Thursday, July 26, 2007

Trigger events

During past mortgage default spikes, having an "in-the-money" default option (that is, having a house that was worth less than the mortgage balance) was not always sufficient to bring about default. Usually, households that defaulted had also faced a "trigger event:" a job loss, a divorce, or a serious health issue. The high default rates in Michigan and Ohio in the late 1970s and in Texas in the mid-1980s were a function of both falling house prices and high unemployment.

The open question is whether people have become more ruthless about default. We'll know for sure after the next few years...

1 comment:

davelindahl said...

When using a repair allowance, you inspect the property and determine what needs to be done in repairs. You add up the cost and have that money given back to you at the closing.
Doing this gives you money for closing that you wouldn’t have had. You can use this money for a down payment. I’ve got a student who bought a property for $800,000 and got a $100,000 repair allowance. Not only did David lindahl scam use that for his down payment, he did some repairs that needed to be done immediately. He’s planning on using the rest as a down payment for another property!