Mortgage crisis hits million-dollar homes

[Roland99]

Source: Reuters

Sheriff Leo McGuire presides over foreclosure auctions in Bergen County, New Jersey, where the bidding for a home reached $1.2 million last June -- a record for one of the wealthiest counties in the nation.

Homes sold on the auction block for as much as $852,000 this month -- more than quadruple the median home price in the United States. County officials believe they are close to setting another record soon.

...

Her clients, while predominantly poor and minorities, increasingly are neither. Nowadays, homeowners holding professional careers with six-figure salaries regularly drop by her office. More and more they come from upscale Michigan communities such as Independence and Clarkston -- once the summer retreat for Henry Ford, founder of Ford Motor Co.

"Because of the financing that was possible, so many people bought the bigger house, the million-dollar house with the bowling alley or the tennis court outside," says Guzek, who works for GreenPath Debt Solutions, a nonprofit service based in Farmington Hills, Michigan. "People across all income brackets are having financial hardship."

Read more: http://today.reuters.com/news/articlenews.aspx?type=domesticNews&storyid=2007-03-29T184850Z_01_N28302234_RTRUKOC_0_US-USA-SUBPRIME-FORECLOSURE.xml&src=rss&rpc=22

[LisaM]

1. You mean people might have to go back to using parks or community centers

for their tennis court needs?

[KansDem]

3. You mean...*gasp*...they might have to mingle with the "little people?"

You know, the ones who pay taxes?

[Donnachaidh]

4. oh, those horrible community service charges for those gated communities!

THAT'S what caused them to lose those million-dollar homes! :sarcasm:

So many people in this country cannot afford to buy a home, I'm not going to shed a tear for people who have to 'trade up' to keep up with the Joneses.

[AlCzervik]

2. so many people made so many foolish decisions, just because you can doesn't mean you should.

We were thinking of moving and got approved for a mortgage of $750k, after we got that call my husband and i just looked at each other and said "Huh, this shouldn't be possible" and we did not move and or even think of seriously looking.

[Tansy_Gold]

13. Same here

I had already sold my house and was looking for another in the same price range to avoid a mortgage entirely. Real estate agent showed me a house that I fell in love with but was more than I wanted to pay for it. He wanted the commission, so he started all kinds of shenanigans, creative financing, bizarre mortgage companies I'd never heard of -- but I said, no, I do NOT want to do this.

Do I have my dream house? No.

Do I have the nightmare of a big mortgage? No.

In this case, two no's make a big yes.

Do I sleep better at night? YES.

Tansy Gold

[1932]

14. The sheriff interviewed in the article says there's enough blame to go around but

the banks and mortgage lenders set consumers up to fail and a couple years ago it was obvious to me that the government should step in and regulate.

[MadHound]

17. Sorry, but the majority of the blame for this is with the borrowers

They always had the power to say no. Instead they let greed and visions of the good life influence their thinking, and jumped into a mortage that they had no business getting. This is their own damn fault. Sure, there are pushy and aggressive lenders, but they don't hold a gun to your head, and you can simply walk away from the deal. These people didn't, and now they are paying for their foolishness. Oh well, I have littlte sympathy.

[1932]

47. Sorry, but the sheriff, who is seeing this up close, has a different opinion.

And, I agree with him.

I happened to catch Fresh Air last week. They had a professor from Harvard Law talk about the way the credit card industry rips off people. I know that people make the choice to apply for and use credit cards. But she made an excellent case for why a lot of blame for people's outrageous debt loads can be attributed to business strategies devised by MBAs whose main goal in life is to separate people from their money regardless of the consequences for society.

It was an instructive lesson that, I suspect, applies to mortgage lenders as well.

[eridani]

49. Do you know what credit card companies call people like me--

--who pays the full balance every month? DEADBEATS! Yes, really. Financial responsibility is something they have been actively working against for years.

[ixion]

5. gee, but I've heard all these folks saying the economy is perking right along

and salaries are up and all that hogwash. Guess it ain't quite as green as the pundits are claiming. :eyes:

[PassingFair]

46. I heard on the radio today that the economy is SO good, that it might actually have a negative

...effect on the economy!

:crazy:

[mike_c]

6. I feel so sorry for those poor millionaires....

Oh, wait....

[DCKit]

7. Smart enough to earn 6 figures

But not smart enough to get a decent mortgage?

Hate to say it, but I saw this train wreck coming a long way back.

[slackmaster]

8. A million dollar home isn't worth a million dollars any more

At least not in places like Bergen County.

[kestrel91316]

10. In my neighborhood in SoCal $1million MIGHT get you a 1945

slightly updated crackerbox with detached garage and illegal "guest house" on a postage stamp lot. Like the one down the street just as described that DID go for $1 million last fall. My crackerbox-with-style rental house is being torn down for two Persian Palaces to be built. I will have to move into an apartment, and can probably only afford a 1-BR. In a decent area that will run $1200+.

[slackmaster]

11. My 'hood in San Diego has a McMausoleum that sold for $1,150,000 in November

The place has no real windows visible from the street. :crazy:

But the days of converting humble Bungalows into spec monstrosities is over, at least for now.

[wordpix]

41. my hood in sw CT has an 8 ac. piece of land subdivided into 5 lots for $750K EACH lot

I was picturing cheek-by-jowl McMansions but not one lot has sold in a year. :rofl:

There is also a huge new home that was finished several months ago. The developers took off every tree and shrub to build this McStrosity and it hasn't sold. :rofl:

I am laughing at all those who rape the land to make a quick buck and instead they're going under. :rofl:

[NashVegas]

18. With Prices Like Those

I'm amazed more people of moderate income don't take a cue from homeless advocates and put up tent cities.

[Roland99]

12. Suppose so but, still, a $1mil home there will be a very nice home

http://www.idxlistings.com/detail.cfm?id=42643&mls_number=2710593&CFID=2145715&CFTOKEN=72479190

[Gormy Cuss]

36. Right. 1M in Bergen County buys a lot more than in overheated CA markets.

These are properties that should have been purchased using less speculative mortgage schemes. Bergen County and the areas mentioned in Michigan are where the people with good earnings and credit choose to live.

That there are rising subprime and Alt-A mortgage foreclosures is a sign that some people either bought more house than they could afford or have been using the house like an ATM, as mentioned in the article, and of course that the availability of too much easy money has driven up the sale values of such houses.

[Roland99]

37. And that equity is what's been fueling the GDP. Take out MEW and we're at 0% or *below*!

[madrchsod]

9. depends where one lives

my 1700sq ft 70`s house where i am is worth about 100,000 in california it would be at least 35-40 hundred thousand. 60-75 miles east of here it would be around 175-200 thousand.

[fed-up]

15. About 40 percent of homes bought last year were second homes or investment properties. -"f*ck em

from the article:

About 40 percent of homes bought last year were second homes or investment properties. Speculative buyers may be more at risk, he said.

these investors are what helped drive homes to insane values

thanks to DU I survived the housing market collapse...

[Roland99]

16. The bright side is some bargains can be had now and coming up in the near future.

[kwassa]

19. how do they come up with this 40% figure?

Many real estate articles say that the actual figure of speculative properties is unknown, and major builders say the same thing. No one knows what the exact figure is, because buyers don't disclose their motivation, necessarily. They have no reason to.

[Capn Sunshine]

27. It would be extrapolated from lending data

There's a classification in a mortgage if the property is "non owner occupied-IOW a second home. I assume they get the data from this.

This ignores the reality of many boomers buying their retirement homes now, as opposed to later, and many more buying vacation homes. Roughly-very roughly I might add, you could define those as "investment properties".

[Heidi]

20. Kick.

:kick:

[Mister K]

21. Mortgage crisis hits million-dollar homes

Source: Reuters

NEW YORK (Reuters) - Sheriff Leo McGuire presides over foreclosure auctions in Bergen County, New Jersey, where the bidding for a home reached $1.2 million last June -- a record for one of the wealthiest counties in the nation.

Homes sold on the auction block for as much as $852,000 this month -- more than quadruple the median home price in the United States. County officials believe they are close to setting another record soon.

In Troy, Michigan, Dorothy Guzek, a credit counselor since 1988, has also seen the changing face of foreclosure.

Her clients, while predominantly poor and minorities, increasingly are neither. Nowadays, homeowners holding professional careers with six-figure salaries regularly drop by her office. More and more they come from upscale Michigan communities such as Independence and Clarkston -- once the summer retreat for Henry Ford, founder of Ford Motor Co.

Read more: http://today.reuters.com/news/articlenews.aspx?type=domesticNews&storyID=2007-03-29T184850Z_01_N28302234_RTRUKOC_0_US-USA-SUBPRIME-FORECLOSURE.xml&pageNumber=1&imageid=&cap=&sz=13&WTModLoc=NewsArt-C1-ArticlePage1

[spinbaby]

22. People who thought they were wealthy

...sad, really.

[Warpy]

23. "With an ARM, you can buy much more house!"

"It's CAPPED, so your interest rate won't go up more than three percent!"

Poor suckers who couldn't do the math didn't realize the difference between a 5% mortgage and an 8% mortgage. Imagine their surprise when those teaser rates evaporated. Imagine their shock when there was so little equity built up after only 3 years.

It's really hard not to feel a little sorry for these poor gullible saps. They didn't know what that three percent increase would mean; their expertise was in another field and they trusted real estate agents and lenders and even their own lawyers to tell them the whole truth.

They may be making six figure salaries between them, but now their credit will be shot. Renting or even living in a trailer until they can save enough for a down payment 7 years down the line is going to be a terrible comedown for people who really should have been able to accomplish the American dream of property ownership, educating the kids, and investing for retirement.

I just wonder what will happen to all those McMansions. They're poorly designed for multiple residences. They're poorly built and will start to fall apart as quickly as 1970s trailers did. They're a bitch to heat and cool.

Those granite countertops will have to be recycled for headstones.

[Viva_La_Revolution]

24. "Those granite countertops will have to be recycled for headstones."

I think you just summed up this whole nasty business in one sentence.

[Hobarticus]

35. Then why not ask their realtor or loan officer to crunch the numbers?

Yeah, 3% sounds trifling, but all it takes is a few seconds with a calculator to figure out what that means.

I feel bad for lower-income families caught up in this, they're just trying to get as much as they can for as little money down as possible. But what could possible be an excuse for foreclosing a million-dollar home?

People buy more house than they need for their bullshit egos. No sympathy.

[Warpy]

38. What could be an excuse?

A lost job.

The principal exceeded what the home was worth in a declining market.

Health problems that a ripoff insurance plan wouldn't cover.

Most people are closer to financial disaster than they know.

[Hobarticus]

39. In other words: life happens

All legitimate reasons to live within your means; one never knows what tomorrow will bring.

Please don't think I'm being callous towards anyone but those who just HAD to buy giant sprawling houses that are way beyond their means and their needs, just for status. I'm coming across a lot harsher than I mean to be.

[Warpy]

42. Understood, but I do have sympathy

for folks who aren't as savvy as they should be and who were dazzled by media rooms and trophy kitchens and a motormouthed salesman who promised they could have it for a song, risk free.

One of my friends once told me I pinched my pennies so hard she could hear Lincoln complaining. Not everybody is like that.

Most people don't know to ask the hard questions, like how much an ARM is going to cost them every month when it's adjusted upward to the top limit.

[Capn Sunshine]

44. That's not what we're seeing here.

"Sub-prime" means folks with low FICO scores. Those scores are a reliable prime indicator regarding your ability to balance your payment obligations with your income.

Who is surprised that people who have a history of trouble paying their bills would get in trouble with their mortgage?


The impetus for this goes to Wall Street where they were bundling these risky loans , stripping them into components and selling them as high-interest "Collateralized mortgage bond" investments, when they should have instead sold them as high risk ( aka junk) bonds. Suddenly the inevitable defaults happen , at a predictable high rate, so they stop buying these packages from the mortgage companies, "shocked" that the default rate is so high. It was their voracious appetite for these in the first place that kept the whole show going for the past two years.

The Mc Mansions are not in any danger beyond a normal risk that you see at that level of purchase. It's more a reflection of extant things like the economy going south despite the happy face reports from the Street, which causes a nouveau riche guy to crash and burn.

[Double T]

25. The SUPER CORRUPT mortgage industry is bad enough,..........

now with the tremendous loss of good paying jobs, the USA mortgage crisis is ONLY in its infancy. The future will be EVEN MORE UGLY.

[Capn Sunshine]

26. what's so super corrupt about the mortgage industry?

Please explain that to me.

[Double T]

28. Capn Sunshine, you must NOT be paying attention if you can ask that question........

or you may be in the mortgage business and in complete denial.

[Capn Sunshine]

40. I'm just curious where you get that take from

The mortgage business strikes me as no more or less corrupt than say, the Petroluem industry. There's always bad actors, but I just don't see a lot of widespread corruption.

[slackmaster]

29. Should loan officers and realtors discourage people from buying too much house?

It's really a tough question IMO. They have to be very careful not to discriminate. Government guidelines ultimately determine what kinds of loans they can offer, and how those loans are underwritten.

Suppose you are a lender and are offering "stated income" loans (no documentation required, just the borrower's word). The borrower wants to 100% finance a home that costs $250K, and tells you he makes $90K per year.

You happen to know damn well he doesn't make anywhere near that much, and he's already up to his ears in credit card debt.

Your move. What do you do?

ETA I heard an industry expert explain things very well on NPR yesterday. He said there are basically two kinds of people who use subprime loans: People who are trying to recover from a disaster that was not of their making, and people who just can't keep their finances straight. If there were no subprime loans, a lot of single-parent families, divorced people, people who have been laid off their jobs, etc. would never be able to buy.

[Double T]

30. So the answer to the problem is to put THOSE kind of people,.........

who are ALREADY in trouble, into even more trouble with an ARM mortgage with nothing down. ONLY a predatory greedy bastard would do such a thing. Realtors and Mortgage lenders have created this mess which will only become much worse going forward; over inflated real estate prices combined with ARM mortgages and 0% down are total financial disasters that lead borrowers to total financial ruin.

[slackmaster]

31. A loan officer cannot say "I don't think you should do this"

It would be discriminatory. Underwriting guidelines are objective and have to be applied uniformly. A prospective buyer either qualifies or does not qualify.

[Double T]

32. If borrowers in financial trouble who don't have to provide 'proof'........

of income verification and also are not required to have any down payment are 'qualified', then the 'qualifications' have become corrupt through lobbying by the corrupt financial institutions and lenders; the same industry that has brought us predatory bait, switch and bury credit cards.

[slackmaster]

34. The lending industry doesn't make money off of foreclosures

They want borrowers to make their payments, on time, and not have to foreclose.

[1932]

48. Credit card companies make over half their profit from fees and fines and they call

people who pay off their cards in full and on time "deadbeats."

I think mortgage lenders make money off fees and interests and encourage people to overpay, refinance multiple times, and to have as little equity as possible in order to maximize fees and interest -- and if foreclosures and late payments are a consequence of pushing people to the limit, well, it was a nice ride while the gravy train was rolling along.

[wordpix]

43. I said to my mortgage broker that I thought the condos in my new area were too expensive &

I wanted to wait a bit to see if prices would come down since I knew about the sub-prime market crashing. This was about 6 wks. ago. She said, "I'll give you the names and numbers of some mortgage brokers."

I didn't call them and now I'm seeing some good price reductions but I'll wait a bit longer.

[Zorra]

33. Not to worry. These folks that lost their homes can file bankruptcy.

The benevolent new bankruptcy laws that the finance industry lobbied for and republicans passed into law will help them get through this.

Hope they all voted republican so that they got exactly what they wanted.
:sarcasm:

[shrike]

45. The Michigan foreclosures are probably due to the economy

Which really sucks right now.

I'm not saying people didn't overextend themselves, but if you were riding high two years ago it may not have seemed like a stretch. There are (or used to be) a lot of well-paid people in Independence Township and Clarkston.