Nightmare mortgages

[technovelist]

This looks like an excellent analysis from the September 11th, 2006 issue of Business Week. What is this, time travel?

[powayseller]

Great article. Two points caught my eye. First, two of the people profiled refinanced from a fixed rate loan, one as low as 5.1%!!!, to an option ARM, to get lower payments. Second, this part of the business will be unaffected by the new lending guidelines: ” To get the deals done, banks have turned increasingly to unregulated mortgage brokers, who now account for 80% of all mortgage originations, double what it was 10 years ago, according to the National Association of Mortgage Brokers”. So John Dugan can’t touch these guys.

[PD]

I predict that mortgage reform is going to be a very hot political topic in a couple of years.

[LA_Renter]

I am very glad Business Week did that piece. Here is an article by foreclosures.com about the uptick they are currently seeing. It compliments the Business Week article. I guess it is safe to say that much of this housing boom/bubble was based largely on fraud. Fraud, although mostly legal, on an unprecedented scale. I know that many feel that these borrowers deserve what they are about to receive, and many of them do, but keep in mind that many of these mortgage companies (not all) prey on the weak (the old, disabled, undereducated, foreign speaking, etc). My S/O was a mortgage broker and left that industry because she saw many of her counterparts shaking down poor and uninformed people on a regular basis. What these banks and lenders did is simply amoral. Most people on this board and other boards have mainly been predicting a housing bubble burst and its potential consequences. Now as this unfolds we are going to see exactly how ugly this bubble is.

http://www.foreclosures.com/www/forecast/ff_aug06/default.asp?topic=nationwide

[PD]

I really feel sorry for these people. Some are exulting in their future downfall. I am not. I think many people got into a game they did not fully understand. The FBs bear heavy responsibility for their troubles but many fell into a trap of smoke and mirrors designed by lenders. Loan documents, fees, schedules, APR, resets, minimum payment repercussions are all things that many average Joes just do not understand. They see ONE thing: What is my payment. Then they sign away their life because it was too complex for them and they relied on their mortgage broker to explain everything to them.

[PerryChase]

I’ve been reading Business Week for a while and they’ve always been positive about real estate. Now they’re running more and more articles about the sector going south.

[Bugs]

“Past returns are no guarantee of future performance. Buyers should be aware that the RE market in this region has suffered significant losses of 10% or more during two time periods in the last 20 years and will likely suffer additional losses at least once in the next 20 years.”

[PerryChase]

http://www.businessweek.com/magazine/toc/06_37/B4000magazine.htm

 

[img_assist|nid=1443|title=Business Week Cover|desc=|link=node|align=left|width=300|height=400]

[no_such_reality]

Sorry PC, don’t buy it. I don’t accept poor lil homebuyer didn’t know what he or she was getting into. It’s really didn’t know and didn’t care what they were doing on the biggest purchase of their life.

[Anonymous]

Here’s some podcast. I’ve transcribed a bit of the 19 minute podcast that came with the BW cover story. References and times in a comment I put under post A reply to “Mike” over at Doom. Here’s what I transcribed, though:

“We don’t know exactly what [refers option-ARM mortgage loans] they [the lenders] have on the books because they haven’t been required to disclose it. Now that is slowly changing. We’re getting little glimpses now because the regulator is mad. And they’re looking at their audits, and they’ve seen and they’ve talked to the banks and they’ve said, ‘you know, you have to get this stuff off your books, you’ve got to raise your standards and things have got to change.’ And so we’re expecting, in fact, new guidelines from the banking industry’s main watchdog, the Office of the Controller of the Currency, to come out with something.
…
The lending system has run amok and real people are going to get hurt.“

[PerryChase]

SEPTEMBER 11, 2006
BUSINESS WEEK
BUSINESS OUTLOOK

Housing: The Slump Begins To Hit Payrolls

The housing market’s decline is moving on to the next stage. As home sales and construction activity deteriorate at a faster pace, job growth in areas linked to residential real estate is starting to ebb and even decline outright in some parts of the country where the housing boom has been the strongest.

State employment data show that construction payrolls in California have fallen by more than 11,000 workers during the six months through July. The number of construction workers in Massachusetts, Connecticut, and New Jersey has also fallen over the same period. Meanwhile, hiring in other housing hot spots, such as Maryland, Oregon, and Virginia, is beginning to slow.

When it comes to work in other fields related to real estate, state data are more limited, but they do show some areas where growth is flagging. Among real estate agents and brokers in California, hiring in July cooled to a 4.8% gain from a year ago. That rise is below the 7.8% national pace as of July and is the smallest gain in the state since August, 2002. Hiring in Oregon for real estate-related financial activities increased 1.5% from a year ago in July, a significant slowdown from last July’s 9.5% pace.

The state data are in line with recent trends in the national job figures. According to investment bank UBS (UBS ), residential housing payrolls, which includes construction, financial, retail, and professional services positions, declined by a total of 15,000 jobs in June and July.

The job market for residential construction could turn south more quickly now. July new home sales and housing starts posted the sharpest yearly drops since the mid-1990s, with big declines coming in the once red-hot West and Northeast. Other jobs linked to housing will also decline. The Federal Reserve’s July survey of banks showed the largest share of lenders reporting a drop in mortgage demand since early 2000.

For states such as California, Maryland, and Virginia that experienced the hottest housing markets, the bust may be doubly painful since construction jobs also accounted for a disproportionate part of total job growth during the boom.

By James Mehring in New York

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