly attributed to their loans. Loans that had low teaser rates, loans with rates that readjusted to highs these people just couldn't afford. How did this happen? Well stay tuned, tomorrow I will write about a personal experience - well actually the experience of a friend - let's suffice it to say that not all real estate agents, and not all lenders are looking out for the client. Maybe you won't be shocked, but you should be.
If you want to read the article I reference above, it is here:
http://money.cnn.com/2007/03/27/real_estate/subprime_losses_spike/index.htm?cnn=yes
Catherine Myers, REALTOR
Serving real estate needs in Walnut Creek, Concord, Pleasant Hill, Clayton, Danville, Alamo and beyond.
Contra Costa Real Estate and Homes for Sale
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