The credit crisis is no longer just a subprime mortgage problem.
As home prices fall and banks tighten lending standards, people with good, or prime, credit histories are falling behind on their payments for home loans, auto loans and credit cards at a quickening pace, according to industry data and economists.
The rise in prime delinquencies, while less severe than the one in the subprime market, nonetheless poses a threat to the battered housing market and weakening economy, which some specialists say is in a recession or headed for one.
Until recently, people with good credit, who tend to pay their bills on time and manage their finances well, were viewed as a bulwark against the economic strains posed by rising defaults among borrowers with blemished, or subprime, credit.
“This collapse in housing value is sucking in all borrowers,” said Mark Zandi, chief economist at Moody’s Economy.com.
This crisis has hit everywhere, and especially here in Los Banos, California. We are now seeing foreclosures all over town, and especially in the new developments such as the one where my wife and I live.
Fortunately for us, we are both retired, and with above-average retirement income, which means that this isn’t affecting us……except for the fact that we’ve lost some of our home value for the present. We are fortunate that we were able to put a very large down payment (half the cost of the home) on our new home five years ago, which lowered the mortgage payment by nearly half.
Our mortgage is a thirty-year fixed rate, and we intend to stay where we are, so that puts us in a much better position financially than many buyers in this town……who made the mistake of taking out variable rate mortgages, which in our opinion, is a disastrous mistake……especially for first-time buyers.
Our advice: Avoid variable rate mortgages like the plague!
I guess it all depends on the individual situation. we are refinancing now and locking in at our current rate for 5 years. otherwise we’d be in a similar situation (monthly payment wise, not property value wise) as Ms. Harris. too high a debt to equity ratio for her, perhaps.
Down here in Florida, we have more concerns over the elderly who are losing their homes due to high property taxes, and inability to pay. And of course our Governor and legislature pass a ‘no help’ bill that idiots in South Florida looked at and said “Oh, well something is better than nothing” and so voted it into law (most of the northern counties saw it for what it was and tried to vote it down. Didn’t work.).
IMO, this is a bigger problem right now than the ‘sub-prime’ problem as more people are impacted, but without the media attention.
Noboby seems to ‘get it’! The government owns it ALL. Don’t believe me…..fail to pay your taxes on
….house…car…income…you’ll see who is in command. Sorry folks, it’s not we the people any more.