Yet another Bush Administration official bites the dust. This time, it is embattled Housing Secretary Alphonso R. Jackson. He is stepping down as HUD chief, effective April 18, 2008. The New York Times reports that controversy has followed Jackson since his appointment:

In 2004, less than two months after his confirmation as housing secretary, Mr. Jackson told a House panel that he believed poverty “is a state of mind, not a condition.” Two years later, he said in a speech that he had canceled a contract for a company after its president told him that he did not like Mr. Bush. Mr. Jackson later said he had made the story up.

The latest problem is to do with an FBI investigation of whether he has been favoring friends with valuable government housing contracts, rather than going through a government approved process of awarding such contracts.

Johnson did not state reasons for his resignation, giving the old “personal and family matters” standby. He has been an integral part of addressing the current financial crisis (you know, the one instigated by the subprime market crash). However, the scandal-ridden Bush Administration doesn’t seem to have the high level of tolerance it had in 2004, right after President Bush won re-election.
This is not the only big news to come from the Bush Administration today. Even as Johnson announced his resignation, Treasury Secretary Henry Paulson unveiled a series of proposals that he claimed will increase Wall Street regulation. The measures, however, are considered fairly toothless and Congressional Democrats are already vowing to draft legislation that makes Wall Street regulation stronger.

It is worth noting, however, that the latest Bush Administration proposals do nothing to address the mortgage market and subprime securities problems that set off the current crisis.

Tags: Alphonso R Johnson, resigns Housing secretary, home mortgage loan, mortgage loan blog,
Bush Administration, Bush Administration scandal, subprime market crash

We hear a lot about the subprime mortgage crisis, and how borrowers with bad credit have landed themselves in positions where they now have upside down mortgages. We hear about these subprime borrowers who maybe shouldn’t have been approved because of their poor credit history. What we don’t hear about are the people who had good credit but are now caught in negative equity situations.

Right now, there is also an increase in foreclosures at the higher end of the market. Forbes reports on this specific negative equity situation:

Many of those in the high-end foreclosure market were traditionally good borrowers with strong credit scores, unlike the profile of the typical subprime borrower. Still, the same gaffes occurred on the lending approval side, as people were given excessively high loans, based on the presumption that housing prices would continue upward. “There were people with $100,000 incomes getting million-dollar loans,” says Wendell Cox, founder of Demographia, a St. Louis-based demographics and housing research company.

Those at the upper end of middle class are just as likely as others to make mistakes in buying a home they can’t really afford. Indeed, it can seem tempting to get a so-called “McMansion” with an ARM or an interest-only loan. It allows you to be qualified for more than you could otherwise afford. And, since you have good credit — and may even have a down payment — it is much easier for you to get the approval you need for a home that may actually be out of your price range. Unfortunately, when the rate re-sets, many find themselves in the same position as subprime borrowers. And foreclosures rise.

I know first hand how eager some mortgage lenders can be to get that big home loan. When I decided it was time to buy, there were mortgage lenders that could qualify me for more than twice the mortgage amount I have on my current home. One lender in particular kept touting the virtues of a 5/1 ARM. Another insisted that I could buy a home in swanky “Cliffside” if I got an interest only loan.

For a brief while, it was a heady feeling. Could I really get that kind of a home? But after thinking about it, common sense set in. I knew I wanted a fixed rate going in, why was I letting these mortgage lenders push me in another direction. I went with a mortgage broker who listened to my needs, and approved my home mortgage loan in an amount that I am comfortable with.

The current negative equity situations across the country teach a valuable lesson: Just because you can get approved for a certain loan amount doesn’t mean you should take it.

Tags: negative equity, mortgage lenders, home mortgage loan, mortgage loan blog,
upside down mortgages, subprime borrowers, McMansions

Even though existing home sales got a bit of a boost in February, the same housing trend did not carry over to new home sales. Instead, new home sales saw a decline. Some feel that this is a sign that the housing market will continue to weigh on the economy, reports Bloomberg:

Federal Reserve policy makers said last week that the economic outlook had worsened and the “deepening of the housing contraction” was one factor likely to hurt growth in coming months.

The fact that existing home sales are on the rise speaks to foreclosures and motivated sellers trying to get out from under their homes — possibly before foreclosure becomes a problem. Indeed, this is an increasing problem as more and more homeowners find themselves “upside down” with their mortgages. The Associated Press reports that the number of upside down mortgages has reached an all-time high:

Nearly 9 million households now have upside-down mortgages, and for the first time ever, aggregate mortgage debt is bigger than the total value of homeowner equity — bigger by $836 billion, according to research by Merrill Lynch.

All of this could mean that now could be a good time to buy, if you plan to keep the house for an extended period of time. But there are still hoops to jump. First of all, you need to have an improved credit score. Second, a down payment is required. And more mortgage lenders are requiring better proof of income.

So, even though the homes are out there, and many of them are at good prices, some would-be buyers are having trouble qualifying. This is another reason that existing home sales are doing better than new home sales. They cost less, and are therefore easier to qualify for.

Tags: upside down mortgages, existing home sales, home mortgage loan, mortgage loan blog,
housing market, housing trend, new home sales