What do think the Mortgage Lenders and the Government will do about the rising defaults and foreclosures?

Question

They have to do something about this otherwise more defaults are going to happen. Do you think they are going to create some breaks on mortgage financing, such as lowering rates and offering 50 year fixed loans, so many people are able to afford the payments. Or are they just going to let more borrowers go into foreclosure? If this continues to happen, we may see a depression coming in the near future.

Answer 1

The government will do little if anything.

Mortgage lenders have already started by tightening up guidelines. Just a few months ago, someone with a 580 credit score could qualify for a 100% mortgage, but now the minimum score is 620.

Interest rates will not go down as a result. Mortgage rates are determined by the secondary market, not regulation.

Woof.

Answer 2

Alot of big name lenders made loans that they shouldn't have. That is what this is all about. Someone with a 400 credit score could walk into New Century, Fremont, etc. and walk out with a 90% purchase loan. These are the same people who can't pay their credit card bill. Those lenders should have seen it coming that they wouldn't be able to pay their mortgage bill. There are programs for people who don't make enough money to qualify for a loan, if they have a good enough credit score they can do what is called a stated loan. That means that the lender looks up their job title in salary.com and puts whatever it says in the income field in the application and assumes the borrower works 40 hours a week. Many times this isn't the case and while, yes, the borrower does now have a house, he isn't able to afford it! Of course their are exceptions to every rule and sometimes stated loans are used the right way by people who just have hard to document income and can actually afford the payment. The bottom line is that lenders are now cracking down on lending guidelines. You're not going to see people with a 400 credit score buying new 400k homes with little or nothing down. Everyone just needs to borrow responsibly. I understand that EVERYONE wants to own a home, but putting yourself into a mortgage you can't afford just causes trouble in the long run. I think this "shake up" is really going to clean up the mortgage industry. I for one am happy. It's about time it gets a major overhaul.

Answer 3

I dont think its as bad as the news makes it out to be.
If everybody had to sell tommorrow, yes, but most people are not in that predicament...just hang on and enjoy the house for a few years.
I compared a 40 yr to my conventional 30 yr mortgage, and it only saved me 20 bucks a month, which was hardly worth the effort....i wouldnt consider any increased length mortgage unless the payment went down 100/150/200 bucks.
I did hear today that many of the reputable mortgage lenders are temporarily reducing their interest to 0%, if the buyer needs a little breathing room, rather than foreclosing.
I don't think the "goverment" needs to do anything, they will just mess things up...the market will correct itself....the period of 2001-2005 was not normal.

Answer 4

Presumably the lenders will tighten up their standards. Hopefully, the government will do nothing; the private sector is capable of dealing with the situation.

Answer 5

using fact the whole situation is approximately destiny investments. The holders of the debt have calculated destiny fee of the securities based on the predicted fee. with the skill to diminish or carry that fee comes the forced devaluation of that long term destiny fee.