Mortgage Companies in Trouble

August 19, 2007 | Posted by Jorge

First Magnus Financial Corporation halted all mortgage applications today. A quick trip to their website only helps to justify the trouble that the housing/financial sectors are in.

Will the 50 point basis cut in the discount rate help any? Temporarily perhaps. I think the problem stems farther than the liquidity issues the market’s been seeing the past few weeks. Something needs to be done to keep the 7 million + homeowners afloat. It’s not an easy solution though. Even if the Federal Reserve rate is cut, it appears that quite a few owners are “upside-down”. Upside-down refers to the situation where a home’s value is less than the current mortgage loan for that home. The only way homeowners can refinance is to bring the loan to an equal level of the home’s value. There’s no easy solution in the short term and as a result I have a feeling we may be seeing a recession sometime in the near future.

Update: It seems that as a result of the discount rate cut, First Magnus has reopened shop. Glad to see things are getting better.

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