Subprime risk: Most vulnerable markets - Omaha

[Uffda]

Subprime risk: Most vulnerable markets
2.2 million homeowners are endangered by the subprime crisis. Which markets may be hardest hit?

Throughout the nation, the subprime loans recently made are performing very poorly. "What we're seeing is subprime 2006 loan originations are going delinquent much more quickly," said Bob Visini, vice president of marketing for First American LoanPerformance. "2006 is way ahead of previous years."

Even some of the metro areas with the lowest rates of subprime loans - including Iowa City (2.9 percent), Burlington, Vt. (4.0 percent) and Dubuque, Iowa (4.2 percent) - may be more vulnerable than they first appear.

In a lot of these places, a disproportionate number of owners refinanced with subprime loans during 2004 and 2005, according to Allen Fishbein, director of credit and housing policy at the Consumer Federation of America.

In the Davenport, Iowa metro area, for example, 47.6 percent of all refinancings done in 2005 were subprimes. In Peoria, Ill., the figure was 45.4 percent and in Omaha, 42.9 percent.

http://money.cnn.com/2007/03/21/real_es ... 2007032115

[Big E]

and in Omaha, 42.9 percent.

At least they didn't say "Omaha, Neb."

-Big E

[DTO Luv]

[Uffda]

At least they didn't say "Omaha, Neb."

LOL

Oh by the way I use to live in Wyoming...  


After reading some of these articles I wonder how this subprime is going to shake out.  I lived in Wyoming during one of the Mineral "Bust"  times and heard how people who had lost jobs in the oil fields would walk into the bank and drop their house keys on the banker's desk and walk back out because they couldn't make the house payment and there werent any buyers. It took several years before that came back around.

[Stargazer]

Wow, that is astonishing ... so 43% of people who bought homes in Omaha in 2005 we're complete idiots (or at least so desperate to own a home, they essentially signed up for the mortgage equivalent of a Nigerian email scam).   I wonder how many of these people built new homes and just started paying property taxes on the full value of the home a year after they were in them as well?

Perhaps my prediction for the US reaching third world status is even closer I thought.

This is a very serious situation.

[riceweb]

Perhaps my prediction for the US reaching third world status is even closer I thought.

This is a very serious situation.

The keyword in all of this is "vulnerable." The article does not say that we have an impending crisis, but rather that the possibility for a housing crash well exists, and that Omaha might feel it badly. But that's a lot of conjecture for me, so let's take a look at some fundamentals:

The U.S. economy is strong. Omaha's is even better. So what if a few loans default? People are still moving -- in droves -- to this city. Heck, I'm one of them (I'm moving in on Saturday from Grand Forks, North Dakota). So as long as the American economy is growing and people are moving to Omaha instead of out, I see no reason to worry about a collapse of the housing market.

Short-term investors in real estate might see a pinch, as housing prices could fall, say, 5-10% even in Omaha a year or two from now. But any long-term investor need only begin to worry if the entire economy of Omaha begins to collapse, and that certainly doesn't appear to be the case.

[Stargazer]

Fortunately, the Omaha market didn't see the type of ridiculous rise in property values which many parts of the nation saw during the housing boom.  That would further compound the situation.  Down in a suburb of Phoenix, my sister saw her 1,500 sq foot ranch (which she built about 8 years ago for $125k) rise all the way up to $300k in value, before dropping down to the low to mid 200's.  Which might have opened the door for some of these people to get second mortgages on their 'equity'... only to see it all lost.

True... Omaha is in a much better position than the rest of the country.  I AM however, just shocked... that half of all home buyers in the past couple of years would have even considered a loan like this.

[joeglow]

 I AM however, just shocked... that half of all home buyers in the past couple of years would have even considered a loan like this.

-Really?  Have you not noticed our instant gratification society?  I have a friend who does home health physical therapy in primarily North Omaha.  I am shocked at what percentage of homes he goes into where people have big screen televisions and more electronics than I (someone making a LOT more).  I will not spend money on them because I have more important things to save for.  Yet, or society tells people they deserve and NEED this stuff today.  Frankly, the only shock I have is that it has taken this long to implode.

[agibson95]

Wow, that is astonishing ... so 43% of people who bought homes in Omaha in 2005 we're complete idiots (or at least so desperate to own a home, they essentially signed up for the mortgage equivalent of a Nigerian email scam).   I wonder how many of these people built new homes and just started paying property taxes on the full value of the home a year after they were in them as well?

Perhaps my prediction for the US reaching third world status is even closer I thought.

This is a very serious situation.

I purchased a home in 2005. I paid 168,000 and it was valued this year at 198,000. Plus I live in Bennington, so my property tax is 2.7%. Essentially I pay more in taxes (5,000 more) than my cousin who purchased a house in Elkhorn for $240,000. His house was valued at $223,000.

I pay over $100 more in property taxes than I originally budgeted for. Which was more money than I made at the time anyway. Basically they keep bending me over and having their way with me.

[Uffda]

I bought a house in a neighborhood that has appreciated like other places but then again I would have been killing myself with a 168000 house (mine was around 120000).

I think the main thing with the subprimes is what it is going to do to these people's payments when they reset as they call it.

Here's what the resets can do to monthly mortgage payments: At the original rates of, say, 6 percent, the payment on a $200,000 home was only $1,200 a month. Upon reset, however, at perhaps 10 percent, that monthly payment jumps to $1,755, a $555 increase.

Of course according to what they are saying it could also effect the neighborhoods and the prices there.

It's not just borrowers who suffer: "The [resets] could have a major effect on whole neighborhoods," Fishbein said.

He explains that recent studies indicate that even one foreclosure may reduce values of neighboring properties by about 5 percent. That can cut into home equity even for those who keep current with their bills and make it harder for them to borrow because it lowers their home equity.

[HskrFanMike]

Wow, that is astonishing ... so 43% of people who bought homes in Omaha in 2005 we're complete idiots (or at least so desperate to own a home, they essentially signed up for the mortgage equivalent of a Nigerian email scam).   I wonder how many of these people built new homes and just started paying property taxes on the full value of the home a year after they were in them as well?

The key item to note is "refinancings", not "home sales".  How many offers did you get over the last few years about "lowering your payments" to a 2% or 3% APR adjustable?  Well, guess what.  The teaser introductory rate expired...and wowzo.

I assume that the dancing dogs, pigs, and Santas of the "LowerMyBills.com" ads had to be somewhat effective if they are still running them after all these years.

[Coyote]

An industry that won't quit: mortgage fraud

You'd think that since mortgage fraud more or less toppled the U.S. economy and its banking system, every lender would be on the lookout for it. You'd also think fewer home sales would equal fewer mortgage originations and less mortgage fraud on a sheer percentage basis. But no.

The FBI​ says an army of professionals, and even a few ethnic gangsters, are still out there ripping off lenders, despite all the warnings about criminal mortgage practices in the headlines. It's all the usual suspects, too: mortgage brokers, appraisers, underwriters, accountants, real estate agents, settlement attorneys, land developers, investors, builders, lenders, and bank and trust account representatives. And they're playing all the same old games, from inflating appraisals and fabricating income statements to recruiting straw buyers.

How hard can it be to rob a bank? They've known about mortgage fraud for years, and they're still falling prey to the schemes of penny-ante crooks? The rise in mortgage fraud has been like a surge in bank robberies after banks decided to leave their safes unlocked. And now it looks like the safes are still unlocked.

[ricko]

As long as the people in these lending institutions don't have to take financial responsibility for their crappy loans, and still get their fat commissions, this will continue (and they'll still get their triple A ratings from Moodys).  I love how the business press is all sanctimonious now about shady lending practices. Where were they 5 years ago?  Forget the political community, they were bought off long ago.