KeNo's Housing and Economic Portal: Thursday April 7 Housing and Economic stories

Wednesday, April 6, 2011

Thursday April 7 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Dominoes fall hard for loan cosigner - (www.tbo.com) Q: I bought a house over a year ago with a balloon loan that comes due later this year. I had to get this loan because I cosigned a loan for a friend and she missed some payments. At the time, this was the only loan I could get. After I closed on my loan, my friend was laid off and stopped paying her mortgage, the loan went into foreclosure, but my friend and the bank came to some sort of agreement. I am trying to refinance my loan, but no one will consider my application. Can you please tell me what route I can take? Is there a way to legally remove my name from her loan even if she is unable to refinance because of her credit?

A: You were a kind and generous friend to cosign your friend's loan. But once you knew trouble was brewing, you should have cleaned up the mess that your friend created before taking on a new loan. When you cosigned the loan, you and your friend were both equally liable for the repayment of that debt. You should know when you cosign a loan, if the borrower fails to make a payment, your credit history and credit score will suffer. Furthermore, the bank is legally entitled to come after you for the money.

Boomtowns Humbled After the Bust - (www.nationaljournal.com) During the long property boom here, when subdivisions marched like an advancing army into the desert and new casinos opened with the predictability of an annually blooming flower, the joke was that construction workers were building houses for other construction workers. No one’s laughing anymore. In the fat years, Las Vegas and other boomtown cities across the Sun Belt appeared to have discovered a perpetual motion machine. The principal agent of growth was growth itself—more houses, condominiums, shopping malls, and warehouses, plus all the jobs that they generated, from carpentry and plumbing to real estate sales and accounting. With the collapse of the property market, however, that machine has now stalled here and in dozens of other high-flying communities—from Cape Coral, Fla., and Myrtle Beach, S.C., to Phoenix and Riverside, Calif.—that excessively relied on residential and commercial development for their prosperity. Places that once measured good times by the number of bulldozers digging foundations are now scrambling to fill the hole left by the construction industry’s collapse—and reluctantly acknowledging that real estate may never again fuel as much growth as it once did.

If you are buying a Bank of America Short Sale, Watch Out - (www.youtube.com) Good video. If you are buying a Bank of America short sale, you need to watch this to know what to guard against. They have a flaw in the system, they admit it, and they are rather nonplussed about it!!!

New revelations how the Federal Reserve shrugged off housing crash warnings - (www.boston.com) A little known real estate industry trade group makes for an unlikely whistle blower. Yet check out this story from Fox Business. The Mortgage Insurance Companies of America were warning the Federal Reserve and other bank regulators in 2005 and 2006 that disaster loomed. The warnings, in a stream of letters from the trade group to the Federal Reserve and the FDIC, turned out to be right on the mark. Concerned about a rising tide of subprime lending, MICA highlighted 15 states that were likely to lead the way down with a flood of foreclosures, including Nevada, California and Florida. Of course, as the Fox story pointedly notes, Ben Bernanke, now chairman of the Federal Reserve, was countering such concerns with happy talk. In a now infamous 2005 TV appearance, Bernanke called a housing crash a "pretty unlikely possibility." (Bernanke wasn't Fed chairman yet - at that point he was chairman of White House's Council of Economic Advisors.) Thanks for the heads up, Ben.

A battle over minimum down payments - (www.irvinehousingblog.com) The most pernicious lie in real estate lending is that restricting access to loans prices buyers out of the market. The hidden assumption is that bids must always be raised because prices never go down. If the government chose to enact the most Draconian standards possible, it may reduce sales volumes at current pricing, but it does not price buyers out of the market -- it prices sellers out of the market. As credit tightens, Lenders want to make the largest loan possible at the highest interest rate they can. That is their business model. Of course, they would also like the borrower to repay that money, so pushing loan balances up too high leads to Ponzi borrowing, widespread insolvency, and a catastrophic market crash as we have witnessed. However, lenders don't care about the risks as long as Uncle Sam backstops them. They will push for the ability to make the largest loans they can and pass the risk off to whoever they can.