The Truth about Lenders and What's to Come

Well, we've lost American Home Loans and then went Homebanc to bankruptcy. There has been some speculation that Countywide was following suit, and that seems to be put to rest with the demise of their B/C programs. And the news about the new lending practice of Suntrust Mortgage with no longer allowing paycheck earning borrowers regardless of credit history and score to do a stated loan (meaning a loan where they receive approval on the basis of their great standing in paying back debt). In listening to the best minds in the real Estate business I have been repetedly told this "little downturn" in the housing markets across this country coupled with the struggles of the lending institutions could potentially spell a depression that would make the Great Depression look tame. The following is a quick description of the Great Depression. Change Stock market for Real Estate (Which is and will effect the stock market), and this could be written about where we are headed.

"Great Depression in the United States, worst and longest economic collapse in the history of the modern industrial world, lasting from the end of 1929 until the early 1940s. Beginning in the United States, the depression spread to most of the world’s industrial countries, which in the 20th century had become economically dependent on one another. The Great Depression saw rapid declines in the production and sale of goods and a sudden, severe rise in unemployment. Businesses and banks closed their doors, people lost their jobs, homes, and savings, and many depended on charity to survive. In 1933, at the worst point in the depression, more than 15 million Americans—one-quarter of the nation’s workforce—were unemployed.

The depression was caused by a number of serious weaknesses in the economy. Although the 1920s appeared on the surface to be a prosperous time, income was unevenly distributed. The wealthy made large profits, but more and more Americans spent more than they earned, and farmers faced low prices and heavy debt. The lingering effects of World War I (1914-1918) caused economic problems in many countries, as Europe struggled to pay war debts and reparations. These problems contributed to the crisis that began the Great Depression: the disastrous U.S. stock market crash of 1929 (see Black Monday), which ruined thousands of investors and destroyed confidence in the economy. Continuing throughout the 1930s, the depression ended in the United States only when massive spending for World War II began."

More to follow...