The Mortgage Crisis, Home Values, and Responsible Borrowers

Mortgage Crisis – Responsible borrowers are suffering too.

With all the news about the mortgage bail out lately, it is common knowledge that the problem began when loans were given to people who never could afford them in the first place.

Down payment assistance programs, interest only loans, variable rate loans with escalating payments all went into the pot to make the witches brew that poisoned the economy and set Wall Street reeling.

But what about responsible borrowers? Even though responsible borowers can take some solace in knowing they made the right decision in not borrowing money they could not repay, they are still suffering the fallout and paying for other peoples mistakes.

Foreclosures are pushing property values down.

People who are trying to sell their homes are competing with other homes being marketed at foreclosure prices. In addition to a competitive market place for selling a home, real estate and home prices are largely determined by something realtors call a CMA, which stands for Comparative Market Analysis.

In simple terms, realtors access tax records to determine what comparable homes in the neighborhood have sold for recently. When there are numerous foreclosures that sell at below market prices, it lowers the value of nearby homes and home prices go down.

Foreclosed homes also hurt the community in other ways because on foreclosed homes, no taxes are being paid.

Revenues that normally go to support police and fire departments and other community services and that are necessary for a functioning healthy community are just not coming in like they do in a healthy economy.

We are all in this mess together. Everyone has skin in the game.

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