Equity Home Loans

Will conventional home loans be the next area of the credit sector to implode?

I really dont see the end of this mortgage crisis. I am really woried that the next bubble to burst are the prime mortgage homes. Please give details as to why you think the way you say.

Public Comments

1. Whenever there is an "up" economy, people get too giddy and greedy. And whenever there is a "down" market, people see the end of the world. The truth is somewhere in between. Markets are remarkably efficient self-correctors, as painful as the process can be. There will be a bottom - the only question is when.
2. The value of our homes is coming down, but it won't have anything to do with prime mortgages. If you are talking about safe, conforming, 30 year fixed rate mortgages, and a bursting bubble? That won't happen. The secondary market will continue to buy them. But, as far as the next mortgage crisis? The first one isn't over yet, and rates will be at least a point higher this time next year. Think 1970's all over again.
3. Conventional mortgages aren't going to blow up as much, because those borrowers are still going to be able to repay. It's the credit cards that are going to blow up next.
4. Sub prime loans are actually a type of conventional loan, just a non conforming type of conventional loan. Stated income and stated asset loans were available in both conforming and non conforming loan types but were still consider "prime" lending. However, these types of risky loans weren't restricted to just "sub prime" loans and the bubble has been bursting on the prime stated income/asset program. People that got a mortgage with just a good credit score were not ready for the perils of home ownership, they could not call the bank when the septic needed to be replaced. Between that and real estate taxes increasing at highest rate ever, and values going down, and if they got a adjustable rate then the payments soared. Interest only loans meant they most likely owe more than what the property is now worth and creating neg amortization. They were in way over their head. The lenders are already reverting back to old school lending with requiring documentation to be sure the borrower can actually afford the house. I see a lot more people not able to qualify for conventional loans and more people will get FHA loans, and with many states outlawing the use of stated income / stated asset loans the market will turn back and rebound. I think we still have a long way to rebound.