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How Real Estate Professionals can Gain During the Subprime Squeeze

By Kristin Gabriel

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Published: 01Oct2007
Word count: 497
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About 1.2 million foreclosure filings were reported last year in 2006, 42 percent more than in the year 2005. Many more are projected for this year of 2007. Current home owner defaults and late payments are not just causing problems in the mortgage industry but the situation is also raising the question if the U.S. economy will suffer from this subprime market squeeze.

What is the subprime squeeze about? Subprime loans are given to borrowers who have poor credit. Foreclosure rates on subprime loans more than doubled in 2005, however it's important to remember that the subprime market is fragmented. Homeownership has grown from 65 percent to 69 percent in the last ten years, and of those, half came from subprime lending. (Source: Federal Reserve Bank of Chicago.)

Companies specializing in subprime mortgages are the ones that are currently suffering, along with the financial institutions that lent money to them. That's why many people are concerned that the subprime squeeze will lead to more credit restrictions on borrowers, which could hurt consumer spending. There are experts who believe that there's a big market segment of the population still out there who are actively seeking financing for new homes, and new technology companies have come up with new ways to help provide loans to these folks via a unique mortgage payment calculator that is so advanced that borrowers know immediately if they have the possibility of financing a purchase.

Many borrowers took out what amounted to uncollateralized personal loans to get into a home they couldn't afford. Now they are crying because they are loosing their homes. In many cases it happened because unscrupulous loan officers put many people into loans they shouldn't have been in. Greed up and down the line from investors to borrowers dominated this run up and it is fitting that all of the players are feeling their part of the pain.

"If you are stuck in the subprime squeeze crisis, ask yourself if you can pay your bills over the next 18 months, then tough it out. If not, sell your house now before your credit is ruined," said Eric Lesin, known as the Loan Warrior. "Unskilled and unscrupulous brokers are at the root of much of this, but borrowers are at fault too. Many people placed bets that they could get in with little or no equity and they fudged their applications."

Now, the fundamental direction of the market is towards more traditional rules for loan approval. This return to traditional standards coupled with the robustness of the rest of the economy will help borrowers with savings and sufficient income to quickly absorb the formerly overpriced houses coming to us through foreclosure of former owners or renters.

The future holds new technology tools that offer complete disclosure which is certain to protect all parties - from brokers, to banks to consumers ... even real estate agents, who will profit by earning the commissions that brokers typically get.

Dogtor Paco, Inc. is a proprietary patent-pending online lending services engine where loan officers, mortgage brokers and real estate agents can facilitate the approval and processing of loans for customers faster. Dogtor Paco's powerful on-demand mortgage calculator provides good faith estimate (GFE) level quotes with full disclosure including monthly payments and all closing costs, using instantaneous rates to calculate closing costs and monthly payments for a particular property.

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