Issue Date: September 7, 2007

The Mortgage Mess

By Jody Zink
Licensed Realtor in Ohio & Michigan

All this talk about the mortgage crisis got me thinking about how hungry everyone is for
more. More, more, more. More furniture ... more appliances ... more house. And it's so
easy! Just sign here. It reminds me of how Saturday morning commercials growing up made
me want to eat Capt'n Crunch and Lucky Charms for every meal. Getting fat on all that
sugar is the financial equivalent of living beyond our means.

Although I didn't understand it then, Mom always warned me, if something sounds too good
to be true, it probably is.

The mortgage crisis we're hearing about will take some time to sort out. Its long-term
ramifications remain to be seen. How did it happen? Some lenders, caught up in the
momentum of the real estate boom, enticed high-risk borrowers with low teaser rates. They
granted loans with low or no down-payments and little proof borrowers could repay.
Lenders gambled that housing prices would continue rising, and then the borrower could
just refinance their way out of trouble, or even sell for a profit. When housing prices
coughed and sputtered, borrowers couldn't sell or refinance for what they owed on the
property.

Poor underwriting is leading to more foreclosures and delinquencies as the teaser periods
end and monthly payments re-set at higher interest rates. Owners with a fixed-rate
mortgage who plan to live in their home for a while probably need not worry. The same
goes for an owner with a sub-prime loan that's current. Owners with an adjustable rate
mortgage, especially an Option ARM with negative amortization should consult with their
mortgage professional. In any case, be sure to understand your options. It can be much
too complicated to sort out on your own.

What does this mean to sellers? The pool of potential buyers will shrink. Shane Marzullo,
founder of Greentree Mortgage Services says, "Many will find it difficult, if not
impossible to obtain mortgage financing." Also, the increase in foreclosures can depress
community values resulting in saturated inventories, further driving down prices.

If you're a buyer, qualifying standards are in for massive tightening, so be prepared.
Providing documentation will be crucial and don't be surprised if your lender asks for
more just when you thought you'd given your life history. She's only doing her job.
Buyers need to get pre-approved before entering the market. Marzullo adds, There are
deals to be had, "but getting credit is becoming tougher and tougher,and it's taking
longer to complete a transaction. In this volatile market, what you qualify for today
could change tomorrow."

All that sugar-filled cereal that tasted so good is finally starting to cause a bellyache.

Jody Zink is a licensed REALTOR in Ohio and Michigan with the Loss Realty Group. Her column appears every other week in the Toledo Free Press. She can be reached at jody@jodyzinkrealtor.com or 419-725-1881.