Ilyce Glink's Blog

Welcome to Ilyce Glink's blog! Here you'll find Ilyce's latest insights on personal finance advice, real estate advice and consumer issues. Come back often for timely and interesting posts on a wide variety of topics.

Foreclosures in Military Towns Rise Four Times National Average

Labels: Foreclosure, military, Mortgage, Subprime

posted by Melanie G. Rogers at 12:57 PM 0 comments

How Much Mortgage Fraud?

Labels: Clark Howard, FBI, mortgage fraud, Subprime

posted by Ilyce Glink at 10:12 AM 0 comments

What do a housing economist, an investment analyst, and a home builder have in common?

What do a housing economist, an investment analyst, and a home builder all have in common?

They all agree the housing market is weaker than it seems. But they're divided on how bad it really is and what can be done to improve it.

Emile Haddad is the Chief Investment Officer of Lennar Home Builders. The company, which was founded in 1954 and is headquartered in Miami, has about $10 billion in sales (give or take a house). Emile says the company has written down optioned property, sold others, and is trying to sell homes. They are offering some discounts and incentives. He believes (wrongly, I think) that the media has played a role in making the housing downturn worse than it might have otherwise been.

"If you would all just write a story that we have hit the bottom, things would improve," he told a gathering of 150 top business editors and writers at the recent Society of American Business Editors and Writers conference in Anaheim. (He got a few chuckles.)

Amy Crews Cutts is the deputy chief economist for Freddie Mac. She says that we're in a place we've never been before with regard to the fallout from the subprime lending mess.

"The prime mortgage market will be absolutely boring," she told attendees at the same conference.

"We expect delinquencies in prime fixed-rate mortgages to be about level as economic growth sustains increases in employment and incomes. Adjustable rate mortgage resets are likely to raise prime ARM delinquency rates a bit, however resets don’t start in earnest until 2008," she added.

The problem is with the subprime market and payment option loans, which became very popular in 2003. These loans haven't really reset yet, but already there are repayment problems very early on.

"People can't afford these loans right now," she said. And because certain pieces of useful information aren't available, no one really knows who has these loans and what's going to happen when they do reset. "Clearly, foreclosures and delinquencies will rise."

"There are $1 trillion in ARMs that will reset in the next year, and those people are going to have trouble refinancing or keeping their homes," predicted Mark Keisel, executive vice president with PIMCO. "We've never before had mortgage debt grow faster than the GDP in 10 years. You can make a good case that the economy has been supported by mortgages."

Keisel is worried about the number of permits being pulled (down 28 percent from last year) which means fewer jobs, which means the economy will be slowing and job growth will be slowing as well.

"If you don't have a job, you're not buying a house," he said.

But Keisel has a job and isn't buying a house. "I probably won't buy for another year or two."

Labels: Economy, Freddie Mac, Mortgage, Subprime

posted by Ilyce Glink at 6:03 PM 0 comments

No More 100 Percent Loans?

I was hosting my WSB radio talk show this morning (tune into www.thinkglink.com/radio to listen or go to iTunes to download it next week) and was taking calls from first-time buyers who wanted to know what kind of financing to get.

This isn't unusual. During the course of a 2 or 3-hour radio show, I always get a few calls from folks who want to know more about mortgage financing.

But this particular caller wanted to know about 100 percent financing. And while I was answering his question, I realized that as of tomorrow, 100 percent options are going to be few, far between, and very expensive.

Countrywide Financial (www.countrywide.com) put out a notice at the end of last week that it was going to stop making 100 percent loans. It's been at the forefront of these kinds of loans, but what isn't as widely knows is that subprime lending accounts for a chunk of its portfolio -- and those loans are going bad at a much higher rate than expected, just like in other lender's portfolios.

(BTW: I'm not suggesting in any way that Countrywide will fall off a cliff like the two dozen other subprime lenders who are in real trouble. These loans are a relatively small part of its overall mortgage portfolio. But the company has decided to pull back from making these loans -- at least for the moment.)

The point is, if you're looking for a 100 percent loan, or an 80/20 piggy-back mortgage, very few lenders are going to offer them. And if they are offering them, they're going to require a higher credit score and better credit history.

Most people who want 100 percent financing (or anything more than 95 percent financing) are first-time buyers without a lot of options to begin with. VA loans, which were the first true 100 percent loans, are expensive to do and even the VA doesn't like to do them.

For agents, this means you've got to figure out where the cash is coming from for the down payment before you waste your time showing houses to folks who are expecting to buy them with 100 percent financing. And for you "flippers" out there, the Nothing Down phenomenon is soon to turn into Almost Nothing Down.

NOTE: This entry was also published at www.inman.com/blog.

Labels: Mortgage, Subprime

posted by Ilyce Glink at 12:42 PM 1 comments

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