One of the largely unreported white collar crimes in the mortgage business is that loan officers inflate the income of marginal buyers so they are approved to buy a home they can not possibly qualify for.
Greed on the part of the buyer for supposedly inflated home valuation and greed on part of the mortgage lender for a juicy commission. The bank regulators looked the other way, the mortgage higher ups tacitly approved the practice and now with a declining real estate market buyers are bailing out in droves. Foreclosures are rampant.
Unsuspecting investors buy these mortgage obligations from brokers assuming they bought a sound investment. For instance Goldman Sachs , one of the top sellers of C.M.O.’s (collateral mortgage obligations) for the past few years sold about $100 billion to unsuspecting investors.
With the real estate decline, the bubble popped and everyone is looking for a scapegoat.
The real cause is the mortgage scams and lack of enforcement in inflating mortgage applications at the entry level. With the interest only mortgage obligations, greed on part of all parties involved perpetuated the fiasco.
Rising subprime mortgage defaults can add 500,000 homes to the U.S. real estate inventory according to a Bloomberg morning report. Speculation looms for New Century as they consider bankruptcy. In the meanwhile, new mortgage lending is halted at New Centrury.
Unsold home inventory shot up 5.9% in February to 3.75 million while the average 30-year fixed-rate mortgage was 6.16% in February according to Freddie Mac.
Existing-home sales 3.9% rise in sales for February. It would take 6.7 months to sell off the excess inventory of homes at the current real estate sales pace.
Subprime woes have left the housing industry in an adjustment phase with borrowers with poor credit defaulting on mortgage loans. Estimates suggest it will cut housing demand by 100,000 to 200,000 units annually.
Builder, supplies, real estate connected jobs slump as housing related employment is effected. It’s no longer boom times in the construction industry. Interest rates have settled and offer a good chance to refinance at favorable interest rates.
Property tax appeals offer an excellent means to lower your tax dollars. To keep up with additions and subtractions the municipal building department missed, the mass appraiser is contracted. Mass property tax appraisers often use the most expensive property on the block to gauge properties against. Using error in judgement often results in not making location and other value adjustments. Maybe that’s why you’re over-assessed!
At the end of the day, the person doing the measuring has hundreds of measurements and calculations in his head. He probably will not even remember your home. He doesn’t have the same recall as an appraiser making an individual property appraisal.
Inaccuracies, math errors and observation made in haste and not recorded or misplaced occur frequently. Depreciation is not accounted for. For a good do it yourself property tax manual go to Property Tax Appeal Ax You might save yourself quite a few mortgage payments when you win.
Nationwide, one in every 92 households is in foreclosure with Nevada having the highest foreclosure rate! According to RealtyTrac, more than 1.2 million foreclosure fillings were reported in the U.S. last year. Foreclosures could rise as some 1.5 trillion in adjustable-rage mortgage get repriced this year. Couple that with declining home prices and increase property taxes and one can be whistling some sour notes.
Home prices fell in 17 out of 20 cities in November compared with October 2006 data according to a recent MacroMarkets and Standard and Poors report. Although home prices in some cities did rise, nation wide there is no sign of the downtrend in real estate prices slowing down.
Property tax rates continue to skyrocket in many areas because of weak-kneed elected officials not reigning in expenses or living within town budgets. Many municipalities are soft on curbing excesses or cutting budgets. Rising property tax payments make many homeowners budgets too tight and they are not able to keep up.
Many banks have promoted hybrid and adjustable mortgage loans some with no and others with low down payments. With delinquent mortgage payments and foreclosures far above year-ago levels, indications are that hard financial times are gaining on many. Ballooning interest rates often surprise those who hold an adjustable-rate or sub-prime mortgage and when it is time to refinance, many are left with no option but foreclosure.
Some banks were, in some cases, even selling houses and forgiving debt. Do some of these banks feel some culpability for some creative loans they have saddled the homebuyer with? If they studied their customers' financial profile, they might never have made those loans. Do these banks fear scrutiny given the strong likelihood that their customers mortgage interest rate would be higher and unaffordable upon the refinance period? It's not unreasonable to expect mortgage rates to return to that double-digit territory as the economy cycles through a downturn.
A hybrid mortgage may be an appropriate choice if one plans to live in their house only for three or four more years. The first years of a hybrid loan are generally charged at a lower rate than traditional fixed-rate loans and if one plans to move and sell the home in a few years, it makes sense. If, for some reason, one don’t sell the home, they’re gambling using any form of a hybrid mortgage loan since it converts to an adjustable rate.
Hard times and rising payments make for tight budgets. If one wants predictability and the security of paying the same interest rate for the life of the loan, a fixed-rate mortgage is the smart choice. Rates are still low, by historical comparisons and given many economic forecasts of a weaker dollar and predictions for higher interest rates, locking in a fixed rate will reward one with peace of mind.
Surprisingly, construction spending is up and Master Card purchases are on an increase. Reports show that the U.S. grew at a 3.9 percent pace in the third quarter. Even though home building activity is plunging, exports grew at the fastest rate in nearly 4 years. All this good economic news while inflation seems tame.
Oh yeah, did we mention the quarter percent rate cut? The Fed cut .25 basis point off the rate to make it 4.5%.
