MORTGAGE CRISIS ISN’T JUST FOR POOR PEOPLE ANYMORE

According to a Reuters report the U.S. mortgage crisis, that had been seen as the result of the rash of subprime loans made to mostly poorer borrowers, is now hitting the million dollar home market which was often financed through jumbo loans for more than $400,000 and so-called Alt-A loans that are above subprime and a step below prime.

Americans already are facing foreclosure at a record pace, according to the Mortgage Bankers Association. Lenders started foreclosure actions against more than one in every 200 U.S. mortgage borrowers in the last quarter of 2006.

The 2.2 million foreclosures due to bad mortgage loans may cost U.S. homeowners $164 billion, mostly from lost home equity, according to the Center for Responsible Lending, a Durham, North Carolina-based research group.

Those that are not getting hurt seem to be the banks, which have made the loans. The debts on the foreclosed houses is still a small percentage of the total loan debt extended. Plus, most of these loans are insured which pays back the bank for its losses. And then…the bank just might be the purchaser of the property at the foreclosure sale. An example is Deutche Bank, holder of a loan for a Korean homeowner with $509,000 of outstanding debt, who bought the property with a $100 bid at the Justice Center in Hackensack, New Jersey, last Friday.

In the last three months, the percentage of foreclosures for U.S. homes valued at more than $750,000 has climbed to 2.5 percent, the highest since early 2005, when RealtyTrac, a online marketplace for foreclosed properties, began tracking data. The overall rate of foreclosures also is on pace to increase by a third this year.

About 40 percent of homes bought last year were second homes or investment properties by speculative buyers.

For the past four years I watched as the frenzy to buy into the Las Vegas market appeared as driven as the 1990’s need to own tech stocks. Always at the end of the run someone–or many someones–is left holding a chunk of something he or she can’t afford to hold on to, hoping for another rise in the market. I have to admit that I only feel sorry for the lower end people trying to get into a starter home and had the market manipulated by that 40 percent who thought they would make real estate killings like they advertise in the infomercials or simply those who believe that six bedrooms and five baths with clubhouse privileges made sense for a family of three. By the way, did anyone notice that those real estate commercials disappeared at least six months ago to be replaced by how to win in the stock market infomercials while the stock market rose dramatically, only to suffer its own deflation? I don’t know what impact our lemming investors actually have, but it appears many Americans want to be Donald Trump–and didn’t he go bankrupt a few times? But I am not an expert in banking and mortgage financing issues. Instead of staying up late with financial reports and banking treatises, I might have a glass from a six dollar bottle of wine or maybe go for a walk in the desert because you know…thar’s gold in them thar hills.