Is anyone else tired of the negative media?
In yesterday's Business Section under the headline: "Foreclosure Filings, Bank Repossessions surge"
(In the Asbury Park Press, from the Bloomberg News service)
The Article starts off with; "US Foreclosure Filings Jumped 57% and Bank Repossessions more than doubled in March from a year earlier as adjustable rate mortgages increased and more owners lost their homes to lenders."
Doom and Gloom from the beginning, but luckily for the second paragraph they throw in some numbers for the educated reader to digest... And lucky for me I am pretty good with math.... After all, if I cant figure out percentages, who can?
Here are the facts from the article: "234,000 properties were in some stage of foreclosure" (not foreclosed on) "or one in 538 US households".
Lets dissect the numbers a little bit. First off, 234,000 sounds like a huge number, but remember this is a national number... There are a lot of households in the nation. Second, 1/538th... thats the fraction.. Crazy low when you think about it. lets put that into decimal form: 0.001859, or as a percentage 0.185874%. The glass is not half empty.. it is 99.8% full!!! In a so called "Bad" market 99.8% of home loans were NOT in foreclosure proceedings in March of 2008... That sounds a heck of a lot better, Doesn't it?
If we take things a step further, the article said "in some stage of foreclosure" so that doesn't mean the sheriff was knocking on the door to kick them out, that means they were sent a letter saying "hey, you've been bad, pay up... or else....." I don't know what the statistic is here, but I would imagine that a pretty big percentage of people who get that type of letter will do something... Beg Mom and Dad for help, sell the house, etc... So not every one of that 0.186% are actually foreclosures.
Next fact: Typical "a" paper ARMs that are adjusting now will actually lower a borrowers interest rate, not increase it. As an example, the fully indexed rate for a 5/1 Libor arm, (one of the most popular ARMS in the past 5 years) is 5.125% and the index is falling still, so each month that number will drop for people adjusting.
To be fair, the true sub prime world loans... typically a 2/28 or 3/27 loan used to help repair credit have much higher margins and will bump up, to potentially painful levels. But these loans were done for people that would not have been able to buy a home any other way, and if they were "good" for the past two years they should be able to refinance to market rates now, (which are low)... If they were not "good" and continued to abuse their credit, who's fault is it?
Have I ranted on long enough? We need to be sure we communicate this to our clients... Get them to read beyond the headline and form their own opinion... Every article I have read has more positive in it than negative, but it is the negative spin that is broadcast as gospel.... A wise man once said, "97.6% of all statistics are made up"
Keep a positive spin on EVERYTHING, and you will find that the world will treat you much better.
Have a great week
Rob
Robert Rauf
Real Estate Mortgage Network
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