It was called the Refi-boom…
From 2000 to 2005, the number of mortgage programs available to the general consumer went from hundreds to tens-of-thousands.
ANYONE could get a loan, even dead people got loans.
On 3/10/2007 it should be no secret that the mortgage world is on the verge of an epic correction. Fraud permeates the industry from the top down, with New Century looking to be the early mover under the ‘debacle’ category, although many more are sure to follow.
Reading any of the insider trades shows a list of bankers and wholesalers who are exercising damage control, by making major changes to their underwriting guidelines, closing shop, and/or settling lawsuits on the cheap now rather than go through litigation and a damning lawsuit.
The Problem:
The dream of homeownership was afforded to alot of people who had no business buying a home. State your terms (with alot of coaching), and a loan was delivered.
Brokers, Bankers, and the willing consumers should shoulder the blame. Some people were preyed upon, others played the game- Silently rationalizing the ramifications.
The Fallout.
Couple wholesale lenders tightening up their qualifying guidelines substantially (or eliminating them all together), with a record $1,000,000,000,000 in maturing Adjustable Rate Mortgages, and you get an ENORMOUS pool of demand with no supply. The products mortgage products many will need don’t exist anymore.
Indexes are rising back to historical norms. LIBOR, MTA, CMT, COFI, COSI, MBS Market, etc are all categorically and substantially higher than they were 3 years ago all but guaranteeing a minimum 1% rate increase, and as much as 4%. Refinancing into a lower rate without hi costs will be near impossible.
The Foreclosure Boom. As with any market correction, someone stands to benefit- If you subscribe to the logic that one should buy in a down market and sell in an up market, its about to be a Bear of time in the real estate investment arena, houses can be acquired for 10%-40% below what they appraised for just 1 year ago.
An imminent foreclosure boom means property is about to go on sale in a big way for the financially literate (which is shockingly low in our First World Nation) who are in position to snap up the deals; make no mistake, there are droves awaiting this scenario to play out. It’s the 90/10 rule in full effect.
As these discounted sales are recorded, future values become deflated since appraisers use recently sold comparable homes as the basis for establishing current values. The retro depreciation factor has yet to hit it’s baseline. If houses are being bought and sold at ~15% below ‘recent market value’, a ~15% depreciation for all similar homes in the area can be expected.
The writing has been on the wall.
Also see:
Mortgage Industry’s Internal Civil War
Interest Rate Pricing. The Disturbing Truth
Deceptive Mortgage Marketing Tactics
Related blogs and news:
FBI ISSUES MORTGAGE FRAUD NOTICE IN CONJUNCTION WITH MORTGAGE BANKERS ASSOCIATION
Regulatory fire may torch lending business Inman Real Estate News
Thx to mortgage-x.com for their chart 
