Circles, Dots and Mortgages

Real Estate Technology with BoomTown

What the hell is this?  My kindergarten drawing of what happened to the mortgage industry and why so many homes are in foreclosure or heading there.

The black dots represent the relative amount of people who have/need a mortgage.

The gray circle represents the size of the pool of available mortgage programs prior to ~August 2007, i.e. the sub-prime and Alt-A market. 

The white circle represents the size of the pool of available mortgage programs today going forward, i.e. Conforming and FHA.  

The gray circle has since evaporated.  No new sub-prime or Alt-A loans available.

There are far less people who fit into the white circle. 

That leaves a bunch of black dots that cannot get a mortgage anymore. 

If you're a black dot that has a sub-prime or Alt-A ARM and it adjusts for the worse, dont have the credit/financial strength to qualify for a Conforming or FHA loan (fit in the white circle), your stuck.  Pay the higher monthly payment, sometimes as much as 50% higher, or lose the home to foreclosure. 

Thats leaving a bunch of houses empty.  

End of story.

Comments (9)

Carla Muss-Jacobs, RETIRED
RETIRED / State License is Inactive - Portland, OR

Thank you for sharing the story of the dots.  I kept staring at it thinking this was some type of Rorschach Test and I was going to get some ephiphany out of it -- by staring blindly at the dots.  But, I had to read your article, and there was a quasi-ephiphany.

I just wish the buyers could have figured out their budgets prior to . . . well, becoming a black dot in the gray circle.  Plus, I know a ton of agents and mortgage brokers who played the system, buying, flipping, re-financing with "equity" cash outs. 

Jan 30, 2009 03:01 PM
Fred Carver Personal Real Estate Corporation
RE/MAX Camosun Victoria BC Real Estate - Victoria, BC
Accredited Real Estate Consultant

Hi Jeff...Great Visual of where the mortgage Customers and Money supply Is and Was up until recently.

Lets hope not to many homes become Vacant :O(

Cheers, thanks for the visual aid .

Jan 30, 2009 03:09 PM
Bill Gassett
RE/MAX Executive Realty - Hopkinton, MA
Metrowest Massachusetts Real Estate

Simple explanation and diagram Jeff but all too true unfortunately!

Jan 31, 2009 04:39 AM
Fran Gatti
RE/MAX Integrity - Medford, OR
Managing Principal Broker - RE/MAX Integrity

Well, that's certainly easy to understand.

Feb 04, 2009 03:55 PM
Debi Braulik - Maple Valley, WA
Selling Maple Valley to Fife WA Homes For Sale

I agree, good explaination of what happened to the mortgage industry. Easy to understand - especially for "visual" people.

Feb 13, 2009 05:35 PM
Lyn Sims
Schaumburg, IL
Real Estate Broker Retired

Great analogy.

Feb 17, 2009 04:11 AM
Kristina Yorke ~ FL FHA Mortgage Expert - Saint Petersburg, FL

OH how true yet simple to understand!

Now we approve two out of ten applications...the white dots

Feb 20, 2009 09:01 AM
Joe Garcia
thanks for the kids point of view. good info. hate to see it, but good. Thanks joe
May 01, 2009 08:48 AM
Tammy Deviley
RE/MAX Select REALTORS LLC - Green Bay, WI

Ha!  I feel like a I had a test done at the eye dr

Jul 06, 2009 08:54 AM