May 28, 2008
New figures show that option payment loans are defaulting at higher rates than sub-prime loans. Clark has often spoken out against these kinds of loans, where your balance actually rises over time. Option payment loans sometimes go under the name "Pick a Pay" or "Pick a Payment." Countrywide is in the midst of a criminal investigation for allegedly pushing through falsified applications for these loans.
Meanwhile, The Los Angeles Times recently reported a new wrinkle on the old practice of owner financing in the loan market. Clark has done owner financing several times over the years. That's where he's actually served as the bank for a borrower.
During that time, he's received letters from investors wanting to buy his loans. They typically offer him an immediate payout at a discounted rate. So if he holds a $120K note, for example, the investors may offer him $100K upfront. Obviously, he's never taken them up on their offer.
Now here's the latest twist: Investors are pooling money, going to banks and buying "non-performing" loans for between 30-70 cents on the dollar. Then they go to the homeowner and offer to reduce the interest rate and the balance on the loan. People immediately suspect that they're being scammed, but this is actually a new business in the marketplace.
The next question that comes to mind: Why wouldn't the banks themselves just do this for the borrowers? Clark thinks they're too bureaucratic to make it work efficiently.
If you're behind on your loan, how would you know if you're facing a legitimate mortgage reduction offer from an investor who recently bought your note? This may sound crazy, but Clark actually suggests that you spend some money, hire a lawyer and have them vet the paperwork. Lower-income homebuyers may be able to get this legal advice for free.
May 26, 2008
We track the calls that come into our show and the Consumer Action Center. There's been a shift during the last 30 days from calls about debt and credit questions to calls about the housing market. About 35 percent of your questions now deal with this latter topic.
In some of the most speculative markets in the country, a much larger percentage of homes than previously thought were owned by speculators who never intended to live in them. This is referred to as occupancy fraud.
What happens when these homes go into foreclosure? Usually, an increase in foreclosures equals an increase in demand for rentals. As people get displaced, they have to have to go somewhere. But in this case, the normal cycle of displaced demand is upset because the foreclosed houses were ghost residences.
The end result is that housing recovery in spec-heavy markets will take longer to happen and the decline in values could be deeper than anticipated. The Wall Street Journal reports that Nevada, Arizona, Colorado and Florida will be hardest hit by this trend.
Meanwhile, homes in Michigan and Ohio are very inexpensive, but for good reason. Both states have declining job markets. Sure you can steal a deal, but where will you work?
Some builders have responded by offering price protection. Always remember that housing is cyclical and will recover. What makes the occupancy fraud scenario different is the combination of spec building in oversupply and the dangerous lending that fueled it. So it's going to take longer to work off the excess in many places.
May 16, 2008
A lot of Americans are afraid to buy homes right now. It's no wonder that people are skittish about jumping from renter to owner when you think about the constant barrage of "housing crisis" headlines. Clark wants to offer some "tools of trade" so you have a better feel for when you should venture into the marketplace.
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May 13, 2008
Have you heard of Zillow.com?
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May 9, 2008
Have you heard of anyone who wanted to refinance their mortgage and couldn't do so because the appraisal came in too low? This is the natural result of the pendulum swinging back after a spike in inflated real estate appraisals.
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