Well, many of you who actually know me in person, know that I have been pretty bearish on the national real estate markets for some time. In short, I feel that the lack of oversight and allowing interest rates to hang as low as they have is going to cause another real estate crash like we saw in the late-eighties and early-nineties. As you may or may not know, many smaller lending institutions and savings and loans went out of business because the loans they made on real estate defaulted at a very high rate. This caused many of them, as well as some bigger names, to have to close their doors and let the RTC (Resolution Trust Corporation) come in and dispose of their remaining assets.

Well, today I think we find ourselves in a similar situation. Banks once again are fighting to place their deposits into real estate loans. Because of the weak regulation that exists today, they have been able to sell these loans on the secondary market, getting their funds back to lend out again. Option ARM and negative amortization loans have worked fine in the hyper-inflating real estate market that this country has seen over the past 5 or 6 years. But, as many on the inside know, this is coming to an end quickly. There was a good article in the Washington Times this morning that talks about the risky mortgages and how they are likely to cause serious problems for us all in the near future.

Just last week I watched one of these risky loan making lenders close their doors suddenly. As if that was not scary enough, there were reports on our company forums that they were reversing fundings that had taken place over the previous three days.

My prediction, as it has been for some time now, is that we are going to see the crap hit the fan this year. I am sure this is why Alan Greenspan retired last year. I don’t think that he wanted a part of this nonsense any more. If you are one of the people out there that have been living off of the false money factory that a negative amortization loan / option ARM has been providing you, I have a couple of recommendations for you. If you have been making the 1% payments, make sure you can afford to make the payments you will have when your loan goes adjustable. If you cannot, then refinance to a payment you can make or SELL YOUR HOUSE. We talk to people every day who don’t seem to understand the concept of a sinking ship. There is a window of opportunity right now to abandon ship for many people. For some it is too late. If you are one of the lucky ones and you cannot afford the house you now own, sell it while you can actually put some money in your pockets after the sale.

tags: crash, forclosure, loans, mortgages, real estate, short sale