Mortgage Investors Backing Off

Mar 7th, 2008 @ 5:05 PM by Alden Smith

Investors, scared off by the mortgage market, are beginning a pull back, and with good reason.  Now doesn’t seem like a time to be invested heavily in the mortgage market, with the loss of jobs, high oil prices, and, for the first time since 1945, home values way down.  I read that what is owed on homes now far outweighs what they are worth since 1945, and it is reason enough that many people, unable to get the help they need, are walking away.

We are in a serious downturn right now, and Warren Buffet, the Oracle of Omaha, says that we are now in recession, and the price of stocks is not cheap.  Even he has been taking some hits, according to the nightly news.

President Bush spoke tonight on the economy, as reported by NBC Nightly News, and acknowledges the shape that the country is currently in.

With all this, investors are going to run for the trees.  The Mortgage Bankers Association reported Thursday that loans past due, or currently in foreclosure, hit 7.9 percent of the total in the fourth quarter, from 7.3 percent at the end of September and 6.1 percent from December 2006. It is interesting to note that records show 18% of these are owned by people not living on premises.  In other words, speculators and people flipping homes.  Of course they would walk away from a bad investment!  Not good news in anybody’s book.  Investors, meanwhile, are taking a real hit, and are having trouble paying back their banks.  This of course drives stocks lower.

Investor and banks are unwilling to lend and buy mortgage securities.  Citigroup, one of the nation’s largest mortgage lenders, is cutting back holding in the mortgage industry by 20%.

All sorts of plans are in the works, involving banks, investors and even the FHA.  What I see as the biggest issue is that it will be too little too late.  The governmental wheels turn very slowly, and many people are living paycheck to paycheck, and have run out of time.