Mortgage Last Loan People Pay, Study Finds
When faced with the possibility of falling behind on home loans, credit card payments or car loans, borrowers are more likely to choose to let their mortgages slide than the other kinds of debt, according to a recent study conducted by Equifax, a major consumer credit rating agency. In the study, researchers looked at thousands of borrowers who had taken out mortgages in 2002 and 2005 and tracked their payment behavior over a 24-month period. Of those in the 2002 sample who missed two payments on their mortgages during the two years, 26% maintained a spotless credit card payment history and 59% kept pace with car payments. Mortgage payments continued to slide down the list of priorities a few years later. Of those in the 2005 sample who fell behind on their mortgages, 38% kept up with credit-card payments and 62% made all their car payments. Kisha Wright, a counselor for the Long Island Housing Partnership, a nonprofit affordable-housing group in Hauppauge, N.Y., said many of her clients lack the monthly income to pay all of their bills, so they pay the minimum amount necessary to keep their credit card. “People are living off their credit cards — buying food, gas or even taking cash advances to pay their mortgages,” she said. (www.sfgate.com)
San Francisco Gate (10/12/08); Bob Tedeschi, New York Times
[Return to top]
Feeling the Economic Pinch; Small Percentage of Small Firms Say Credit Crunch Forces Layoffs
Almost two-thirds of small-business owners said in October that the credit crunch is affecting their ability to do business, and a small portion of those said they’d been forced to lay off workers as a result, according to a survey by American Express. Of the 63% who said their firm “has been affected by the tightening of credit in the company” — up from 50% in August — 12% of small-firm owners said they’ve been forced to lay off workers, 7% have been unable to make payroll and 4% couldn’t fill customer orders. Also, of those 63% who’ve been hit by the credit crunch, 79% said sales are decreasing, 51% said they’ve tapped personal asserts to pay business expenses, 40% are unable to pay bills or are paying bills late and 24% tapped another source of financing. Eighteen percent of firms said their company risks going out of business in the next six months due to the state of the economy, up from 9% who said that in August. (www.marketwatch.com)
MarketWatch (10/12/08); Andrea Coombes
[Return to top]
Credit Crisis Hits Home for Local Rehabber
Instead of being part of the solution to the housing and financial mess we’re in, John Quargnenti and his two employees appear to be among the victims. Quargnenti is a rehabber and landlord with a simple business plan. He buys a distressed property, usually from a bank, then fixes it up and rents it to a low-income person who qualifies for the government’s Section 8 housing subsidy. Once he has a rental contract in hand, he takes out a mortgage on the house, freeing up cash for his next project. He has been working in North St. Louis County, the epicenter of foreclosures in the metro area. The trouble is, he’s been turned down for a mortgage on his latest property, a two-bedroom house that soon will be home to a mother and her young daughter. He was turned down because he has too many mortgages — eight on rental properties and one on his own home. Although he is current on all of them, in an attempt to limit speculation Fannie Mae changed its rules this summer to add a limit of four mortgages per investor. Quick profits were never in Quargnenti’s game plan. He still owns every property he has fixed up, and he sticks to “old-school rules” like making sure his rehab expenses don’t go over 50% of the house’s value. “It’s not like I’m trying to buy myself a half-million dollar condo on the Gulf shore,” he said. Still, he’s getting tripped up by rules that the condo-flipping crowd made necessary. He’s eyeing three properties, one of which shows obvious fire damage, but if he can’t get a mortgage on the house he just completed, he can’t afford to buy any of them. (www.stltoday.com)
St. Louis Post-Dispatch (10/14/08); David Nicklaus
[Return to top]
Credit Crunch Hits Bay Area Housing Market Hard
Recent bank failures and stock market declines are hurting the San Francisco Bay Area’s real estate market in two ways, economists said. First, the turmoil has deepened the country’s economic woes, and second, it has dried up the credit market and made it even more difficult for potential home buyers to get loans. The Bay Area up until now had skirted a recession, said Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at UC Berkeley. But as Wall Street’s troubles have made the national economy worse, “It means there is less security of employment and when that happens, fewer people are willing to go out and buy things,” he said. “People are going to be more cautious about buying a house if they’re afraid of losing their jobs.” Beyond the psychological impact, the losses have a very real effect on some Bay Area buyers, said Avram Goldman, chief executive officer of Pacific Union GMAC Real Estate. Many home buyers sell stock in order to put together a downpayment. At a time when lenders are requiring high downpayments — in some cases more than 20% — shrinking stock portfolios mean that potential home buyers are having a hard time scraping together enough cash. Home buyers seeking to take out jumbo loans of more than $729,500 are being asked to put down as much as 30% in some cases, according to real estate and mortgage industry experts. That’s because the investment banks and hedge funds that gobbled up those loans on the secondary market during the housing boom have slammed the door shut, limiting the capacity of banks to make loans. Economy.com Chief Economist Mark Zandi said he expects the credit situation to begin to ease up a little bit in the coming months. (www.sfgate.com)
San Francisco Gate (10/12/08); Marni Leff Kottle, Special to San Francisco Chronicle
[Return to top]
Credit Squeeze Hits High-Rises; Buyers of High-End Condos Struggle to Secure Mortgages
Potential buyers are struggling to secure mortgages at two major condominium-hotels in Las Vegas — Trump International Hotel & Tower and Palms Place — as credit has tightened, even for the well-do-do. “I’ve never seen anything like it,” New York billionaire developer Donald Trump said. “Historically, the banks will call me and beg for end loans. But they don’t do that any more because the banks are really out of business.” Brock Davis, founder of U.S. Express Mortgages, said prospective condo-hotel buyers are now facing lenders who want as much as 50% down and require borrowers to have exceptional credit. The buyer must be willing to take adjustable-rate mortgages to obtain lower rates. “The rules have changed on qualifying,” said Davis, who has been involved in the area’s mortgage industry for 30 years. “They still have to qualify better than normal on income, on credit and showing where your downpayment is coming from.” Rates on 30-year fixed-rate mortgages for banks willing to loan on condo-hotel purchases are as high as 8% to 9%, according to the latest data Davis had seen. “There’s just not the financing available at the interest rate or small downpayments there was two years ago,” he said. “That’s the problem.” A few potential buyers have had to walk away from their nonrefundable 20% deposits, Trump said. (www.lvrj.com)
Las Vegas Review-Journal (10/14/08); Arnold M. Knightly
[Return to top]
More People Find Refuge With FHA Mortgages
Demand for loans insured by the Federal Housing Administration is soaring, after years of being overshadowed by subprime, interest-only, no-doc and other inventive mortgage types. Through July, the number of FHA loans in New Jersey already is 80% higher than in all of 2006, according to the Philadelphia office of the FHA. Most of the new interest is coming from distressed home owners seeking to refinance their existing, mainly non-FHA loans — especially adjustable loans resetting at higher rates. Of 22,666 FHA loans in New Jersey through July, 13,597 were for refinancings by existing home owners. The refinancing boom was ignited by the FHASecure program announced in September 2007, which loosed loan terms and authorized refinancings for borrowers who were delinquent in paying their non-FHA mortgages. FHASecure loans have accounted for 51% of all FHA refinancings this year. (www.pressofatlanticcity.com)
Press of Atlantic City (10/14/08); Kevin Post
[Return to top]
|
