“The Last Chance Mortgage” Solution

Last week Diane linked to a video of a presentation that we attended at the recent Inman Connect conference in NYC.  Today I’d like to share another one of the excellent presentations we attended.  In this video John H. Vogel Jr., Adjunct Professor of Business Administration at the Tuck School of Business at Dartmouth, explains: What Went Wrong in the Housing Market and What Can We Do to Fix It?

If you have 30 minutes to spare, I recommend watching this video (click on the link above).  I found Mr. Vogel’s presentation and his ideas worth a listen.

Here is a synopsis of the video content:

0:59 – What are some of the components of the problem?
• record inventory
• nationally, the Case-Shiller® Home Price Index is down 5% for 2007
• presently, the Case-Shiller® Home Price index is projecting another 7.7% decline in the next year.
• 2 million homes owners in danger of losing their homes

2:40 – What is the scale of the housing problem?  If you took all those homeowners at risk of losing their homes and concentrated them in the New England area, it would be equivalent to every homeowner in Maine, New Hamshire, Vermont and Rhode Island combined.

3:00 – Debunking the popular causes presented by the media, namely unscrupulous lenders and uneducated/reckless borrowers.

5:00 – What is a more likely cause?  A dramatic drop in risk tolerance…

6:30 – …which led to a rise of sub-prime lending (20% of the mortgage market)

7:24 – all the while housing became increasingly less affordable (from 2.7 : 1 home price:income ratio to 8:1 ratio home price:income.

9.25 – Who are these 2 million homeowners at risk of losing their homes?  Families with children.  Having a child is the biggest single indicator of someone filing for bankruptcy.
• 1 in 7 families with children will declare bankruptcy
More people will file for bankruptcy than will:
• Graduate from college
• File for divorced
• Have a heart attack

90% of those filing for bankruptcy will be middle-class families.

11:49 –  What do we do about this problem?

12:50 – “The Last Chance Mortgage” – Mr. Vogel explains his plan to fix the problem.

20:18 – Q & A with the audience.