What Is In the News?

Oct 19th, 2007 @ 4:38 PM by Alden Smith

I have spent a better part of the day sifting through the news to try to bring something worthwhile to the blog this weekend.  As I post every weekend, it sometimes gets a bit hard to find anything besides news that is not so good.  Today I will recap the things I have been seeing.

News from the Treasury Secretary

Secretary of The Treasury Henry M. Paulson, Jr. reports that housing starts are off more than 40 percent from the peak of 2.3 million units in early 2006. Employment in residential building, including specialty trade contractors, has dropped by almost 200,000 since early 2006, offsetting about one-quarter of the jobs gained in the housing boom, and mortgage defaults and foreclosures are rising. More than 900,000 sub prime loans were at least 30 days delinquent at the end of the second quarter this year.  Foreclosures have increased about 50 percent from 2000 to 2006.  Those involving sub prime loans are up over 200 percent in that same period. Current trends suggest there will be just over 1 million foreclosure starts this year – of which 620,000 will be sub prime.  The NBC Nightly News tonight is warning of recession, and is saying that it is already a fact of life in other countries.

More Bad news For Countrywide

The SEC is running an informal investigation against Anthony Mozilo for the sale of some 130 million of his company’s stock in the first six months of 2007.  Mozilo is apparently protected by a 10b51 trading plan. Many see this as a loophole to cover up insider trading.  North Carolina’s state treasurer Richard Moore asked the SEC last week to investigate Mozilo’s stock sales, claiming that there were changes made to the pre-set trading plans in the months before the company’s stock fell. Mozilo is the nation’s seventh most highly compensated chairman with a total compensation package of $141.98 million (approximately $48 million of that amount is salary.)

Lenders and Feds Finally Paying Attention to Mortgage Crunch

I reported last week on the newly developed HOPE NOW program.  A website has been established at HopeNow.com, but reports say it offers little to borrowers in the way of information.

A study by Federal Reserve of Boston reveals that people do not keep their sub prime mortgages over a long term. Of those using a sub prime loan to purchase a home between 1999 and 2004, two-thirds were prepaid within two years and almost 90 percent within three years. Fed researchers found that many of the sub prime borrowers have respectable credit histories.  These ranged from credit scores of 620 or higher and 18 percent had scores over 700. The study shows that so-called “teaser” mortgages carry a much higher rate than found on prime loans.  It is felt that the buyers who qualify for a prime product might actually see a significant reduction in their interest rate.  If their FICO scores are this good, there is no reason not to qualify.

Last, but not least, The Mortgage Bankers Association (MBA) has established a Foreclosure Prevention Resource Center on its consumer education site, HomeLoanLearningCenter.com.  People who are facing foreclosure from their inability to make loan payment are advised to contact their loan servicer as soon as possible to determine if an alternative to foreclosure may be possible based on the borrower’s financial and employment status.  The site is bilingual.

Other News

I have been attempting to coerce a colleague into doing an interview to post on the Loan.com blog.  He is a Realtor that lives in Gulfport, MS, and is still struggling to rebuild his business after Katrina.  Now, he has the issue of all the fuss and bother in the sub prime market.  Hopefully, he can give us some real insight into the real market conditions as seen from a realtor’s point of view.  Stay tuned…