The Foreclosure Wave
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- sfrtpro
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jubal
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I another big reason people have defaulted on their homes is that the interest rates jumped from their sub prime levels to levels that they could not afford once the loan has gone into a variable rate. For example a Latino family purchases a home in New Jersey for $200,000 at an introductory rate of 6% with interest only payments of $1000. per month. Once the rate goes variable it jumps to 11.5% and they have to also pay principal along with interest. Suddenly their monthly payment jumps to $1980. per month. If that family was on a tight budget of say $3000 in after tax dollars to live on, they would be hard pressed to pay their mortgage and their taxes and their insurance and still eat and buy gasoline. Often times the loan officers/salesmen will assist people in blatantly lying about their income in order to "push" the loan through.
I think it is important to stress that everyone all of the players share the responsibility for creating the sub-prime mess. But on the other hand, this pod demonstrates that the foreclosure market is good for the bargain sale buyers. People can also make a lot of money buying foreclosures and fixing them up to resell them. That is the business that my father has been in for years; buying distressed properties for less than market value.
- 4 years ago
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jubal
