Estate and mortgage
Does The Mortgage Meltdown Impact The Rich?
There"s a constant kind of bleating about the current mortgage meltdown, the idea that somehow this is a "subprime" issue involving only those with minimal credit and that the rest of the world need not worry. Anybody take a look at Montgomery County lately? This Maryland county is one of the most prosperous communities in the United States, home to 855,000 people just north of Washington, D.C. According to the 2000 Census, among all 3,142 counties nationwide Montgomery ranks 15th in per capita income and 13th in median household income ($71,551). Among adults, 59.2 percent have a bachelor"s degree and 30.6 percent have graduate or professional degrees. The county is home to the National Institutes of Health, the Food and Drug Administration and a vast number of private research facilities. It is a place loaded with doctors, lawyers, researchers, entrepreneurs and well-paid government workers. I mention these numbers to provide some context. If Montgomery County can be seen as generally well-to-do -- and that"s what the numbers say -- then it ought to be a place where the impact from the much-publicized "subprime" mortgage meltdown is minimal if nonexistent. In fact, you can see a remarkable change in Montgomery"s housing market during just the past year. Information from Metropolitan Regional Information Systems (MRIS), the major MLS in the area, shows that home sales in Montgomery County fell 41.47 percent between September 2006 and the same period this year. Amazingly, average prices fell by just 1.23 percent during the year. Here"s the rub. Even in Montgomery County you can"t ignore the massive increase in foreclosure activity. Figures from RealtyTrac.com tell the story: In the first nine months of 2006 there were just 184 foreclosure actions in Montgomery County. This year? During the same period foreclosures increased 971 percent to 1,971 homes. Go back to that price drop. MRIS statistics say the average sale price in Montgomery County fell from $517,823 to $511,423. These numbers are no doubt accurate as far as they go, but they don"t go far enough. For instance, "seller contributions" are not reflected in recorded sale values but a 6-percent discount for a typical Montgomery home still amounts to more than $30,000. No less important, recorded data doesn"t tell us how many homes were listed but never sold. Montgomery County is a place with a lot of wealth. With typical home prices above half-a-million dollars, it"s not a subprime haven. Why then have foreclosure numbers exploded? The answer doesn"t concern subprime loans, it concerns the entire mortgage system, a system where loan officers are not required to get the best rates and terms for borrowers, overcharging borrowers is perfectly lawful and federal regulators failed to protect the public interest. As the Federal Reserve has just reported, it"s not just subprime loans that have caused lenders to scurry. Look what the Fed says is happening with jumbo loans, big mortgages for those with solid credit: "Domestic banks tightened several lending terms on prime jumbo loans over the past three months. In particular, significant fractions of respondents reported that they had increased loan fees and spreads of mortgage loan rates over their cost of funds and that they had required more stringent income and asset documentation as well as higher minimum downpayments." For all the mooing and screaming about the "subprime" meltdown, for all the denial, the bottom-line reality is that we have a lending system which needs to be modernized. Bills now moving through congress would require loan officers to be licensed, loans to be documented, lenders to be responsible and borrowers to be informed. Most importantly, lenders would finally have an obligation to work for the best interests of borrowers. Will measures to modernize the lending system pass? Will efforts such as H.R. 3915, the Mortgage Reform and Anti-Predatory Lending Act of 2007 be enacted? If not, the alternative is more of what we have seen to date, and what we have seen to date has hurt a large number of borrowers and lenders, investors and homeowners -- including homeowners who are far from credit-impaired. For more articles by Peter G. Miller, please press here.Payday Loans commented:
Offcouse , meltdown of mortgage market will affect rich too.Any action in market affects both ,the rich and poor as both are part of same chain.However,it is true that some are directly affected and some are indirectly in future.
26.12.2011