Upcoming Foreclosures

About mortgage foreclosures?

This is not typically a question I would ask in an open forum like this. Eventhough mortgage forclosure has been one of the biggest stories in the news I have to ask due to my lack of knowledge and understanding on the topic. How much does change in mortgage rates have to do with the recent foreclosure phenomenon? What is the relationship between real-estate and mortgage increases? What ultimately lead to the foreclosures of so many families with in such a short period of time?

Public Comments

1. First of all, the price of houses comparied to medium family income has gone up. Housing markets are stable when the medium house sells for three times the medium family income. When it goes higher, like in California, people half to streach more. If anything happens, they will miss a payment and things go downhill from there. The second thing has been mortgage approval. I remember a banker telling me I did not quilify because my mortgage would be 29% of my gross pay. I pointed out I had no student loans or car loans, and he reluctantly agreed. In the last eight years, you could put any numbers you wanted on your form, they did not check. I found out that a speculator purchased 10 houses in my neigborhood using liar loans. All went to forclosuer. That of course, put every house in the subdivsion underwater with fair market values 10% lower than 6 years ago. So if you have to move, or loose your job, or have a divorce, you can no sell the house for what you owe. And more houses are forclosed, and market values drop more. Throughout this, banks have refused to manage risk. A bank could have taken a 5% haircut up front, but time and time again, they go for the 30% hair cut. Now banks know they could loose money, the have tightend up requirements, and there are 20% fewer qualified buyers, so prices continue to drift lower. Eventually, the hard core cash buyers will start to buy, and thing will even out. But that may be a year from now. Now what is going on with the banks is a whole other story.