The ‘Carnival of Real Estate’ continues to elude me–Ive always been interested in participating, just never seem to find the time or remember to actually register…or exactly where to do so. Any direction on how to get on the bus would be appreciated. (Thx Greg)
The Sub-Prime Shenanigans. Although Ive done my share of reading into The Great Sub-Prime Mortgage Correction, and (of course) have a personal view to share from the space between my ears, Pat did his own mini carnival on this topic. I’ve had numerous convo’s with Pat, met him, and really value his insight…so I trust his ‘A-list’, although I had to choose a different winner: Nigel Swaby’s post from the Salt Lake Real Estate Blog hits on a key risk factor that is often way overlooked: Borrower Assets. It reminds me of the differences between being ‘rich’ and ‘wealthy’.
‘You can’t get rid of ‘Wealth’ if you wanted to…’Rich’ is something you can lose over a crazy summer and a drug habit.’
‘Shaq is Rich, The Man who signs his check is Wealthy’
(Official props to Chris Rock)
Rich is measured in current money, Wealth is measured in time and experience. Look at your assets (your residence is not an asset). If your regular income were to stop today, how long could you make all your current liability payments and live as you are accustomed to before ‘going negative’? Unfortunately ‘The Shenanigans’ will be blamed primarily on grievous broker conduct against the “poor defenseless sub-prime borrower”. But, the Consumer and the Lender deserve their fair share of blame, all the way up the credit ladder.
During the pending mortgage fallout a ‘Borrower Type’ who is sure to be overlooked by the mainstream is the 660+ credit score who bought too much home because they could (A- Paper).An low initial interest rate with WIWA (What Income What Assets ?) documentation requirements made the dream of looking and feeling Rich rather easy (perception is reality?). What happens when the mortgage program adjusts up 3% and Amortized as advertised? Current ‘disposable’ income is squashed as the paycheck can no longer keep pace with the payment. No surprise here, it’s the same for EVERYONE.
On the contrary, there are plenty of 610 credit score Full Doc ‘Borrower Type’ with $3k in the bank (Sub-Prime) out there who have never missed a payment, yet will have the rug yanked out from underneath them. They can thank the financially irresponsible consumer, broker, banker, and lender.
So…I agree with Nigel, Lenders should think in terms of the individuals relative wealth/ financial responsibility when granting high LTV mortgages. Also….qualification methods should be carefully adjusted according to past mistakes, not abandoned as if they never existed. The current methods being suggested are too discriminate and unfairly biased towards punishing the ‘Sub-Prime’ market, when in fact the entire pool has been peed in….its all contaminated.
Also See:
Grievous Mortgage Broker Conduct
