Will Tomorrow Be The Next Mortgage Bust? - NY Times
As we all know, timing is everything, especially in the real estate market. The question on every home buyer and investor’s mind is - should I invest in a home today, in a month, or a year from now? Predicting the future is not possible. However, we can make pretty accurate assumptions. The Opinion selection of the New York Times offers important housing market statistics and takes a quick glimpse into the past, present and future of the US mortgage crisis.
New York Times - OPINION
May 19, 2008
“In responding to the subprime mortgage crisis, most Congressional Republicans and many Bush administration officials apparently believe they have time on their side. They are wrong.
“The housing bust is feeding on itself: price declines provoke foreclosures, which provoke more price declines. And the problem is not limited to subprime mortgages. There is an entirely different category of risky loans whose impact has yet to be felt — loans made to creditworthy borrowers but with tricky terms and interest rates that will start climbing next year.
“Yet the Senate Banking Committee goes on talking. It has failed as yet to produce a bill to aid borrowers at risk of foreclosure, with the panel’s ranking Republican, Richard Shelby of Alabama, raising objections. In the House, a foreclosure aid measure passed recently, but with the support of only 39 Republicans. The White House has yet to articulate a coherent way forward, sowing confusion and delay.
“The fits and starts are harmful. The housing bust is in the downward spiral of price declines and foreclosures. Single-family-home prices dropped 7.6 percent from the first quarter of 2007 through the first quarter of 2008, the largest year-over-year decline since the National Association of Realtors began reporting prices in 1982. Conservatively estimated, 2.2 million homes will enter foreclosure this year. An additional nine million homeowners — those with zero or negative equity — are considered at high risk of default because they have no cushion if recession or inflation, or both, make it impossible for them to keep current on their mortgages.
“That is because a category of risky adjustable-rate loans — dubbed Alt-A, for alternative to grade-A prime loans — is scheduled to reset to higher payments starting in 2009, with losses mounting into 2010 and 2011. Distinct from subprime loans, Alt-A loans were made to generally creditworthy borrowers, but often without verification of income or assets and on tricky terms, including the option to pay only the interest due each month. Some loans allow borrowers to pay even less than the interest due monthly, and add the unpaid portion to the loan balance. Every payment increases the amount owed.”
You can read more at NY Times - Teeing up the Next Mortgage Bust
Copyright 2008 by the New York Times
Tags: foreclosure homes, foreclosure news, foreclosure problem, Real Estate
