MORTGAGE CRISIS HITS THE AFFLUENT
Years after the peak of the housing bubble, it is evident that the home mortgage crisis does not discriminate. No longer is the Real Estate mortgage plague encircled around the low-credit score holders or the hard-working incomers.

So many of today's six-figure earners are continually being impacted at an alarmingly growing rate by the appeal (and the sting) of the Adjustable Rate Mortgage venom. In the past decade, the well-to-do's have also enjoyed the appeal and the benefits of the Adjustable Rate Mortgage (ARM). They have succumbed to the allure of “low-low” starter rates and friendly acceptance to applicants with questionable credit (and incomes) and a lower downpayment. These elements make ARM loans the more popular loan altogether.

For the high-income families, A.R.M. loans incite the consumer to purchase larger, fancier and more expensive homes. The seduction of a lower initial rate (vs. a fixed rate) or 'teaser” rate suggests a higher borrowing threshold that commits the buyer to “bite off more than they can eventually chew”.

Years pass and the cloak of the teaser rate has been unveiled. Mortgage rates climb and climb some more and while the housing market drops the value of the house drops considerably. The homeowner's mortgage payments grow beyond their current earnings (affordability) and there's no equity to refinance because the home is worth less than they owe. This is what is known as “the Crunch”.

Consumers in all income categories fall victim to the same adjustable rate 'trap'. The plague is hardly limited to just the $35,000 - 45,000 per year households; the high-income earners are quite well in the suffering range of this Crunch-- considerably due to their spending appetites and shortsightedness. Many economists and real estate lending experts believe that A.R.M. loans were meant for short-term ownership and are expected to break down in the long-term. By the time you face the decision to refinance, it may be too late. That's when the trouble begins.

The average American household that recently befell into this A.R.M. scenario may (at this moment) find themselves scrambling in the whirlwind of trying to find more money to “buy time”. The Buyer / Borrower is in the habit of “fixing” the problem by paying it off until it goes away. Meanwhile, their mortgage continues to rise without any sign of relief-- to the point where it eventually becomes impossible to keep up the payments.

According to consumeraffairs.com (from April of 2007 news issue), the Mortgage Bankers Association (MBA) experts have estimated $1.5 trillion in adjustable rate mortgages were to face even more interest rate increases resulting in their predicted $700 billion in adjustable rate mortgage refinances. From today’s perspective, the 2007 MBA report provided a fairly accurate assessment; this real estate crisis continues to plague our housing market well into 2008. The repercussions of these numbers present a staggering number of homeowners to face foreclosures, personal bankruptcies and other acts of desperate consumer behaviors nationwide.

FORECLOSURE HITS NYC
New York City and its people are known for their resilience and resourcefulness. It is our strong willed nature to endure all challenges and survive. But even in a city with record wealth in opportunities, this economic struggle has given New York some of the highest records in financial casualties.

“New York City foreclosure filings increased substantially in February,” said Rick Sharga, vice president of marketing at RealtyTrac. “It appears that the foreclosure storm that's been brewing elsewhere in the country is now making its way to New York City.”

The 10-county New York City metropolitan area reported 3,518 properties with foreclosure filings in February, a 19 percent increase from the previous month and a 116 percent increase from February 2007, according to RealtyTrac. Queens County reported 962 properties with foreclosure filings in February, the most of any metro county despite a 2 percent decrease from the previous month. Kings County (Brooklyn) registered the second highest foreclosure total in the metro area, reporting 732 properties with foreclosure filings during the month. Foreclosure activity in Brooklyn increased 14 percent from the previous month, and one in every 1,295 households received a foreclosure filing in February.

Real Estate attorney, Michael Menicucci of Menicucci Villa and Associates (NY) says “how can you possibly keep your head above water when your mortgage doubles from out of the blue? The market drops your house value anywhere from 25-35% and you can't refinance because you have zero equity.”

THE SHORT SALE:
EXIT STRATEGY OVER FORECLOSURE
For homeowners victimized by the MORTGAGE CRUNCH and who have run out of options, FORECLOSURE tends to be the popular recourse that many would consider. Due to the emotional blows from the losing battle with skyrocketting mortgage payments, the consideration of abandoning the home (a direct assault to their relationship with the lender) is more of an act of irrational desperation to get out from under. This decision is one that carries a tremendous set of new financial scars for the borrower more damaging than filing personal bankruptcy.

Experts in the Real Estate industry recommend a return to logic and a little homework will bring forth a solution that preserves the homeowner's financial credibility. INTRODUCING... THE SHORT SALE!

By definition, a Short Sale is a settlement negotiation conducted by a qualified Real Estate attorney between the lender, a realtor and the current owner. This monetary settlement is what the lender is willing to accept once the home is sold.

For properties with little or no equity whose value has sorely depreciated from current the market, the lender is willing to accept a much lowered dollar amount over the total mortgage and allowing the "battered homeowner" to walk away from the home WITH their credit intact. For the lender, a Short Sale settlement concludes the transaction much faster (over foreclosures) while eliminating the very time consuming list of work involved and the tremendous charges brought forth by a foreclosure case (such as eviction fees, attorney and court fees, lost interest etc).

TO BE CONTINUED