Worst Of Real Estate May Not Be Behind Us
August 6th, 2008There are some so-called experts out there that have announced that the real estate market will bottom later this year or in early 2009. This theory is premised largely on the belief that once the worst of the subprime crisis ends, the market will bottom and slowly tick upwards. This theory may be failing to consider the following. In August 6, 2008 edition of the Wall Street Journal, the paper reported a story of FirstFed Financial a LA based bank that just posted a 70 million first quarter loss. The loss was not due to subprime mortgages which the bank largely and smartly steered away from. Instead, these loses are tied to payment option mortgages made to people with good credit. Certain bank analysts are prediciting that up to 48% of these option ARMS could wind up in default. Firstfed has taken the extraordinary effort of contacting borrowers with these loans that are current in payments and offering modifications so that the loans remain in good standing. I am afraid that the mortgage crisis will continue, simply moving to another group of mortgages turned toxic.