I hate when that happens.
Posted on 08/16/2007 11:10:23 AM PDT by Hydroshock
Many homebuyers in recent years took out exotic mortgages that ultimately backfired. This raises the question of why such booby-trapped financing was available at all.
Fisher Investments Charles Schwab
TD AMERITRADE Options House
Zecco.com Fidelity Investments
The answer, in part, stems from overaggressive marketing of what were once niche products intended only for the most financially sophisticated and creditworthy customers. During the housing boom in recent years, banks began offering such elaborate loans to huge numbers of average homebuyers, allowing them to get in over their heads and contributing to the current mortgage crisis, as many borrowers ended up defaulting.
Last week, TheStreet.com reported that several of nation's largest lenders, such as Countrywide Financial (CFC - Cramer's Take - Stockpickr - Rating), were still offering the types of loans at the center of the current meltdown in the subprime mortgage market. That's despite the fact that the company has taken a beating on the stock price, down about 40% over the past month, and some of the loans offered seem doomed to fail from the outset.
The most exotic product, the option ARM (adjustable-rate mortgage), or negative amortization loan, allows the borrower the choice of paying a minimum amount that might not even cover the interest on the loan.
If that alternative is taken, the shortfall is added to the loan balance, and so the borrower gets further and further into debt over time. Such loans are inherently risky for the debtor and the lender as well. Another risky type of loan is the interest-only mortgage. The balance on an interest-only loan doesn't increase over time, but it doesn't decrease either. The borrower is essentially just treading water.
(Excerpt) Read more at thestreet.com ...
ping
Unless they're in California, and the value of their home increases dramatically over the course of a few years, and when they sell they can pay off their negatively-amortized mortgage and take a profit to boot.
Or Florida, or New England.......
I believe that we are rapidly heading for another savings and loan bailout.......and that the entity ripples within this particular scam are very enron-like in that the SPE’s (special purpose entities) within it have covered their tracks and money trail pretty well by this time.....
Same article, different day.
Another source of the mortgage crisis is the ITIN loans issued to illegal aliens based on the government issued TIN numbers, not social security numbers. The government allowed banks to make these risky loans starting in 2003. Now that Homeland Security is now rounding up illegals and deporting them, the loans are becoming defaulted and the homes foreclosed.
In equal measures.
"Now, we've got a problem here in America that we have to address. Too many American families, too many minorities do not own a home. There is a home ownership gap in America. The difference between Anglo America and African American and Hispanic home ownership is too big."
" First, the single greatest barrier to first time homeownership is a high downpayment. It is really hard for many, many, low income families to make the high downpayment. And so that's why I propose and urge Congress to fully fund the American Dream Downpayment Fund. This will use money, taxpayers' money to help a qualified, low income buyer make a downpayment. And that's important."
"This means they will purchase more loans made by banks after Americans, Hispanics and other minorities, which will encourage homeownership. Freddie Mac will launch 25 initiatives to eliminate homeownership barriers. Under one of these, consumers with poor credit will be able to get a mortgage with an interest rate that automatically goes down after a period of consistent payments."
Homeland Security IS rounding up illegals?
Since when? This is news to me!
Don’t worry. We’ll just print more money!
You don't know what you are talking about. Do a little research, the insurance on a Florida home killed the market over a year ago.
My point is the market is dead and people are trapped upside down in their homes.
This bailout is not likely to be as cheap as the Savings and Loan Bailout. ):
I hate when that happens.
Now that is true and it will get a lot worse than it is today. Actually if I were trying to sell a home today and needed to badly I would take the first offer, unless you really don't need to sell and can afford to stay where you are. We have new home where I live approaching three years on the market.
The greed cycle has passed to the fear cycle, with people begging real estate investors to take those properties off their hands, quickly. Kinda like today's stock markets...
I do not see it getting beter for a while, to many Arm’s resetting on house where the owners have to little equity or are flat out upside down. I have read several articles on buys not lowering prices and sellers not wanting to pay what is asked. It got me to thinking that in the current market these home owners do not have equity to move the price to sell and becasue the market has fallen in many areas they mey not have the value to refi. They will cut back if they can stay in their homes and you get a consumer driven recession.
Then, the Countrywides, DiTechs, Wells Fargos et al can wheel and deal with all their funny money schemes.
Many are now so upside down that even cutting 2 points will not save them. Alot of people either will lose their homes or be stuck in one that they can nto sell for years until they buy enough equity.
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