Rise in California mortgage defaults expected

[Judi Lynn]

LATEST NEWS
11:15 AM PST Monday
Rise in California mortgage defaults expected
As mortgage rates move up in response to strong job growth, Foreclosures.com, a Northern California investment advisory firm specializing in distressed property, expects a surge in mortgage defaults by the second quarter of 2005.

"Employment, or the lack thereof, is no longer the primary cause of foreclosure activity," said Alexis McGee, president of Foreclosures.com. "The problem now is that too many households are overloaded with debt."

McGee said during the long period of below normal interest rates, consumers continued spending and financed their purchases with adjustable rate home equity credit lines.

"You could say that homeowners got addicted to a combination of low interest rates and double digit price appreciation every year. Now that combination has reversed itself," she said.
(snip/...)

http://eastbay.bizjournals.com/eastbay/stories/2004/11/29/daily2.html?jst=b_ln_hl

[medeak]

1. It's going to get worse with ARM's

when the rates skyrocket. Opportunity for those to pick up foreclosures Scrooge that I am.

[Bono71]

4. Was thinking the exact same thing...well,

we may be scrooges, but what the heck

[MidwestTransplant]

5. There will be opportunites

but if they need to be financed at the higher rates they won't be the great deals they were at lower rates.

[Bono71]

7. Of course, as interest rates rise, so do rents

[Carla in Ca]

21. My husband has been a mortgage broker for 30 years

and he is starting to see the panic from the calls he gets. People with little credit and no money for down payments got loans with 100% financing, a pure gimmick to keep the economy rolling, and now are starting to see their payments going up. You NEVER get something for nothing.
He gets calls from previous borrowers who refinanced and paid off their credit cards and promising they will not abuse their credit cards but, of course, they got new cards and ran those up as well.
The calls that really make him mad are the people who have filed BK and/or have a foreclosure and want a good rate! They tell him they should qualify because they have no bills! He says yeah, you wiped them all out and the rest of us are paying for it! Then he says he cannot help them, thank you for calling and hangs up.
A lot of brokers love to 'help' those people, but my husband will not, his conscience won't allow it.

[Ima]

2. not so sure

"Employment, or the lack thereof, is no longer the primary cause of foreclosure activity," said Alexis McGee, president of Foreclosures.com."


I'd say he's uninformed. There are very few jobs where I live.

[GraphicQueen]

13. I understand what you are saying about jobs,

yes but the facts are that the people of this country are too used to living beyond their means. If most would actually live within their means and not have and use credit cards, except for absolute emergencies, then you would see more people that are a lot poorer than they look like by living beyond their means. This is one of those way I am much more conservative than many people. I don't see any real need for most women to work outside of the home, except to fill some void, but not for the money. People could get along quite well with one vehicle and let the man, or whomever makes the most, be the one who supports the household. People do not have to have 2 and more televisions, two and more vcrs, two and more of whatever and there is no way that most people need the huge size in homes that so many have.

[frylock]

3. strong job growth?!

WTF are they smoking? The job boards are decimated. I'm trying to get out of Cali because of the lack of available jobs.

[wicket]

6. beat me to it

You beat me to it, was just going to comment on this, wtf are they talking about???? Job Growth? HA!!! Sounds like they are describing Bizarro World to me.

[Judi Lynn]

9. Really! Thanks for the news.

God knows we're screwed if we're going to be forced to read information without knowing it's twisted to the right!

Very helpful to get your view based on experience, for those of us who live Eastward.

[AP]

8. Someone please explain:

People who are taking out mortgages over the last five years must have taken out mostly fixed rate mortgages, so a lot of them won't be hurt be increased interestes rates, provided they still have jobs and aren't going into any more debt, right?

But is it the case that people taking out loans against equity (not for the purchase of a home, but to make a lot of consumer purchases) are doing that mostly through ARMs?

Or would it be the same proportion?

Is it harder (or impossibled) to do that kind of borrowing with a fixed interest rate?

[Algomas]

12. I read somewhere recently...

that almost half of the mortgages out there are variable rate loans. We could see a real estate melt down.

[sandnsea]

14. *sigh* Not really

Not my daughter. The only mortgage they could get was an ARM, it's like 6% right now. Young, short job and credit record. They make good money. But, they are up to their eyeballs in debt, worries me sick. In fact, we just got in a huge fight on Friday because I dared to suggest they take a good look at their ARM interest on their various loans. I didn't have a chance to explain why. She just screamed at me and now isn't speaking to me. It'll pass, no biggie. But damn. They listen to Republicans who know so much more than dumb old mom. Who's going to be there if it all cracks up and interest skyrockets? Not those Republicans. Ack.

[AP]

16. So you can only get a fixed rate M if your credit is good? Everyone else

has to get an ARM?

I'm just trying to figure out why anyone would get an ARM today?

[shanti]

17. dunno about that

i got a fixed rate loan after a BK...:shrug: but i have a fairly secure job.

[sandnsea]

20. Don't know

He is a sub-contractor, makes good money but only 3 or 4 years steady employment history. She's in school, but has worked part time for the same company for about 4 years too. Their credit is perfect, but again they each only have a few years credit history. The only mortgage they could get was this ARM. Or maybe the ARM had the cheapest current interest rate that they could get, not totally sure. I do know they can't refinance for another year either. I tried to talk to them about getting a fixed rate loan when they bought the house, but they just said this was the best deal they could get and basically listened to their realtor. :shrug: What's a mother to do.

[Anakin Skywalker]

10. Someone please explain:

How, in the infallible words of our strong, resolute and benevolent supreme god Shrub, "the economy is strong"?

[Ima]

15. Could he mean the 'strong' smell?

Stinks:puke:

[struggle4progress]

11. Listen to that economy gurgle down the drain. eom

[lovuian]

18. Real Estate maybe in for a fall!!! Foreclosures first sign of it!!!

and its not just the foreclosures who lose its the whole market cause it makes everybody else's house fall down in price too!!!

Real Estate goes America is screwed!!!

[Andromeda]

19. I do know something about this...

since I live in California. Property is so inflated right now that you can't buy your average three bedroom, bath 1/2 home anymore for less than $450,000. The only thing you can buy for less are condominiums and townhouses and they aren't much cheaper.

The real estate market is pricing itself out of business, almost. People are feeling the pinch and they're leaving CA in droves because they can't afford to buy a house here.

Jobs aren't that plentiful here either so coupled with housing and other factors, it doesn't surprise me that people are defaulting on their loans.

[anarchy1999]

22. Hang on everyone, this roller coaster only is just getting started.

We've yet to reach the top of the first hill. It is going to be a "dilly" of a ride to the end. In the end it will be top-rated as one of the best roller coaster rides to be had in the Northern Hemisphere.

(Keep in mind, the ride is only just starting.)