From the NY Times:
Rising Trouble With Mortgages Clouds Dream of Owning Home
Perhaps the American dream of homeownership is not for everyone.
That may sound at odds with a bedrock notion of society promoted by presidents for decades. But many experts say it is a message that can be drawn from the rising troubles with mortgages provided to home buyers with weak credit.
Several large mortgage companies have stopped making new loans, and others have tightened lending standards.
Hundreds of thousands of families who bought houses in the last two years — using loans with low teaser interest rates and no down payments — are now losing them.
Their short tenure as homeowners calls into question whether the nation’s long drive to increase homeownership — pushed by both public policy and financial innovations — has overstepped some boundary of demographic and economic sense.
“Clearly we went too far,” said Joseph E. Gyourko, a professor of real estate and finance at the Wharton School of the University of Pennsylvania. “It’s not the case that high homeownership is always good.”
Consider Nathaniel Shields, who expects to lose his four-bedroom Cape Cod house in southwest Chicago to a foreclosure in May.
He cannot afford his mortgage payment, which jumped to $1,300 a month from about $1,000 after his loan reset to a higher interest rate last summer. A divorce and the loss of his county government clerical job, which paid $14.80 an hour, have also hurt.
In 2004, Mr. Shields took out a popular hybrid mortgage that carried a fixed interest rate for two years before becoming an adjustable-rate loan for the remaining 28 years. In August, his loan’s interest rate rose from 6.6 percent to 8.1 percent, and to 9.6 percent now. “I love the house,” said Mr. Shields, 47, who now works in a custodial job with the Chicago school district that pays $10.40 an hour. “I put a lot of money in the house — a deck and a new garage — and they are just going to take the house.”
Kathleen Van Tiem, a counselor at Neighborhood Housing Services of Chicago, has been trying to help him, but says that his weak credit and low income make him ineligible to refinance or modify his loan. Mr. Shields has put his house up for sale, but in a market with many homes available, he has found no takers.
Guys I’m sorry but he needs to make up 400 a month extra. Thats it. 10 hours of a second job a week.
If the difference between losing my house and staying where I am means doing some OT or getting a second job BE A MAN AND BUCK UP AND DO IT!
1/2 the guys that drive for the Wheelchair Van company I work for right now are moonlighting on another company because the other company won’t give OT.
No love, no sympathy for this guy. This is not NNJ where that reset is 1000+ and there is no way to make up the difference.
he’s only making 10.40 per hour after taxes he can only bring home about 1200 per month. ten hours of part time will not make up the rest of his expenses.
Please see clot’s previous posts, he’s ahead of the curve on this one.
KL
where?
These stories are going to be increasingly common now. HEre is another.
http://news.yahoo.com/s/nm/20070316/ts_nm/usa_subprime_fight_dc
As the bubble/collapse/subprime story unfolds, it may be spun to suggest that the main problem was lending to unworthy individuals.
True, buyers have responsibility. But let’s think of what we’re talking about by subprime: low teaser rates, adjustables, interest-only loans, etc. These kinds of products are virtually guaranteed to lead to massive deliquency and defaults with merely a shift in fundamentals.
With an interest-only loan, for example, the owner can only exit if prices rise or if refinancing conditions are favorable — neither of which exist now.
How was it that these loan products were allowed to be sold at all, much less in mass quantities? The financial institutions that pushed and backed these products were infinitely better positioned to know the full risks, especially the risks to the economy at large, than were average homebuyers. And let’s not even talk about the lobbying & influence clout of this industry, capable of trumping the combined interests of tens of millions of Americans — as typified by recent regulatory changes that allow credit card interest rates north of 30%.
So, don’t fall for the spin, and you know it’s coming
What a mess these subprime mortages turned out to be, stupid buyers & greedy sellers made and make NJ a disgusting State to live & buy in! Shame on those lenders for teasing millions of people into thinking they could buy (afford) one of these dumps in NJ for over 400k with little or no money down or interst only loans, its coming around, forclousure time everybody!