More Fallout in the Sub-prime Frontier

As I instruct all my students in my How to Get a Mortgage for Any Real Estate Property classes, do not get a mortgage via the internet. Use the internet merely as an educational tool to understand loan programs. Do you really think it is a good idea to get a loan from a company called Ownit? StuffIt? DoIt? MortgageIt? I think not!

     Ownit Mortgage Solutions was the next victim in the sub-prime market to be shut down by its backers (Merrill and Chase) as the default rates went up, they had less funds to work with and Merrill called back over 90 million in bad loans. Obviously the company did not have it and Merrill closed the faucet on new money. You will see more of these this year than you have seen in the last 5 years all together.

     Why? The housing market is in a [surprise] slump bringing housing prices down. People are having a tough time selling and the prices are falling, bringing with it values needed to pay off or refinancing existing home loans. As these values fall there is less equity in the home. This will turn mortgages “upside-down” meaning that the owner owes more money on their mortgage than the value of the home. There have been many 100% and 95% loan to value mortgages provided by “A” lenders (banks) and sub-primes lenders (Wall Street). These loans are the ones that will go belly up first and they are. Default rates are slowly creeping up.

     This will affect current borrowers in that bank and sub-prime lenders are curbing guidelines for certain loan programs that were available before. If you are an honest borrower in need of an honest loan, you will have to look harder for a good loan provider. Tips: do not go online and obtain a loan from an out of state lender; do not go to schlock mortgage brokers and bankers for your loan. Shop around and get referrals. Compare programs rates and fees and get everything in writing
Rumor has it that Bank of America is looking to purchase Countrywide Home Loans in order to secure its new position as the largest bank worldwide. This is an interesting and legitimate consolidation in the market. I find this fascinating and will have more information as it develops.
– Dale Siegel