Straight Talk on the Mortgage Mess from an Insider
The posting includes commentary from Mark Hanson (the "insider"), VP of Mortgage Funding at Freddie Mac. He says that the Government and market are primarily blaming sub-prime loans for the mess, while in fact, sub-prime is only a small piece of the mess.
Here's a snippet:
"One final thought. How can any of this get repaired unless home values stabilize? And how will that happen? In Northern California, a household income of $90,000 per year could legitimately pay the minimum monthly payment on an Option ARM on a million home for the past several years. Most Option ARMs allowed zero to 5% down. Therefore, given the average income of the Bay Area, most families could buy that million dollar home. A home seller had a vast pool of available buyers.
Now, with all the exotic programs gone, a household income of $175,000 is needed to buy that same home, which is about 10% of the Bay Area households. And, inventories are up 500%. So, in a nutshell we have 90% fewer qualified buyers for five-times the number of homes. To get housing moving again in Northern California, either all the exotic programs must come back, everyone must get a 100% raise or home prices have to fall 50%. None, except the last sound remotely possible."
I highly recommend reading the entire post.
No comments:
Post a Comment