Strike The Root Blog

Housing Twist

Everyone knows we’re in a depreciating housing market. I’ve just realized something that is bound to make it worse for a lot of families.

I have a friend who bought a house six years ago for $223k with ten percent down, bringing her mortgage balance to about 200k. Two years ago she had it appraised for $250k and the bank removed the pmi requirement (private mortgage insurance typically required for mortgage balances over 80%.) Her neighbor, with basically the same home only updated, has had her house on the market for year at $236k and can’t sell it, even though she has three people a week come through to look at it.

That says to me that my friend no longer has 80% equity in her home, not even close. The questions are: when will the bank come back and demand the pmi again, how many families will this be happening to, and how many will be able to afford to add that fee back into their monthly budget with everything else costing more? Most probably started spending the money on something else quicker than you can say “car payment.”

It sounds to me like this will force a few thousand more families to fall over the edge of foreclosure, adding to the already burgeoning housing inventory. Where she stops nobody knows.

This entry was posted on Monday, February 5th, 2007 at 8:33 am and is filed under Uncategorized, economics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

31 Responses to “Housing Twist”

Ken Bank Says:
February 9th, 2007 at 6:43 pm
I’ve been retired from the real estate business for a few years, but I cannot recall any instance where pmi was added back to the mortgage payment once it has been removed. I don’t remember ever seeing a clause in the fine print of a mortgage document that would allow lenders to do that.

Maybe someone else has more info about this.
rettafontana Says:
February 15th, 2007 at 10:46 am
Yeah, I could be way off.

As a realtor, wouldn’t your dealings with a home buyer end when you get your commission check? I mean, would you really hear about it when a mortgage is adjusted? Time will tell if this is a threat. Lenders don’t like being caught holding the bag and they’re already getting caught left and right. Lenders have powerful friends Washington.

There’s never been a housing situation quite like this. All they need to change the rules is a little bone tossed to them by their adoring congressional critters to say its A-OK, to “help stabilize” the housing market. The sheeple would eat that up. Legality is the easiest thing to change. They’ve already simply changed the way bankruptcy is declared to the benefit of lenders. (I’m not saying this was a bad idea.)

The previous generation saw this: one day a man walking down the street with gold in one pocket and alcohol in the other was a criminal because the alcohol was prohibited. The next day, the alcohol was legalized but possessing the gold was a crime. Right and wrong are subject to whim depending on which one benefits the powers that be. “Legal” is whatever the ruling class says it is. The little guy at the bottom pays every time, one way or another. If a bank goes bust, the taxpayer bails it out.
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Housing Twist

31 Responses to “Housing Twist”

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