The Christian
Science Monitor reports that a coming wave of home mortgage foreclosures may rival the record set in the 1980s.
The problem, of course, is
that over the last few years lots of people bought houses they couldn't afford, thinking housing prices
would continue to rise.
The story says:
Across the nation,
foreclosures and defaults are rising
as mortgages that were once affordable are now expensive
albatrosses as the introductory "teaser
rates" that made the loan possible end
and higher interest
rates kick in.
Some housing specialists
worry that the mortgage industry -- with
more than 20 companies already in
bankruptcy -- will raise
its lending
standards so high that would-be homeowners with
less-than-perfect credit will
be frozen out. There is even some concern that
the pullback in lending
will extend the slump in
the nation's housing
market.
"It's the most serious threat to the
economy," says Mark Zandi of
Moody's Economy.com. "It has
the potential to set the housing market back another big notch since there could be a whole
class of people who can't get credit."
Loans that go to the riskiest
borrowers are called
subprime loans. These loans carry a higher interest rate than normal, or prime, loans. The
CSM story says:
At issue is a class of mortgages that lenders call "subprime" because they do not
qualify for the lowest or prime interest rate. These are designed for high-risk borrowers, those with fixed incomes, or those who have had
credit problems in the past. Since 1998, more than 6 million Americans have borrowed in this way, according to the
Center for Responsible Lending (CRL). The majority of these loans are
adjustable-rate mortgages (ARM) that are tied to changes in interest rates.
The story goes on to say that one in five home mortgages are subprime, adding this:
That's a dramatic increase in only a decade. In 1995,
subprime mortgages represented a niche market: less than 5
percent of mortgages originated. Today, Wall Street analysts estimate they make up from 18
percent to 24 percent.
Advocates contend they've made it possible for millions of Americans who in the past would not be able
to qualify for a mortgage to own their home. But critics contend they've also
become open to abuse, in part because qualification standards are now so low.
According to
Fortune magazine,
the failures, especially
for subprime loans, are piling
up:In the past few weeks, the bodies have been piling up fast and furiously. Fallout from subprime mortgages -- that is, home loans to borrowers with a blemished credit history -- gone bad has wreaked
havoc on the industry.
Big names
Washington Mutual and
HSBC have reported hits tied to their subprime business and there has been a nonstop
barrage of bad news for major subprime lenders, including
New Century Financial and
NovaStar Financial.
Now the worry is what happens to the economy
if enough homeowners go into default and to the financial markets if enough investors take a bath on mortgage-related
securities.
The market may want to brace itself for more surprises. "To one degree or
another, all of these lenders are facing the same kind of difficulty," says Mark Zandi, chief economist with Moody's Economy.com.
Last year, 13.5 percent of mortgages originated in the U.S. were subprime, according to the
Mortgage Bankers Association,
compared to 2.6 percent in 2000. Overall, the subprime market was $600 billion
in 2006, 20 percent of the $3 trillion mortgage market, according to
Inside Mortgage Finance. In 2001, subprime
loans made ups just 5.6 percent of mortgage dollars.
By the end of 2006, subprime delinquencies more than 60 days late
jumped to almost 13 percent, compared to 8 percent a year earlier, according to
LoanPerformance.
Habitat Runs Into High-Priced LandThe
Dallas Morning News says
Habitat for Humanity is having problems
finding reasonably priced urban land on which to build affordable housing.
Passport Rush
The
Detroit
Free Press reports that changes in immigration rules that now require a
passport for return from nearly anyplace outside U.S. borders has created a run on passport renewals. The demand is so high that passport
offices have opened on weekends. Next Saturday, March 10, has been dubbed
Passports-to-Go Day in Michigan, with clerks in 17 counties, as well as those in some other municipal offices, planning to
open from 9 a.m. to noon to take passport applications.
How come other
states, especially the ones that sit on the borders or contain big departure and entry cities are not doing this, too?
Al's Morning MultimediaMy old buddy,
Mike Wendland, who over the years has
taught with me many times at
Poynter, has recreated himself once again. He went from being a print reporter to a television investigative reporter in Detroit. When he left television to return to print -- as a technology reporter for the
Free Press -- he was among the country's best investigator
s.
Now, Mike is combining all his talents. As a video columnist, he writes and produces one-man-band video stories for the newspaper's Web site, a feature he often reformats to publish as a column in the print edition. His stories focus on life in Michigan.
It is interesting that newspapers are discovering video as a way to tell feature stories just as TV
stations are giving up on features to chase more
spot news.
Look
at Mike's gallery of stories here.
We are always looking for your great ideas. Send Al a few sentences and hot links.
Editor's
Note: Al's Morning Meeting is a compendium of ideas, edited story
excerpts and other materials from a variety of Web sites, as well as
original concepts and analysis. When the information comes directly
from another source, it will be attributed and a link will be provided
whenever possible. The column is fact-checked, but depends upon the
accuracy and integrity of the original sources cited. Errors and
inaccuracies found will be corrected.
