Why the housing market is going to get much worse
Politics, California Housing Crash, Florida Housing Crash, The Economy, Real Estate October 28th, 2008
I just read this on CNBC.com:
“In my wildest dreams I couldn’t have imagined that the market could have gotten this much worse, as bad as it was last year,” says Rick Sharga, senior vice president of RealtyTrac.
Why is this happening—especially when the last thing most lenders want to do is repossess a house?
For one thing, banks are overwhelmed with the sheer number of troubled mortgages. That’s made it more difficult for them to work out loan modifications—essentially reducing the interest rates and even the principal to help people keep their homes.
Many mortgages also have second liens attached to them, requiring negotiations with third parties.
But the main problem is that so many mortgages have been grouped together into securities and sold off to investors worldwide. These mortgage-backed securities typically carry terms that severely limit the homeowner’s ability to renegotiate a mortgage.
So the banks that typically service the mortgage—collecting payments from homeowners and passing them on to the investors—risk being sued if they deviate from these terms. And those servicing the loans often make more money in foreclosures than in renegotiating a loan, giving them even less incentive to help out homeowners.
November 1st, 2008 at 12:49 pm
Excellent post and website.
We are organizing nationwide to elect Congressmen committed to stopping the bailout madness, and we would invite you and your readers to view “A Cordial Invitation to the Bailout Tea Party; An open letter to all Conservatives, all LIberals, and everyone in between”.
You can find the video here:
www.ourcaucus.com/teaparty.html
Theres only 3 days left until the election!
Thank You
Frank