Sonia

The Forthcoming Prime Mortgage Meltdown

Good article. The crux of the matter now is employment, which gives "prime" homeowners the ability to pay their mortgage. When husband and wife are both employed and have owned their home for years they may be unhappy to learn a house across the street sold for less than they paid, but aren't likely to walk away from the roof over their head because they are "under water." But when either husband or wife is laid off the risk of default increases. Here's the real-life situation of a couple in Dallas who have owned their home for nine years. The husband, a certified computer tech, was laid off eight months ago and can't find anything in his field; the wife makes just enough to keep their home out of foreclosure. Meanwhile, they and countless others in this situation can't spend an unnecessary dime, causing stores to lay off clerks, manufacturers to lay off workers... and others to be unable to pay on their mortgages. Until the downward spiral in employment is resolved, a vast number of "prime" mortgages are liable to join the pecipitous slide in values. Stay away from financials!

When Will Housing Prices Return to Previous Highs?

The housing crisis can only get worse. A friend in Ohio hoped to get a first and second mortgage with "blended" interest up to 11% modified, but was told that Bank of America/Countrywide and National Mortgage are not modifying mortgages or interest and will not refinance. Her income from commission as a real estate agent has collapsed, both from declining sales prices and lack of sales, and she cannot make the payments. The 2 bedroom condo she put 20% down on 14 years ago would not sell for 90K on the courthouse steps - but she owes $140K on it. When she and hundreds of thousands of people in the same situation across the country give up and walk away, the avalanche of foreclosures will bury the banks.

A PA in Dallas recently took a pay cut and her husband, a computer tech, was laid off. Her income is sufficient to pay the mortgage and his unemployment to buy groceries. But if she is laid off there will be another house for sale on the courthouse steps.

Why can't the government use TARP to refinance mortgages at present appraised value?

Could the Dow Sink Another 50% by 2012?

There has been so much negatism that I'd guess we've seen the bottom, but there are steps we can take to protect ourselves. My son, whose house is half paid for and had a 5.25% mortgage on 15 years, has refinanced at 4.8 for 30 years to reduce his payments in the event that he loses his job. With the much lower payments he could deliver pizzas and not lose his home. Make a game of "how fast can I pay off the credit cards?" Buy quality stocks in essential industries that pay stable dividends, and reinvest the dividends. When you walk a middle course between gloom and euphoria, life is good!