'A Bigger Hit Than Anyone Saw Coming'

From About.com:

A few months ago, a borrower came to Fidelity National Title in Sacramento to sign loan documents. She was closing on her dream home. As the escrow officer explained to the borrower that her new PITI mortgage payment would be $2,500 per month, the soon-to-be home owner's jaw fell.

"But I take home only $2,500 per month," the borrower gasped. Apparently nobody explained to the borrower that she would be responsible for paying taxes and insurance. Those liabilities bumped her payment to $2,500 per month.
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A Sacramento man bought a home two years ago by taking out a 2/28 mortgage. After it closed, he called his lender to complain that he did not realize his mortgage payment could go up 2 points on his two-year loan anniversary.

To further complicate the situation, since the value of the home rose after one year of occupancy, the owner refinanced his mortgage into another 2/28 mortgage. He also rolled the costs of the mortgage into his loan and financed them, which increased his mortgage balance.

As the owner watched home prices in his neighborhood fall, he became depressed. It's easy to point fingers at the mortgage lender, but this borrower was advised by his agent not to refinance. His home is now worth less than he originally paid for it. What's worse is he owes 120% more than the value of his home.

From the LA Times:

According to a recent Fox News poll conducted by Opinion Dynamics, there's 70% opposition to a taxpayer sub-prime bailout. "It is amazing all the sympathy we are seeing from politicians for people who knowingly took out loans they couldn't afford, often lying on their applications to do so," commenter "srl" posted at the LA Land blog I write for the Los Angeles Times. "Usually," added "Brian," "when the facts are examined closely, we find people who . . . took a chance that house prices would keep rising, that they could remodel the kitchen, buy the truck and the motorcycle, put it on the credit card and pile that debt into the next refinance. ."
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How can these people oppose helping out their fellow Americans? Easy. Many or most of them saw this crisis coming years ago -- not through any real estate wizardry but by observing the signs that have been in front of us through most of this decade. In large parts of the United States -- and in all of Southern California -- the housing market turned into an obsession, a mania. So when the mortgage industry nearly collapsed this summer, Americans were fully versed in 100% financing, "liar loans," "teaser rates" and "flippers." There was no mystery here, no unforeseen "perfect storm."

And yet now, just as the market is starting to cool and possibly provide buying opportunities, many of these folks -- especially those patiently waiting out the bubble -- find themselves crashing a pity party for the very buyers who priced them out of the market. They are furious that the government appears interested in supporting overextended borrowers and high prices....
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Politicians, by rushing to the defense of recent home buyers, give the appearance of endorsing price stability at historically high levels...Why should government favor today's owners over tomorrow's buyers?

From the Stockton Record:

Donna Kniess and a friend have their three-bedroom, two-bath Clarks Fork Circle home in Spanos Park West up for sale at $389,000 - and the for-sale-by-owner fliers specifically note to agents: "I am not interested in having my home listed with an agent. This allows me to offer a better price to the buyer."

Thus far, the only response has been a deluge of printed information or phone calls from agents who want to list the house, Kniess said...Actually, there has been one other response: Someone pulled the for-sale-by-owner sign out of the front yard Thursday and placed it by the garbage bin in the backyard.
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Longtime real estate agent Kevin Moran of Coldwell Banker Grupe concentrates on foreclosure residential properties. "I saw the writing on the wall," he said. Moran, who has worked in real estate a quarter-century, said he decided to specialize in foreclosure properties this past spring, when it became clear how much the market was slowing for traditional sales.

"It's just a bigger hit than anyone saw coming," he said. He expected about a 30 percent drop in business. Instead, it's down about 70 percent from its heyday in 2005. Moran estimated three out of 10 homes on the market these days are foreclosures and expects that will increase in coming months.

From Newsweek:

When CNW Research asked consumers who were putting off plans to buy new cars why they were doing so, 17.6 percent cited housing issues like falling home equity or rising mortgage payments. That compares with just 2.3 percent in 2005. John Crane, general sales manager at Ron Smith Buick Pontiac GMC Jeep in Merced, Calif., a farming community of 80,000 that has experienced an influx of Bay Area refugees, has seen a tremendous slowdown in the past six to eight months. "People don't have the money to look at cars," he says. "They're having a hard time paying house payments. Now their second mortgages and 1 percent loans are coming up."