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Media Creates Another Untrue Story! May 10, 2008

Posted by shaferfinancial in Uncategorized.
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I have already posted several times that the story that variable rate mortgages resetting causing folks to foreclose is not really much of a story after all with this causing less than 2% of the foreclosures.  Now we have the “walk away” stories.  Seems that the media wants us to think that all these folks are walking away from their homes because they owe more than the homes are worth.  Well, Fannie Mae and Freddie Mac, the two major folks who bought and currently buy mortgages say that is not true, at least with their customers who represent the majority of borrowers.  Freddie Mac estimates that the walk-a-way’s represent .14% of defaulted loans.  So again the media was making much of really nothing.  And once again, you have to look at the investors for any significant amount of voluntary foreclosures.  Folks, I have said it before and will say it repeatedly, this foreclosure crisis is caused by lenders giving money to folks with poor track records of handling debt.  It is that simple.  As to the rest of folks the foreclosures are the result of the same things as always.  Job losses, sickness, death of bread winner, and divorce.  Recessions cause foreclosures to go up.  Personal tragedies cause foreclosures. 

Now with the folks who never should have gotten a home loan, because they had no reserves, no money for a down payment, and had a poor history of paying back debt.  Did they get sucked into bad deals?  Well maybe, certainly, the lenders did them no good sucking fees in, while the going was good, selling this stuff to greedy Wall Street folks, waiting for the inevitable foreclosure.  But there was much greed going around, from the real estate folks selling these houses to folks they knew or should have known had no business buying a home, to the folks themselves who “only wanted to buy into the American Dream,” but were not willing to wait until they had developed the financial habits to suceed in home ownership.

Now the congress wants to legislate so this won’t happen again.  OK, but want to bet somewhere down the line it will?  Meanwhile, we wait and watch as this unwinds and the real estate market returns to normalcy.     

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