| It isn't surprising to see another mortgage
lending company having problems. Leading up to this housing bubble in
the US was a major loosening of credit to allow almost anyone to get a
mortgage. The ability of the homeowner to pay the loan often was often
overlooked because they weren't going to have to deal with that
anyways. The loan would be bundled together with others and sold on the
open market to others.
Now, we are starting to see the tightening of
credit as these investors now realize that these bundled mortgage loans
are risky and it is now a much tougher sell for mortgage companies.
Most likely we will see many more of these
types of companies having problems or failing in the next few years as
this process takes it's course. There is even talk of government
intervention in California to try and get homeowners out of ARM's to
keep owners from defaulting on their home loans.
Here in the southwest in places like Las Vegas
and Phoenix just years ago people were coming out from all over to wait
in line to buy houses in a lottery pool system. These houses were
often houses that were to be resold and never lived in. Some of these
people even came out by the busload to signup for these lotteries to
buy a house.
A quick look in the newspaper at rental rates
for homes would have shown these people that they would be losing money
each month even if fully occupied.
Now, we are starting to see these same people
fail to make payments and these mortgage companies having problems as a
result. This is similiar to the people that threw money at internet
stocks leading up to the 2000 bubble. However, in this case people were
even more highly leveraged.
Keep your eyes open for more problems in the next few years.
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