Poor Mortgage Documentation Shredding Housing Dream
As if the housing market wasn’t bad enough, Bloomberg Businessweek produced the article, Shredding the Dream, in their October 25-October 31, 2010 issue in which they quote J.P. Morgan Securities reporting, “some $2 trillion of the $6 trillion in U.S. mortgages and home-equity loans that were securitized during the height of the bubble, from 2005 through 2007, are likely to go into default. The report says the housing bust will ultimately cause losses of $1.1 trillion on those bonds.” Due to such a decrease in credit standards during these lending years, a lot of these default loans are lacking appropriate documentation if there is documentation at all. As a result of this, foreclosures are being frozen and some people are living in these homes payment free. The fear is that as consumer confidence in the housing system declines the amount of people willing to walk away from their payments will increase and something is going to have to change, most likely a political intervention. The government’s current attempts at modifications are not succeeding and some suggest reducing principal loan amounts. While this solution sounds good to all home owners, lenders probably don’t share the same enthusiasm. The answer is there is no easy fix. By the looks of things the housing market is in a bigger mess than anticipated, and there are going to be more problems than answers in the near future so start dreaming of something different than the dream home.