Caught In The Mortgage Meltdown
Credit Crunch Is Making It Tough To Get A Mortgage Or Refinance A Home
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Play CBS Video Video Borrowers Squeezed By Market The credit crunch has made it harder for aspiring homeowners to get mortgages and for current homeowners to refinance the ones they have. Cynthia Bowers has more.
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Video Surviving The Mortgage Crunch Julie Chen speaks to Greg McBride, a senior financial analyst from Bankrate.com, about what would-be homeowners can do to survive the mortgage crunch.
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Video Dealing With Mortgage Meltdown After the mortgage meltdown on the stock market, Stephanie AuWerter, Editor at Smartmoney.com, offers some helpful tips to borrowers, buyers and sellers.
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The credit crunch has left Carl Donovan unable to borrow money to refinance his house. (CBS)
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Interactive Eye On The Economy In-depth features on U.S. markets, taxes, employment and the Federal Reserve.
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Section Real Estate Buying, selling, or just trying to stay afloat? Get the latest on the housing market.
"I don't know how I'm going to get out of this," he tells CBS News correspondent Cynthia Bowers. "I don't want to go backwards."
Donovan bought his suburban Chicago home 15 months ago using an adjustable rate mortgage. Since then, he's seen it skyrocket four points and his monthly payment go up by almost $700 a month — and it could go even higher.
At this point he owes $14,000 more than he paid for the house, and he's panicked.
"If I don't find somebody to refinance my house, I'm going to lose it," he told Bowers.
But he can't refinance because the stock markets jitters have made lenders nervous.
His mortgage broker, Rich Bira, has already tried 160 different banks. Bira says Donovan and others are victims of a perfect storm: tightening credit and declining home values.
"When they go to do the refinance because the mortgage is coming due or they see that their payment is increasing, they are finding that they are not going to be able to do that refinance because the property values have come down," says Bira.
What started as a credit crunch for only the riskiest borrowers, the so-called sub-prime market that made up 20 percent of mortgages last year, has spread so far that it's harder for everyone to get a loan — even those with good credit.Bowers Blogs: Watching The Bubble Burst
That group includes first-time buyers like Cary and Camelia Moncrease, who thought they'd done their homework.
"When it was time to get ready to close and sign the papers, they told me the interest rate had went up," Camelia said.
Meaning the payment on their South Side Chicago duplex would be $500 more a month than they thought. They got lucky: The developer, eager to make the sale, dropped the price — making it possible for them to get into their dream home.
Meanwhile, the Donovans wonder how much longer they'll be able to stay in theirs.
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