The Housing Bubble and Foreclosure Crisis

CNN reports today that as the subprime mortgage mess has unfolded, American home values have declined by a total of more than $2 trillion dollars.  And CBS’s 60 Minutes reported last night that significantly larger numbers of other mortgage loans, known as “Alt-As” and “option ARMs,” which attracted home buyers with low initial interest rates, will soon reset at higher rates.   

Investment fund manager Whitney Tilson, who was interviewed by Scott Pelley on 60 Minutes, thinks we’ve only worked our way through about 50% of the housing bubble as yet and that, over the next few years, resetting Alt-As and option ARMS may bring a repeat of the subprime fiasco, with many more Americans suffering the trauma of foreclosure.  Let’s hope Mr. Tilson is wrong. 

If you’re facing foreclosure and looking at your options, try this page on the Federal Government’s Department of Housing and Urban Development (HUD) website.  It’s got loads of information about steps you can take to avoid losing your home. 

In the upper right hand corner of the HUD page, you’ll see a link to information by state.  Click on the link to North Carolina and you’ll find a variety of other links, including how to contact HUD’s North Carolina office, which happens to be here in Greensboro at 1500 Pinecroft Road, Suite 401.  Their phone number is (336) 547-4000.   

The HUD website also includes a page on the Bush Administration’s recently unveiled program for assistance to those facing mortgage problems called Hope for Homeowners.           

Freddie Mac and Fannie Mae also have pages on how to avoid foreclosure.  Both of these companies, which as mortgage lenders had sort of quasi-governmental status as government sponsored enterprises (GSEs) and are now, owing to the fallout over the mortgage mess, under Federal Housing Finance Agency (FHFA) conservatorship, have recently anounced they will temporarily suspend foreclosures

The FHFA website, by the way, is a great place to follow trends in housing prices as the bubble bursts.  They also have a house price calculator which you can use to figure out what your home is now worth.

How is the mortgage crisis effecting North Carolina?  According to this Greensboro News and Record article, in October North Carolina ranked 29th in home foreclosures nationally.  So, things are not yet as serious here as they are in hard-hit states like California and Florida.  Nonetheless, all Americans have to be concerned.     

The mortgage mess has manifested itself so quickly that the Library has relatively few print resources on how to cope with home foreclosure (most are in fact on how to make money on the foreclosure woes of others).  But this book, published in 2008, called The Foreclosure Survival Guide:  Keep Your House or Walk Away with Money in Your Pocket by Stephen Elias, is definitely on point.  We also have a couple of works which should help with legal issues relating to foreclosure.  These are Buying and Selling Your Home and Real Estate Law for the Homeowner & Broker, both by Margaret C. Jasper and located in our reference collection at Central Library. 

Also, please remember that you can continue to find loads of articles about the mortgage crisis in NC Live and Facts on File.

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2 Responses

  1. Re: CBS 60 Minutes “The Mortgage Meltown” aired on Sunday 12/14/08.

    Scott Pelley’s piece on the 2nd Wave of Foreclosures overlooked a critical fact. The next wave of Foreclosures in 2009 Will Take Self-Employed and Smaller Businesses who have these TOXIC mortgages. In fact, ALT-A, Option ARMS, Interest-Only, the TOXIC Mortgages that are considered the “Troubled” assets in TARP were marketed to the self-employed who fell prey to them.

    An NASE survey,www.nase.org, was the first to provide compelling evidence of small business involvement in the upcoming toxic mortgage crisis. The survey was created by Prof. Samuel D. Bornstein and Jung I. Song, CPA of BornsteinSong Consultants in Oakhurst,NJ,and was conducted by the National Association for the Self-Employed (NASE) which issued a Press Release on November 21, 2008. According to this survey, it is estimated that 3,709,800 small business owners hold Alt-A and other toxic mortgages, and 1,279,800 are already delinquent as they have missed one to three or more monthly mortgage payments at mid-November, before the expected Resets that are scheduled to begin in 4th Quarter 2008 through 2012. These small business owners will be at-risk of payment shock and default as their monthly mortgage payments skyrocket. Small business owners were especially targeted for these Alt-A loans which required little or no documentation of income which appealed to many small business owners who previously were unable to qualify.
    The resulting defaults will be the cause of the upcoming second tsunami wave of foreclosures that will dwarf the subprime crisis and will take many homeowners and small business owners.

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