|
Go
|
New
|
Find
|
Notify
|
Tools
|
Reply
|
|
A1 |
Published on Thursday, March 15, 2007 by TomPaine.com
Whose Mortgage Crisis? by Anya Kamenetz “A Mortgage Crisis Begins to Spiral, and the Casualties Mount,†read the headline in The New York Times last week. I clicked on the link expecting to read about the growing numbers of victims of “exploding†subprime mortgages, suddenly stuck with unaffordable payments as interest rates tick up and housing prices fall. Instead, the “casualties†of the headline were the subprime mortgage bankers and brokers, multimillionaires who are losing their red Ferrari convertibles and private jets now that the housing bubble has officially burst. Yes, this current stock slump looks to a lot of people like the tech bust 2.0, and it may very well affect the whole economy. The economic big picture is an important angle, also explored by the Times here, here and here. But what about the angle involving real people who are actually going to lose their homes? "Subprime" lending is a creature of our recent unprecedented era of unrestricted credit. It is the business of providing mortgages at exceptionally high interest rates to people with poor or spotty credit histories, who in this economy, tend to be lower earners, less educated and disproportionately minority. It also often has an uglier name—predatory lending. In the just-passed era of record-low interest rates, the lenders who are now in trouble dangled homeownership before millions of people who never dreamed of such a thing before, enticing people into barely affordable contracts with low introductory rates and zero percent down, helping drive housing prices up and inflating our homeownership rate to the highest in American history. Not to mention minting money for themselves. And President Bush bragged about it, because it looked like progress. He repeatedly cut funding for Housing and Urban Development programs, even in the wake of the Katrina diaspora crisis. Yet, because of the proliferation of subprime loans, he was able to tell a black audience in 2005, “Today, nearly half of all African Americans own their own homes. And that's good for our country.†It was the ultimate in privatization. Unfortunately, sometimes the risk gets so high that owning is not really owning. The Center for Responsible Lending, a nonprofit that takes on all forms of predatory lending, estimates that predatory mortgage lending costs Americans more than $9.1 billion each year. And African Americans and Latinos are more likely to get subprime mortgages even when they have the same qualifications as whites. "Nontraditional loans in the subprime market are seriously eroding the traditional benefits of homeownership," Michael Calhoun, the Center’s president, has said. "By their very nature, they pose a high risk of losing valuable home equity or foreclosure." Now the brokers are going to take some losses and switch to trading something else—fine for them. But what about the millions of marginally middle-class people stuck up to their neck with higher and unaffordable monthly payments? Their futures hold delinquency, defaults, foreclosures and bankruptcy. According to Barron's , during the next two years homeowners can expect increased monthly payments on an estimated $600 billion of subprime mortgages. The last quarter of 2006 had a record rate of foreclosures. Senator Christopher Dodd, D-Conn.,, the chairman of the Banking Committee, told reporters that the next 18 months may bring as many as 2 million more. America is at another Enron moment. Rather than shedding a tear for the traders who pumped up this market, we are now required as a country to reexamine the responsibility that creditors have to borrowers—to make a sane assessment of the ability to repay, not merely to make as much money as they can out of the risk. It is high time to block predatory lending of all kinds by reinstating usury laws, limiting interest rates, penalties and fees that creditors can charge. Will our Democratic lawmakers accept this moral challenge? The jury’s still out. On the one hand, 14 Democratic senators voted for the credit-industry-authored bankruptcy bill in 2005. On the other hand, Senator Carl Levin, D-Mich., recently held some pretty harrowing hearings on predatory credit card industry practices, in which he raked over the CEOs of the top three credit card issuers in the country. Several lawmakers, including Ted Kennedy, D-Mass., and Hillary Clinton, D-NY, have introduced reforms of the extremely predatory practices of student lenders. And Senator Chris Dodd and Representative Barney Frank, D-Mass., are each discussing introducing legislation on subprime lending, Dodd to protect the borrowers already trapped and Frank to restrict these risky mortgages going forward.I have high hopes that predatory lending could become the moral values issue of 2008. In the meantime, let’s keep in mind who the real casualties are. Anya Kamenetz is a freelance writer, the author of Generation Debt and a journalistic fellow of the Freelancers Union. She can be reached at her website, anyakamenetz.blogspot.com. © 2007 TomPaine.com When we speak we are afraid our words will not be heard or welcomed. But when we are silent, we are still afraid. So it is better to speak Audre Lord |
||
|
|
A1 |
How come we're not hearing about banks, and mortgage companies going belly up, but we're constantly told that there is a crisis? and that that crisis has been created by people who weren't really credit-worthy defaulting on their payments?
is the whole real estate/housing industry based on people with bad credit? I just don't believe it. Who has a vested interest in spreading this? When we speak we are afraid our words will not be heard or welcomed. But when we are silent, we are still afraid. So it is better to speak Audre Lord |
|||
|
|
A1 |
From what I've read, the Mortgage Crisis is real. As you've [via the article] mentioned, 100s of thousands of working class people are trapped in sub-prime loans and are now experiencing back-breaking, or better, budget breaking payment increases. They were roped into 2/28 loans [2 years at a low interest, low payments rates, followed by 28 years at a substantially higher rate] not because they were foolish or unsophisticated borrowers; but because they were told, "take this low rate for the 2 years, get your credit together and with the house's appreciation as increased equity, re-fi before the 28 year rate kicks in." [I know this is what I was told] The industry and the media worked over-time to show that houses were appreciating at unheard of rates [30-40% in 2 years, so the deal seemed like a smart move.
But all of this was based on continued housing appreciation and a loose credit market. Sadly, this is exactly what didn't happen. Now the secondary banking markets are saddled with securities backed by assets [the notes and ultimately, the houses] that are losing value. But everyone is being hurt be the banking industry's "Get paid today, damn tomorrow" business model. You and I, through our pension plans, are heavily invested in these securities, just like we were in Enron because its bust. If there's any good in this debacle is that the hurt will be/is being softened by a federal bail-out, just like with the other recent "Get paid today, damn tomorrow", the S&Ls. And it would not surprise me if the backroom discussion planned for this bail out.
No ... but the crisis is based on the entrance of so many folks who wouldn't have been afforded home ownership opportunities but for the greed of the industry. Example: In year A, 1,000s people sought and received financing for a home. The bankers made millions of dollars on the processing, sale and servicing of these loans. The bankers lost on some of these loans through foreclosure; but because of rigorous vetting, this number was kept down to roughly 3%. In year B, some banker one figured out that if we made millions by lending to 1,000s of people, we could make billions by lending to 100,000s of thousands of people. And, we really don't have to worry about foreclosure, because we aren't going to hold or service [collect payments on] the notes. So today's greed ruled the day. And this leads to who stands to profit from spreading the mortgage crisis word, the more fear out there, the more likely the fed will act to bailout the industry. |
|||
|
|
C4 |
They are going out of business. There's alot of the small to mid sized mortgage lenders who have folded. You will see Countrywide laying off large numbers of employees soon. (I accidently deleted the remainder of my original post attempting to copy some of it for a quote. Stupid me.)
__________________________ Africa, my Africa, I have never known you but my face is full of your blood. - David Diop |
|||
|
|
C4 |
The bottom line in this whole thing is people let their emotions cloud their judgement.
It's real easy to get caught up in the moment when you are walking through that beautiful new model home. That's what it is designed to do. Builders spend alot of money on marketing that evokes an emotional response that will cause us to buy their product with all of the over priced upgrades. The problem as I see it, is far too many of us go in uneducated to the process. I have asked friends of mine who bought houses what their mortgage rate was and they didn't know. They didn't even know if they had an adjustable rate or a fixed rate. Some of them have lost their homes. The first question that may come to mind is, if I were such a good friend why didn't I help them before they bought the house. Well I did. I suggested books to read to help them along. I offered my own personal experiences as well as professional ones. The reality is they let their family, realtors or bootleg, shade tree brokers talk them into something that was an extremely bad deal (emotions got the best of them). At least three of them were looking for the quick fix. They came to me two years later when they were in deep trouble for help. I did what I could but they didn't stick to the plan and lost the home. (Sorry, for venting like this. This is a sore subject with me. I have witnessed at least 10 black families loose their homes in the past 5 years due to predatory lending. 2 in July)
__________________________ Africa, my Africa, I have never known you but my face is full of your blood. - David Diop |
|||
|
|
A1 |
I here you. I see it as well on my job. Fortunely, if the loan is truly predatory, my job is to help them get their house back ... and of course to smack the lenders hand a little bit. You seem to be financially astute ... What is your profession? |
|||
|
|
A1 |
No apology necessary! Your post was very informative. I have been hearing a number of radioshows which seem to place the whole "fiasco" on the shoulders of people with bad credit and minorities... I'm like minorities combined are less than 30% of the population so how can the WHOLE market be in danger because of them? Your explanation was very insightful... When we speak we are afraid our words will not be heard or welcomed. But when we are silent, we are still afraid. So it is better to speak Audre Lord |
|||
|
|
A1 |
and yours too Kweli!
 When we speak we are afraid our words will not be heard or welcomed. But when we are silent, we are still afraid. So it is better to speak Audre Lord |
|||
|
|
A1 |
Were homes overvalued in the appraisal process?
Did people actually pay more for less house? When we speak we are afraid our words will not be heard or welcomed. But when we are silent, we are still afraid. So it is better to speak Audre Lord |
|||
|
|
C4 |
I am an I.T. professional. I have always been the type of person who will ask as many questions as I can or read as many books as I can before I spend my money. I don't have any to waste. __________________________ Africa, my Africa, I have never known you but my face is full of your blood. - David Diop |
|||
|
Tasmanian Angel |
This seems to be a related story. I would appear that the stock markets are feeling the mortgage crunch as well!
Here are some snippets:
And here's The Entire Article BLACK by NATURE, PROUD by CHOICE. Before there was ANY history, there was BLACK history. |
|||
|
|
C4 |
Yes, our tax burden in Fort Worth and Dallas for example is one of the leading causes for inflated home prices. Places like California it's more of a case of supply and demand/location.
Not necessarily, in the Dallas Fort Worth metropolitan area you can get alot of house for a relatively low price, depending on the neighborhood. There are a couple of key areas of concern in Dallas and Fort Worth (which, by the way is one of the top 10 areas for foreclosures nation wide)that is causing the foreclosures. We are experiencing urban sprawl like never before. For the past ten years or so, we have been averaging 80k new residents annually. As a result that is causing the tax burden to be excessively high. When people build these new homes in new developments, they rarely realize that the first two years their taxes will be calculated on what is called unimproved land. What that means is the county tax appraiser is determining your tax rate as if there is no house on that land for at least one and a half to two years even though there is a structure there. As more houses are built in that developmet of various sizes the taxes begin to level off. What will happen most times is the tax appraiser will send the adjusted tax bill in October and your taxes will increase by thousands of dollars in June. Your mortgage company will then send you a notification that your escrow account(taxes and insurance) is short by whatever the dollar amount is. They will give you an option to pay the shortage up front or they will divide it into 12 equal payments. In addition to tax increases the insurance will more than likely go up and that will cause the mortgage payment to increase. Utilities are very high in North Texas. We pay 15 cents per kilowatt hour for electricity on average(peoples bills are $300 - $800 monthly in my neighborhood). Another area of concern are adjustable rate mortages. The initial rate is lower than a fixed rate. But that will only last for two to five years in most cases. What is happening here is people are not refinancing before that rate adjusts and they are experiencing a one and sometimes two percent interest rate increase every six months. That amounts to hundreds of dollars added to their monthly mortgage payments. In some cases you can't refinance before the end of the adjustable rate period without incurring a hefty penalty(fee). To give you an idea what all of this means numbers wise I will give you a real life example: Someone I know bought a house in a brand new development in a subburb of Dallas. Their mortgage was 1200 dollars per month for the first year and a half. Then they received that dreaded tax bill. They had a $9600 tax shortage from that period. Their mortgage was going to increase $800 per month. They were shell shocked. I suggested that they call the mortgage company and tell them that they couldn't afford to pay the shortage in full or an additional $800 per month. I told them to ask the mortgage company how long they would extend the shortage out for. The mortgage company spread the shortage out over 24 months instead of 12 months. $400 wasn't much better but it was manageable for them. My wife and I built our current home two years ago in a new development as well. I asked the mortgage broker to calculate our mortgage based off of improved taxes instead of unimproved taxes. We stayed with the same insurance company so they gave a so called customer loyalty break on the price. Even doing that I still put extra money back in the escrow account just in case. It's good that I did. We received our tax bill this past October and our taxes had increased $1800. Our mortgage was going to increase an addtional $155 per month this past June. They used the extra money we had sitting in our escrow account to cover the shortage. There are so many other things that cause people to loose their home such as home equity loans, credit card abuse or even job loss or divorce. I focused on some of the most common reasons. I hope my long winded answer makes sense. __________________________ Africa, my Africa, I have never known you but my face is full of your blood. - David Diop |
|||
|
|
A1 |
AC has it correct, but I'd like to add ... don't forget about the "Investor Effect." Here in AZ, housing prices appreciated at better than 30% for 4 years running. Why? Because investors [mostly from California] looked around and saw hundreds of 4 br/4ba houses being built and selling in the $250K-275K range. They saw this as cheap so the bought in. I personally know of three people from Cali that sold their 3br/1ba Cali home, moved to AZ and bought 2 homes [and still pocketed close to $100,000]. They then told there friends who didn't move here but mortgaged there Cali homes and bought in AZ. At that point it became a matter of supply and demand ... but the Cali folks were willing to pay more for the homes, thus exerting upward price pressure on the market. Unfortunately, many of the Black folks that did this caught the tail end of the market and are not seeing the returns or appreciation that they expected
Yes and no, but that is not the issue/problem ... the issue is people bought more house than they could afford. Because most consumers are conditioned to not look at the price; but rather, the monthly payment when the 2/28 no/low down loans came about, people said "I can get this 5 Br/4ba house for $800/mth?!? Sign me up." However, they did understand/care that the $800 payment would last for only two years and paid very little on the loans principal. |
|||
|
B2 |
Alright Mr. Kweli and Mr. AC(7-7-7)9311
 Countrywide is in the news again! http://money.cnn.com/2007/08/16/news/companies/countryw...stversion=2007081613
How does this affect, if at all, current holders of Countrywide loans? Is Countrywide allowed to start selling off loans to raise cash? I have a 30-yr VA fixed at 5.99 that I don't want touched.   All this talk makes me nervous.Also, I heard rumors a while back that there was a possible merger or someting between them and B of A. Does the current climate make that more or less likely to happen? I don't really care to do business with B of A. Thanks. The information you guys are giving is fantastic!  ------------------------------ DOMS is my friend.  |
|||
|
|
A1 |
ATP, You can take a breath ... Your mortgage won' be touched, even if Country-wide sells it to another servicer [collector]. The only thing that might change [if the loan was sold] would be those nasty little, but completely avoidable little fees, e.g., late fees, paying on-line, paying by phone; but the term and rate won't change. BTW ... 30 years, 5.99 Fixed ...  I'm with Country-wide, as well. It took me a long time [and several "Go to Hells"] to get a comparable rate.But, based on what you've told us earlier, your payment history means that your loan WILL likely be sold at about your one year mark. Lenders such as Country-wide bundle the loans they service into several categories, e.g., those paying on time, over time; those that sometimes pay late, but never more than 10 days; those that sometimes pay late but never more than 25 days; those that pay late a lot, or have gone over 30 days. When the lender needs to raise capital, they will discount these bundles [according to the category] and sell them.
I'm thinking [and this is only a guess] that the current climate will make a merger less likely because B of A has it's own mortgage arm [that doesn't service loans], it doesn't need a mortgage lender with bad loans on it's books. But again, this is only a guess. BTW ... For those of you with cash and/or solid credit and a desire to be a landlord ... Now [in many markets] is the time to purchase and hold property. |
|||
|
|
B2 |
Yes, I am a paranoid worrier and I have the gray hairs to prove it. Woooo-saaaah. Wooooo-saaaah. ------------------------------ DOMS is my friend. |
|||
|
|
C4 |
Kweli4Real was on point ATPWordPro . I totally forgot about the investors driving prices up. That is a phenomenon that we are experiencing here as well. As he said you are locked in you don't have to worry about your interest rate, even if your loan is sold. It is extremely rare to remain with the same mortgage company. Especially if it's a larger one. By the way, I see you got jokes on the 777, lol. Also, thanks for sending us some rain from Space City. The heat was getting unbearable.
__________________________ Africa, my Africa, I have never known you but my face is full of your blood. - David Diop |
|||
|
|
Tasmanian Angel |
Top 10 Foreclosure Cities
By Les Christie, CNNMoney.com staff writer August 14, 2007 NEW YORK (CNNMoney.com) -- The binge that many housing markets went on in the early- to mid-2000s is over, and some of the hottest markets like California are now experiencing the worst hangovers. But other areas, especially many that recorded slower home price growth earlier this decade, have seen little increase in foreclosure rates, according to the latest data released Tuesday from RealtyTrac, the online marketer of foreclosure properties. "While foreclosure activity has skyrocketed over the past year in many cities, particularly in California, Ohio and the Northeast," James Saccaccio, RealtyTrac's chief executive, said in a statement, "foreclosure activity seems to be subsiding in parts of Texas, South Carolina and other states." "Still," he said, "the overall trend is toward escalating foreclosure rates, with 82 of the top 100 metro areas reporting year-over-year increases in the number of homes affected by foreclosure." Stockton, California now leads the nation in foreclosures. Of RealtyTrac's top 10 metro areas for foreclosures, four are in Central California. Coastal California cities are doing relatively well, although foreclosures are up there too. San Francisco had one foreclosure for every 263 households, a fairly low rate, but up 83 percent from the first six months of 2006. Stockton city drew thousands of home buyers to the Central Valley area from the prohibitively expensive Bay-area markets during the housing boom and saw home prices nearly double in the four years ended December 31, 2005, according to the Office of Federal Housing Enterprise Oversight. Because of California's outsized home prices, option and hybrid adjustable-rate mortgages (ARMs) interest-only loans became widespread. They enabled home buyers to get into properties they could not otherwise afford. But often these loans were time bombs; hybrid ARMs, for example, reset to much higher rates - and payments - after the first two or three years of low fixed rates. Many buyers were also approved for expensive mortgages based on applications in which income or assets went unproven, the so-called no- or low-doc loans, AKA "liar loans." Lenders underwrote mortgages for these borrowers based on their income or asset claims without proof and many times the claims were exaggerated. When hard times hit, these borrowers had fewer resources to fall back on than the lenders anticipated and foreclosures followed. Seven of the nation's top 10 metro areas are in the Sun Belt. Only three are in economically hard-hit areas, historically the kinds of places that once produced the highest rates of foreclosure filings. Stockton recorded one foreclosure filing for every 27 households during the six months ended June 30, a 256 percent increase compared with the first six months of 2006. Number two in the nation was Detroit, where job losses in the auto industry drove foreclosures higher. One of every 29 households recorded a foreclosure filing there, almost double the rate of a year ago. Las Vegas (one of 31, up 142 percent) was third. The other California cities in the top 10 were Riverside/ San Bernardino (one in 33, up 198 percent), Sacramento (one in 36, up 231 percent) and Bakersfield (one in 47, up 222 percent). Rounding out the top 10 were Denver at No. 6, Miami at No. 7, Memphis at No. 9 and Cleveland ranked 10th. The lowest foreclosure rate recorded by RealtyTrac among the 100 metro areas surveyed was in Richmond, Virginia. It had just one for every 2,319 households, about the same as a year ago and a rate barely more than 1 percent of Stockton's. Other low foreclosure metro areas included Greenville, South Carolina (one in 1,721, down 66 percent), McAllen, Texas (one in 1,494, down 35 percent) and Honolulu (one in 1,151, up 68 percent). Most Ruthless Foreclosure States BLACK by NATURE, PROUD by CHOICE. Before there was ANY history, there was BLACK history. |
|||
|