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Emailwire.com - As the housing market downturn across the country continues lenders are reexamining their lending policies and making loans less available than they were in years past. This effect is lauded by many economic observers, but may result in a reduction of buyers which could lead to an even greater supply of homes on the market.
In California's greater Sacramento region lenders began the processing of foreclosing on homes for non-payment of mortgages at a 239% higher rate in 2006 as compared to 2005. According to Patrick McGilvray, J.D., President of Sacramento-based TheHomeBuyingCenter.com, “Our region saw homes skyrocket in value between 2000 and 2005 and many, many new homes were built. We’re still dealing with a glut of houses available for sale.” Mr. McGilvray added, “this [situation] could last for years, but I am optimistic about the long-term health of California’s housing market."
Economists will tell you that when supply outstrips demand then prices of a given commodity, houses in this example, will fall. In this environment, the moves by politicians and lenders to restrict prospective homeowners from easily obtaining loans will likely continue the stagnation and decline in the California residential real estate market.
The prospective home purchasers in question in recent years were able to buy homes because of the ability to qualify for so-called subprime mortgages. These products were sometimes the only way to get money to buy a home for people in the process of repairing their credit status.
Congressional hearings, run by Senator Christopher (D)-Connecticut are investigating the subprime mortgage market industry’s practices in Washington, D.C. The industry, in addition to lax underwriting practices, is accused of predatory lending practices, among other things, that have had a disproportionate effect on minority purchasers.
Consumer advocates have alleged discriminatory practices among lenders in recent years and have complained that many African-American and Latino homebuyers have been sold inappropriate products that were not fully explained. Many of these people were first-time homebuyers and were sold mortgages with dramatically higher costs than white purchasers even with identical financial backgrounds.
According to real estate tracking service RealtyTrac up to 1.5 million homeowners will face foreclosure in 2007.
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