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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Cactus Jack who wrote (51846)	5/30/2006 11:03:19 AM
From: mishedlo	Read Replies (1) \| Respond to of 116555

Easy-to-get loans cause thousands to lose homes palmbeachpost.com As the state's red-hot real estate market grew hotter, thousands of new brokers and brokerages obtained licenses to operate in Florida. That coincided with the availability of new types of loans, which gave far too many middle-income buyers who couldn't afford it a shot at living in a half million-dollar home. "Feeding frenzy," sums up Fred Glick, managing member of U.S. Loans Mortgage LLC, a Chicago-based mortgage broker doing business in Florida and other states. Yet, some of the loans offered were never intended for the middle class. "I think the reason we are going to see so many foreclosures, so many more than we have ever had in the past, is because a broker or loan originator has gotten people into these crazy kinds of loans," said Steven Schneider, president of the Florida Association of Mortgage Brokers. These "exotic" loans, as they've come to be known, include newer adjustable-rate mortgages, also known as option ARMs, which start a borrower at one rate and can adjust upward with time. Interest-only loans allow borrowers to lower their monthly bills by paying only interest in the early years of the loan. In both cases, the terms of the loans change. That can spell disaster, particularly in a market facing both declining real estate values and rising interest rates. The analysis of RealeSTAT.com data showed that roughly half of the defaulted loans had some form of adjustable rate feature. More than $65 million in defaulted home loans carried interest rates of at least 10 percent. Typically, a sub-prime loan is made to a high-risk market of borrowers that includes those with lower credit ratings. But not all of these borrowers had poor credit. National research by mortgage giant Freddie Mac found that approximately three of every 10 people with a sub-prime home loan had good enough credit to qualify for a less pricey mortgage, raising concerns that even people with good credit are being steered into unnecessarily costly deals. The Florida Attorney General's Office issued a consumer alert in February warning people about unscrupulous lenders. It noted another national comparison: In the early 1990s, only one of 20 mortgage loans was a high-interest sub-prime loan. By 2004, one out of five was in that category.