The Trouble with Easy Money
You may have noticed headlines lately about some major trouble in the subprime lending markets. Despite reassurances that this trouble is "limited to subprime", I believe that this may be the beginning of the end of this massive credit bubble. Look for more troubles in the Alt-A and Prime lending markets as the year goes on. As standards tighten, sales will likely fall and speed up this nationwide downturn.
State Representaive Bob Lake wrote an opinion piece last year about how Fannie and Freddie should not be prevented from continuing "innovative" financing since housing is becoming unaffordable. At the bottom of the piece it is disclosed that Rep. Lake is also a real estate agent.
The following comment from an anonymous reader was at the bottom of the article for awhile. I will reprint it here because it perfectly describes the problem with our lending situation:
Rep. Lake, I beg to differ re. your premise that the more readily available loans have made housing "affordable" to us who are not millionaires. I propose that the easy lending practices have made housing LESS affordable for just about every American. Please do some research regarding suicide loans and how they have fueled the current housing bubble. Americans do not need easy loans to get a house. What they need are home prices that are in line with incomes. I feel the Fannie/Freddie fiasco has only served to price most Americans out of the market. It's true that many have "purchased" in the past few years, with the "help" of easy loans and low interest rates. I believe that in the next few months, we will see increased foreclosures as Americans find that the house they were told they could afford by their friendly lending institution becomes beyond their reach to pay for in reality. Lesson learned. As a lower income person, I think the best way to make housing "affordable" for future generations is to get rid of Fannie May and go back to 20% down, 15 or 30 year fixed. Get sanity back into American society and economy. We'll all be stronger for it. Thank you, A (very) concerned American
Doug this is Duane Lapinski.I got some numbers you might like to see.In Gallitan County from the Clerk and Recorders office. And from The Mortgage-Impolsion-Meter. These are mortgages from the following firms, Wells Fargo, Countrywide, Washington Mutual, Long Beach, Citifinancial, Option One, Ameriquest, Accredited, Novastar, WMC,Decision One, GMAC, New Century, Aegis, Hsbc, Enncore, Fieldstone, BNC,, New America, Peoples Choice. From 1992-1999 all of these outfits sold a total of 392 loans in Gallitan county. Year total#loans loans % 2000 5161 333 6.5%2001 7341 1446 19.7%2002 9175 2098 22.9%2003 11247 2555 22.7%2004 9807 1967 20.1%2005 10651 1988 18.7%2006 9934 1696 17.1%total#loans=mortgages recorded in Gallitan County. loan=mortgages made by toxic loan outfits listed You should ask that senior VP exactly what significant means, 5% or 10%, perhaps 15%? 2006 was Countrywide biggest year here. They sold 579 loans, that is 5.8% of the market. Wells Fargo biggest year was 2002, 994 loans or 10.8% of the market.