The Foreclosure Report

'People Are Maxed Out With Debt'

The Associated Press looks at the changing environment for mortgage firms. "With the housing market cooling and loan demand shrinking, banks and other lenders are turning to nontraditional and sometimes riskier mortgages to bring in more business and make up lost revenue. 'We're at a pretty difficult time for the mortgage industry,' said Stephen Rotella, president and COO of Washington Mutual Inc."

"The slowdown in home sales and lending was first apparent during the summer and has become even more evident in recent weeks. To make up for the drop in borrowing, lenders have resorted to what the industry calls alternative payment products, loans designed to lower monthly payments to help borrowers qualify more readily."

"The industry's gravitation toward non-traditional mortgages raises concerns about whether some borrowers will be able to keep up with their payments. 'When the industry is topping out, people stretch to get that last unit of output, and the result is you find yourself in a situation where there will be definite problems in the next six to 12 months,' warned Richard Bove, banking analyst at Punk Ziegel & Co."

"David Olson, co-founder of a Columbia, Md. based firm that tracks the mortgage industry, predicted that mortgage defaults will increase. 'As long as we had the mantra that prices only go up, you could have the most stupid mortgages and it was great,' he said. But going forward, 'the public will see more foreclosures. People are maxed out with debt.'"

posted by Ben Jones @ 10:44 AM