The scary outlook I envision is two-fold.
First, a lot of the mortgage-originators/packagers/sellers are now gone and lending standards are getting tougher. And so it's obviously tougher for people to get a new loan if they are trying to buy a house.
That's not good, but what could be worse, is all the people already in houses who have to re-finance. How will these people do this if the the mortgage-originators/packagers/sellers who got them in, are themselves now gone? There will be others who can and who will step in, I'm sure.
I'm speculating though they'll say something like:
"Okay, we'll refi you, but you have to qualify by our standards -- you will need to prove your income and your fico score at a certain level. And oh, by the way, we'll refi you -- at current rate of course - which as you know is higher than the rate you are now paying---, but we'll refi only for 80% of appraised value of your home. And we want a current appraisal of its value. So if your appraised value has dropped to $300k and your note is $290K, we'll grant you a mortgage for 80% of $300K which is $240K, and of course you will have to come up somehow with $50K to pay the difference (between the $290K payoff due now and the $240K).
In the first case, somebody is living somewhere but they can't move to buy a house because they can't get financing. In the latter case, somebody is or could be in big trouble if they can't quality and/or can't come up with a bunch of money pretty quickly.
In either case the housing market sector - the homebuilders, banks, Home Depot's, etc. suffer. As do we stockholders in such companies. |
