Ghosts Of The Past Foreclosure Crisis Haunt The Present

Posted in Foreclosed Homes, Foreclosed Properties, Foreclosure, Mortgages, August 13th, 2007 |

There seems to be no second opinion that aggressive mortgage lending during the time of the recent property boom is responsible for the bubble burst. Some seasoned experts see similarities between today and what happened 35 years ago due to a government programme. Flipping is one such practice in which one quickly re-sells a home for a huge profit. In 1970 Congress investigated one such deal in which an investor pocketed $95,000 from one deal. In another instance a speculator got involved in a lawsuit for purchasing 184 duplexes in a run down Indianapolis neighbourhood and by re-selling them quickly raking in $70,000 per home. There is a difference between government and private programmes in the housing sector but in both cases the obvious soft targets have been the borrowers. The immediate neighbourhood has suffered being dotted by abandoned houses, which has become haunts of drug and crime addicts. The worst home sufferers are those living in Detroit, Cleveland, Brooklyn, Baltimore and Atlanta.

Shock waves are now touching the global financial markets. Calvin Bradford, a real estate researcher says that the actors have changed but the same drama with cosmetic changes here and there continues to be played out. In the sixties the housing issue was a big one due to the race riots. Till then the black and Hispanic localities had been sharply defined. But in 1968 an ambitious housing project brought about radical changes. President Johnson surveying the damage had remarked that in black localities those who owned houses had not been overly destructive. During the last decade the number of Hispanic and Black owners have risen although the gap between the white majority and the minority had not shrunk. During both the periods the lenders as well as the government had fundamentally altered lending rules to rule out any possibility of default. Or so they thought. Reality turned out to be different.

But by the end of the first quarter of this year about 20% of loans to sub-prime borrowers had gone into delinquency. Mortgage bankers cite optimistic figures saying that 80% loans are still running and 68% Americans are house owners. But others despair that one out of five houses is abandoned. Other suggestions are that the mortgage brokers be paid monthly as a reward for good performance of loans. The opinion in favour and against down payments swings.

Via