How bad will foreclosures and late...

[Yogi]

...mortgage payments...? look on your credit report to future creditors if SO many people are having problems due to rising mortgage payments?

Is the FTC making arrangements to help people who are struggling or are they just going to let everyone hit credit rock bottom?

How will this affect the economy later when many will not be credit worthy?

And, what's the real reason that rates aren't being lowered? We see the mass devastation that is happening all over the country with late mortgages and loan defaults. At some point wouldn't the government NEED to step in?

Buyers feel like the market is a sinking ship and don't want to buy because they know that the values are still dropping. This is VERY smart thinking. How long will this be the reality?

Who is going to step in and make a change and when?
I agree that the ones who made their beds should lie in them. However, there is a trickle down affect. The ones who didn't get the risky loans. Properties foreclosing are sold below value which brings down the market value for comparables. In addition, lenders are not jumping at the chance to lend to people anymore due to the amount of sub-prime loans defaulting.

If someone needs to move and sell their house due to the need to relocate and can't sell for the profit then they take a loss. If someone loses equity due to the market value and can't borrow against it to do home improvements then they lose. Its not just the "idiots" who suffer. But, in order to get back on track something has to be done unless everyone just haults at a stand still until it gets better.

It's not fair. The market is going to hell in a hand basket and it's hurting a lot of innocent people.

[spifiman1]

The only people responsible for the current housing mess are the ones that bought seasoned trade lines to raise their credit so they could qualify for loans that they really did not deserve and the appraisers who said that homes were worth more then they really were so people could get mortgages without making down payments.

Add to that the morons who signed adjustable rate loans thinking that the market would bail them out before the higher payments kicked in and there you have the result, foreclosures all over the Country.

This will change, but it will take a few years for the market and the lenders to recover from these losses.

As far as how bad it will look, there is nothing as bad as a foreclosure, bankruptcy or repossession for your credit.

As far as the FTC stepping in, they have to a certain point. Come September the way credit scores are calculated will change and people that are authorized users will no longer get additional points added to their scores. This is going to be retroactive so anyone that has gained points by this will lose them.

Other than that, it is not the FTC's job to step in and save anyone. Nor is it any branch of Governments job to save anyone from their own mistakes.

[P J]

"At some point wouldn't the government NEED to step in?"

Believe it or not, not everyone is struggling. There are people who made the decision to live within their means and get a house they could actually afford. Then there are those who went with these fancy loans to get bigger and better and worry about that increased payment tomorrow. Well tomorrow is here.

Why should some idiot who made a dumb dumb mistake be bailed out?

[shelcom]

Why aren't rates lowered? My God, they're at 40 year lows!
The government doesn't need to rescue people from loans they shouldn't have taken in the first place. No one held a gun to these peoples heads and made them sign an expensive mortgage.

[Corey1023]

Your whole post could be summed up as Cliche+Cliche+Cliche+Hyperbole+Hype = BS

Here ill go through and show you what I mean.

The only people responsible for the current housing mess are the ones that bought seasoned trade lines to raise their credit so they could qualify for loans that they really did not deserve and the appraisers who said that homes were worth more then they really were so people could get mortgages without making down payments.

Ehhh no. This is one of the most Cliched responses to the sub prime meltdown and its probably the most incorrect.

The ones responsible MOSTLY are the lenders with loose lending guidelines, that turned a blind eye to the rampant fraud that was going on. They ABSOLUTELY knew it was going on and did nothing substantial to curb it until they could ignore it no longer. Ive been around the game since 97 and I saw what was going on. I asked and the WHOLESALERS would say "Hey we are just making things happen, people make the choice and if they default its on their shoulders."

Why would they do this you might ask? Well its what I call Lending's Dirty Little Secret. They need the volume. Their industry DEPENDS on loan fraud. Dont believe me? What do you think would happen to the housing market if we were to go back to say the 1950's lending guidelines? Ill tell you, it would crash. For a time. It would eventually recover as people realize that they need to practice sound financial principles like saving a down payment and only financing what they can actually afford in LESS THAN IDEAL conditions. People almost always get financing for what they can afford if everything in their life goes perfectly. Then when life throws one curve ball at them, they have a rough go of it. But thats a topic for another day.

One last thing. The whole basis of my business is Credit. We help people who have gone through foreclosure and bankruptcy rebuild so they can eventually own again or refinance out of bad loans. You couldnt be more wrong about seasoned tradelines. Saying they
qualified for loans they didnt deserve" is both incorrect and really disingenuous. Bottom line is this; If I can get someone approved at 9% with a $1700 dollar a month payment. Tell me how they are a GREATER risk if I can get them a better loan by improving their scores and the net result is their payment drops by $400 dollars a month? They are a GREATER RISK FOR DEFAULT? Id love for anyone to explain that logic to me.

Now If you are talking about some game with arbitrary rules where people who never had poor credit act like Dr Seuss's star bellied sneeches going around saying you 'dont deserve' to get what they get cause they 'earned' it, well then im sure no amount of logic or common sense would convince them.

Add to that the morons who signed adjustable rate loans thinking that the market would bail them out before the higher payments kicked in and there you have the result, foreclosures all over the Country.

Sure theres some of this that happened, but its not even close to correct to make it sound like its even close to a majority.

This will change, but it will take a few years for the market and the lenders to recover from these losses.

Well sure, of course it will, its another economic cycle. It goes up, it comes down some, it goes up again later on. Ill tell you all why the fed isnt jumping to drop rates and run to everyones rescue. First because the total expected defaults while a large number, will be a very small percentage of the mortgage's out there. Its expected that the problem will lie with less than 10% of Sub Prime Loans. Sub prime makes up only about 30% of the overall industry, so someone good at math help me out here, 10% of the 30%...yeah i shoulda paid attention

As far as how bad it will look, there is nothing as bad as a foreclosure, bankruptcy or repossession for your credit.

Close. Foreclosure is the hardest on your scores, and from a lending stand point one of the toughest to overcome. Lenders will over look a BK more readily than they will a foreclosure. I mean at the end of the day, it might look like the same thing but the difference between defaulting on credit cards or defaulting on a home makes all the difference in the world to someone who lends money on homes.

As far as the FTC stepping in, they have to a certain point. Come September the way credit scores are calculated will change and people that are authorized users will no longer get additional points added to their scores. This is going to be retroactive so anyone that has gained points by this will lose them.

Actually not all of the Bureau's are adopting this policy. Fair Issac's has indicated that THEY will make it so that the authorized users will not account for their scoring, however Fair Issacs is not the only scoring model in use. Each of the Bureau's has their own models in addition to FICO. Ill have to go look it up, but I want to say it was Experian that just plain isnt changing their model. Moreover the changes are not going to be 'retro active'. Why? Because of two things. First retroactive scores are irrelevant. You use a trade line or disputes to raise your score for a certain goal: getting a loan. Once that is done, what do you need it for? So if I went from a 680 to a 720 last year got a loan and im in my house. I honestly dont care if my scores go back to 680...im done!

2nd Seasoned tradelines ALL stop affecting your scores after you remove the person as an authorized user. No one that sells tradelines just leaves people authorized on the tradelines indefinitely. They use it for a specific purpose, once thats done they are removed. So making it 'retro active' would be an effort in futility. It would literally accomplish nothing.

Other than that, it is not the FTC's job to step in and save anyone. Nor is it any branch of Governments job to save anyone from their own mistakes.

Im not being sarcastic here, but FINALLY SOMETHING WE CAN AGREE ON!. Spoken like a true Libertarian. Come here man brothers dont shake hands...brothers gotta hug!

J/K hope i dont ruffle your feathers too much here, I just want correct information out there to the public. Its kinda something im passionate about. Nothing personal intended.

[Corey1023]

As for the original question, if you simply default and then are able to pull out of it through Loss Mitigation remedies or say a short sale your scores should rebound from the late marks within 1 year. After 1 year FICO and all the other scoring models drop the relevancy of the 30,60 and 90 day late to your scores.

[robertlaf]

"Foreclosure is the hardest on your scores, and from a lending stand point one of the toughest to overcome."
That is harder to overcome than a bankruptcy? There is some very knowledgable repsonses here. I know little about it all, just trying to get started as an affilaite for a loss mitigation company. Dave Ramsey says bankruptcy is much worse than foreclsoure on your credit.
I do know economics some and the govt. always makes things worse. The solution is less taxes, capital gains, and income, less govt. regulation such EPA on house builders to rebound this economy.
The Dems are socialists and when they start looking at the problem and advocating "solutions" we are in trouble. They will regulate us into the poor house. Personal responsibility caused this more than predatroy lenders Dave Ramsey said and Neil Cavuto got huffy and gave the other side, much like the debate here.

[877YouKeep]

One culprit I think is over looked is the appraiser. You do not know how many times the broker tells the appraiser what the number they need is in order to do the deal. Not knocking anyone but I get tons of brokers that were making way too much money and have nothing but late payments to show for all of their hard work.

Corey you are right about the slack or even non-existent underwriting rules. It was as if there was no criteria and if you had a pulse a broker could get you a loan.

Tenants bought houses in the last 3 years, there is a big difference between a renter and a homeowner and the market is making a huge correction. The only real issue is that rents have stagnated because there were so many speculated buys and mortgagors are taking extremely low rents just to offset some of the negative cash flow. Although it depends on where you live for speculative buying. just my thought and trying to change the thread from getting political. I am sure there is a political forum out there if you can not find it let me know and I will find one for you.

[robertlaf]

I knew someone would rag me about politics. It's related to politics if you don't see that I would never want to use your services. I was just commenting on it, John Ochhi's blog is brilliant, he is constantly commenting on politics because there are new laws being passed everyday and more to come that will drastically affect this industry. Are you the moderator? . Texas Lending, a great company, said the same thing on the radio today" if your lender doesn't know about the Fed, govt. regulations., differences in the 2 political parties, how the Federal Reserve works, he shouldn't be your lender". I may have gotten too much into politics, I think I made mypoint, the fastest growing mortgage company in Texas and a realator who also a loss mitigation consultant wouldn't even try to be in busines without studying politics they both said.
I guess you run the board though. If you are moderator, my apoligies if not what is your problem?

[Corey1023]

I think Don has the right idea in heading it off before it becomes an issue. I also think youre a bit over zealous in your response to him.

To whoever it was asking about my response about BK's and Foreclosures, I know plenty of lenders who can refi you while in a 13, and can get loans done after a 7. But a foreclosure will put you out at least 2 years before you can even get a look from them.

Granted in theory it should say "included in bankruptcy" if they filed, but more often than not it never gets put that way so they are getting a double ding. The other issue is it often reports twice. Once from the credit standpoint, and once from the public records. It can be tedious to go through and get everything set in order so its reflecting properly.

Its always better to avoid the foreclosure, even if they are planning to do a BK on other debt. The more you can demonstrate a willingness to pay, the better your chances are of getting financing again.