Affluent buyers losing homes

[TexasLawyer]

Affluent buyers losing homes
Risky borrowing leads to surge in foreclosures
By MICHELE DERUS
[e-mail] (Milwaukee)
Posted: May 24, 2006

How bad is it? Foreclosure.com reports 14% more homes being lost to creditors this April than a year earlier. RealtyTrac.com reports 33% more people in some stage of foreclosure this April than April 2005.

What's startling isn't just the higher numbers, but who they represent - the affluent, not just the down and out. "These are the ones with a bigger ability to get money - the executives, businessmen and professionals - buying more than they can possibly afford," said Brad Geisen, president and CEO of Foreclosure.com in Boca Raton, Fla. "They were banking on price appreciation continuing to go up fast, and pulling their money out in time."

It didn't work.

"With interest rates almost double what they were two years ago, their payments are up - and they're finding it's not as easy to sell," Geisen said. "Some leveraged the equity in their primary residence - to the max - to buy a second home."

This may look bad, but the worst is yet to come, said Rick Sharga, vice president of marketing for Irving, Calif.-based RealtyTrac Inc. "If people get in trouble now, they're not going to get top dollar for their house and they face a longer time on market," Sharga said. "Meanwhile, the clock is ticking. There are $2 trillion-plus in loans whose interest rate is due to re-set this year and next. They could be looking at a 30 percent to 50 percent increase in monthly payments."

<snip>
http://www.jsonline.com/story/index.aspx?id=427244

[TexasLawyer]

1. Financial time bombs

May 22, 2006 06:01 AM US Eastern Timezone
ForeclosureS.com: Northeast Foreclosure Activity Up Sharply

SACRAMENTO, Calif.--(BUSINESS WIRE)--California based ForeclosureS.com, a real estate investment advisory firm and nationwide foreclosure lists publisher, reported today that 2006 foreclosure activity in the Northeast is up sharply from 2005 levels. "In Massachusetts," said ForeclosureS.com president Alexis McGee, "we saw 1551 new foreclosure filings in April 2006. As of May 13, foreclosure filings were up 35% from the same period in 2005."

"According to our research, foreclosure activity in New Jersey reached a level of 4,425 filings in the first quarter of 2006 as opposed to just 459 in the same quarter in 2005. That's an almost ten fold increase," warned Ms. McGee. She added that she expected the situation to get worse through the rest of 2006 and into 2007.

Ms. McGee expressed concern that homeowners were still using their houses as ATM machines. She continued, "Freddie Mac just reported that 88% percent of the loans they purchased in the first quarter of 2006 were cash-out refinances. With the real estate markets going flat, the refinance resource will dry up. And with interest rates continuing to rise, payments on so-called exotic adjustable loans would become unaffordable for many households."

Ms. McGee pointed to a recent report from the FDIC stating that 49.5% of recent purchase money loans were categorized as "high risk loans." "These interest only loans and option payment ARMS are financial time bombs that are going to lead to trouble for many homeowners," she said. She added that she found it "amazing" that some lenders were still pushing home equity loans and lines of credit up to 125% of the home's value. "With markets cooling down and prices leveling off, that's another recipe for disaster," said Ms. McGee.

<snip>
http://home.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&newsId=20060522005333&newsLang=en

[MADem]

2. Good. Maybe some of the GOP assholes who have ruined my hood

will have to sell out and leave. That would be fine for the area, IMO.

My neighborhood used to be a D stronghold. Then, all of a sudden, historical houses became hot, and all these shitheels moved in as the grandmas died.

The few of us originals in this area are stunned at the greed, avarice and hubris of these jerks. I can only pray they are overextended, and sell to progressives. Because we ain't leavin'!

[TechBear_Seattle]

3. Frankly, I have little sympathy for the greedy SOBs

When you get a zero down mortgage and then borrow the down payment, all at an adjustable rate, you have a disaster waiting to happen. Now that interest rates are going up again -- exactly like everyone was predicting ever since they started going down -- the harpies are coming home to roost.

I hope you will excuse the lack of empathy for the people who drove the price of homes up to the point where I will never be able to afford one.

[TexasLawyer]

4. Affordability

You'll probably be able to afford one here pretty soon as prices come back down to earth.

(But the interest rate will probably be a killer).

[physioex]

8. I remember the big bust....

Of the 80s, and I also think it is coming back again.

[mike_c]

5. agreed, let them eat cake....

Only 14 percent of people working in my county can afford to buy a home here, and I live in one of the more rural and undeveloped northern CA counties. I'm not in that fourteen percent, despite making a professional salary that's well over the local median income. I have friends who bought houses here seven or eight years ago-- they just squeaked in under the astronomical price rise. None could afford to buy their own house today. The house I rent was appraised about that time at $142K, and similar houses in the same neighborhood now sell for $350K. The guy who owns the house next to mine just rented it for exactly twice the rent I pay-- double!-- and it's a smaller house that's not nearly as nice.

I expect to be homeless when I retire. That's just wrong.

[susanna]

6. I have been the "crazy kid" in my family, as long as I have lived...

...mostly because I "bought down" when all my friends were overextending themselves for homes.

In truth, me and my DH could have bought 4-5 times the house we own. But, good news, we did not, and we own our home now - we OWN it. It's paid up and there is no bank with any say in what we do or do not do. That is comforting to me in what is proving to be a very strange time. We have also gotten out of debt; that was very important to me and DH seems to understand.

That said, our family members who chose speculation have just gone into foreclosure on their main home and it is heartbreaking. They had an amazingly beautiful home they built a few years back, in a solid town with prospects. Then, they succumbed to greed (IMHO) in building out further where folks MIGHT have bought five years ago, but cannot justify it now due to gas prices and inflated real estate.

I actually feel terrible about all this, but wonder what we could have done differently. We told our relatives to think twice, move/build once. They did not get it, I guess... :-(

on edit: BAD emoticon

[physioex]

7. Good for you...

More people should live within their means.

[susanna]

9. That is the scary thing.

Banks are offering unbelievable amounts of money to people right now, convinced they can make money off of it. Case in point: my DH and I went to get pre-approved for a loan recently. We are planning on buying some farmland (w/ home, hopefully) as a vacation/retirement location. The number they gave me we "qualified" for made me absolutely dizzy.

On leaving the bank, I told DH "they are straight up crazy. we should only borrow 1/4 of that, tops." I think that is the thing; like with doctors, people believe that bankers are smart and know what regular folks should borrow. The bank guy seemed amused by me in a strange way, which makes me think lots of folks believe the banks' sales pitch. :-(

[physioex]

10. What kind of loan,,,,

Was he trying to sell? Was it the ARM no equity loan? That really isn't technically a loan in my opionion. It is just perpetually living in debt.....

[susanna]

11. That's what got me...it wasn't an ARM/no down payment.

We have a decent amount of money saved to put on a down-payment, fixed rate mortgage. Even with the fixed rate, the number they thought we would be able to afford was insane, seriously. When I told the bank employee how much we wanted to borrow (much less than he thought we should), he thought we were crazy. Conversely, I thought he was.

I think they are over-lending to people, based on my experience.