Saturday, July 14, 2007

Subprime mortgages in Texas

This from the Dallas Morning News:

Now, Texas ranks third in the nation in the number of foreclosures, according to RealtyTrac. Homes posted for foreclosure in the Dallas-Fort Worth area rose nearly threefold between 2000 and 2006, according to Addison-based Foreclosure Listing Service Inc.

Subprime mortgages, which helped fuel the surge in homeownership by providing loans to those who might not otherwise qualify, are now part of the problem. Such loans usually come with a higher interest rate – typically 3 percentage points higher or more – and often are adjustable, meaning their interest rate can adjust upward as overall rates rise, as is happening now.


In Texas this has meant that a large percentage of subprime mortgages and foreclosures have gone to the Hispanic population.

In Texas, the number of Hispanic homeowners nearly doubled between 1995 and 2005, according to Tim Ready, research director at the University of Notre Dame's Institute for Latino Studies. Hispanics accounted for nearly 65 percent of the state's growth in owner-occupied homes during that period.

Now, Texas ranks third in the nation in the number of foreclosures, according to RealtyTrac. Homes posted for foreclosure in the Dallas-Fort Worth area rose nearly threefold between 2000 and 2006, according to Addison-based Foreclosure Listing Service Inc.


I suggest reading the rest of the article in full. It simply goes to further prove that irresponsible lending has done us all a disservice. Hispanics are more vulnerable given their lower average incomes, but the situation is the same for all those in the lower income brackets.

Fixing the problem will take some work and money, but this story is flying fairly low on the radar right now. It's not something the vast majority of people are reading or hearing about, especially when stories on CNN Money or MSNBC are telling us about record-breaking highs on the stock market. Nobody wants to hear the bad news, except maybe Congress.

I can only say again, this happened because of a lack of regulation in the market (meaning on banks). Hopefully legislation will get passed, but Congress hasn't before even when it was Democrat controlled. We'll see. Let me tell you, if we don't, it'll just happen again.

3 comments:

TMTGBroker said...

It is predicted that Texas alone will have over a million foreclosures within two years. There are several factors in the overall analysis. Congress requested Fannie and Freddie for help in refiancing subprime borrowers with risky loans but risk management in both troubled institutions are shaking their heads "no thanks". The market has taught borrowers even if they are in financial trouble (bankruptcy, foreclosure etc) "don't worry we have a loan for you". So you have portfolios of loans out there with tax liens, judgements etc. that no one will refinance. Oddly not even the lenders who took the loans in the first place. Wall Street or equity holders are simply going to let them go to forecloser. There is no choice. Desperate people, do desperate things in desperate times so now we have fraud running all through the system. If you are a Texas Mortgage Broker I would have all of your broker contracts examined by your attorney. Expect correspondence in the future from your lending partners that suggests that you repurchase loans. Several Brokers in Dallas are writing checks for repurchase now. It's going to get ugly here in Texas.

Anonymous said...

check: http://subprimemess.blogspot.com for the latest news on subprime.

Nat-Wu said...

Wow, thanks for that insight, tmtgbroker, and thanks for the link, anonymous.