Values to A paper

I don't need to get into a lecture of what the subprime markets have done to values. I think we all know where we sit with that. This is about disturbing news that almost 50% of home owners are or will be "underwater" in the next year.

This INCLUDES the A paper and Jumbo loans that many thought had no problems. I don't know why people would think that an overall drop in value wouldn't eventually catch up to the Prime borrowers? I've got 5 - 10 loans that I can think of off the top of my head that would refi today if they could but we can't because of value issues. These are not subprime borrowers. These are grade A Prime borrowers. They're truly stuck. Luckily when dealing with Prime borrowers they have good jobs and savings to dip into to make sure they pay the mortgage but at anytime people can loose their jobs. If they're self employed their customers could stop coming back. We're over 10% unemployment and I believe over 20% if you add the under-employed to that.

Now the Prime borrower's who are at 100% or more on their Loan to Values are finding out that it's not so simple to just get a loan. This is the start of another dip in housing and if nothing is seriously done to work down the principal of the loans, we're going to have real problems in the future.

A normal rate mod will give you a few years of a low interest rate and make it easier, but the fact could remain the same for some time that the loans are higher than the values. what happens in 3 years when that lower rate comes back up? Are we going to see people walking again? Other than the "unfair" argument that I've heard, it seems that if you where to use the stimulus money to lower people's principals, that would help in the short them (because the payment would be less) and in the long term by allowing the markets to move because houses will have equity.