By MIKE LARSON
Special to The Post
Sunday, September 09, 2007
Let’s not mince words: We are experiencing one of the most severe downturns ever seen in the mortgage lending industry.
Many subprime lenders are tumbling into bankruptcy, while many medium-grade mortgage lenders are curtailing operations. In just the past few weeks, for instance, both GreenPoint Mortgage and First Magnus Financial effectively were shut down. They originated around $66 billion worth of mortgages last year. American Home Mortgage, a $59 billion lender, also recently went broke.
Foreclosure activity is surging. In the second quarter, a record 0.65 percent of the nation’s mortgage loans tumbled into foreclosure, according to the Mortgage Bankers Association. A private firm called RealtyTrac tallied almost 180,000 foreclosures in July alone – up 93 percent from a year earlier.
Mainstream banks and lenders, including Wells Fargo, National City and Wachovia, are eliminating certain adjustable rate mortgages, requiring borrowers to put more money down on home purchases and forcing applicants to prove – rather than state – their incomes.
In the capital markets, pools of bundled home mortgages, packaged and sold as “low-risk” fixed-income investments, are falling in value. Hedge funds are going belly up. Reports of large losses are emerging not only in the United States but also in Asia and Europe. How did we get here? Why are things getting so bad, so quickly? What can be done to prevent this crisis from getting worse – and to prevent future meltdowns?
We have proposed some answers in our white paper “How Federal Regulators, Lenders and Wall Street Created America’s Housing Crisis: Nine Proposals for a Long-Term Recovery.” Our findings:
See the full article here:
http://www.palmbeachpost.com/search/content/opinion/epaper/2007/09/09/a1e_larson_0909.html
