Archives > McKinney Courier-Gazette > News
Print
E-mail
Comment
Rate
RSS
Share
Home industry guarded about bailout
By Lynn Proctor Windle, McKinney Courier-Gazette
Collin County real estate agents and mortgage brokers are tempering their enthusiasm for President Bush’s subprime mortgage bailout.
Concern stems from the fear that it is prolonging the inevitable, they say.
On Thursday, Bush announced a three-point agreement with the mortgage industry to help some borrowers.
The plan also offers borrowers help in refinancing with their current lender or with a loan secured by the Federal Housing Administration.
The plan offers no relief to those who are already behind.
Bush said the plan could help up to 1.2 million people, but local experts say there is no way to predict the real impact in Collin County.
Scott Drescher, a local mortgage banker with 15 years experience and an adjunct professor at Collin College who teaches real estate finance, predicted the measure would keep Collin County home values from tanking further than they otherwise would. However, the bailout would not help all troubled buyers, nor should it, he said.
“It won’t have as big of an impact as many people want, but for good reason. It’s designed for a small percentage of subprime borrowers. It shouldn’t be available for investors and speculators, borrowers who should have stayed renters and who will become renters again, and people who cannot afford to make the payment anyway. It’s for homeowners who can afford and are willing to make the payments,” he said
Since Monday, the Collin County clerk has posted 49 trustee sale notices, properties that have been foreclosed on and are scheduled for a Jan. 1 sale on the courthouse steps.
“A large class of people that bought homes misstated their income or did not have the willingness to pay debts on time. Homes were sold to those people in record numbers. Those people will return to being renters,” Drescher said.
Investors make up another large chunk of those who defaulted on subprime loans.
“The biggest problem is spec buyers and pseudo investors who bought when they didn’t have the money long term,” he said. “They bought in droves in Collin County when prices got too high in other states.”
Many times, homebuilders would sell spec homes 10 at a time to investors to close out a neighborhood, he said.
Bob Baker, president of the Collin County Association of Realtors, believes many of the current foreclosures probably were new homes just a couple of years ago.
“Collin County has a lot of new homes,” he said. “These foreclosures are probably buyers who bought new homes. I would say about two-thirds of the builders use the adjustable rate” for their in-house mortgages.
Baker said homes sales in 2006 were strong for both new and pre-owned homes.
According to the Real Estate Center, 11,580 residential building permits were issued last year in Collin County. In 2005, 12,558 building permits were issued throughout the county.
The relief plan may or may not help many homebuyers in McKinney, Allen, Frisco, Prosper and Celina — the communities with the largest concentration of new home construction, he said.
“Those who’ve never missed a payment are not getting ready for foreclosure anyway,” he said. “The number of foreclosures may still continue because those on the verge of foreclosure have already missed a payment.”
Drescher said: “Most subprime lenders knew there was a problem going in, but are too embarrassed to admit it. Now they’re blaming somebody else. Loans shouldn’t be made just because money was there.”
Now, in the wake of Bush’s plan, the money may not be there.
Mark Dotzour, chief economist with the Real Estate Center, predicted that investors who provide money for mortgages would be stingier with their capital. Based at Texas A&M in College Station, the Real Estate Center is the nation’s largest publicly funded organization devoted to real estate research.
“It’s going to be real interesting to see how the investment community is going to view this,” he said.
Mortgage investors were promised a specific rate of return. Under the plan, they are unlikely to earn that rate.
“It’s a difficult situation to overcome,” he said. “On the face of it, it sounds nice. For homeowners, it’s a bonanza. They’re going to get a cheap interest rate for five years. But those who invested in those mortgages, that’s going to be a little bit more difficult. It’s going to be interesting to see how the investment community responds.”
There is no consensus among Realtors on whether freezing adjustable rate mortgage rates is a prudent move, Baker said.
“There’s a real mix of emotions as to whether this should be done at all,” he said. “All businesses have to operate appropriately and if they don’t, they should suffer the consequences at some level. If lenders and people made mistakes, maybe there should be consequences, maybe no.
“We’ve still got the time bomb ticking. The full impact won’t be known for another decade,” he said.
Contact Lynn Proctor Windle at lwindle@acnpapers.com. To post a comment online, access this story at www.scntx.com.
The following are comments from the readers.
In no way do they represent the view of Starlocalnews.com
In no way do they represent the view of Starlocalnews.com
Nick wrote on Dec 8, 2007 10:18 AM:
" People living beyond their means . . . not a surprise in Collin County; it's more of a tradition. "
Chip wrote on Dec 8, 2007 1:30 PM:
" "If lenders and people made mistakes, maybe there should be consequences, maybe no."
Now there's real leadership for you. I feel better already. "
Culture wrote on Dec 9, 2007 8:34 AM:
" Its the culture - people are getting out of school and feel they 'deserve' to live in a 4000 square foot house because they were raised in one. They borrow from lenders all too willing and anxious to make the loan, then find they can't make ends meet. Our neighborhood is chocked with people in big houses but little or no furniture other than a plasma or big screen tv (what they have is also unpaid for), but there's a BMW, SUV and oftentimes a motorcycle in the driveway. "
You must register with a valid email to post comments.
Only your Member ID will be posted with the comments.
Only your Member ID will be posted with the comments.
Registered users sign in here:
Become a Registered User
- Return to: News «
- Home «
- Top of Page ^
