Homeowners Defaulting On Loans

Home mortgage lenders are going through some rough times right now.  There is a big increase in homeowners who are defaulting on their loans.  The challenge is many home buyers bought homes thinking that the prices would continue to increase at the rates that they were increasing.  Many buyers had adjustable rate mortgages and paid little or no money down so as the interest rates on their adjustable rate mortgages went up and their home price dropped making it harder to sell, it made it hard to keep up with the payments. 

Subprime lenders have felt the biggest hit but it has really hurt them all…

Problems in the mortgage market spread deeper and farther afield yesterday.

Trading in the shares of a large mortgage company was suspended yesterday, and the nation’s largest insurer of home loans said its stake in a business that underwrites and invests in mortgage securities may be worthless. Earlier, a German bank acknowledged that its investments in American loans have deteriorated.

The developments are the latest indications that the housing slump will affect a broader segment of the mortgage industry and that the problems will last longer than many officials had suggested earlier this year. Just last week, the nation’s biggest home lender, Countrywide Financial, acknowledged that defaults on second mortgages to prime borrowers were rising quickly.

The New York Stock Exchange never opened trading in shares of American Home Mortgage yesterday after the company said late Friday that it would suspend its dividend and was facing “significant margin calls” from its banks.

Already down 70 percent for the year, shares in A.H.M. fell 39 percent in premarket trading, to $6.39.

To learn more on this subject, read the complete article below from The New York Times:


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