Cazimi

NYT - 'Prime Loans About to Implode': Where's the Evidence?

Matt - I have been a very successful mortgage broker for over sixteen years in Marin County, California. The problem that Vikas writes about is very real. From my perspective the real mortgage crisis is coming in 2009, and it will dwarf the sub-prime mess. There is a perfect storm coming in the mortgage world. Declining values and the new aversion to risk are causing lenders to be increasingly restrictive; the almost complete disappearance of stated income loans, combined with rising loan-to-values caused by deteriorating prices, is making it impossible for many borrowers to refinance out of the 5 year fixed loans they got in 2003 and 2004. On top of that lenders are freezing equity lines, the only life line that many consumers have. I spend my days telling borrower after borrower that they cannot refinance, cannot buy, cannot take any equity out of their homes - and these are generally people with excellent credit and substantial equity. As these people are forced to sell there will be more pressure on prices, making the problem worse. From my seat, I see unequivocally that the problem is going to get much, much worse before we hit bottom. By far the biggest lender on the Alt-A side was Countrywide, and a large portion of those loans were five year fixed interest only.