We received this from The Viers Team @ Diablo Funding Blackhawk this morning and thought we would pass it on. 

If you watch TV, listen to the news on the radio, read newspapers or get the news online, chances are you can easily feel a dark cloud hanging overhead because of the war, murders, global warming and many other negative things the media is so eager to tell us about.  At the forefront of the media hype these days is the doom and gloom of the subprime market and how that is going to devastate the U.S. economy.

According to the media, we should all be afraid that the subprime loan default rates will soar, further weakening the housing market and making it more difficult for financially healthy borrowers to get loans.  And as the housing market goes south, so does the U.S. economy.  But if you listen to the experts, not the media, the picture is not near that dismal.

Barry Habib, CEO of Mortgage Market Guides suggests that we look at the numbers.  About 20% of ALL loans are subprime loans, and of those, only 40% are purchases.  So if you break that down, only 8% of all purchase loans are subprime loans.  In the picture of overall home purchases, that equates to only about 2% of potential homebuyers that won’t be able to obtain a loan because of the tightening of the subprime market.  Yes, that’s probably about 100,000 homes nationwide, but in the scheme of things, it doesn’t pencil out as having as big an impact as the media is playing it to have.  Mathematically an increase in interest rates of a half of a percent (.50%) would have a greater impact on the economy.

So while experts like Habib and Chief Economist Brian Westbury agree that poorly structured loans will result in foreclosures and bankruptcy for some lenders, the impact on the overall U.S. economy should be negligible.  Yes, lenders will tighten their guidelines and modify their programs so that the loans they do make can be sold on the secondary market.  But 100% financing will still be available – for those with somewhat higher credit scores than before.  And those with low credit scores will still be able to get a loan, but full documentation to demonstrate their credit-worthiness will likely be required.

The market is still making a correction, and the lending side is adjusting accordingly, just as it has for decades.  But all is not doom and gloom, and we’ll all feel less of an effect if we don’t subscribe to the sensationalism that sells advertising in the media.