News Channel Mortgage

Note: I’m excited to introduce a new contributor to Blown Mortgage - Patrick O’Hearn.  Patrick O’Hearn is a financial services professional with extensive mortgage industry experience.  Mr. O’Hearn’s strategic connections to and knowledge of the secondary mortgage market give him unique insights into the mortgage industry.

He penned this after Bush’s announcement and before the official bailout plan was announced (more coming on that), but I was in Las Vegas and couldn’t post it - my bad.  But I think he has some excellent commentary.

The buzz last week, of course, had to do with the major steps announced by the president to shore up the markets.  The message to both US and world markets was an unequivocal, “we’ll do whatever it takes to stabilize the situation.”  

That commitment made all the difference.  World markets soared and the Dow ended the week just 34 points down.

What is the underlying lesson of all this?  Three critical points.

First, as the saying goes, when the US gets a cold, the world gets a fever.  What happens in this country matters.  Our economy is linked in major ways to so many other economies, that problems here quickly spread to the global market.

Second, the mortgage industry as a whole has shown itself to be one of the most important pillars of our economy.  After 9/11, when other parts of the economy tanked, the overall economy remained firm because the housing industry continued to do well.  Problems in the mortgage industry, on the other hand, almost caused a meltdown as horrendous as the Great Depression!  For most people, their greatest investment is their home.  The lesson here, then, is when the housing market gets a cold, the rest of the economy gets a fever.

Finally, market perception is reality.  Overall, the economy is still sound.  Yet the perception that Wall Street was in a meltdown caused investors all over the world to panic.  It was the perception that events were spinning out of control that triggered a collapse in global markets this week.

Even Congress was showing signs of panic.  Harry Reid, the Senate’s Majority Leader was quoted in the Washington Post saying he didn’t know what to do.  

So the Bush Administration stepped up and let it be known they were taking charge and would support the markets.  The response was a restoration of confidence and a restoration of business as usual.  

People wanted to know that someone was going to “take charge.”  Once that message had been conveyed, things stabilized.

This, of course, is the tightrope that government walks.  To allow the markets to work in their normal efficient and free manner, but to be able to step in and under gird the system in times of trouble. 

The balance is a delicate one because both the markets and the government represent the interests of the people.  The government must protect the people while the markets protect the people’s investments.  Government gives us stability in the present while investments are there for our future.

So the challenge is for the federal government to protect the interests of the people without interfering too much in the interests of the people.  I give the Bush Administration credit for doing what they absolutely had to do.

At the same time, some of the panic might have been averted if President Bush had begun addressing the nation a week ago, and continued throughout the week.  Yes, President Clinton loved the sound of his own voice, but he also understood the need to communicate regularly with Americans.  He would have held daily press conferences so that people understood that he was paying attention to the situation.  That alone would have helped.

Did the Bush Administration avert a “financial Katrina”?  My gut tells me yes.  We’ll have to wait and watch to know for sure.

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From Debbie:

OK, so I wasn’t expecting a lot of praise with my first post here on Blown Mortgage and I’m fine with that.

Several, if not all, of the comments were far from welcoming. One essentially said that I had no clue about what I was writing, and yet another that I do not understand the complexity of the mortgage problem. I have to disagree as I’ve been writing about real estate issues for some time now. While I’m not a numbers person, I, like most Americans, have some idea as to what’s been happening in the housing industry.

In addition, I was once involved with someone who was in the mortgage business. I ate, slept and lived it daily; as he went from job to job working and cashing in when said mortgage companies were making millions during their heyday.

I never claimed to be a mortgage expert nor will I ever apologize for not being an expert.

However, I do know many close friends and acquaintances who have indeed lost their homes because of the fall out. I hear on a day-to-day basis about others who are going to lose their homes or are afraid they are going to lose their homes. True, some of these folks did get in way over their head, and maybe they even deserve to lose their homes.

According to a press release at DQ News: “Lenders started foreclosure proceedings on a record number of California homeowners last quarter, the result of declining home values and the rampant spoilage of a batch of especially risky home loans made in late 2005 and 2006, a real estate information service reported. Mortgage servicers recorded 121,341 “notices of default” during the April-through-June period. That was up 6.6 percent from a revised 113,809 for this year’s first quarter, and up 124.9 percent from 53,943 in second-quarter 2007, according to DataQuick Information Systems. Last quarter’s number of defaults was the highest in DataQuick’s statistics, which go back to 1992.”

The numbers don’t lie my friends.

Oh, and by the way, to the one reader who bet that I found a better home and for less rent, I can only wish. I did indeed find a great place and a place that I wanted to move into many years ago, but in no way is it cheaper.

I also noticed that my former Landlord’s McMansion and the home that I had to leave are both up for sale. I laughed because even if he gets what he’s asking, he will still be taking a hit. Both homes have already been reduced twice in a matter of a few weeks of being listed.

He paid well over $1 million for his own home but now that same home is listed for under $800,000. Oh, and the home that I personally had to high tail it out of? The same one he bought for less than half a million in 2005? I just looked at the MLS and it, too, has been reduced yet again since he first listed it in August.

So, as we move ahead and I TRY to make sense of this mortgage mess, I have little doubt that you will keep me in check. Don’t be afraid to criticize what I write (as if you would hold back), give me input (it is always welcome) or challenge me (I’ve always loved a good challenge). Hey, I’ll even take a blog topic suggestion from you if it’s a good one.

I learned a long time ago, when I started as a journalist in the late 1980s, that even if you get hate mail, it means they’re still reading.

The writer, Debbie L. Sklar is a 20+year journalism veteran residing in Southern California, where she is a writer, columnist and editor for many local, regional and national publications. She will be a regular contributor to Blown Mortgage and may be reached via e-mail at DebbieSklar@cox.net.

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