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Tuesday, August 21, 2007

Foreclosures Up Again - Government Bail Out?

CNN is reporting that RealtyTrac says foreclosures were up another 9 percent in July over June and up 93% over the same month last year. They originally predicted a 33% increase over last year in foreclosures for the year, but have now raised that forecast to 60%.

But more ominous is this story from msnbc.com. Congress is looking at bailing out homeowners and lenders. Right now, it seems most of the possible action seems to be related to modifying the rules of Fannie Mae and Freddie Mac to allow them greater flexibility in the types of loans they can insure. I don't know about you, but I get nervous whenever the government decides to step in and "fix" a problem.

And in other mortgage related moves, there is this story that says Warren Buffett is considering buying part of Countrywide's mortgage business. Buffett has a pretty good track record at picking up good companies and discounted prices..

6 comments:

Steve said...

I agree 100% with your assessment of government intervention. I was actually reading a post on one of those REI web sites where a guy made a long post saying that the subprime mortgage mess isn't as widespread as the media would have us all believe (he gave excruciating details using graduate-level economic jargon about the mortgage market and where the subprime piece falls in). Now, I'm not saying this guy is right, but I'd hate for our government to "cause widespread flooding to put out a campfire" so-to-speak. I think the best thing right now would be to lower both long and short term interest rates 1/4-1/2 (which appears likely in September, or before).

Doug O said...

It's like I said previously - as long as you are a prime borrower, and have some cash set aside, this is developing into a terrific time to buy... Because of the crises with mortgages on the lower end of the food chain (below 700 credit scores), this provides a lot more decent applicants to the tenant pools in many urban areas... It's a great time to own property that you bought wisely, since vacancy rates are declining (at least they are in the areas I'm invested).. Not to mention getting better quality applicants these days, since the people who 6 months ago were buying a house now have to rent...
This is a perfect time to buy more B/C properties in metro areas... I'm still optimistic about my two favorite areas - Memphis & Houston... Good growth in both areas!

Shaun said...

The credit problems are affecting prime borrowers too. The company that I'm in the Louisiana deal with has had to put a hold on some plans. They were looking to get a $1 million loan and their banks have stopped lending while the mess is sorted out. This is a company that has a spotless credit history, large amounts of cash in the bank, a perfect payment record, and in the past basically got loans on their word. It's nothing wrong with them - the banks just stopped lending right now - to anyone.

Doug O said...

Shaun, nah... I'm still seeing commercial rates in the 6.5-6.75% range from various lenders... Granted, I'm not borrowing $10 million, but I'm still talking about amounts $1-3 million...
Hasn't made any difference to me (yet)...
As I mentioned, the only thing I've noticed is stronger applicants appearing, since they no longer qualify for mortgage money..
Not to mention, any deals that I price out or put together for lenders are generally 1.40 DSC as a minimum, not to mention the fact that I'm putting 20-25% down... By going the traditional route, if you have the funds and are finding the properties, it's a great time to be buying... Even while prices might be trending down for the next few years, rents have been increasing steadily... And with more competition for those rental units, I'd anticipate that trend to continue...

jason said...

Great post! I am gonna share it with my own blog readers at jason.landbrokr.com ! Thanks.

Louisville Real Estate said...

I can't agree more with Doug O. This is a buyers market!

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