The majority of California homeowners that purchased properties in last four years have an adjustable rate mortgage. I for one purchased several properties with adjustable rate mortgages not really thinking of the long term effect. Back then, I only thought about the instant gratification. Property values kept increasing and anyone that purchased properties around 2002 made money. The real estate market in San Diego, California was so hot. A lot of people I know personally jumped in the band wagon. Who wouldn’t? It was easy money! Back then, I worked in escrow, and we were very busy. It was definitely an opportunity for people in the real estate industry to make a lot of money.
The market started slowing down in the middle of 2005. Still, a lot of people were purchasing properties using adjustable rate mortgages. In 2006, we saw foreclosures going up as a result of creative financing. The first wave of homeowners with adjustable rate mortgages saw their mortgage payment start to increase. Since then, we have been seeing a high foreclosure rate and thousands of people have lost their homes and thousands more will lose their homes.
American Foreclosure Specialists::
the mortgage company on your behalf so you can avoid foreclosure and delinquency. How to avoid Foreclosure. Do you want to save your home?
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Because of the severity of the situation, a lot of lenders who offered the Adjustable Rate Mortgages and subprime products closed their doors. Countrywide, Bank of America, Wells Fargo, Washington Mutual and other financial institutions are slowly eliminating their wholesale department. Countrywide will focus on retail lending and eventually, all financial institutions are going to do the same. We all know that lending guidelines will be tougher and I think that they ought to be. By eliminating the wholesale department, this will be the end of mortgage brokers and its in-house loan officers.
We are going back to traditional lending. There is going to be a focus on government loans: VA and FHA. Though the maximum amount of these government loans is $417K, there is an ongoing process of increasing it up to $625K. When approved, people can afford to buy in San Diego as most prices in the MLS ranges from $417K to $625K (with the exception of Poway, Coronado and some parts in La Jolla and Chula Vista million dollar homes). A colleague of mine recently attended a real estate seminar where Countrywide was one of the panelists. The representative said that “it will be hard to predict when this mess can be fixed. It is definitely not an overnight solution. What is happening right now is a result of lending activities for the past 5 years not only by Countrywide but by some 59 other wholesale lenders who were forced to close their shops. Some of the adjustable loans that started at 4.5 percent made 2 years ago will kick its initial adjustment next year.”
Mortgage Basics, Ch. 7: Refinancing::
There are two primary reasons to refinance a mortgage: to get more desirable rate and terms, or to extract cash from the homes equity.
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Job wise, it is still a tough market for a lot of people in the real estate industry. We still have an interesting year ahead of us. Economists say that inflation has already hit us. Our dollar is down to 39% worldwide and the stock market is slowly going down. The number 39% seems to be steady as economists are saying that the chance of recession is 39% as well. Perhaps we can say that the subprime lending mal-practice takes the highest percentage of the domino effect in our economy. There are still industries such as oil, gold, and others that are still stable. Obviously, this type of practice has created a downward spiral to most of us. Yet, there are select individuals who see this situation as an opportunity. They are excited to invest their monies in different businesses or the people that have a millionaire mind that create wealth for themselves no matter what the circumstance may be.
I believe we need to create an upward spiral solution to educate people by workshops or seminars on how to find resources after the subprime had hit most of us and after the firestorm. Let’s invite public officials and have them discuss how they foresee the local economy after the firestorm and reports on non employment. We should also invite Countrywide or any lenders and have them speak about where financial institutions stand in providing products and services, insurance companies, big time real estate coaches who have experienced and survived at least 3 downfalls in the real estate market, and the tax office regarding propositions that real estate people can benefit from (Prop 60, 90, 58). As Gregory Smith once said, Why the real estate bubble isnt real, because we still have lenders offering the lowest interest rate at 5.5% and interest rate to raise to 8% to 9% will be gradual. This project can create positive awareness for our local community.
I am a product of this industry and I chose not to play the victim. I am in charge of my own financial downfall or my own financial gain. I am in charge of my own destiny.
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Avoiding Foreclosure