7 Comments Add your own

• 1. Corri Klebaum  |  August 10th, 2006 at 5:57 pm

  Let’s not just blame the ARM’s. Before I made to the move to Mortgage Consultant I spent over a decade as a Collection Specialist and I can list a few more reasons as to why the foreclosure rate has spiked. To start, I have learned that many people are simply careless with money; I find myself guilty to some extent and for that purpose I will say “we” and “our”. We use the debit card for everything then don’t balance the checkbook and are left to wonder why we can’t save any money. To perpetuate this when there is an emergency we will rely on credit cards. Worse, the emergency was defined as the Nordstrom half yearly sale or to be fair, the GI Joes sidewalk sale. We love our SUV’s, RVs, boats, quads, sleds, and basically anything else that requires gas. Ooops now gas is $3 a gallon and we can’t afford to fill up our rigs to get to work let alone go play. I forgot to mention all of the above are financed, further propelling the carelessness into living beyond our means. Another key factor is recently the payments on our credit cards nearly doubled so it doesn’t take 45 years to pay them off. Our “budget” (not a dirty word btw… so please let’s teach our children) continues to be stretched to the max as the cost keeping of food on the table and the lights on continue to rise. We live paycheck to paycheck and to compensate when the unexpected happens we pay our bills late or “juggle” if we prefer, add in a few late fees to the increasing the debt load and our vicious cycle continues. We will refinance and bail ourselves out if we are lucky escaped the predatory lenders we read about. We find some relief but unfortunately didn’t learn from our mistakes and end up right back where we started. Finally when we become tired of the collection calls, the nasty grams, the sleepless nights and heart palpitations we consider bankruptcy. Enter the bankruptcy reform act! We can’t just run to the courthouse steps anymore waiving our Chapter 7 notices to save our house, we must to attempt a debt program and/or try to make a Chapter 13 fly. It may not be all of the above but for the most part it I paint an accurate picture. We have killed ourselves trying to keep up with the Jones’ but we still can’t fathom how it is that the Jones’ are broke.

• 2. pdx pipeline  |  August 10th, 2006 at 7:34 pm

  That 20% increase should be illegal to create and to charge. I don’t see how this can help the economy in any way.

• 3. Hank  |  August 10th, 2006 at 8:01 pm

  Corri, there is certainly some of what your suggesting, and I don’t doubt you saw a lot of poor choices as a Collection Specialist. But over-consumption really doesn’t get to the question of why Portland’s foreclosure rate is going up now. Did Portlanders all of sudden develop spendthrift habits when they didn’t have them before? And are Portlanders really all that different in their financial responsibility than people in communities where the foreclosure rates have declined?

• 4. Jim  |  August 10th, 2006 at 9:19 pm

  Let’s face the facts folks. We are in an unsustainable housing bubble, the likes of which hasn’t been seen since the Florida real estate boom of the 20’s.

  Bust follows boom as sure as night follows day. The recent rise in foreclosures is just the tip of the iceberg. As a country and as individuals, we will be forced to live within our means. That means one hell of a lot smaller economy than we have today and that unfortunately means skyrocketing unemployment.

  Greenspan lowering interest rates to 1% and triggering an unsustainable housing boom will go down as the greatest central banking blunder of all-time.

  Over the longer term, recessions are healthy because they purge the excesses and malinvestments out of the economy so that the next economy expansion can occur on solid ground. Between now and the next recovery, we expect to endure the worst economy recession since the Great Depression of 1929+. Hopefully it won’t be worse.

• 5. Corri Klebaum  |  August 11th, 2006 at 12:38 am

  Hank, don’t get me wrong, I am not saying over-consumption and bankruptcy reform is solely to blame here, just my 2 cents. As for Portland’s spending habits I do remember more Hondas than Suburbans about town ten years ago, we must need more room to haul bags from all those high end stores that have taken over… Maybe our image has gotten the best of us. But seriously, as Jim stated “we will be forced to live within our means” I agree, so let’s also hope all the weight we put on in our fat and happy days is enough to keep sustain us through the lean times…

  Happy Budgeting Portland : )

• 6. Larry Morris  |  August 11th, 2006 at 10:08 am

  All good points, but I believe that there are dynamics here aside from our love for credit and a 1% Prime. We have had an influx of greedy investors (in state and out of state) who have bought just about anything that had a roof on it or a foundation with little due diligence. Their only hope was that the value would continue to appreciate. Many of these had little or no experience in the real state market. Some probably also lost a fortune in the stock market.

  Another segment would be those who bought more house than they could afford because of the low interest rates or poor counseling.

  Add to that a mix of unethical or uneduacated professionals who have encouraged this. These would included investment seminars, realtors and mortgage brokers.

  Lenders also are to blame as the rules of the game have changed. It is harder to find a lender who will allow a earnest money agreement to be “assigned” especially with an increase in price. They are also much tougher on loans that don’t stay in force 120 days (the term that they guarantee the secondary market). This makes it harder to handle a quick flip with little down. But it’s not their fault. They are reacting to our abuse of the rules.

  And finally, it is significantly cheaper to rent in Portland, and many other cities, looking solely at a monthly payment. If you can’t bring a serious downpayment to the table or afford a negative cash flow you are going to be in trouble.

  When asked what I wll do when the bubble bursts I sya that 1st I don’t believe it will burst. I believe that there will be a correction and that things will come back to normal. We are starting to see that now. Houses are staying on the market longer and selling for more realistic prices (less increase). Rates are getting back to a more stable place that supports both borrowering and saving.

  But mostly what I tell people is that I will continue to finance homes. When a property goes into foreclosure someone will buy it. That buyer will probably need financing.

  http://www.PDX-Mortgage.com

• 7. Jim  |  August 11th, 2006 at 4:58 pm

  manias that cause a parabolic rise in prices don’t level off and then go up at a slower rate. please show me a chart of anything that goes parabolic and you’ll see it go down just as fast on the other side.

  as a society, borrowing on the house, spending beyond your means, exporting manufacturing jobs, importing illegal mexican immigrants and displacing millions of american middle class will all blow up.

  an economy can’t function on mortgage brokers, real estate agents, remodeling contractors, toe salon operators and starbucks baristas. sooner or later, the bills come due and continued increases in borrowings won’t cut it.

  one way or another, americans will earn the right to consume based on what they produce. borrow and spend isn’t production. it’s the road to bankruptcy.

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