The XBroker: January 2009

Circles, Dots and Mortgages

What the hell is this?  My kindergarten drawing of what happened to the mortgage industry and why so many homes are in foreclosure or heading there.

The black dots represent the relative amount of people who have/need a mortgage.

The gray circle represents the size of the pool of available mortgage programs prior to ~August 2007, i.e. the sub-prime and Alt-A market. 

The white circle represents the size of the pool of available mortgage programs today going forward, i.e. Conforming and FHA.  

The gray circle has since evaporated.  No new sub-prime or Alt-A loans available.

There are far less people who fit into the white circle. 

That leaves a bunch of black dots that cannot get a mortgage anymore. 

If you're a black dot that has a sub-prime or Alt-A ARM and it adjusts for the worse, dont have the credit/financial strength to qualify for a Conforming or FHA loan (fit in the white circle), your stuck.  Pay the higher monthly payment, sometimes as much as 50% higher, or lose the home to foreclosure. 

Thats leaving a bunch of houses empty.  

End of story.

9 commentsJeff Corbett • January 30 2009 09:42PM
Circles, Dots and Mortgages
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