"Option" mortgages to explode, officials warn

1889 Views 18 Replies 11 Participants Last post by HitACraw, Sep 26, 2009

angler2020

Discussion Starter · Sep 22, 2009

"Option" mortgages to explode, officials warn
http://www.reuters.com/article/newsOne/idUSTRE58G5U320090917

In Arizona, 128,000 of those mortgages will reset over the the next year and many have started to adjust this month, the state's attorney general, Terry Goddard, told Reuters after the meeting.
"It's the other shoe," he said. "I can't say it's waiting to drop. It's dropping now."

Look we made National News on this topic. The housing market is so screwed in Arizona.
I wonder if the government and officials have learned how to handle this problem. Round one was last year and round two is coming. I wonder what things will be like after round 2. Tarp #2 is coming. LOL.

1 - 19 of 19 Posts

Silvas1

· #2 · Sep 22, 2009

When it rains it pours, just wondering if they were trying so hard to push this health care because they knew this was coming.

CJAmerican

· #3 · Sep 22, 2009

Hey, The Magic Man said everything is on the upside...

jbv

· #4 · Sep 23, 2009

At least everyone will be able to buy real estate at pennies on the dollar - too bad most people currently owe dollars on the pennies.

But, according to the Fed, all if good - the recession is over and we all survived and made it!

realtordude

· #5 · Sep 23, 2009

You are exactly right. The banks are holding in Arizona about 43k foreclosures. This is a tactic to shrink inventory to drive up price. Being in the business I'm seeing people coming in and wanting to buy a house quickly to get the 8k credit. FHA loans are running about 45 days to get closed. Anything under 100k is being snatched up by cash buyers and usually there are multiple offers thus driving up the price.
When the option arms start adjusting, price increases will stall and inventory will be high.
The Banks are not being held accountable for the Tarp money. They don't loose anything on the homes because the Tarp money is used to pay them back for the loss. Sit Down and hold on for the ride.:hitsfan:
The short sale market is a joke. I have seen 60 days at best to 120 days for a bank to make a decision.
For example: 3/2 bath that sold at the peak of the market for two hundred thousand. Home is in pre-forclosure and auction date is 20 days away. Home is listed at 105k so buyer makes full price offer. The last six sales in the neighborhood are around 92k-110k. Send offer to the bank and you would think they would accept it and get it off their inventory,right? WRONG!:beatingdeadhorse:
They will most likely let it go to auction where it will be snatched up for 50k-75k. They don't care because the Tarp funds will pay them back for the lost equity.
Get ready for this spring. The best is yet to come.

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lotsa luck

· #6 · Sep 23, 2009

Commercial properties are next in line and that failure will be huge also.

The Lite

· #7 · Sep 23, 2009

jbv said:
"But, according to the Fed, all if good - the recession is over and we all survived and made it!"

Yeah that's the same FED that received $1,200,000,000,000.00 in bailout money and still refuses to tell congress where the money went, and how it is being used.

And don't start blaming Obama for this one, Bush had an equal part in this one. It's not a Conservative Party mess, and it's not a Liberal Party mess.
The FED has been corrupt for a LONG time and it's now OUR mess, and we are FUKED!

ringer

· #8 · Sep 23, 2009

So what? I am so tired of the doom and gloom bullshit that I am not even watching the news anymore. Both parties, wall street, the fed and the consumer got us into this depression and there is very little we can do to change things. Commercial is collapsing and that means lower rents for small businesses like mine. I have cut $20000 a month out here and learned that you better negotiate pricing on every deal. I don't give it away but we make much less than before. I finally have new orders and am caught up on everything so feeling like it is getting a little better. I know one thing I will pay off everything I can, put some cash in the gun safe and pay cash for the next boat.

jbv

· #9 · Sep 23, 2009

realtordude said:
You are exactly right.

wow, finally a realtor that's willing to speak the truth! Thank you sir.

I love reading the comments on AZCentral.com about real estate. There's this one realtor that is constantly posting crap like: "now's time to buy - you've thrown your money away for years but renting, and you've lost time that equals appreciation." Um, how is renting when there has been 30-35% declines the last three years of home values throwing money away?

realtordude

· #10 · Sep 23, 2009

In my previous comments I talked about the option arms, that is just the tip of the iceberg. When the commercial market crashes it will be crazy! Anyone with alot of cash will be buying up these properties, mostly foreign investors. This whole thing needs to complete the cycle before we see any relief. As for prices, I don't think they will drop much more. I have already seen an 11% increase in some areas. The tax credit has stimulated buying but not as much as you think. Remember it only applies to first time home buyers with a 620 fico or better. Some lenders do down to a 580 but those programs are disappearing fast.
There are many other loan programs not being talked about such as the USDA loans. In most of Buckeye and some of Goodyear homes can qualify for the USDA loan because it is considered rural. These are no money down loans and with a seller contribution for closing costs you can buy with little or next to nothing out of your pocket.
These don't apply to first time home buyers only.
When one program from the government ends another is started. Do I agree with all this type of entitlement, no! With that being said I will play by the rules with the cards I have been dealt. I still make a living understanding that people need places to live, raise there kids, and park their boats!!
Good luck out there!

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angler2020

Discussion Starter · #11 · Sep 23, 2009

realtordude said:
You are exactly right. The banks are holding in Arizona about 43k foreclosures. This is a tactic to shrink inventory to drive up price. Being in the business I'm seeing people coming in and wanting to buy a house quickly to get the 8k credit. FHA loans are running about 45 days to get closed. Anything under 100k is being snatched up by cash buyers and usually there are multiple offers thus driving up the price.
When the option arms start adjusting, price increases will stall and inventory will be high.
The Banks are not being held accountable for the Tarp money. They don't loose anything on the homes because the Tarp money is used to pay them back for the loss. Sit Down and hold on for the ride.:hitsfan:
The short sale market is a joke. I have seen 60 days at best to 120 days for a bank to make a decision.
For example: 3/2 bath that sold at the peak of the market for two hundred thousand. Home is in pre-forclosure and auction date is 20 days away. Home is listed at 105k so buyer makes full price offer. The last six sales in the neighborhood are around 92k-110k. Send offer to the bank and you would think they would accept it and get it off their inventory,right? WRONG!:beatingdeadhorse:
They will most likely let it go to auction where it will be snatched up for 50k-75k. They don't care because the Tarp funds will pay them back for the lost equity.
Get ready for this spring. The best is yet to come.

Thanx for the info. I just wonder how much the shadow inventory will increase over the next year.

SKIRTS'NBASS

· #12 · Sep 24, 2009

realtordude said:
In my previous comments I talked about the option arms, that is just the tip of the iceberg. When the commercial market crashes it will be crazy! Anyone with alot of cash will be buying up these properties, mostly foreign investors. This whole thing needs to complete the cycle before we see any relief. As for prices, I don't think they will drop much more. I have already seen an 11% increase in some areas. The tax credit has stimulated buying but not as much as you think. Remember it only applies to first time home buyers with a 620 fico or better. Some lenders do down to a 580 but those programs are disappearing fast.
There are many other loan programs not being talked about such as the USDA loans. In most of Buckeye and some of Goodyear homes can qualify for the USDA loan because it is considered rural. These are no money down loans and with a seller contribution for closing costs you can buy with little or next to nothing out of your pocket.
These don't apply to first time home buyers only.
When one program from the government ends another is started. Do I agree with all this type of entitlement, no! With that being said I will play by the rules with the cards I have been dealt. I still make a living understanding that people need places to live, raise there kids, and park their boats!!
Good luck out there!

I have a question for you. We have been asking around and get absolutely nowhere.

So we have our house, we make our payments on time each month. Our house is worth about $50,000 less than we owe. All we want to do is refinance for a better interest rate. Is there any programs/loans available out there that do not require either an appraisal or the amount upside down in cash? We do not want a loan modification, just a better interest rate but can not seem to get any answers from anyone. I just want to know if we are up the creek without a paddle or if there is actually somewhere to turn.

thanks!

deb:biggrin:

(angler 2020 - if you are going to call me an idiot or tell me its my own fault I am in this mess, I would rather YOU not give me any answers! LOL :biggrin

angler2020

Discussion Starter · #13 · Sep 24, 2009

SKIRTS'NBASS said:
I have a question for you. We have been asking around and get absolutely nowhere.

So we have our house, we make our payments on time each month. Our house is worth about $50,000 less than we owe. All we want to do is refinance for a better interest rate. Is there any programs/loans available out there that do not require either an appraisal or the amount upside down in cash? We do not want a loan modification, just a better interest rate but can not seem to get any answers from anyone. I just want to know if we are up the creek without a paddle or if there is actually somewhere to turn.

thanks!

deb:biggrin:

(angler 2020 - if you are going to call me an idiot or tell me its my own fault I am in this mess, I would rather YOU not give me any answers! LOL :biggrin

If you do refinance watch out for those tricky ass lenders. If the refinance says they can garnish your wages then rip that crap up. It will be in the fine print.

The Lite

· #14 · Sep 25, 2009

SKIRTS'NBASS said:
I have a question for you. We have been asking around and get absolutely nowhere.

So we have our house, we make our payments on time each month. Our house is worth about $50,000 less than we owe. All we want to do is refinance for a better interest rate. Is there any programs/loans available out there that do not require either an appraisal or the amount upside down in cash? We do not want a loan modification, just a better interest rate but can not seem to get any answers from anyone. I just want to know if we are up the creek without a paddle or if there is actually somewhere to turn.

thanks!

deb:biggrin:

Deb,

As sad as it sounds, unless you got into one of those crazy loans stay where you are at.
If you have a loan that is going to adjust or re-adjust, then try to get into a fixed rate mortgage without changing any % or points.

If you have a fixed rate mort. then stay with it!!!!!

If you modify or change any payments amounts, it will count against you on your FICO score.

(angler 2020 - if you are going to call me an idiot or tell me its my own fault I am in this mess, I would rather YOU not give me any answers! LOL :biggrin

The Lite

· #15 · Sep 25, 2009

Deb,

As sad as it sounds, unless you got into one of those crazy loans stay where you are at.
If you have a loan that is going to adjust or re-adjust, then try to get into a fixed rate mortgage without changing any % or points.

If you have a fixed rate mort. then stay with it!!!!!

If you modify or change any payments amounts, it will count against you on your FICO score.

The Lite

· #16 · Sep 25, 2009

OOPS! Sorry if I confused anyone

northeastbasser

· #17 · Sep 26, 2009

http://www.upi.com/Real-Estate/2009/09/24/Federal-Reserve-Extends-Bailout-for-Housing/8781253803454/

Federal Reserve policymakers announced yesterday that although the economy has improved, they are not yet ready to remove monetary support for growth. This was good news for both the economy and housing markets.

After its two-day meeting, the Federal Open Market Committee made two important decisions that affects the nation's housing sector—keeping the federal funds rate near zero and extending its agency and mortgage-backed security purchase program.

The central bank continued to proceed cautiously about the recovery, warning that the nation could experience further job losses into next year. To this end, the Fed left its target interest rate near zero and asserted that the rate will likely remain at "exceptionally low levels" for an extended period.

The Fed also issued a statement about unwinding its purchase program. The Fed has indirectly subsidized the housing sector this past year by purchasing a great deal of mortgage debt which bids up bond prices, while bringing down bond rates. Thirty-year mortgage rates have hovered around 5 percent for the past twelve months, providing low cost financing for home purchases. Market observers have anticipated that at some point, the Fed would begin winding down its bond purchase operations, likely sending mortgage rates northward. Higher mortgage rates promise to inhibit future home sales.

The Fed has already purchased more than half of the $1.45 trillion committed to these purchases. According to the Fed's statement, the central bank will commit to extend this program until March 2010. This means that the Fed will purchase about $24 billion of mortgage-related bonds every week until March of next year.

Most analysts applauded yesterday's news coming out of the Reserve and expect the central bank to remain accommodative until late next year. Economy.com issued a statement on its web site endorsing the Fed's action.

"We believe the central bank is taking the correct approach, as both the economy and financial markets remain fragile. With inflation pressures dormant and the unemployment rate within striking distance of 10 percent, we don't expect the Fed to begin tightening monetary policy before late 2010. By holding rates extremely low and extending purchases of agency-and mortgage-backed securities into next year, the central bank is providing the necessary stimulus for the recovery to firm."

Participants in the nation's housing markets issued a collective sigh of relief immediately following the release of the Fed's statements. Although the housing sector has experienced modest gains in home sales and residential construction activity in recent months, a complete recovery remains extremely fragile. The $8,000 home purchase tax credit is scheduled to expire at the end of November which is expected to inhibit first-time home buying in the coming months. In addition, most analysts expect a new steady flow of foreclosure filings due to planned rate resets on option ARMs and interest only over the next several years. More foreclosures adds to the already excessive supply of homes, exerting downward pressure on home prices which drives some households to postpone home purchases until prices stabilize. And a successful housing recovery continues to be held hostage to a struggling economy that continues to shed jobs on a monthly basis.

The Fed's actions yesterday provide some comfort to a fragile housing sector that the central bank remains ready to support housing activity, at least until March of 2010.

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HitACraw

· #18 · Sep 26, 2009

realtordude said:
You are exactly right. The banks are holding in Arizona about 43k foreclosures. This is a tactic to shrink inventory to drive up price...

What's funny is I have a good friend that is in the lending business, she said the banks are going to try to get the ~50k houses off the books by the end of the year due to tax reasons (??). This is why they are expecting a big price drop coming as well as the tax break expiration but a lot of people think that will get extended through 2010 (who's going to pay for that? Hmmm... I wonder). I am sure there are more coming too, that ~50k is current inventory.

Here's a snapshot, it appears to be stabilizing but there are simply too many homes under the banks to sustain this. Those vacant homes rotting away are driving the prices down too. At least the realtors and listing agents are coming to their senses and have been trying to close the gap between list and sales prices.

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HitACraw

· #19 · Sep 26, 2009

Also, I know a few gainfully employed people who are walking from their homes in the next few months. I have tried talking them out of it, but they all paid for lawyers to consult them on this.

The lawyers are telling them there is absolutely nothing the gov or banks can do to you if you walk away, even if you CAN afford your home. All you have to do is try to short sell it to show you tried, live mortgage free for 4-12mo, and be prepared to rent for 1-3yrs. Your credit score will be damaged for the next 8yrs so purchase vehicles or anything that requires an interest rate before you go dilenquent on your house. When they come asking what kind of cash assets you have? Just tell them it's none of your business. There are apparently state laws that protect you on this.

Apparently a lot of people who CAN afford their homes are doing this and renting a house on a 1yr lease. Investors are doing everything they can to get in on this by buying up the cheaper properties and renting them back to the same people who walked away.

So basically in the state of AZ it's totally cool to walk away from your home as long as you are okay with your credit score going in the gutter. Lawyers sure are something!! What doesn't make sense to me is this: If I buy a risky stock and loose my ass (like 50-60%) on it using borrowed money, why can't I walk away from that? Gauranteed I'll get nailed one way or another, but for houses our wonderful state legislature has enabled the sheeple to keep being sheeple...

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