is it really all about high-risk loans to those with poor credit, and for some, failure to meet their mrtg pymts? And if the squeeze will be filtering down to those type of mortgages, it must follow that mrtg companies will refuse refinancing, etc., but what does that all mean for the Buyer’s market? Tighter restrictions on subprime high-risk loans across the board?
SIDEBAR:
my gf in chicago (she’s still working fulltime), got very excited 2 yrs ago with her 2nd investment property purchase; then she “creatively” purchased another, then another, now 5 properties in total, but she jsut learned last wk, that her brokers mrg companies are refusing her refinancing requests, she doesn’t have renters for 2 of her properties… what might happen to her?
You don’t provide much info., but I’ll specultate a bit. Assuming that she can’t meet the mortgage payments for very long, she needs to find ways to cut some losses. Maybe unload the vacant properties, at a loss if necessary. That would be my first instinct. If her credit is still good and/or she’s got a bit of equity, plus rental income, she might be able to get refinanced w/ fixed rate loans. I’m assuming that she’s currently got variable mortgages and/or balloons coming due. She could also liquidate any other assests to help sustain her mortgages. It’s tough, but if she can hang in there for a year things should start to ease by then. Good luck!
From what I remember, she used the increased market value of her initial home and its equity, refinanced twice on that house, borrowed against multiple credit cards for cash, then led to purchases to two purchases… nxt a property in Oak Park (no renter yet), another property downtown and no renter for long, then she has to pay that mtg w/o rental income. I’m not sure if her loans are balloons, that would be frightening! You think this could last another year? And buyer’s should jump at this current crisis to buy or will it be even harder for them as well?
Right now there’s a huge “credit crunch” and there’s no sign it is going to get easier to buy soon. Seriously, she’s probably screwed.
The run up in housing prices was driven by people exactly like her. . .people using creative mortgages to buy investment properties. Especially in the condo market. They tried to tell themselves things like “it’s different here” and “they’re not making any more land”, but there was enough land already. She can’t rent them to cover the mortgage because a million other people tried to get rich the same way she did.
If there were solid reasons behind the run up in prices that she was trying to profit from, she’d stand a chance. But she was still holding property that she couldn’t afford when the supply of greater fools ran out. Property values are dropping. Her mortgage payments are going up. And, mortgages are getting harder to come by because there have been so many defaults by people like her. Banks can’t take the risk.
I don’t know how it’s all going to play out. She might have to declare bankruptcy. If she has cash from somewhere else, she might have to sell the houses for a loss and cover the difference. She might just stop making payments and get foreclosed on.
Of course, there was an article in today’s NY Times that said that even people who get foreclosed on could be on the hook for taxes on the forgiven debt, as if it were income.
These are pretty typical outcomes when people have a lot of greed and leverage.
I can’t predict the future, anymore than the next guy. I do know this has happened before and will happen again. It’s the result of poor business practices, poor oversite and good old greed. If it’s any consolation, your friend has lots of company. If it were me, I’d be looking to reduce my risk as quickly as possible. The potential for loss will likely increase, the longer she tries to maintain her current exposure. Better to try to extricate herself as much as possible and take some loss, rather than wait until she has no control and loses everything.
this doesn’t sound good for my gf… the only cash she may still have is in her 401k through work, which I know she borrowed from once already. Knowing her as well as I do, filing for bankruptcy will be her absolute last resort. That article is like salt on a gaping wound! Thanks for providing.
Yes, I agree with yours and trunk’s advice… I’ll be speaking with her tonight for an update and will ask if she’s prepared for the long haul or considering any of the advice posted here.
From what I read government backed loans are still available, but subprime loans and jumbo loans are very expensive. I think interest rates on jumbos went up a point. Plus, no one is going to loan to someone without money down anymore.
So, I expect a buyer with money who can get a loan can do very well. In my county, prices went up a little bit last quarter, but sales went way down, and I think prices are going down a bit further from the Valley.
According to The Vancouver Sun the US market is looking good for Canadians. The Canadian dollar is strong, and prices here are declining. Birch Bay, where I live, has always had a lot of Canadian homeowners. In recent years they have been selling their homes/vacation properties. Now it looks as if they may be able to snatch up some bargains. (More power to them. The more they buy, the more my house is worth! Only that doesn’t do me any good unless I sell, which I’m not planning to do.)
Only that doesn’t do me any good unless I sell, which I’m not planning to do.)