Hala Ranch Sale Hindered by Housing Slowdown

Well it looks like the housing market slowdown is even hurting Prince Bandar in his efforts to sell his Hala Ranch proeprty in Aspen Colorado. According to BBC, Prince Bandar is having a difficult time selling his $135 million home.

Now in the BBC article they say that the housing slowdown is causing problems for the Prince and it has been on the market for quite some time. Is it really an issue with the housing market or could it be that there are not a whole bunch of people who can afford to plunk down $135 million for a vacation home? Maybe I am wrong but it would seem to me that a home in that price range would not really be affected by the trends in real estate? I have been known to be wrong every once in a while so who knows.

Maybe it is time for the Prince to lower his expectation and move in line with the current market trends. Maybe if he lowers the price someone who actually has an interest in the real estate market trends can make an offer. Somehow I doubt that this will happen and he will eventually sell it to one of the very few people around the world that can actually buy it.

Housing Market Slowdown Uncovers Increase in Mortgage Fraud

According to a recent article on the Inman News site 2006 showed a sharp increase in loans involving suspected mortgage fraud. According to the Mortgage Bankers Association there was an increase in mortgage fraud of 30% in 2006. According to the article, which can be seen on the ALTA site (I would prefer to post the original article on Inman but it requires a subscription), there were even greater increases in mortgage fraud in a number of states with high home prices.

"States with the fastest growth in mortgage fraud reports during the first quarter of 2006 were New Jersey (up 250 percent from the same period in 2005), California (214 percent), Arizona (213 percent) and New York (187 percent)."

The Mortgage Asset Research Institute (MARI) asserts that the high number of mortgage fraud discoveries is due to increased detection of fraud in 2006 and because the downturn in the housing market revealed fraud cases that were hidden by strong price appreciation. Now that that appreciation has slowed or even reversed there are more delinquencies and defaults because borrowers are unable to make payments or refinance because their home is now worth less than when they got their original loan. To me that explains why the fastest growing mortgage fraud cases are showing up in states that experienced dynamic home cost increases that are now reversing.

Most of the fraud cases are a result of borrowers misrepresenting their income, employment history, etc. In my opinion both lenders and borrowers played a part in this problem. The fact is that lenders were loose with their lending requirements in the booming market because homes were appreciating so quickly that borrowers could refinance or get out of their mortgage at a profit by selling. This meant that even if they provided fraudulent information it would not be discovered because the lender continued to get their money. It was not until the market started going south that borrowers were not able to pay their mortgages and lenders began looking into the problems more closely.

Of course borrowers are responsible too because they were providing false information to brokers, which ended up biting them back when they were unable to pay their mortgage payments. Too many people bit off more than they could chew because they falsely believed that the market would continue to go up and they could always refinance or sell at a profit. When the prices dropped this house of cards fell apart and they were upside down on their mortgages.

I believe that this report should represent an opportunity for lenders and borrowers to be more realistic in their expectations. Lenders have already started to increase lending standards. They are now being more selective in who they loan money to and are doing their due diligence on prospective borrowers. It is imperative that this continues so that lenders are protected and borrowers are not getting loans that they can not afford. Borrowers need to do their part too. They need to be more realistic in what they can afford and provide honest information on their loan application. In the end their dishonesty will cost them more than it will cost the average lender.

All financial markets experience ups and downs and the real estate market is no different. Too many people held the false belief that the real estate market would continue to rise at an astronomical rate. When the market corrected itself too many were left out in the cold (literally) and they are now paying the price. It is time for everyone involved to take a close look at the situation and change their behavior to avoid the problems we are seeing now.