Subprime Again ?

Would a return to subprime mortgages be good or bad for the real estate market?

There are so many different ways to look at it that I’m not exactly sure what I think.

On one hand, I do believe that the subprime mortgage debacle played a huge role in the implosion of our housing market. But what was it that drove the machine in the first place? Was it lender greed? Borrower ignorance? Crowd mentality? Inflated appraisals? Over enthusiastic Realtors? Buyer desperation? Keeping up with the Joneses? Bad timing? “Big bank” duplicity? General apathy? I would tend to go with All of the Above. And who benefitted? We all did. There are millions of thankful homeowners who wouldn’t be homeowners at all if it weren’t for the leg-up they received from their first (subprime) mortgage.

On the other hand, I keep having this nagging feeling that if everything negative in our economy hadn’t come together just as it had, in precisely the right way and at precisely the right moment, the real estate crash mightn’t have been so severe (would it even have happened?). There’s such a muddle of cause and effect in this whole snarl of events that it’s become a “chicken or egg” debate. No one is really certain what came first and what caused what.

I watched the movie Too Big to Fail again last week. It’s an eye-opening little piece of cinema for sure! All about manipulation… ultra-powerful people in various stages of delusion, seducing and misleading the general public. I felt gullible and exploited. But then maybe it’s just a movie. Maybe.

As much as I’ve mulled over our economic maladies in the past 5 or 6 years, I am no closer to understanding them. That’s frightening to me. Does anyone understand, and are we doomed to repeat this?

This all incites me to share a very brief article I read today, courtesy of Housingwire.com. You can read it here. Apparently someone is suggesting we return to some version of the subprime mortgage.

Knowing what I know, which as you can see is very little. And feeling what I feel (very much conflicted). I’m right back where I was before I read that article. I have no idea what I think.

What I know…

1.)    People need a place to live.

2.)    People deserve a second chance.

What I feel…

1.)    This might help our housing market and in the process, our economy.

2.)    We still don’t know what started this whole thing.

Survey: Rising Prices Motivate Buyers to Purchase Now

Thanks to DSNews for this informative article.

Changes in HARP & HAFA are the HOT topic !!

It seems like a relatively small thing, but it would appear that everyone is talking about recent adjustments to the HARP & HAFA programs, and I mean everyone. The subject has caught on with the American public and they’re not letting it go! An obvious explanation would be concern over hundreds of thousands of upsidedown mortgages and their residual effect on almost everyone else’s home values. But I think it goes much deeper than that.

For those of you who have been living in a cave for the past 2 ½ years, HARP AND HAFA, are part of the current administration’s Making Home Affordable program, which was implemented in February of 2009. The premise is to provide homeowners with alternatives to foreclosure through refinance, short sale or deed-in-lieu. Until now this program has received less than stellar reviews. But the most recent updates will possibly (possibly being the operative word) give this program the jump-start it has lacked so far.

NOTE: contrary to popular opinion the enhancements to HARP and HAFA have not taken effect yet. In fact they have not even been finalized and are not scheduled to be for several weeks, with an implementation date months out.

The proposed modifications should help underwater homeowners refinance at today’s low rates by lifting the 125% loan-to-value restraint… this is HUGE! Proposed changes also void the requirement of a new appraisal in favor of automated estimates, and eliminate several risk-based fees.

Now here’s where I believe the overwhelming interest in these adjustments is coming from. For the very first time since 2009, “reality” is being addressed. Previous guidelines seemed to assume that the real estate and job markets were not going to get worse, and that the only homeowners needing assistance would be those who were already behind in their payments. At a time when virtually every economist predicted several years of negative growth in our economy, and more to the point in our real estate market, HARP materialized as nothing more than a symbolic gesture. Unfortunately the economists were right and the symbolism of HARP only infuriated us all.

I’m going to choose to be optimistic about these impending developments with HARP & HAFA. They’re far from revolutionary but definitely a step in the right direction.