This is my first blog.  I want to speak about the mortgage crisis and the governments reaction.  I have been in the real estate business since 1986 and went through a far worse "crisis" in the southern California market in the 1990's when the aerospace industry went sour and many jobs and subsequently many homes were lost in foreclosure. Stay alive in '95 was the sign of those times.  With the exception of places like the rust belt states like Michigan where manufacturing is the primary source of jobs, most of the people who are in trouble are still working.....they got in over their heads financially.  Many people, both the buying public, the press and inexperienced real estate people seemed to believe that home prices would never drop and if one got in trouble, the market would bail them out.  There were people in trouble when the market was good, too.  People don't realize real estate is a commodity, just like gold, just like lumber, just like gasoline, and as a commodity, it is subject to the marketplace of buyers/sellers/supply/demand, which ultimately dictate prices.  What goes up can come down.  Only about 2% of mortgages nationwide are affected by foreclosure, meaning 98% of borrowers are still making their payments.  The press only gives out the bad news.

The government plan to bail out a select few homeowners is both a terrible plan and a bad idea.   It does not help people that are in foreclosure or have missed payments, and if you have no equity, you can't refinance under this plan.  It also leads people to believe that the interest rate is frozen at the lower adjusted rate, but what they are not telling you is that the payment you are now making is not necessairily amortized, meaning you might have the interest rate frozen, but will end up owing more on the house after 5 years because none of the payments have been amortized.  What is terrible are prepayment penalties many homeowners are stuck with.  I have one client that has a $9000 prepayment penalty and that $9000 is the difference between pricing the home to sell and having it sit there.  The idiots at Countrywide would rather end up foreclosing on this seller than agree to waive the $9000 to allow the seller to drop the price in order to sell the house.....it will ultimately cost Countrywide anywhere from $30-40,000 in foreclosure costs, fees and reduced sales price....rather than take off the $9000 prepay....I know other lenders who also operate this way....if you are not behind on your payment they don't want to talk to you.  Lip service is all it is.

Fundamentally I am against any kind of bailout.  if I get into trouble financially, who will bail me out?  I think now is actually a great time to buy, with lower interest rate and prices along with more motivated sellers. Naturally areas where there is an overbuilt market of new construction like Phoenix, Riverside and San Bernardino Counties in southern California, Sacramento, Stockton, Florida will take longer to get out of the doldrums than smaller markets like Humboldt County where I am given the limited inventory and very few new homes to drag down the rest of the market.

Thank you for reading my blog.

My e-mail address is jeffkatz@assist2sell.com and my website is www.humboldthouses.com