Archive for November, 2008

Our new President will need help to address the problems in the residential real estate financing system that resulted in The Great Housing Bubble. My full proposal is here: Preventing the Next Housing Bubble.pdf. The following is an exerpt from this proposal: bernanke_forever_blowing_bubblesThe secondary mortgage market was created in the 1970s by the government sponsored entities, Freddie Mac, Fannie Mae, and Ginnie Mae. This market was expanded by the creation of asset-backed securities where mortgage loans are packed together into collateralized debt obligations (CDOs). This flow of capital into the mortgage market is a necessary and efficient tool for delivering money to borrowers for home mortgages. This market must remain viable for the continued health of residential real estate markets. The problem during the Great Housing Bubble was that the buyers of CDOs did not properly evaluate the risk of loss[READ MORE]

There has been plenty of conjecture about the impact of adjustable-rate mortgages (ARMs) on the future of our housing market. Some people believe that if interest rates remain low that the upcoming ARM resets will not cause many foreclosures. This is wrong. Today's post examines what will happen when these resets occur, and it will demonstrate why this problem is so big. Adjustable Rate Mortgage Reset Chart   By now, most of you have seen the ARM reset schedule shown above. But what does it really mean, and why is this a problem? ARMs became very popular in the bubble rally because they allowed people to finance huge sums of money with smaller payments. In time, it became the only viable alternative for financing. There are two types of ARMs: interest-only and negative amortization (Option ARMs). A typical ARM has a fixed interest rate[READ MORE]

Never Miss A Post


Past Housing News

Search

tghb_ochn