Crisis In The Mortgage Industry

It was announced yesterday that New Century Mortgage is not accepting new loan application from it's mortgage broker network. This is continuation of the deterioration of the non-confirming or Sub-prime mortgage business. Numerous companies have fallen in this industry in the past several months. This is an indication of serious problems ahead for the mortgage, banking and real estate industries. The industry is facing increases in mortgage delinquency and in the number of foreclosed homes it is going to have to market. These problems will not be isolated to just sub prime companies as all credit has been relaxed over the past several years.

As the mortgage industry falls it will trickle through to other aspects of the market place. Mortgages on sub prime loans are already becoming more difficult to get which is seriously hurting the First time home buyer market. Individuals with credit problems are also being forced out or the market place because of tighter lending standards. No home buying hurts builders furniture companies and any industry related to homes.

The sub prime crisis will also impact real estate because more foreclosed property will be coming on to the market. This will drive down real estate values more again making it more difficult for people to sell properties that they have. This will have a ripple effect that will impact many other industries.
The economy is looking like it may go into a down turn because of this. Too many people have been living off the equity in their house over the past several years. And now the party may be over. With the Government spending money at record levels and possible recession on the horizon the economic outlook does not look good.

The only way to help get this crisis resolved is for the Fed to start reducing interest rates. This will lower monthly payments for clients giving them some relief on the payments they are making on adjustable rate mortgages and credit cards.. It will also help to stabilize Real Estate Prices by allowing more people to qualify for loans. Additionally it will allow refinancing of existing debt to help people with there over burdened debt load.

Quick action is needed on the part of the Fed before this crisis worsens.