Real Estate Market of 2008 May Be Worse than 2007, Says Watchdog Group

In 2005, America's real estate market was said to be a "train wreck waiting to happen." Current predictions are that "the 2008 national real estate market will make 2007 look like a walk in the park." All of this is according to America's Watchdog and its National Mortgage Complaint Center. The agency issued a press release Sept. 13 predicting that 2008 will see millions of Americans lose their homes to foreclosure as more mortgage lenders go out of business, home builders go bust and commercial real estate investment trusts collapse.

America's Watchdog (AW) is a consumer advocacy group that, as the parent group of several consumer protection agencies, is continually keeping tabs on and assisting businesses and consumers with everything from mortgages and real estate issues, to product piracy and counterfeiting, to corporate waste, fraud and corruption.

AW's frightening real estate prediction can leave many a new homeowner or prospective buyer wondering how to protect themselves if such a dire scenario presents itself in 2008.

According to AW, there are several things to consider, beginning with those who have what's called a "Pay Option Adjustable Rate Mortgage." If that's the case, AW recommends getting out of it if at all possible by contacting your lender and demanding a fixed rate mortgage. If that doesn't work, AW says consultation with a bankruptcy attorney may be worthwhile.

If you have an adjustable rate mortgage, refinance your mortgage into either a 30-year fixed rate mortgage, or get a five or seven year adjustable rate mortgage and sit tight.

If you already have a good fixed mortgage rate, stay put.

If you're trying to sell your home in a major U.S. market, AW says you may have to lower your asking price or consider renting out your home for at least three years. It's AW's opinion that 2008 will see more real estate price reductions in the southwest, southeast and northeast. In fact, some real estate markets like California may actually see reductions of 15 percent or more.

For people in the market to buy a home, AW says to "wait if you can."

If that's not a good option, and you are a veteran, a first time home buyer, or have average to poor credit, AW suggests getting either a VA or FHA loan or mortgage. In fact, says AW, both FHA and VA mortgages may be the best mortgage products available in today's market.

AW cautions consumers to beware of no cost mortgages, Internet solicitations and anything else that sounds too good to be true. The agency suggests that before signing any mortgage documents, have the National Mortgage Complaint Center (NMCC) do a thorough exam of your paperwork; the cost is only $65. The NMCC mortgage inspection service can help anyone who is either buying a home or refinancing their existing mortgage. In examining your mortgage documents, the service can advise of excessive fees and what realistic fees should be. If you've already signed, but believe you've been cheated, the NMCC will do a complete mortgage review for a fee of $150. At the very least, a free call to the Center can give you some direction.

For years, AW has been pushing for banks and mortgage bankers to disclose the same fees that mortgage brokers must disclose, particularly what is called "yield spread premiums." A "yield spread premium" is actually a kick back mortgage lenders get for increasing a buyer's interest rate/mortgage payment. Mortgage brokers have to disclose these fees, but banks or mortgage bankers don't. AW says that home buyers would never agree to a kick back that increases their monthly mortgage payment if they understood what it was.

AW says that the real estate disaster has been caused, in part, by such double standards on the part of banks or mortgage bankers. Also, many home builders have inflated the value of their homes and then sold the over-priced loan to a pension fund or mutual fund. Add to that home buyers who should never have obtained a mortgage to begin with - or who have "used their home as an ATM" - and the end result is disaster.

Bottom line, says AW: "You cannot stop a train wreck once its started."

Sources:

Press release, Americas Watchdog Offers Tips on How To Survive The Real Estate Crash Of 2007 and 2008; http://www.prweb.com/releases/2007/9/prweb552672.htm

America's Watchdog; http://americaswatchdog.com/

National Mortage Complaint Center; http://nationalmortgagecomplaintcenter.com/