Lewis Poretz - Open Mortgage - Maryland Mortgage Expert - FHA

Many readers may not want to hear what I have to say. I said it before and it brought out responses from a few people that don’t like reading statements they percieve as doom and gloom..... Maybe I didn’t do a good enough job of simply pointing out some GLARING STATISTICS that can’t be denied nor be thrown out with the bath water. People remember this – politicians can put a spin on any statistic and make it look good. That is what politicians do. Read the facts below – I am not a gloom and doomer. I am a realist!

People with good credit and equity left in their house need to know what’s up. They need to understand how lucky they are that bills get paid every month. They need to become an expert on saving money and reducing debt, for these are the rare breed that will hunker through this and possibly even profit from our current economy. This message is intended for people who are above water because people who are $100,000 plus under water on their house, people who have been out of work for months, people whose income has been slashed, many of these mentioned people with excellent credit through all of this. Well these people just don’t care anymore. Read below with an open mind and try and comprehend. Do not hide from reality. This is reall world. If you are one of those that is laughing right back at this economy you are awesome and I am jealous. If you have been crushed by this economy – god bless you….

Our Vice President – the man just under the head honcho - said just a few days ago, “we misread how bad the economy really is”…. SHOCKER!!!

DUH! Let me tell you what I see must rebound before we even hit the bottom, let alone recover. I don’t care where you live……

PROPERTY VALUES - In MOST areas – I said MOST – values continue to decline. For the first time home owner and the mortgage banker who is originating these loans, you guy’s should be kickin ass. BUT for the millions who can only dream of purchasing in this market, well they are simply getting crushed.

Mortgage insurer PMI Group Inc. says home prices continue to fall and will likely be even lower in two years. Their recent index shows approximately 85 percent of the nation's 381 metropolitan statistical areas (MSAs) are now facing increased risk of lower home prices in 2011. Florida, California, Nevada and Arizona continue to have the highest risk scores but an increased risk of lower future prices is now spreading across all regions of the nation because of the significant increases in unemployment and foreclosure rates. Some experts are now predicting another 40% drop in home values are inevitable. Hmmmmm let’s read on –

UNEMPLOYMENT – the number of unemployed Americans will top 10% within two months, possibly even next month. Watch the news - last I heard GM and a few other pretty large employers were letting go employees by the tens of thousands. Even hospitals are cutting their budgets. HOSPITALS!!!

Imagine Emergency Departments closing for the night. How bizarre huh?

FORECLOSURES - I see somewhat of an algebraic formula here – check it out…

Property Values + Unemployment = Foreclosure what a genius thought –

If you own a house and you owe more than it is worth (property value) +

You ain’t got no dough to pay the rent (unemployment) =

You gonna lose your house!!!

Why is that so damn hard to understand? Statistics show in in every 5 homes in America is upside down on their mortgage – read on…..

BAIL OR NOT? – A study of the Massachusetts housing market by researchers from Northwestern University and the University of Chicago concludes that a home owner’s propensity to default increases the further their loan goes under water.

The study found that home owners begin to walk away after declines of 15 percent or more. More than 17 percent of households would default, even if they can afford to pay their mortgage, when the equity shortfall reaches 50 percent of the value of the house.

Recent studies show 20% of American homeowners are under water. TWENTY PERCENT! That is 1 out of 5 homeowners. If housing prices have another 40% drop to go let’s take a look at something here.

Your current house value is 300K You owe 350K you continue to maintain good credit and pay on time. Next year your home is worth 240K. That is simply a 20% drop, a number that can be seen as fairly conservative. So now your house is worth 240K and you owe 345K – It could possibly take 10 – 15 years of mortgage payments simply to get back to frickin even! Highlighted below is a new term you are going to start hearing more and more… trust me on this. This term has no prejudice to credit or income. This demonstrates that housing values must hit bottom before anything will even remotely begin to get better in our economy. The new saying will be –

Strategic Mortgage Default

MORE BAD NEWS – Bank Failures will be on the rise. It is inevitable. Just look at what the subprime mess did to them. The conforming, A+ credit loans nobody expected to go bad are going to start happening very soon. Given the example above, if you were that far underwater and it could take up to 15 years to break even, what would be the most strategic financial decision to make? As property values continue heading south more of those good borrowers will choose to simply walk away. More bad loans = more bank closings. There is NO WAY AROUND IT….

from Forbes 7/7/2009 --

"Rising unemployment, a shrinking economy and falling home prices have left U.S. consumers increasingly unable or unwilling to pay credit card bills and home equity lines of credit.

THE SOLUTION – Now there is your gazillion dollar question. Would it make sense if the government told the banks, which they own anyway, to just forgive any mortgage amount owed on a property until the loan to value hits 80%. Hs the government already spent that much money bailing out the banks anyway? And speaking of the bailout money, I called my lender, told them I owed more than my house was worth, and they told me because I always pay on time there was nothing they could or would do. My current lender held their hands out to the government for billions in TARP money, still went belly up, and was purchased by a bigger bank with TARP money they received from the government. WTF???

Maybe this 2^nd round of government stimulus they are now talking about – (would it really be the 2^nd round or the 3^rd, 4^th or 5^th?) – maybe this money can really be not just earmarked but handed directly to underwater homeowners and small business. Fix those two core units that America was built on and then we can begin a recovery. Hopefully it won’t take the next 5 – 10 years to figure this out. Until then --- God bless you all ~~~

MARYLAND MORTGAGE EXPERT

Consumers, realtors and mortgage brokers continue to have deals killed because of the new HVCC appraisal compliance regulations. Inferior appraisals are now becoming the norm with no help in site. This program has come under serious fire and hopefully will be placed on hold very soon as refinances and purchases fall by the wayside with no appeals process that seems to work.

Have you been listening to the media lately?

Many are saying that the housing market has hit bottom and the economy is on the way to a recovery. To these people I say nonsense! As a mortgage banker who fields calls for refinancing and purchases every day I can tell you this is a false statement which is harboring false hope. I have my finger on the pulse and it is not good. Here is a snapshot of how I see it -- like it or not.

The stock market is still 40% off where it was just a year or so ago. And in my opinion will continue to head the wrong way. Unemployment is up. Way up! In fact it will likely go over 10% next month. That means if you put 50 Americans in a room, 5 of them will be unemployed. 1 in 5 American home owners are under water! Foreclosures continue to rise. A recent report shows that 1 out of every 4 homes are delinquent on their mortgage. If you live in a neighborhood of 50 houses, 12 of your neighbors could be facing foreclosure. Staggering!!!!

Here is my finger that is on the pulse and this is what it is telling me.

I am approving fewer loans than I did last month and the month before that.

Housing prices continue to sink at an unthinkable pace.

Credit scores continue to drop.

Income continues to drop.

Personal debt continues to increase.

So what can I do about this you ask? First of all, hunker down. Change your spending habits. Stop using credit to purchase things. Cut up your credit cards. Call your creditors and ask if they have any programs to help eliminate your debt faster and less costly. Pay your mortgage, autos, electric and feed your family first! Do not let unscrupulous creditors and collection departments bully you. And finally this may come as a shock to you hearing this from a mortgage banker, do not open a line of credit or a second mortgage. If at all possible, do not consolidate your bills into a new mortgage and eat up the remaining equity in your house. These may be moves you never recover from.

In my opinion, this country is in for a more serious economic crisis than most so called experts have ever predicted. I see this stuff every single day and I am living this nightmare right along with you. My mission is to provide you with honest answers to your questions. Possibly selling your home and moving “down” makes the most financial sense. Maybe, walking away from your house or negotiating a short sale makes the most sense.

Seek high quality advice and a get a complete credit check up from someone who has a heartbeat and NOT a dollar sign in mind. It may be the most important move you ever make.

Mortgage rates this week should be -- HIGHLY VOLATILE

As appraisal requirements become more detailed typically resulting in substantially lower appraised values, mortgage refinance deals are falling by the wayside. I have never witnessed such a huge difference in clients perceived value and actual appraised value. Up to 400K spreads just this week.

So what does this mean to me?? – Let’s say you have some equity left in your house and you have a need for cash out – (college, home improvement, bill consolidation whatever…) the true motivation in refinancing would be cash, NOT interest rate alone. Rates are higher – that is a fact, but there is still cash available with acceptable appraised value…. that is the problem… as values continue to fall, consumers are facing less available cash when refinancing.

Don’t let interest rates determine your refinance if cash is a big factor. You may lose the opportunity to achieve your goals. We are still lending money!

Why would I ever want to refinance my 2.5% line of credit???

Were you one of the ones who took out a monster line of credit a few years back, because you could? Well there were plenty of you that did. And what a brilliant decision you made huh? Where else could you get a payment that low for that amount of money borrowed? Why would you want to refinance a 100K loan at 2.5% to a fixed rate that is higher?

Let’s assume the prime rate (the tool used in adjusting your line of credit) remains low for a bit longer. Eventually, when government debt must be repaid and inflation hits – (all the experts say it’s coming) mortgage rates will hit double digits. It’s a fact. History repeats itself. To see in black and white what that could mean to you, look at a few examples below, based on the prime rate historical index.

Let’s assume your rate today is set at prime (3.25%) - .75 which would be a rate of 2.5%

100K balance 250K balance

2009 - @ 2.5% monthly payment - $208 $520

2008 - @ 5% monthly payment - $416 $1041

2006 - @ 8.25% monthly payment - $708 $1718

1989 - @ 11.5% monthly payment - $958 $2395

1979 - @ 21.5% monthly payment - $1791 $4479