Thursday, February 21, 2008

Locked Out 2008: The Housing Boom and Beyond

You can download the Housing Boom and Beyong report in PDF by clicking the following link:

Here are a few excerpts below:

  • How did Californians manage to buy homes during the
    housing boom?
    Increased homeownership was aided
    by the fact that lenders allowed borrowers to put little or
    no money down and to provide few or no details about
    their income and assets. Lenders also promoted a variety
    of loans that allowed homebuyers to borrow larger sums
    than they could have with a conventional fixed-rate loan
    as well as to qualify for financing despite having credit
    problems. These loans include ARMs with short-term teaser
    rates; interest-only loans; and “subprime” loans, which are
    generally provided to borrowers with weak credit histories
    and those who choose not to specify their income and
    assets when they apply for a loan. Subprime loans were
    often structured as ARMs with low promotional interest
    rates. Other factors that helped Californians purchase
    homes during the housing boom include the decline of
    mortgage interest rates after 2000, the migration of many
    Californians to less expensive areas of the state, and the
    substantial income gains of the state’s wealthiest residents
    during the past decade.
  • Tens of thousands of California homeowners face
    foreclosure. As introductory mortgage interest rates
    expire, payments are increasing to unaffordable levels for
    many homeowners with ARMs, including homeowners
    with subprime loans. Many homeowners who bought
    their homes or refinanced their mortgages in 2005 find
    themselves “locked in” to loans they cannot afford: they are
    unable to refinance their loans or sell their homes because
    the amount they owe exceeds the current market value of
    their home.....The state and federal governments have promoted
    initiatives to help stem the increase in foreclosures among
    homeowners with subprime ARMs. However, unless such
    relief efforts are expanded, the number of foreclosures is
    likely to increase as California’s homeowners face higher
    mortgage payments at the same time that credit standards
    tighten and home prices soften, making it harder to sell a
    home or refinance to a more affordable loan.

Some Lenders Used Predatory Practices to Lure Borrowers into Loans with Risky Features

Some homebuyers were lured into loans with risky features by unscrupulous lenders who used aggressive and deceptive practices, particularly in the subprime market. In 2006, for example, Ameriquest Mortgage Co. – once the nation’s largest subprime lender

– agreed to pay $325 million to consumers and states after investigations revealed predatory practices, including inadequately disclosing prepayment penalties and improperly influencing appraisals to inflate home values. Some observers suggest that predatory lending practices have been widespread, rather than limited to a few “bad apples.”

• The Center for Responsible Lending contends that subprime lenders have knowingly made “reckless loans to families who have no prospect of repaying those loans.”

• The National Association of Realtors suggests that “abusive lending occurs much too often in subprime markets,” including “charging extremely high interest rates and loan fees unrelated to risk [and] using aggressive sales tactics to steer consumers into unnecessarily expensive or inappropriate loan products.”

• The US Government Accountability Office has found that advertising tends to emphasize the benefits of risky loans “without effectively explaining the associated risks” and that federally required disclosures given to borrowers generally were “too complex,” “used small, hard-to-read typeface,” and “buried key information."

• Furthermore, The Wall Street Journal reports that many borrowers “whose credit scores might have qualified them for more conventional loans say they were pushed into risky subprime loans. They say lenders or brokers aggressively marketed the loans, offering easier and faster approvals – and playing down or hiding the onerous price paid over the long haul in higher interest rates or stricter repayment terms."

To download this free report, click here.

Richard's notes... If you're unable to afford your home, have no equity, unable to refinance or sell at a profit, please call me ASAP 818-730-4128. We can list your house on the market and I'll negotiate with the banks to sell your home quickly. If you have received a "Notice of Default" letter in the mail, you are possibly 3-4 months past due on your mortgage payment. Please do not panic but it's also important you do not wait any further.

If you're an investor, it's an excellent time to purchase a home. Rates are still low and bank owned homes are selling up to 50% off market value. It's also an excellent time for home-buyers to get a great deal on a home. Stand out from the crowd! The first step is to get pre-approved with a loan officer.


Richard M. Johnston

P.S. As home prices continue to decline here in the San Fernando Valley, it's getting harder for home-buyers to buy a home because lenders are tightening their loan standards. To help protect you from future price depreciation and being locked out of obtaining a home loan, I'll help you negotiate an extra 10-15% off already reduced market value and pre-approve you with a proven loan officer ensuring the best rate and terms. Call me now.

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