Subprime - personal stories

Rising Trouble With Mortgages Clouds Dream of Owning Home

Business
Rising Trouble With Mortgages Clouds Dream of Owning Home
By EDUARDO PORTER and VIKAS BAJAJ
Published: March 17, 2007
Hundreds of thousands of families who bought houses in the last two years are being expelled back into rental housing.

Excerpt:

Consider Nathaniel Shields, who expects to lose his four-bedroom Cape Cod house in southwest Chicago to a foreclosure in May.

He cannot afford his mortgage payment, which jumped to $1,300 a month from about $1,000 after his loan reset to a higher interest rate last summer. A divorce and the loss of his county government clerical job, which paid $14.80 an hour, have also hurt.

In 2004, Mr. Shields took out a popular hybrid mortgage that carried a fixed interest rate for two years before becoming an adjustable-rate loan for the remaining 28 years. In August, his loan’s interest rate rose from 6.6 percent to 8.1 percent, and to 9.6 percent now. “I love the house,” said Mr. Shields, 47, who now works in a custodial job with the Chicago school district that pays $10.40 an hour. “I put a lot of money in the house — a deck and a new garage — and they are just going to take the house.”

How this could cascade:

1. More houses in foreclosure ... (supply / demand)
   
2. Lower housing prices ...
   
3. Tighter mortgage credit market ...
   
4. ....
   

Questions: Did the government help make this mess but subsidizing mortgage interest rates? In the rush to make money (through loan originations) did mortgage companies create this situation?