I see another potential issue to all of this - people who have credit cards with limits of more than their annual salary who have run them up and now have less money to pay for them because of their ARM. They miss a payment or two, and their credit card rates go up to 15, 18, 21% or more. There is no more cheap money to borrow to knock these things down, and bankruptcy laws have changed to make it more difficult to be able to walk away from this sort of thing.
Some people have financially screwed themselves for the rest of their lives for the sake of a plasma TV. Unfortunately, we know what is going to happen when they hit retirement age and have nothing but SS. I hate the concept of SS, but knowing human nature I think that the alternative is a lot worse.

Steve

Jamo,
They are already are doing that. Mortgage companies are now going to the extreme for qualifications. Interesting that all the Realtors and mortgage brokers that were making a killing over the last two years now have their big a$$ homes for sale and are looking for work.

Here is an example of what is coming for the mortgages of our future. This is a true example of a client I "was" working with. Lost the deal because of financing. He said "I guess Now is not the time to buy after all"

EXAMPLE: (real numbers were different but you get the picture)
New home cost $100K
Appraisal is $100K
On his job for over 20 years
790 FICA score
All is right with the deal right?

NOPE:
Mortgage company writes down appraisal 20%
Home now appraises for $80K (cost more than that much to build)
Mortgage company will finance 80% of appraisal amount or $64K
Client has to put $34K down payment and pay TWO points.

That is 36% down with excellent credit, very stable and on job over two decades!

The guy walks and Says "Now is not the time to buy a new home."

VRM
Yes people had to have the Plasma TV. It is interesting how soon we forget that in the eighties this happened. I guess each generation has to get their clocks cleaned for life to proceed.

Credit card companies are DOGS and will raise the rate in the blink of an eye. I have seen instances where the rates were raised on good paying customers because they were loosing so much money on defaults of others.

So what kind of rate would he be getting for all that?

Good for them for finally figuring out that they need to restrict things a bit, but they are just going to hurt themselves by being ridiculous about it.

I refinanced from 7% to around 5.6% fixed, and I plan to stay right there. I also have a line of credit that I don't use. It costs me nothing unless I use it. And I have no plans to use it, despite what my wife says...:eek:

Steve

I was trying to remember the rate they quoted him. I want to say it was 7.25 or 7.58 something like that. I remember I was pissed off because I had used this mortgage company for many years, heck decades and I will NOT use them again.

Don't get me wrong I do realize something needs to be done but I also think being stupid has never been a good solution to anything.

Note that all these changes have taken affect in the last six weeks to two months.

It amazes me how many builders are closing up shop and just not building. I went to a development on Sunday and they would not even take a deposit. They said they have laid off ALL their construction crew and would have no one to build the home.

It will get really bad before it gets any better.

I was approved for my second mortgage a couple weeks ago. (Second mortgage and second house btw not 2nd on 1 house) loan 94.64% of value, 6.375% rate. This was with USAA federal savings.

On the guys coming... I actually got a PM from somebody on here who is on his way to Camp Bucca!!! Small world! Another guy on here (Jerry Clayton) has a nephew here! There are only a few thousand people here! VERY small world!

Yea I am not sure how long they will be there, he thinks about 11 - 12 months. I am sure they will move around during that time though.

Just more news on the housing problems.

http://biz.yahoo.com/cnnm/070830/083....v=2&.pf=loans

Ron :(

That's true Ron,
The flippers and would be investors were a very large contributing factor.

I know in Florida builders had to limit how many homes a person could buy at one time. People would stand in line to buy them ten at a time.

Most of those were never closed on and the builders now have them in inventory.

The builders acted way too late in those markets. Had they restricted the homes to end users only this would not have happened. I have seen people buy up to 50 homes in one community.

Toll Brothers for example, has over 2,000 completed homes that are unsold.
That is just STUPID on the Division President's part. They got HUGE bonuses for selling these. I wonder if they have to pay them back... NOT!

Can you say
POOR LEADERSHIP

One point that has not been covered is that the people holding these sub-prime loans on properties they purchased over the last two years CANNOT refinance them into something else because their properties won't appraise....so they are stuck with what they have. At least if the interest rates are eased, they may be able to find something to replace it in the near future.

Are these people responsible for getting involved in this type of loan. Yes. But I also blame the greedy mortgage brokers that put them into these programs just to make a quick commission.

A sudden drop in house values is nothing new of course, it's the number of sub prime loans that are the real killer deal here. In 1991 the Hawaii economy collapsed virtually over night. Japan's economy is what killed Hawaii's economy. I had just bought my first Hawaii home. Put 10% down, had a reasonable fixed interest rate and payment, typical for that time frame. Suddenly I had a reverse mortgage as the house was 'devalued' by some $50,000. I could not refinance and could not sell and niether I nor the bank had done anything wrong, stuff happens.

I cut a deal with the bank, let me market the house and get what I could while they FORGAVE the loan. Or, I'd stop making payments and they could go through the eviction process and end up with a 'trashed' house. They agreed. This was VERY early in the economic crisis phase of things and within a few months of MY deal the banks were NOT 'dealing' anymore. They pursued evictions and foreclosures with vigor as there were just to many homes on the market with a reverse mortgage. I shudder when I think about how that deal COULD have come out. I'd STILL be trying to pay off that loan I suspect.

Just for info: Our last house was appraised at $231K.

That was a year ago. It's listed at $179K, realtor has shown it twice in 6 months.

I am in rural Oklahoma, but JEEZ!

We are eating our retirement funds making current mortgage payments on three houses, two of which are for sale.

There is no "movement" toward UT's little corner of the world.

Hey, 2500 sq. ft., 4 BR, 3B, magnificent kitchen with new appliances, hot tub, HUGE 2-car garage, a "toy box" out back with stalls for an RV and a boat, sitting on an acre.

I'm PO'd and frustrated and going broke.

Go look.

http://www.pattydingle.com/cooksey.htm

UT

I suspect that you know why - jobs! A lot of little people are hurt when a big company goes down - thousands normally.

I really, really hope that the FED does not lower the FF rate later this month - the RE market needs to work this out. Keep in mind that 30-35% of the homeowners in trouble in the metro areas or areas close to metro areas are house flippers that were unable to flip. Also, a huge percentage were not truthful on their application and another huge percentage simply stupid. Huge money was made by Countrywide and others - let them pay the price of those gains, not taxpayers. Besides, this mess has promise of bringing down housing costs so people can afford to buy houses. That really, really needs to happen - developers have ripped buyers, now the chickens have come home to roast and they are huge mad chickens!

Also - think about what is happened - the 'holder' of mortgages wants to increase the rate, based on the contract - so it's the 'holder' of the mortgage that is causing the problem for the home owner. In theory, the 'holder' can grant an interest rate break, but the 'holder' appears to not want to do that, they want the government to step in to assist the homeowner to make the higher payment. Well, screw them - keeping to mind that they originally purchased the mortgage with the higher rates as an incentive down the road. We are now down that road. A bailout will bailout the mortgage holder - greedy bastards with few exceptions. On the other hand, home owners did sign up for the deal and a deal is a deal. So, both the home owner and the mortgage holder deserve to lose.

CDC,
Exactly. I say do not lower rates. Everyone that has a normal mortgage will be fine. The investors and the ripe off mortgage companies will pay the price. We builders are paying the price right now, so why should the flippers and mortgage companies get the bail out.

I think they need to go down with the ship. I have some friends that are in the mortgage business and they are crying every day wanting me to send them "Good Deals" I tell them I would not send them my criminals. Especially after what they did to my last client. This is the same company that ran off one of our good clients.

Truth is they do not want to make loans, they just want to get paid!

They all have HUGE homes now and cannot make the payments. They all brag on their websites they did ""$____________"" in closings or sales in 2006. I always ask them what have they done since they stopped taking orders? I get this hollow look every time.

Paying the fiddler has never been fun OR easy........

BUT - if you njoyed the music it is now time to pay! Amen.

I agree with that to some extent.

It is time to pay for those who bought ten houses in the same development betting on the come.

I really think those people knew what they were doing as they did it SOOOOO many times.

The homeowners on the other hand (I feel) were hornswaggled into something they may not have understood. Believe me I sat at many of settlement table and they had no idea what they were signing.

On one occasion I specifically asked the Title Company rep to explain what type of loan this was because I felt the older couple were being taken advantage of. I tried to talk them out of this type of loan. She told us all she had no idea what would happen on this loan in 30 days. The loan was a "fixed rate" for the first 30 and then adjusted every two weeks. It was VERY heavily marketed as a "fixed Rate" because it started out "fixed" for the first 30 days.

To me that is FRAUD!

Withing three months the home was for sale and it was foreclosed on within seven months. The interest rate jumped 3% the first 30 days 3% the second thirty days and 3% the third 30 days. The house payment more than quadrupled. Now I know for a FACT that these people DID NOT understand the loan they signed. I do admit they should have listened and or should have hired an attorney. I tried my best to get them to not sign this loan. They just did not understand what they were getting into.

The mortgage broker misled them. Plain and simple. They are now suing the mortgage company and I may be called to testify. I will tell the court the truth. They were misled.

I have been reading this thread with interest as I know very little about the ins and outs of creative financing. but from the number of foreclosures around here and the amount of for sale signs that have been setting in front of homes for the past year, I am sure some of that went on. To many people buying houses for over $200K that should have sold in the $75 to $100K range and now can't make the payments. Just for kicks when all the selling was going on I had real estate estimator come out and give me an estimate of what my place would list for. When she told me $230K I almost fainted. No way is it worth more than maybe $130K, and to me that would be a stretch. I got all my paper out and figured out what the property and house cost me when I bought it and built, and I spent just over $47K. Now that doesn't include the new roofs and upkeep over the years, just my initial investment which I paid for in cash. One place that finally did sell near me, they had to lower the price from $225K to around $100K before they could sell it.

Ron :confused:

An update - data just received:

All the big financial institutions estimate the FF rate into the future, BofA, etc - all of them have the rate steady at 5.25 through the third quarter with a few projecting a downturn in the fourth quarter, specifically Countrywide has it at 4.75, Merrill at 4.50 and Bear Stearns has it going up to 5.50. The median is 5.25 through the fourth quarter - interesting - no bailout scenario.

Countywide must be praying for 4.75!

Merrill has the rate going down to 3.75 by the first quarter 08 - this is the only entity that projects such a downdown with others only moving 25 BPS over the next year, up or down. Does Merrill know something that others don't know or do they know nothing at all?