Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Monday, September 25, 2006

The Soon To Be an FB Club....

"Two out of three Sonoma County home buyers and owners, joined the fast-growing club of borrowers in high-cost housing markets who financed purchases and home equity loans with low-payment mortgages that explode into much higher payments within a few years."

"At first, they don't have to pay a penny on the actual mortgage - and in some cases, don't even pay the full interest cost.Now, the first wave of borrowers faces a costlier mortgage bill as payments on the popular loans begin rising with higher interest rates. Some will be in over their heads if they can't afford to pay more. Many others are taking steps to soften or postpone the day of financial reckoning."

"The initial surge of what amounts to delayed-payment mortgages coming due—called “resets” in lender speak — is hitting this year. It will go higher in 2007 before ebbing some in 2008, according to Freddie Mac, the national mortgage company."

'“It’s already started. I think it’s going to go for a while because we’ve made so many loans on that interest-only product,” said Randy Blankenbaker, regional manager for Chase Home Mortgage."

"The reset impact is sizable inSonoma County and other expensive housing markets where these loans have become popular. They account for twothirds of all purchase and refinance loans in Sonoma County, compared to a quarter of loans three years ago—and have supplanted long-term, fixed-rate loans."

'“Sooner or later, they’ve got to pay the true cost of a loan,” said John Klein, branch manager for Charter Funding in Santa Rosa."

"Darren Seliga, owner of Seliga Financial, is busy working with clients who need to refinance and figure how to budget $350 to $650 or so more for monthly house payments."My job is to find a creative way to get them into something and help them find something different down the road," the Santa Rosa mortgage broker said. "Sooner or later you've got to face the music or sell the house."'

I'm pretty sure that creative financing thinking is what got them here in the first place. How much do you want to bet the same thinking isn't going to get them out of hot water now?


At 9/26/2006 09:56:00 AM , Anonymous tom stone said...

based on my 10 years plus experience in commercial collections,and the last couple of years as a loan broker,i would estimate that between 25-30% of those getting stated income loans would default within 3 years,if there were no rise in their payments,and no exogenous events in their job loss,illness or divorce.

At 9/26/2006 12:39:00 PM , Anonymous Anonymous said...

And we'll have FUN FUN FUN
Until Daddy takes the credit away...


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