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5-1-2007 -- Foreclosure Filings Are Up in 2007

Foreclosures rose sharply in the first quarter of the year as housing prices stalled and homeowners had an increasingly difficult time making their mortgage payments. The number of foreclosures jumped over 25% from the previous quarter with 430,000 foreclosure filings occuring nationwide. California led the number of foreclosures at over 80,000 -- nealy twice the amount from the same time last year. The top California cities for foreclosure filings include Riverside / San Bernardino, Sacramento and Stockton. Florida foreclosures are up over 50% from last year.

Many industry experts expects the number of foreclosure filings to rise steadily in 2007 as many adjustable rate mortgages will reset this year -- causing interest rates to riseas much as 3 points.

4-19-2007 -- Sub-Prime Lenders: What Role Did They Play?

Lenders increasingly accepted high-risk borrowers because they knew they could sell off these sub-prime loans on the secondary market if they included risk premiums to the interest rates. The hope was that higher payments would be greater than the increased number of defaulted loans -- this strategy worked for quite some time. One of the main reasons was the booming housing market, which meant that even with the defaulted loans, the bank could usually recoup its original loan. When the housing market cooled off, it meant that cash strapped borrowers could no longer tap into the equity that they had been using in tough times in the past. This is one of the main reasons that foreclosures will certainly increase in the next several years.

4-13-2007 -- Sub-Prime Home Loans: Regulators

Government officials have accused regulators of being much too lax by allowing lenders to push adjustable loans with low "teaser" rates that would adjust in future years to much higher rates. Mortgage regulator representatives counter that many of these loans were offered by large mortgage companies that weren't under the bank regulators control. In addition, they contend that these loans weren't bad in and of themselves as they gave many borrowers a chance to get into the market. The danger came when a broker sold the loan to a borrower without properly disclosing the terms and the rates that the loan could adjust to in future years. Regulators were using a policy aimed at increasing home ownership, which was certainly endorsed by politicians at the time. What is not in debate is the fact that regulators could have acted sooner to stem any abuses that occured in the subprime market.

4-11-2007 -- Sub Prime Loan Market Decline

Appraisers: The argument against appraisers is that they put borrowers in immediate jeopardy by inaccurately high appraisals. An appraiser's job is to place an objective monetary value on a property. If, however, a home is estimated to be worth more than it actually is, the home buyer could actually owe more money to the bank than the original loan amount.
In addition, high appraisals exacerbated rising home prices and heightened some borrower's inability to repay their loans.

Appraisers themselves claim that besides a few bad apples, the home estimates given by appraisers were reflective of the home prices at that time. The homeowners themselves were itching for high appraisals on their homes.

Bottom line: Appraisers don't bear the primary responsibility for all the bad loans, but more accurate appraisals could have lessened the severity of the problem.

4-09-2007 -- Who's To Blame In the Sub Prime Loan Market Decline

Mortgage Brokers: The argument against mortgage brokers is that they intentionally steered borrowers towards loans they couldn't afford. As the number of mortgages increased in 2000 and onward, many new and inexperienced mortgage brokers entered the profession. The increased number of brokers fed on itself, meaning that more and more loans needed to be originated -- all fine in a great market where lenders are more bullish on increased property values than on risky borrowers.

However, as business slowed towards the end of 2005, all of these brokers still needed to create loans and looked to more creative ways of financing for risky borrowers. Some critics charge that prime borrowers may have been pushed into sub prime loan programs because it was more lucrative for a small percentage of brokers.

The mortgage brokers answer the critics by pointing out that the lenders offered the loan programs and accepting or denied the borrowers. Their job was to sell the programs -- in this regard, no one denies that they were successful.

3/23/2007 -- Foreclosure Market is on the Rise

With the number of foreclosures set to continue its stead rise, the question on many borrower's minds is how it will affect home prices. For lenders (mostly sub-prime lenders who deal with less than perfect borrowers) who are now under tougher scrutiny, it will probably mean less loans are funded (industry experts put this number at 500,000 less loans for 2007), which basically puts more homes on the market. The recent sub-prime shake up has led to a larger supply of homes with less individuals able to step in and assume a mortgage on properties.

Adding to this is the rising foreclosure market which has been going up over the last year and a half. Common wisdom tells us that this would hurt home prices as the supply of homes or inventory is already somewhat high, up nearly 20% from last year. This, in turn, could cause home prices to decline by 5 or 6%. But like everything in the housing market, it's a wait and see game.

3/21/2007 -- Consumer Demands for Loans Drops Although Rates Stay Low

The number of consumers that applied for a mortgage loan dropped for the first time in a month. This slowdown in demand for mortgage refinancing comes as interest rates remained quite low. According to the Mortgage Bankers Association, applications for refinance loan and new home purchases went down almost 3%. The 3 ear fixed rate mortgage averaged 6.06, up ever so slightly from last week. As a comparison, one ear ago at this time the interest rate was 6.31.

Many industry analysts cite the troubles in the sub-prime loan market as the likely culprit on this consumer demand.

3/18/2007 -- Sub Prime Market Woes

Foreclosures are on the rise, with a million expected over the next several years. Many experts think the cause is the huge rise in adjustable rate mortgages that occurred over the last 6 years. While these ARM loans were one of the principal reasons why many homeowners were able to get into the market at all, millions of these loans are resetting, placing a heavy financial burden on the borrowers.

Sub-prime loans offer borrowers an initial period of low interest rate and therefore low loan payments. Because interest rates were at an all time low, the rates offered were extremely low, allowing borrowers to get into more expensive homes in a normal mortgage market. When the adjustable rate period (often 3 to 5 years in length) resets, it does so at current market rates (they slowly reset over time).

Borrowers also face their loans resetting to current market rates while their property values are staying constant or are falling, leaving them with little to no equity. If a borrower took out a line of equity on their home at the height of the housing market, the may actually owe the bank more money than the originally borrowed.

However, the rise in loan defaults is causing many sub-prime lenders to close their doors. In all likelihood, many of the large lending houses will assume these sub prime loans and will have to deal with the fallout from the rising numbers of foreclosures.

In anticipation, many mortgage lenders are working with their currents clients to make sure that the can refinance into a loan and comfortably make the payments.

If you would like to refinance your adjustable rate mortgage loan, click below.