Mortgage Tips, Tricks & Secrets

The Sky Is Falling (fable), also known as Chicken Licken, Chicken Little or Henny Penny, an old fable about a chicken (or a hare in early versions) who believes the sky is falling. The phrase has also become used to indicate a hysterical or mistaken belief that disaster is imminent. 

Hopefully you get the humor, in terms of everyone crying that the mortgage sky is falling.

Is ”the mortgage sky” really falling?

Let’s take a closer look and bear in mind that even though the news is totally focused on all the bad, it’s never as bad as it seems.

“It’s not necessarily a national problem,” said CoreLogic’s chief economist, Mark Fleming. “It’s focused on local markets.”

High risk markets have foreclosure rates and fraud risk indices three times the national averages. High risk markets also have job issues such as high unemployment along with low wages and wage growth, all indications of economic stress (not necessarily all having to do with ONLY the mortgage market itself).

By contrast, the lowest risk markets have low unemployment, high-paying jobs and solid job growth, moderate house price appreciation, low foreclosure rates, and minimal fraud and collateral risk. Overall, the rankings strongly support the assertion that mortgage risk is concentrated in specific regional or local markets.

The areas most affected by delinquencies are represented by Rust Belt localities such as Detroit, where the troubled auto industry has devastated the local economy. 

In more economically healthy areas, overheated housing prices in mostly coastal state communities can drive up the delinquency risk.

High home prices mean that a large percentage of buyers can overextended themselves to get into a home.

Some “Stupid Home Owners” may have taken out mortgages with low initial interest rates that later reset much higher, counting on rising prices to allow refinancing at lower rates.

Hey, they gambled - some lost. However it’s not the MORTGAGE market in and of itself that’s to blame. In this case it’s the home owner with the gambling problem in the first place betting on the unknown, unforeseen future of lower rates and soaring home prices.

I personally was praying for the correction. Originally being from Michigan where my friends were building new 5000 sq ft. homes for $190,000 and then moving to Virginia where a 1500 sq ft. townhome is $750,000 (and that’s without a garage or a yard) - I knew something had to change.

My point is, the mortgage sky is NOT falling, its just that gambling home owners are paying the price for getting into a mortgage they have no clue about.

If you take the gamble that a 2 year ARM helps you afford your house payment now and that you’ll just refinance before it adjusts then you are willing to lose it all as we’ve seen with the recent foreclosures.

If you refinanced into one of those new fangled Pay Option ARM loans with the 1% interest rate then you ARE a gambler - and you’ve got your work cut out for you come adjustment time.

The simple fact is, those loan types are excellent for short term owners who are cash positive and can bail themselves out if needed however it was a majority of the long term home owners that opted for those amazingly low rates and low closing costs.

Home values dropped, that’s why we are where we are today. They needed to drop, they were out of control.

Take mortgage loan gambling chances when you can afford to (i.e. cash in the bank, excellent credit, short term living needs, investment, etc.)

For those of you who’ve ruined your credit along the way - you can still correct all the negative items by visiting my recommended Credit Repair Service. Even if you’ve had a bankruptcy it can possibly be removed and that in itself will increase your credit score and make you a viable mortgage owner again soon.