Lenders Told Foreclosure Picture Grim

[Herman Munster]

http://www.rismedia.com/wp/2007-02-23/lenders-told-foreclosure-picture-grim/

RISMEDIA, Feb. 26, 2007-(MCT)-Mortgage professionals who are struggling with a national spike in residential foreclosure rates were warned yesterday to expect more of the same in 2007. Unemployment, mortgage fraud and speculative buying are among the factors behind the recent surge in filings, experts said at a conference of the Mortgage Bankers Association. And this year $1 trillion in adjustable-rate mortgages are due to reset before Dec. 31. "This is really a wild card," said Rick Sharga of the Irvine firm RealtyTrac. "We don't have a precedent."

Sharga said he was worried by the fact that 13.6% of residential mortgages are in the riskier subprime market. Mortgage attorney Daniel D. Phelan echoed Sharga's concerns. "I personally think we are at the beginning of this cycle," he said. "It is going to get worse before it gets better." Sharga said 130,511 nationwide foreclosure filings in January marked a 19% increase over December and a 25% jump over January 2006. He told lenders to brace themselves for an annual jump of 20% to 25% in 2007.

Sharga is vice president of marketing for RealtyTrac, which provides listings of foreclosed properties. An estimated 2,000 lending professionals attended the association's National Mortgage Servicing Conference & Expo at the Manchester Grand Hyatt downtown. The event will end tomorrow. arga said lenders were concerned with two key loan default issues: the prospect of litigation over the rising number of foreclosures and legislation that could make it harder for them to navigate through the foreclosure process. With adjustable-loan resets looming, there is mounting pressure for tougher lending regulations. U.S. Rep. Barney Frank, chairman of the House Financial Services Committee, has said enactment of a national lending-standards law to protect consumers from unfair and predatory practices is a priority.

Michael Feiwell, who moderated the foreclosure discussion, noted that the Center for Responsible Lending recently predicted that foreclosures will increase in many markets as housing appreciation slows or reverses. The center has projected that 2.2 million borrowers will lose their homes and up to $164 billion of wealth. The center's report holds that one out of five subprime mortgages originated during the past two years will end in foreclosure. Diane Mitchell, an attorney from Salt Lake City who spoke at the conference, said numerous foreclosure filings come from loans that were originated in 2006, when home prices had peaked in many markets. Some borrowers now find that their properties are worth less than they paid for them. "They got in at the top of the deal and didn't get out quick enough," Mitchell said.

[hippiechick]

1. I am so freakin' scared to buy a house right now ..

... I'm on the borderline of FHA/conventional financing and the thought of some unexpected interest rate change, property tax change etc just makes me sick to my stomach.

But staying in an apartment and flushing all that money down the toilet every month is getting really old.

What's a scardey girl like me to do ?? :shrug:

[Sherman A1]

2. Look at buying

something that is WELL within your means. Obviously avoid adjustable rate mortgages. Property taxes are going to go up and you are either going to pay them in your rent (for your landlord) or pay them in an escrow payment with your mortgage. Every situation is different... I am certain that you will do what is best for you.

[SoCalDem]

4. 30-yr FIXED mortgage on a house "less than what you dreamed of"

a toolbox, some paint, and friends who are "handy".. You'll be fine :)

As long as you look at your house as a PLACE TO LIVE, and not as another "investment" you'll be fine..

BUT, if you think you are going to move around and you job may transfer you, buying is not necessarily the best deal around..

If you think you'll be in it 5-7 years, it's a good deal..

[Mnemosyne]

5. Be careful with a 30 yr. mortgage. You pay way, way more in

interest, though the payments are lower. Just depends on your situation I guess. Be careful, it is worth it to own though. I bought my home for less than $30,000, small, in decent repair and homey, no major repairs so far. zillow.com lists my house at $93,000, lol, not accurate at all.

15 Year Mortgages vs. 30 Year Mortgages

http://homeguide123.com/articles/15-Year_Home_Mortgages_Versus_30-Year_Home_Mortgages.html

The debate between the two mortgages has been around almost as long as mortgages themselves. With a thirty-year loan, the longer amortization schedule spreads the additional cost of the rate differential over twice as much time. Buyers can purchase larger homes or keep their payments on smaller homes more affordable as a result.

Fifteen-year mortgages help the buyers own their homes at a faster rate. Larger payments go toward the principal rather than the interest, which builds equity faster. The lower interest rate and shorter term make the loans cost less by lowering the overall interest payments.

It has been noted that buyers get a substantial benefit on the fifteen-year mortgage from the lower rate. The buyer is paying down the balance at a much faster rate than the buyer with the thirty-year mortgage. However, people with stricter budgets and less income should definitely consider the thirty-year mortgage. The fifteen-year mortgage can be dangerous for buyers that do not have money in savings or an expected increased income. If the higher payment of the fifteen-year mortgage leaves the borrower with little to no money to save each month, an emergency could cause a huge financial disaster.

Spending Habits

Buyers should also consider their spending habits. If the homeowner knows they will save their extra money and might be on the fringe financially, then they should go with the lower monthly payments in order to save money and avoid credit card debt. If a consumer is not a big saver and will just spend the extra money they have every month, they should choose the shorter-term loan.

snip>

Good luck if you buy! :hi:

[Warpy]

6. I was scared 10 years ago

and I ended up with a 1946 fixer in an unfashionable neighborhood. I got a FIXED mortgage, though, and it's been a great hedge against rising rents. Rent in apartments in areas where I wouldn't stand a big chance of getting killed by crossfire exceeded my mortgage payment 6 years ago, it didn't take long.

Unless you're on either coasts or in an overpriced metropolitan area like Chicago, it's still a good deal to buy a very modest property as a hedge against escalating rent. Rents WILL go up, you know, as foreclosed families compete for places to live.

Just don't expect to make a profit. If you're lucky, the tax break will equal the yearly equity loss. If not, you'd probably be paying the same in rent, anyway, and you're still paying off the loan and will eventually own the property, outright.

The time for looking at housing as an investment upon which you expect to realize a profit is over. The time for looking at it as a roof over your head is here. Renting makes sense for people who don't want the responsibility of maintenance and don't mind white walls. Buying makes sense for people who will do the maintenance and want the chance of building equity.

Nobody knows what's down the road, especially now. Good luck, whatever you decide.

[hippiechick]

7. Thanks for the feedback everyone!

:hug: If/when I do buy, as I've said to my broker, this is the house I'm going to be in until they take me out in a bag. Totally not in it for profit/flipping/etc.

On the other hand, I'm not at all fixer-uppery so I have to buy something that's at least in solid shape. As much as I love the little old 1930's bungalows around here, I fear it would eat me alive because I'm not handy, and I'm most definitely not a saver or someone with alot of disposable cash to pay for maintenance/improvements.

Stay tuned! :hi:

[Atman]

3. When the prices fall, the speculators will get back in, and the cycle continues

And we have to stop the crazy gimmicks to "qualify" people who couldn't otherwise rent a room at the Motel 6. There is colossal train wreck coming, and I think anyone would be nuts to buy anything except at a genuine fire-sale price, with a real mortgage calculated to be really within their means, not just within their means for the six-month teaser period.

.