Daily Real Estate News | December 5, 2007
Foreclosure Plan Will Be Greeted With Questions
Treasury Secretary Henry Paulson will unveil a plan on Thursday to forestall foreclosures and ease the housing recession.
The release of plan’s details will coincide with the release of data from the Mortgage Bankers Association that show that homes in foreclosure hit record levels in April through June, and that nearly 17 percent of subprime borrowers missed at least one payment in the first quarter of the year. An additional 2 million home owners will face their first interest-rate reset by the end of 2008.
“This is the most serious housing recession since the Great Depression,” says Mark Zandi, chief economist for Moody’s Economy.com. Zandi predicts that home prices, on average, will fall 7 percent more through next year.
Paulson says he wants state and local governments to be allowed to issue tax-exempt bonds to “temporarily” raise money to help some struggling subprime borrowers refinance.
Questions remain about how many investors, who bought bonds backed by these mortgages and are spread out around the globe, will agree to change the terms of the loans.
Source: USA Today, Noelle Knox (12/4/2007)
White House, Banks Hammer Out Foreclosure Plan
The Bush administration and major financial institutions are close to an agreement that would temporarily freeze mortgage rates for home owners with spotty credit histories.The agreement is designed help the 500,000 subprime borrowers whose mortgages are resetting and are likely to result in foreclosures, threatening the broader economy.
A sticking point is which homeowners would qualify and how much they would have to pay to refinance or freeze their loans, sources close to the discussion say.
Treasury officials say financial institutions are likely to create a set of criteria based on income, credit-worthiness and the amount of equity borrowers have in their home.
They will then divide borrowers into three groups: those who can continue to make their payments even if rates rise; those who can’t afford their mortgages even if rates stay steady; and those who could keep their homes if the maturity date of their mortgages were extended or the interest rates remained at the teaser rates.
Only the third group would be eligible for help.
Source: The Washington Post, Deborah Solomon, James R. Hagerty and Lingling Wei (12/01/2007)
Maine has been affected by the latest mortgage crisis. Following up with our in house mortgage brokers, Approved Home Mortgage, many buyers are surprised by the criteria for these types of loans. It really isn’t a sure deal getting a loan these days. The best time to buy real estate is now especialy to increase your portfolio and I have even looked into buying multi-units recently. I was told the credit scores had to be in the 700’s, with 30% down, stated income with verified assets and 6 months reserve. Huhmmm…I had to say, maybe I should have been saving a little more in case the market moved in this direction
This article came in this morning which touches tis subject. Read on…
The assumption that the subprime mortgage crisis is limited to buyers with poor credit is mistaken, according to an analysis prepared for The Wall Street Journal, which examined more than $2.5 million in subprime loans made since 2000.
In 2005, the peak year of the subprime boom, borrowers with credit scores high enough to qualify for a normal loan received 55 percent of all subprime mortgages, the study says.
The study by First American LoanPerformance, a San Francisco research firm, says the proportion rose even higher by the end of 2006, to 61 percent.
“Brokers and agents were telling” borrowers with high credit scores for the past several years “that it was OK” to get subprime loans, “and borrowers were wanting to take on more debt,” says Mark Carrington, director, analytical sales and support at First American LoanPerformance.
Analysts conclude that credit-worthy borrowers holding subprime loans may be more likely than traditional subprime borrowers to afford to double whammy of rising rates and declining values.
The data could explain why nearly 80 percent of the borrowers with subprime loans have continued to keep their loan payments current, according to some analysts, and suggests that the crisis won’t deepen as much as some fear.
Source: The Wall Street Journal, Rick Brooks and Ruth Simon (12/03/2007)