Introducing "Mortgage Matters"

Written By Brian Hicks

Posted October 26, 2006

Gene Hackman is a great actor. He played the lead in one of my favorite films from the 70s, "The Poseidon Adventure."

It's the unforgettable story of a cruise ship that is struck and capsized by a massive tidal wave at midnight on New Year's Eve.

It was an instant classic then, and remains so even today.

In the movie, Hackman plays the part of Reverend Scott. He leads an eclectic group of passengers in a harrowing set of adventures as they make their way through the bowels of the capsized ship to a "thin spot" in the hull at the stern. It's where, in the end, the remaining battered survivors are rescued.

But before Reverend Scott can help save the passengers, he must convince them that his is the only way out of the capsized ship.

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It is my favorite scene in the movie, because amid the carnage of the overturned ship, in a world where down is up, scores of passengers are divided into two groups: those who believe they will be fine if they just stay put and those who believe they should take matters into their own hands.

It's a classic juxtaposition, and it reminds me of what is going on in the housing market.

On the one hand you have industry shills like David Lereah and his "soft landing" fantasy, urging everyone to stay put. And on the other hand you have folks like me, who look out on the carnage and predict that it can only get worse.

So the question is, who should you believe? Mr. Lereah and his "this is the bottom" or the actual numbers?

My vote, not surprisingly, is for the numbers, because unlike the people who twist them, they never lie. In fact, they tell the truths that others want to hide.

Unfortunately, these truths point not to a cushy landing but to a meltdown.

According to the national existing home sales figures released yesterday, every measure of supply is dramatically higher and every measure of demand is equally lower. It is the disturbing continuation of a pattern that began to develop in the spring.

And while the industry did manage to woo many a buyer with its "real estate never declines" mantra, it never managed to divorce them from the laws of supply and demand.

This means one thing and one thing only-price declines.

In fact, according to the numbers, home prices have already begun to fall.

The median price of a single-family home fell to $219,800 last month, a drop of 2.5 percent from the price in September 2005. That was the biggest year-over-year price decline going back nearly four decades.

With numbers pointing to a meltdown coming in at a faster and faster pace, the question is not whether or not the ship has capsized. It's what you can do now to help yourself.

That's why I'm introducing a new section to the Housing 911 Report. Because while I have spent months talking about the existence of the bubble and the bankers that created it, I've haven't done enough to protect you from them.

The new section is called "Mortgage Matters," and it draws on my five-year experience as a loan officer. They were the reason I was able to recognize the bubble in the first place.

How could I have missed it, since I was literally at ground zero from its inception?

In Mortgage Matters, I am going to attempt to both educate and enlighten you as I tear down the curtains of the industry, exposing the things that they want to hide from you-including their infamous yield spread premium.

I'm doing this now not just because it's obvious that the bubble has burst, but because, in my opinion, now is absolutely the time to refinance if you're considering it. This is especially true if your loan is something other than a 30-year fixed. And it is urgent if your loan could be described as "exotic."

If many of you don't act now it will be too late to do so in the future. Market forces simply won't allow it.

I am, in short, like Hackman's character– Reverend Scott. I'm standing up the Christmas tree and telling you to climb out of the ballroom because I believe that it won't be long before the water starts to pour in.

But I'm not just going to tell you to climb; I am going to help you climb as I guide you through the mortgage process.

I will happily answer your mortgage questions in these columns if you email them to me at Because now is not the time to just hope that it will all turn out OK.

Now is the time to act.

And while I may not be able to get you to that thin spot in the hull-after all, I'm no preacher-I am certainly willing to help you along the way.

I look forward to this new venture, and I think that you will too.

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