Micott Mortgage Blog

The Real Estate market in the U.S. will not improve any time in the near future. This is because a combination of government actions and greed has severely hampered the ability of borrowers to find inexpensive mortgages, if they can find mortgages at all. There are four events that have caused a severe downturn in the mortgage marketplace. These four items are: (1) Significant numbers of first time homebuyers have been shut out of mortgages. (2) The bankruptcy laws have been changed so that many first time homebuyers cannot clean up there credit in order to then qualify for mortgages. (3) The subprime debacle has eliminated programs and frightened potential purchasers/investors of mortgages so that an originator of a mortgage cannot find anyone but four government or quasi-government agencies to purchase the mortgage. (4) Lenders have decided that real estate investors who purchase distressed properties are very high risk.  Programs for real estate investors to purchase properties to fix and flip or to hold long term have been severely curtailed. For a complete explanation please refer to this article. �

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Filed under: Financial, economics, Real Estate
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Mortgage delinquencies frequently lead to a final destination –foreclosure.  This nasty trend that stared with poor lending practices and unsophisticated borrowers has now reached all facets of American society.  The plight of the subprime borrowers is well known.  But foreclosures are now being recorded among the very wealthy and among the upper income levels of America; those called prime borrowers.

Recently well know Hollywood and sports celebrities have been force into foreclosure.  Some of the better know names are Evander Holyfield, Ed McMahon, Michael Jackson, Latrell Sprewell, Aretha Franklin, and Jose Canseco.

The statistics as reported by the Mortgage Bankers Association are beginning to get scary.  Nationwide, there are about 1.3 million homes that were in foreclosure on March 31 of this year.  About 10% of the homes built after 2000 are now vacant whereas only 2% built before 2000 are empty.

The trend toward more foreclosures among prime borrowers is increasing.  The following chart show that although more subprime borrowers are in foreclosure, the prime borrowers are catching up.

Adjustable Rate Mortgages – First Quarter 2008

                                                            Total in Foreclosure                  Number Increase

Subprime  Borrowers                                         195,000                                 20,000

Prime Borrowers                                                117,000                                 29,000

The forecaster of future foreclosures is delinquency rates.  Nationwide, loans 30 or more days past due climbed almost a ½ % to 6.35%.  Among just adjustable rate mortgages, the number of 30+ days past dues are for 10% for prime and 39% for subprime borrowers. The worst states for delinquencies and foreclosures are California, Arizona, Nevada, and Florida.   Clearly the foreclosure problem is not going to improve in the near future.Gasoline prices are over $4.00 per gallon, grocery prices are up dramatically, banks are growing weaker and curtailing lending and unemployment is creeping up.  What is going to save the American consumer?
   

Filed under: Financial, economics, Real Estate
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This morning CNBC cable screamed the good news.  Pending home sales rose in April by 6.3% over the previous month to the highest level in 6 months.  Miraculously, the housing crisis is over. The stock market has rallied and government bonds yields are up and everything is rosy. This is nothing but spin to help sell stock and to attempt to fool the American consumer.

The aforementioned statistic is grossly misleading.  In the June 6, 2008 newspaper issue of the Rocky Mountain News, there was a report of an analysis done by the Berkshire Group.  The headlines in this article said “Home sale closure rate staggers.”  The article went on to report that more than 25% of homes in the Denver area placed under contract in May, failed to close.  Certainly, some of these homes were to close in June but certainly, many of these contracts cratered.  They cratered for three principle reasons.  (1) The buyers could not get financing. (2) The appraisers did not cooperate and appraised the homes for less than the purchase price, and (3) The buyers backed out because of inspection items.

True, this was one month in the Denver metro area and CNBC reported figures from the National Association of Realtors for the entire US.  However, the fact remains that the housing market is in desperate condition and a statistic such as pending home sales is not to be relied upon.

It is a great disservice to the American public to report misleading information such as CNBC did without questioning the relevance of the data.

Filed under: Financial, economics
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