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America's Subdivisions, A Ticking Time Bomb?

Aug 20, 2008
A report was released recently by the LIUNA, Laborers' International Union of North America. The report detailed the implications of the homeowner and the nation's economy when the adjustable rate mortgages reset in 2010 and 2011. For the releasing of the report at a conference held outside the KB Home Headquarters, LIUNA was accompanied by homeowners from a KB Home development and community reps who feel the worst is yet to come in the mortgage and housing crisis.

The report, titled "The Ticking Time Bomb: Adjustable Rate Mortgages and Depreciating Home Values in New Subdivisions," takes a look at mortgages that were originated between 2005 and 2006 in Maricopa County, Arizona by three of the nations largest corporate home builders including KB Home. According to the report more than a third of all mortgages are five year ARMs that will reset in 2010 and 2011 meaning that people will be trapped in their loans and unable to refinance before their interest rates reset due to high loan amounts and decreasing home values. The report also goes to show that the home values have declined significantly in just the last year.

What this is causing is a huge jump in subdivisions with an increasing number of foreclosures; an epidemic that can mean death to a subdivision. With an economy that is quickly spiraling toward recession the problems that are resulting from the mortgage and housing crisis threatens entire communities.

Many new subdivisions that are experiencing an unhealthy number of vacant foreclosed homes are really worried about the threat that looms in 2010 and 2011 when a large number of loans will have the interest rates reset. This disaster for current homeowners can be a guiding light to the potential first time home buyer in a couple of ways.

The First Time Home Buyer:

The biggest thing for the first time home buyer is to educate themselves; be aware! When looking to finance your first mortgage take the advice of many who have lost their homes due to foreclosure and make sure you get a fixed rate mortgage. A fixed rate mortgage will not reset after a number of years so you will know what your payments will be. If the interest rates significantly lower after time you can always check into refinancing to get the better rate.

When looking for your first home look around the area at the number of vacant homes. Will your new neighborhood be changing drastically as more homes are foreclosed on? This could cause your property value to decrease further than the exceptional deal you may have gotten. Take heed from the report if you are looking to buy your first home in a subdivision that may be facing the time bomb of foreclosures as well.

Gamble with the roll of the dice. Some potential first time home buyers may see this as a prime time to get into a home and a sub division they would otherwise never be able to afford. They may enter the subdivision with the hope that eventually the tide will turn and the sub division will be restored to its previous glory. However, know that it may turn the opposite direction and end up being a neighborhood you will grow to fear or regret and then be trapped and unable to sell as the home values have spiraled downward.

LIUNA is now calling for agencies including Fannie Mae, Freddie Mac and HUD to buy or securitize mortgages and to exercise more examination of mortgages that come from corporate home builders or lenders under the control of home builders who have caused much of the crisis. With unethical and often illegal manipulation that put many people in the way of harm in their mortgage these home builders need to be investigated further lest the subdivisions of America fall away.
About the Author
J Stromsteen has many years expertise in the finance, real estate, and insurance industry. She contributes to various websites such as First Time Home Buyer where you can find today's mortgage rates as well as a wealth of information on getting a First Time Home Buyers Loan .
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