Skip to comments.Investors Default On Outsize Share Of Home Loans
Posted on 09/01/2007 6:22:34 PM PDT by CutePuppy
Investors played a big role in pumping up home prices during the housing boom. Now, they account for an outsize proportion of loan defaults, mortgage bankers and builders say.
A survey by the Mortgage Bankers Association found that mortgages on properties that aren't occupied by the owner -- mostly investment homes -- account for between 21% and 32% of the defaults on prime-quality home loans in Arizona, California, Florida and Nevada, states where overdue payments are mounting fast.
Defaults were high on both prime and subprime loans, those made to borrowers with shaky credit histories.
The four states were among the favorites of speculators during the housing boom. When the market was hot, many speculators bought homes hoping to flip them for a quick profit. But now that home prices have turned lower, that strategy is backfiring.
As a result, some investors have "simply walked away from their mortgages," said Doug Duncan, chief economist of the MBA, echoing recent comments from executives of Countrywide Financial Corp., the nation's largest mortgage lender.
In Nevada, Arizona and Florida, loans for properties that weren't owner-occupied accounted for nearly a third of all home mortgages issued in 2005. The figure was 14% for California and 17% for the nation as a whole. The nationwide share for these primarily investor loans was in a range of about 5% to 7% in the 1990s, then jumped to 11% in 2002, 12% in 2003 and 15% in 2004.
In Nevada, homes that weren't occupied by the owner accounted for 32% of the prime-mortgage defaults recorded as of June 30, the MBA said. Such homes accounted for about a quarter of prime-loan defaults in Florida and Arizona and a fifth in California. For the nation as a whole, the figure was 16%.
(Excerpt) Read more at online.wsj.com ...
Here’s somewhat related article in NYPost :
SEN. SCHUMER LEANS HARD ON COUNTRYWIDE
August 30, 2007 — Senator Charles Schumer asked Countrywide Financial Corp. to waive prepayment penalties, refinance loans and eliminate “above-market fees” to help homeowners struggling to make payments on subprime mortgages.
Countrywide, the biggest U.S. mortgage lender, should stop paying higher commissions to brokers who steer borrowers to high-cost loans that “are designed to fail,” Schumer told reporters in Washington yesterday.
“I am calling on Countrywide, as our nation’s largest lender, to bury its bad business practices and reverse some of the damage it has already inflicted on our housing market,” Schumer said.
Schumer, a member of the Senate Banking Committee, has been among the most vocal lawmakers seeking tighter restrictions on mortgage brokers.
He introduced legislation in May to set U.S. standards for brokers, including requiring them to assess a borrower’s ability to repay at a loan’s highest interest rate.
“Countrywide’s most lucrative brokers are those that make bad loans that are largely designed to fail the borrower,” Schumer said.
Amateur speculators taking a bath. Another “duh” moment.
Correct. Not the kind of people that need to be bailed out, but they’ll be used to push the Fed, White House and Congress to do something which will benefit the money lenders or bond traders.
Good article. Thanks.
Follow the money. FInd out the big players in this and find out how much was funneled to political campaigns.
Anyone want to bet that Edwards wasn’t the only one?
I guess Countrywide didn't make enough campaign contributions to Shumer et al.
You don’t make your money when you sell your stocks, bonds, or investments. You make it when you BUY your stocks, bonds, or investments.
Most often, BUY is the first step, but it usually takes a BUY and a SELL to tango.
And Chucky Shumer is screaming to bail these speculators out. I really need to stop being responsible, blow my wad and cash in on communism. I’m thinking I can make this work for me. I’ve always wanted to drive an Aston Martin. Maybe I can take out a subprime loan on a DBS for 100%, never make a payment and scream “Bailout! Bailout!”
“He introduced legislation in May to set U.S. standards for brokers, including requiring them to assess a borrowers ability to repay at a loans highest interest rate.”
So it was Schumer who started this subprime mess!
Yet it's sounding more and more as if you and I will pay for the mistakes of others in higher taxes and lost value of our already squeezed dollars.
It's so wonderful to have conservative values playing a dominant role in our economic and political system today, isn't it?
My conservative values are too conservative for these people.
No sir, you speak for many Americans who long for liberty and a return to the rule of law.
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