The XBroker: Circles, Dots and Mortgages

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.

Comment balloon 9 commentsJeff Corbett • January 30 2009 09:42PM


Thank you for sharing the story of the dots.  I kept staring at it thinking this was some type of Rorschach Test and I was going to get some ephiphany out of it -- by staring blindly at the dots.  But, I had to read your article, and there was a quasi-ephiphany.

I just wish the buyers could have figured out their budgets prior to . . . well, becoming a black dot in the gray circle.  Plus, I know a ton of agents and mortgage brokers who played the system, buying, flipping, re-financing with "equity" cash outs. 

Posted by Carla Muss-Jacobs, RETIRED (RETIRED / State License is Inactive) over 10 years ago

Hi Jeff...Great Visual of where the mortgage Customers and Money supply Is and Was up until recently.

Lets hope not to many homes become Vacant :O(

Cheers, thanks for the visual aid .

Posted by Fred Carver Personal Real Estate Corporation, Accredited Real Estate Consultant (RE/MAX Camosun Victoria BC Real Estate) over 10 years ago

Simple explanation and diagram Jeff but all too true unfortunately!

Posted by Bill Gassett, Metrowest Massachusetts Real Estate (RE/MAX Executive Realty) over 10 years ago

Well, that's certainly easy to understand.

Posted by Fran Gatti, Managing Principal Broker - RE/MAX Integrity (RE/MAX Integrity) over 10 years ago

I agree, good explaination of what happened to the mortgage industry. Easy to understand - especially for "visual" people.

Posted by Debi Braulik, Selling Maple Valley to Fife WA Homes For Sale ( over 10 years ago

Great analogy.

Posted by Lyn Sims, Schaumburg IL Real Estate (RE/MAX Suburban) over 10 years ago

OH how true yet simple to understand!

Now we approve two out of ten applications...the white dots

Posted by Kristina Yorke ( ~ FL FHA Mortgage Expert ) over 10 years ago
thanks for the kids point of view. good info. hate to see it, but good. Thanks joe
Posted by Joe Garcia (EXIT PERMIAN BASIN REALTY) about 10 years ago

Ha!  I feel like a I had a test done at the eye dr

Posted by Tammy Deviley (RE/MAX Select REALTORS LLC) almost 10 years ago