I was on CNN's site today and saw a link to an article "Mortgage rates fall for third straight week". This really bothered me because while this is to some degree correct, it really gives the wrong impression as to what's happening in the mortgage arena right now.
Don't get me wrong. I'm a big fan of CNN, particularly Lou Dobbs but most consumers would take this article's title the wrong way. While the rate on a Full Doc (income is fully documented) personal residence for 80% or less of the home's value did go down, AKA Conforming loans, just about every other mortgage rate went the other way. They have gone up, way up!
On the other hand many programs are simply no longer available at any price or mortgage rate available from any lender.
Why? It's because they can't sell the loans in the financial markets. They have been passing the risk to other investors who are no longer buying. They can no longer do the loans. This includes Sub-prime (not very good credit) and Alt-A loans (Good credit but typically not documented fully). I have never seen the size of these markets quantified but they are, or more accurately were huge! Millions and millions of home loans during the recent real estate boom were in these two segments.
What concerns me even more is I believe very few Gurus on Wall Street or in the Government realize or if they do, they won't admit just how bad the mortgage market is and what extent it's affecting real estate.
A few like CNBC's Jim Cramer get it but they are in the minority. Being in the mortgage business I get numerous e-mails every day from lenders I work with (and that's a small minority of the lender's out there) about this rate increase or these programs no longer offered. In addition, I see announcements of lenders going out of business. I was not able to confirm it but one mortgage industry website said that over 60 lenders have gone out of business since the first of the year. Some of these businesses were big, but still unable to survive the turn.
Consider the following bits of information collectively and see what conclusion you come to.
1) Many mortgage companies have or are going out of business, significantly limiting loans for potential homeowners,
2) Most non-conforming (Sub-prime and Alt-A) mortgage programs have been eliminated or their requirements have been severely tightened, also limiting loans to homeowners or potential homeowners.
3) As many as 2 million homes may be foreclosed on this year.
4) Millions of other homeowners are behind on their mortgage,
5) If millions of homeowners are behind on their mortgage even to the point of loosing their homes, how are they on their car payments and credit cards?
6) Several million mortgages issued in the past 2 to 3 years are ARMs and will be up for a rate change (No matter what seems to be going on in the market, they always seem to go up) and homeowners don't qualify for a refinance to help their situation,
7) An already depressed Real Estate Market is getting worse,
8) Millions of homes with a 100% mortgage have gone down in value so there is no equity to tap as there was before the current crisis, at any rate.
9) And lastly, no matter what government statistics say, Americans are seriously squeezed between low pay raises (if they are lucky enough to get a raise thanks to outsourcing to China, India and other super low wage countries), high gas prices, and high health care costs among other high every day costs of living that never seem to get considered in government statistics. All the folks who are living on a budget have less discretionary income. They are struggling to pay the bills, not that Wall Street and the government seem to care.
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