The mortgage stupidity era is over, while demands for repayment of soured loans keeps mounting. How bad was Countrywide Mortgage, now owned by Bank of America? The bank made a guess, but those figures don’t add up. Now the bank says the figures might be worse:
“The next six months, the industry, all of the folks that are out there trying to solve this problem, they are going to be very busy,” said Mark Fleming, chief economist for First American CoreLogic, a California research firm. “There are a lot of people facing their resets right now. A good share of them don’t have the refinance option.” Nationally, the number of subprime adjustable-rate loans resetting peaked at 7.6 percent of the loans outstanding last month, according to data from CoreLogic. More than 300,000 such loans will adjust this summer. CoreLogic’s data covers about 80 percent of the mortgage market.
Yesterday we were presented with a report that ut a glossy shine on the subprime crisis. In part – and the main emphasis on the report – was that the worst was over for the subprime crisis. We questioned the validity of the report, seen nationally and on Google News. Today, we are told the opposite – “About half of recent subprime and Alt-A borrowers may soon owe more on their mortgages than their houses are worth or hold minimal equity, putting $800 billion of debt at greater risk of default, according to Barclays Capital.”
A suit files in South Carolina alleges the borrower was not properly informed of how an option ARM actually works. The suit was filed Nov. 16 in U.S. District Court in Charleston and names as defendants World Savings Bank FSB of Oakland, Calif., and Golden West Financial Corp. and Wachovia Corp., both of Charlotte. Option AMRs were invented in the 1980’s for wealthy borrowers, but mortgage enthusiasts sold the products to anybody and everybody by 2005.
There may no responsibility to the customer when applying for a loan, but some loan officers felt bad when they knew the customer could not afford the house payment after the loan reset. They made the loans anyway. One website, Settlement Scams, shows how some loan officers made the loans anyway, telling about how they felt bad after the fact.