In a previous post I had mentioned I belonged to USAA. For anyone who doesn’t know, USAA is an insurance company founded by Air Force personnel back in the days when military members found it almost impossible to get insurance.

As it turns out, I had saved an article from their USAA MAGAZINE, Spring 2007, issue. It was about mortgages. Keep in mind the date of this particular issue.

By the way, USAA has a reputation of being one of the best carriers in the country with a very stable business model. The advice in their magazine usually follows suit.

Here is one sentence from that article that stands out like a sore thumb:

“Many borrowers may not fully understand the changing payment schedules, especially the sharp monthly payment increases common in these mortgages,” says Allen Fishbein of the Consumer Federation of America.

What followed that quote are these words:

And if you put very little down and real estate prices decline, you could face a loan balance that exceeds the present value of your home. That’s downright scary.

You don’t have to be a rocket physicist to know the mortgage type being referenced. And, you don’t even have to be a nuclear pharmacist to see this bit of advice was too late.

I want to believe they just missed the ball by publishing this article when they did. Maybe they didn’t want to believe the problem would grow to the magnitude it has grown. Maybe their mortgage lending division was making very few ARM loans. After all, they are a conservative bunch down there in San Antonio.

I wonder how many other supposedly conservative lenders were of this mindset during the Spring of 2007. It is hard to believe many existed as the problem certainly had its ugly head above water level.

I am not singling out USAA for criticism or accusing them of aggravating the problem. I am merely using their published words as a highlight as to the possible thinking that may have existed that late into the burgeoning crisis.

Wouldn’t it be a kick in the pants if some of that thinking is having a residual effect? It would go something like this, “As long as we warn the consumer about the possible dangers, it is OK to keep making loans they can neither qualify for nor afford.”

After all, there is a school of thought that says you can borrow your way to riches and it is being promoted even in today’s world. I guess pay back never visits some people’s door step.

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Tags: ARM, default, foreclosure, liar loans, loan, mortgage, subprime, USAA

• It looks like pending foreclosures from adjustable rate mortgages are affecting lower income people more then the rich, explains Al Tompkins at Poynter Online. Tompkins looks at recent stories in the St. Petersburg Times (Florida) and Winston-Salem Journal (N.C.) which illustrate this quite clearly.
• Black homeownership is falling in Louisville, Kentucky according the the US Census Bureau, reports the Courier-Journal.
  
  Here are some stats about the Louisville metro market that will blow your mind:

  39 percent of Black households owned their homes last year
  75 percent of White households owned their homes last year
  38 percent of Hispanic households owned their homes last year

  The interesting fact is that five years ago, black ownership was at 40 percent and hispanic ownership was at a low 26 percent. The big question is - Why are these two groups moving in different directions?

• In another report about the recent census, USA Today discusses how the cost to be in a home rose since last census in 2000, while incomes fell, making it much moore difficult to afford to rent or buy a home. “From 2000 to 2005, median home values surged 32%, fueling a consumer boom as homeowners tapped into this wealth. But the sharp rise in home values also boosted the monthly cost to own a home 5%, and to rent one 6.7% . . . The national median income adjusted for inflation was $47,599 in 2000. It dipped to $46,326 in 2005, according to the data.”
• Between 2002 and 2004, the number of Realtors climbed 26%, and today there are over 1.2 million. CNNMoney today covered how it is becoming increasingly difficult for many people to make a living working full time as a real estate agent.

Tags: agent, ARM, census, estate, Foreclosures, home, homeowners, Mortgages, ownership, poor, real, realestate, Realtors