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Property Down 30 Percent. Mortgages Down 2 Percent. Everything Which Diverges Must Collapse.

April 15, 2010

You know about a housing bubble, but not a mortgage bubble. Why?

Seeing the mortgage bubble requires both competence and independence and a little courage. These are not available at Joe-or-Jane magazine or newspaper.

A crash in mortgages represents a true-and-possible Armageddon scenario. Property values have fallen 30 percent and mortgage balances have fallen 2 percent.

One measure is right and one is wrong. In your heart, which one do you think is true?

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PRINT – Everything Which Diverges Must Collapse

Michael David White is a mortgage broker in Chicago.

Please forward questions, corrections, and reactions to comments below or send me an email:

mike@mynewmortgage.com

Please send me an email if you would like to take out a new mortgage.

7 Comments
  1. AndyC permalink
    April 20, 2010 1:15 pm

    Mike

    Can we conclude from this that the banks are on the hook for and not marking to market the 6 trillion dollar difference?

    • April 20, 2010 2:11 pm

      Hi AndyC, i don’t know the answer to your question, but off the top of my head i would say Fannie & Freddie own half of what is out there. The other half is all over the place. I don’t think the large commercial banks have big exposure to first mortgages. The write offs taken by the owners of mortgages may be much larger than the reported mortgage balances. Thanks for your comment. mdw

  2. hstad permalink
    April 16, 2010 7:50 pm

    Good question! I would like to also know. I think that if a change of ownership occurs that is reported as a sale regardless of type of transaction – but am not sure.

  3. April 16, 2010 8:12 am

    I enjoy your writing and insights. I was wondering if you could answer if a home taken back in foreclosure by the bank is listed as a “sale” in the monthly sales figures reported by various companies. It seems there is a disconnect when news reports foreclosures are up (bad), but sales are up (good).

    • April 16, 2010 7:01 pm

      Hi Kelly, i will check this out. mdw

      • April 17, 2010 7:54 am

        I’ve noticed how the news stories seem to pretty much coincide with – bad news – foreclosures are up, but good news – sales are up, and typically the median sales prices are dropping in many markets. I know there is a difference between a foreclosure notice being issued and a foreclosure actually being completed that results in a change of owner as it becomes bank owned, if no one buys it at the foreclosure sale. I’m curious what the “real” sale numbers look like. The numbers of homes selling that don’t include the homes the banks are taking back in foreclosure.

    • April 19, 2010 12:29 pm

      Hi Kelly, the NAR spokeperson said their count is only of transactions reported on the MLS and that foreclosure sales are not reported on the MLS. i hope that answers it for you. mdw

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