Plant Ice…Harvest Wind. Here on The North Fork?

August 17th, 2007 category: Real Estate News, Real Estate Philosophy

Like you, I’ve been watching the sub prime debacle. The result of my observations (a laypersons view) is that the current mortgage company collapse involves a whole lot more than the issuance of mortgage loans to borrowers with shaky credit. I know how to assist consumers when they try to GET a mortgage; I know NOT the inner machinations of the banks in their current state.

Evidence: the recent collapse of American Home Mortgage. This is not a company that made its money on sub prime mortgages- this is a company that more often than not, carried “A” paper (good borrowers).The feeding frenzy of home buying for ANY home buyer, good credit or not, offered a myriad of “creative financing” options.

Those with good credit sometimes submitted no doc paperwork; they were able to borrow beyond a capacity that now permits escape from increased loan payments due to a rate that is adjusting (enjoined with the property value that has declined) and there is NO WAY OUT for those that need to sell, short of, well, a short sale or foreclosure.

While the world watches to see the outcome of Countrywide Mortgage (who is currently intimating some pretty hefty financial burden), those that are in the process of obtaining loans are holding their collective breath- is my company next? And what of the zero down programs; the limited doc programs; the teaser interest rate that captured our attention to purchase above our established price range?

The good news is, 100% financing is NOT GONE. The bad news is: limited or no doc loans, regardless of your financial ability, have seen (for the moment) their glory days. Remember: I’m viewing this as most do; perhaps your study of the current problem is well beyond my view. Because, to me, the problem was NEVER in lending money to less than stellar credit. Fraudulent practices are not unknown in the mortgage industry to accomplish a closing, and borrowers with “issues” have borrowed for YEARS. The problem fell to consumers and lenders engaging in a mutual decision to borrow more than they could afford in a market that would CHANGE.

Knowing this, we will all (real estate agents and consumers alike) write this off as history, in time. In the meantime, the mess has additional “ISSUES”.
Banks that are dealing with ONE foreclosing customer are challenged; the current assault has them swamped. Unprepared, calls are left hanging; customer service is out the window; and frankly, they can be MEAN to deal with. Add to that out of state lenders operating on faith with an appraisal that is skewed, due to fewer sales and older pricing- what a mess.

What will (in my view) happen is that creative financing will take a temporary leave in favor of more traditional standards- ratios will matter (ratios obtained from pay stubs and tax returns); rates of a permanent nature will be more interesting to most than adjustable rates (which are attacking
their owners now), and buyers will understand with clarity the amount that will be acceptable- buying “within their means”.

We can now surmise with caution that our government, seeing a return to traditional, will lower interest rates and offer some incentive for a decreased buying public. The month of October in my earlier years of selling real estate often offered a break when rates were on the way down- I’m very curious to see what this year brings as rates edge upward.

MONEY DOWN WILL STILL BE MONEY DOWN- down payments “talk”. Latitude will be afforded those that offer the banks a possibility of equity
should the property foreclose- 20% being the minimum. Not a bad idea, to cover yourself with an equity loss through the form of a down payment for a home that you plan to keep for several years.

In the meantime, strong borrowers will likely borrow what is, on paper, affordable- no more, no less.

This entry was posted on Friday, August 17th, 2007 at 10:34 pm and is filed under Real Estate News, Real Estate Philosophy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

5 Responses to “Plant Ice…Harvest Wind. Here on The North Fork?”

Blog » Blog Archive » Says:
August 19th, 2007 at 1:03 pm
[...] Plant Ice&#8230;Harvest Wind. Here on The North Fork? [...]
laurie mindnich Says:
August 19th, 2007 at 4:23 pm
Click on the above link to get a more comprehensive view of the current mortgage climate!
Paula Henry Says:
August 28th, 2007 at 1:25 am
There has been a drift of substancial change in the mortgage industry. How this will play out is anyone’s guess. There are still some great loans available with zero down albeit, the quaifying ratios are stricter.

We will this ride this wave, with both a more educated consumer and industry.
laurie mindnich Says:
August 29th, 2007 at 8:34 am
You’re right, Paula- it IS what it IS, but avoiding these loose practices in the future will be key to a healthy real estate environment- hard lesson to learn for ALL.
mortgage lender roads Says:
August 30th, 2007 at 9:00 pm
finding lender mortgage bank lender mortgage

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