"Lending to low income borrowers is necessarily higher risk than higher income borrowers."
No, that is not the case. Lending TOO MUCH to poor risks is the problem. The Grameen bank has proven time and again that you can lend to the poor with low risk.
"High-End Foreclosures Rising Among Top Tier Homes
By Octavio Nuiry, RealtyTrac Staff Writer
Until now, the foreclosure crisis was confined to a narrow niche of middle-class urban communities and outer-rim new housing developments where first-time homeowners and real estate speculators benefited briefly from favorable financing.
But increasingly there are signs that the foreclosure problem is spilling over into wealthier areas, where prime borrowers — and even high-end real estate developers — are rapidly falling behind on their construction loans, mortgage payments, property taxes, auto loans and credit cards at an alarmingly fast pace, according to industry analysts, economists and real estate brokers.
Jack McCabe, a real estate consultant in Deerfield Beach, Fla., said there will be more troubles for upscale flippers, high-end prime borrowers, developers and lenders.
“Upscale foreclosures are a growing trend,” said McCabe, pointing to the overflow of some 30,000 unsold beachfront Miami condominiums. “The wealthy are not insulated from foreclosures. In a lot of the bubble markets — like Miami, Palm Beach, San Diego, Las Vegas, Orange County and the Inland Empire in California — we are going to see an increase in the number of high-end foreclosures in relatively wealthy communities. This is just the tip of the iceberg.”
McCabe believes that delinquencies and defaults will rise not only among subprime borrowers, but among prime mortgages, Alt-A loans, teaser rate loans and low money-down loans as well, forcing homes valued at more than $750,000 into foreclosure. The rising trend of prime delinquencies among the wealthy poses a new threat to a battered housing market, which McCabe and others specialists claim is in a recession or heading towards one.
“The next two years are going to be pretty ugly in South Florida,” predicted McCabe, saying that Florida real estate will drop by another 10 to 15 percent in 2009 and the market will flatten by 2010.
With so many foreclosures across the nation, the mortgage mess is finally hitting the rich and the ultra rich luxury real estate markets. Seven-figure foreclosures — once a rarity in 2007 — are starting to pop up with more frequency in some of the wealthiest communities nationwide. Already, there’s a glut of McMansions in the $500,000 to $1 million range that have been foreclosed by lenders — and many more are falling into foreclosure, according to an analysis of RealtyTrac foreclosure records in 2006 and 2007 (see graphic).....
Maricopa’s Millionaire Mortgage Meltdown
If Beverly Hills and Santa Barbara are too pricey, deals may be had in several other playgrounds of the rich and famous. Elsewhere, in markets where an explosion of cookie-cutter McMansions sprouted in the exurbs, there is a growing inventory of high-end foreclosures.
In some of Phoenix’s priciest neighborhoods — including Scottsdale, Paradise Valley and Chandler — high-end foreclosures are starting to pile up. Along the fringes of Maricopa County, about 13,000 homes are in foreclosure, more than six times the number two years ago. Homebuilders in Arizona, whose lavish incentives haven’t attracted buyers in the slumping market, are turning to the auction block as a last resort to sell empty houses, said R.L. Brown, publisher of the Phoenix Housing Market Letter.
“That’s an indicator of the stress on the upper end of the market,” said Brown. “Foreclosures are occurring across the spectrum because people are overextended financially. It was quite common a few years ago to buy a new home in a master-planned community and then buy three or four more as investment properties. Those buyers are upside down now and are just walking away.”
“The good news in all this is that now is good to time to bottom fish and buy in Arizona for a solidly financed individual,” added Brown, who is bullish on the Arizona housing market. “The investor that buys here and can hold it for three years or more is going to be rich.”
Brian Gaffney, a luxury home real estate agent in Scottsdale, Ariz., said the Valley is experiencing a “huge increase” in foreclosure homes priced in the $500,000 to $1 million range. But he said the upper reaches of the market are holding firm.
“You don’t see a lot of Scottsdale homes over $1 million dollars going into foreclosure,” said Gaffney. “But occasionally we’ll see people who shouldn’t have bought a million dollar home who are losing it to foreclosure.”
Beachfront Bubble Bursts
In Florida’s Treasure Coast, buyers for Palm Beach oceanfront properties are some of the wealthiest people in the world. Ever since the 1920s, when the Vanderbilts and Biltmores built palatial winter estates on the sunny beaches of South Florida, northern snowbirds have flocked southward to Florida.
“I’m working with several foreign buyers right now,” said Deborah Magraw, a Palm Beach, Fla. agent who is currently representing buyers from Germany, Canada and Spain. “One buyer is looking for Palm Beach foreclosures priced between a $1.5 million and $2.5 million.”
Magraw, who sells bank-owned properties in the upscale communities of Wellington and West Palm Beach, Fla., said the trend of expensive homes falling into foreclosure has accelerated the past year, and she estimates that their are 80 high-end Palm Beach properties that are in foreclosure.
Consider Veronica Hearst, the widow of Randolph Hearst and stepmother of 1970s kidnap victim Patty Hearst, whose 52-room oceanfront mansion in Palm Beach, Fla. just recently went up for auction and sold back to the foreclosing lender for $22 million.
The Hearst foreclosure is an extreme example showing that high-end foreclosures are a growing trend.
“It’s going to be nasty,” warned McCabe. “The subprime was only the tip of the iceberg.” --- realtytrac
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"Why did the institutions give the most money to folks like Dodd, Obama, and Frank?"
1. which institutions?
2. organizations give money to those in power and, as the Dem star has risen, more money is flowing to them. I'm for outlawing lobbying but you are not. That makes you a heck of a hypocrite on this issue.
3. Dems come in all stripes including those who are just as corrupt as the vast majority of Republikans. I have no problem throwing out corrupt Dems along with all of the Republikans.
4. The corrupt financial industry is largely a creature of the right wing as it has benefited hugely from the unbelievably flaccid regulation of the right wing. I am against Obama using Rubin/Summers as part of his economic team and I'm not sure about Geithner who is in the midst of the Paulson mess.
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