Standard & Poor’s raised projections of troubled US mortgage securities. The losses will not stop nor slow down until the first half of 2010. More defaults on home mortgages and loans are expected.
http://www.reuters.com/article/marketsNews/idUSN0627123920090706
Should the mortgage crisis be blamed on subprime borrowers? Evidence shows that it only accounted for 34% of bad underwriting while more complicated and crazy mortgage products with rates that shot through the sky accompanied initially with very low teaser rates accounted for a majority of foreclosures.
http://business.theatlantic.com/2009/07/dont_blame_subprime_mortgages.php
WSJ article analyzing the foreclosure crisis.
Slow to adapt reverse mortgages, Texas is the last state not to offer this financial instrument.
One of the Texas consumer safeguards requires owning equity in a house before anyone could apply for a reverse mortgage…
With declining home values, lenders are hesitant to participate in a reverse mortgage. These are specialty loans only available to borrowers 62 years of age and older to release the home equity of the property in lump sums or multiple payments.
When home prices are falling, no lender wants to pay one dollar for a property that could be valued at fifty cents in a few years.
Faced with complicated mortgage choices with varying teaser rates vs plain vanilla 30 year fixed rate plans, the inexperienced borrower will most likely end up with mortgages that they cannot repay. Majority of home owners are Homer Simpsons to put it politely, and easily swayed with a donut to pick the worst mortgage packages that fit their profiles.
http://www.nytimes.com/2009/07/05/business/economy/05view.html
Further discussion on how these mortgage instruments may be leveling the playing field between the poor and rich who choose to leverage properly.
http://www.businessinsider.com/the-dangerous-mortgage-nostalgia-of-behavioral-econ-2009-7