The Storm Has Hit
By this time you are probably tired of hearing about the subprime loan crisis. Sunday November 11 the Press Democrat dedicated most of the Business Section to the problem. Nothing new was unearthed but the blame seems to be looking for a corner to go to. Was it unscrupulous loan brokers-greedy real estate agents-lax lenders or loan underwriters? There is not a simple answer but as I have maintained for a couple of years, if it sounds too good to be true it probably is. When a borrower gets a 1% loan while everyone else is getting 6 ½ % money it is difficult to have sympathy for “ I didn’t know what I was signing”. There certainly was some innocence with some borrowers and cupidity on the part of some loan agents but, on the whole, there really isn’t a free lunch and buyers purchasing homes that they had no business buying based on their incomes just makes no financial sense. Only if one is convinced that there will never be a reckoning and that every buyer will be able to make hi/her profit and get out before the dust settles. The ” Blame Game” will go on but the crux of the matter is that unreasonable expectations combined with an extremely flexible lending market created the fuel for the ascent and descent of the market. Someone buying a $600,000 home who, in reality, qualified for a $300,000 home, will have a rude awakening once the adjustments to market rates sets in.