In the quarter ending September 2008 :
In the United States overall, home foreclosure filings were .5%.
In Nevada, home foreclosure filings were 1.4% (that's the highest in the nation).
During the first nine months of last year, of all the troubled home loans, only 1% of the lenders rewrote their customers' home loans. To me, that means an ARM loan is more apt to go into foreclosure, than it is to be rewritten. ( msnbc.msn.com
)I'm thinking a bad loan is:
An ARM that lets a poorly qualified homeowner over-refinance his home for say $1,000 a month, then in 3 years goes up to $1,350 a month. ( MasonryConstruction.com
). The lure for a getting an ARM was easy money (more money than a borrower could ever have saved). I would be one of those ARM loan borrowers, BTW.
- On my first refi, I realized paying off a mortgage was a mistake. My utilities, homeowners insurance and property taxes ran $500 a month. So I refinanced for a $600 mortgage payment. I got $80,000 cash for that. Easy money, right?
- On my second refi, my thinking back then was: I needed the money. I wasn't working, and I was getting low on cash. Lenders were bombarding my phone and email with incredible offers and I said, "what-the-heck, if I'm going to lose my home anyway, why not have a last fling with it". I got $60,000 for that.
- On both occasions, I was allowed borrow more money than I knew my house was worth. I wasn't working, but still, I was allowed to refinance my home. Lastly, I couldn't sell my house for the amount of money that my house was appraised for. The mortgage companies were speculating that Las Vegas homes would continue to inflate in value. I guess they were wrong.
- I would think my house today should be worth $140,000, and not the $260,000 it appraised for two years ago.
- I would have had to struggle for 10 years to save the kind of cash these companies were throwing at me.
The bad loans were written based on inflated appraisels, and bad lending policies.I'm not alone and I think there is only two solutions.
And it stinks for the lenders. The ways out are:
1) Let the bad loans be foreclosed on and let the homes be resold for their real value
2) Buy back the mortgages, with an assumable loan that has a substantially reduced interest rate.
I think the government is going for the first option, which will cream the borrowers credit ratings, while bailing out the lending companies.For me, I'd rather keep my home.
I don't think buying the house next door for $75,000, then going into foreclosure on my house (with its $200,000 loan) is cool idea at all. But ya know, if I were to go with the flow, that's what I should do.
I'll wait to see what offers float to the top.