FHA Mortgage Guide

Marc Brinitzer wrote and said “here in Sacramento and in California in general, values have fallen 50% in the last couple of years.

“The crisis this has created is far beyond that of resetting subprime and neg am loans. Even those folks with “good” mortgages are walking away from homes at the first hiccup. Why struggle for years to save a home worth $300k on which you owe $425k? Hence the “buy and bail” problem.

“But the bigger issue to me is the “negative wealth effect”, the perception of the loss of wealth felt not just by troubled homeowners but felt equally by all homeowners. Combined with the erosion of 401k values, consumer spending is curtailed, jobs are affected, and the spiral gets worse.

“And, a year ago, the pundits were saying this would never spill out of the subprime arena.”

Marc has this exactly right.

Here are two examples:

Speaking at the National Press Club in May 2007, John Robbins, then chairman of the Mortgage Bankers Association, said “As we can clearly see, this is not a macro-economic event. No seismic financial occurrence is about to overwhelm the U.S. economy.”

Fed Chairman Ben Bernanke said during the same month that “given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.”

Check out these FHA resources for more information

This entry was posted on Thursday, July 24th, 2008 at 3:34 am and is filed under . You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.