With the increase in foreclosures and short-sales brought on by the upheaval in the subprime and now Alt-A loan markets, the question arises – who suffers?

The media as usual is off base with their continued coverage of the usual suspects – those being forced into foreclosures or short sales. I’m not saying these individuals are not suffering, but the major impact of the upheaval in the mortgage industry is not around those with existing mortgages, but those now seeking mortgages or trying to sell.

The changes taking place in the mortgage industry are going to make it much more difficult for people to buy and sell homes. While Congress, the States, local communities and lending institutions look for ways to help existing homeowners with mortgage problems, many people who thought they could buy are waking up to a whole new reality – Things Have Changed.

Every day we talk to potential buyers and the number one piece of advice we give and try to get them to take action on is – contact a lender and see where you stand now. If you are thinking of buying – Knowledge is Power – and the number one piece of knowledge you need is to know your credit rating and what you can qualify for.

Knowing this means that you may be able to improve the situation while you house hunt. Putting this off sets you up for a rude awakening as the reprecussions are still in flux.

California Foreclosures – Most of the loans that went into default last quarter were originated between April 2005 and May 2006. The median age was 15 months. Loan originations peaked in August 2005. Adjustable-rate mortgage use for primary purchase home loans peaked at 77.8% in May 2005 and has come down since.
Alameda        564 (4/06)  1,578 (4/07)   179.8%
Contra Costa  605 (4/06)  1,969 (4/07)   225.5%

Freddie Mac & Fannie Mae loans have announced plans to help subprime borrowers who are in trouble. Their strategies are a little different and both need government approval, but, if approved, the programs will help several hundred thousand homeowners to keep their homes.

Home-Equity loans – After years of piling debt on their homes, Americans are becoming more cautious about using them as a piggy bank.

Tools You Can Use

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