Unsettling news?

At what has become for us an upbeat time in real estate activity we were saddened to hear of a problem afflicting some homeowners. An account executive for a sub-prime wholesaler that calls on us, "account executive" by the way is what they call the field sales reps for mortgage companies, brought the news that in some areas south of us, that would be Yuba City, Marysville, etc., some of the developers are sharply reducing prices to drop inventory. As you can imagine, there is financing in place for all those unsold units and the dollar drain can be substantial. Some of these reductions are reported to be in the $40,000 range. Pretty big chunk of change. While the reduction may be bad for developers, good for new buyers, here is the sad domino result for many homeowners. Many of the folks bought these homes at or near 100% financing with mortgages that contain variable features that are just now kicking in. These are 2/28 and 3/27 programs designed to help people gain entry to home ownership. The plan for these mortgages is to re-finance out of them to avoid the substantial interest and payment jump when they roll over into a variable rate. Now, because of the reduction in price of brand new homes, appraisers are unable to support the value needed to justify a re-finance loan. In short, the market is now saying that these folks owe much more than their home is worth, so no re-finance and they are stuck with what has become a bad mortgage. This is really sad. As mortgage brokers we take delight in rescuing people right at the deadline so they avoid any pre-payment penalty on the old loan and never have to pay any increase. This requires of course that the home has held value or improved, and the credit of the borrowers has not worsened. We like doing this because we can bring a lot of flexibility to the process and save clients a bunch of money. Plus of course we get paid.. When market forces take away the equity of the homeowner we're pretty much dead in the water to do anything, and that's a shame. We're real estate agents and we're mortgage folks and we enjoy doing those things for people, but we also have a responsibility to counsel people as to the wisdom of their choices, and that sometimes means advising against a purchase, even though the mechanics of the transaction might be easy for us. If our experience and our licenses have any value at all we should share our cautionary feelings with prospective buyers and borrowers and attempt to keep them from harms way. If we can't help people we surely can refrain from hurting them. I have great pride in all of our agents and their determination to place their client's interests above all else. If you or someone you know is in a hole or headed for one, call us. If we can't help we can surely make sure you stop digging.

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