"Although significant, the losses won't be large enough to topple the United States' $12 trillion economy, Cagan said. "This is the turning of a business cycle," he said. "There will be some pain, but most people will be fine and most lenders will be fine."
That's little consolation to homeowners like Andrew Villaruz, a 43-year-old hospital administrator who said he refinanced into an option-ARM late last year without understanding what he was getting into. His loan balance quickly grew from $364,000 to $370,000, a shift that become even more disturbing to him as he watched more foreclosure signs go up around his Sacramento neighborhood.
Coupled with other costs lumped into the loan, Villaruz figures he lost about $25,000 by the time he found another lender willing to refinance him into a more conventional mortgage. He sheepishly acknowledged he had never heard of a negative amortization loan until he had one. He knows enough now to stay away from them.
"They might be good for people who make a lot of money, but they don't pan out for the average person," he said. "They just don't make sense.""
When it was it "those stupid not credit worthy" people, there was little registration on the compassion meter. Now that a hospital administrator didn't understand what "he was getting into," he's looking for a little understanding.
Newsflash Mr. Hospital Administrator, if you don't pay your mortgage, on time, your credit will look no different then "those subprime" people.
The disturbing part of this entire debacle is the housing market was overpriced. Too many people were building bigger home when, I'm just guessing" they reallly didn't need "that much house."
But inorder to feed in their fantasy of wealth, these people overextended themselves. I had two employees purchase homes in the past two years. One whom graduated with honors from Franklin & Marshall in business. The other a possessed a high school diploma from a rural county. Both employees put NO money down but just knew it was time to buy.
In their excitement, I asked a simple question of both "Will you have money at the end of the month?" Both were surprised by the question. It never occured to them. Their friendly mortgage broker told them it was time for them to buy a house. Neither employee had prepared a simple budget.
Every 28 year old needs to buy an overpriced four bedroom home, right?
When they signed on the dotted line they could afford the ARM monthly payments as they were trying to convince me and themselves. When the call arrived, I verified their employment income.
Now these former employees and their spouses are working two jobs now just make ends meet. So when do these spend time in their dream homes?
(Oh I forgot to mention, that when our company was preparing to be purchased for the second time in three years, we had to lay people off. Neither employee anticipated losing their jobs within sixty days of buying their homes.)
Now the Feds are dumping money into the markets so RICH people won't lose their expensive shorts in this shell game.
Home depot is having a sale on tents.....