“Whats causing all the foreclosures in San Diego?”
***ANSWER:
Last week I answered this question, attributing them to:
1. Subprime Loans
2. Pay Option ARMs
3. No-documentation loans
4. Zero-down
5. Mortgage Fraud
6. Increased Interest Rates
7. Lower Values
8. Difficult Short Sales
9. Tightened-up Financing
Upon reflection I left off at least four additional causes that dovetail with the first nine:
10. Negative Amortization Loans-
In exchange for lower payments up front, many people got loans with balances that went up, not down. They banked on continued crazy appreciation to bail them out, but things didnt exactly work out that way. Instead, theyre upside down, unable to sell, and often unable or unmotivated to make their payments.
11. Predatory Lending-
True story: What happens when a loan broker makes a loan to an 87-year-old widow with payments greater than her entire (social security) income? She loses her home. Predatory lending is loaning with the knowledge the borrower wont be able to make the payments.
12. Fear, Greed, Panic, & The Pursuit Of The American Dream-
Its not true that what goes up, most come down. But it IS true that what goes up TOO FAR must come down. And thats what happened here. Everyone wanted to make a buck, save a buck, &/or get that home
before someone else did. So values got out of whack and had to correct.
13. Negative Media Coverage (right or wrong)-
When the paper, TV, and web are saying the sky is falling, less people buy homes. And when less people buy homes, less people can sell, and more people lose their homes to foreclosure.
I could probably think of a 14th cause, but perhaps its appropriate to stop at #13.
