Freddie, Fannie, and Indy

There continues to be quite a bit of hubbub about the condition of the mortgage industry.  Just how concerned should the average person be?  Let’s use the analogy of a car wreck on a major road.

Assuming you weren’t in the accident, the traffic that has slowed down on both sides of the road will slow down everyone.  The vehicles going the same direction as the folks in the accident will get really slowed down.  The ones going the other direction will also probably get delayed, because traffic needs to go a bit slower to avoid hitting the accident.  But also, people on both sides of the street slow down to look at the carnage.  Where I grew up, we called that rubber necking.  The rubber neckers weren’t in danger, but if they didn’t pay attention to their own path, they might end up in a wreck, too.

So if you’ve been going on the same path as the wreck – if you’re in an interest only loan that might have a floating rate now or in the future – you’re on the same path and want to look at how to avoid the wreck.  Get out of your mortgage when you can.  Don’t expect the same terms your got now.  Be willing to get the right loan or, if necessary, move to a house that’s more suited to your situation.  If you’re a rubber necker going a different direction – good fixed rate loan that you’re paying as agreed, saving regularly, diversified investments – don’t get too caught up in what went wrong.  Stay on your path and pay attention.  Even people who are doing the right things financially and have clean credit will probably experience delays in getting loans approved.  That’s so we can all be safer.  And, if you’re like me, say a little prayer for the people in the wreck.  Some of them may be scarred for life, or worse.

What caused the wreck?  It might have been a combination of poor road conditions and bad driving.  What if you’re in the wreck?  First of all, be willing to claim your part in it.  If you were tailgating, speeding, not paying attention, own up to it.  So if you got in a loan that you never should have agreed to, you might have to sell your home or even have it foreclosed.  Look for programs that can help you minimize the mess, but you may have to make some tough changes, some of which you don’t have much control over.

And going forward, let’s all try to drive safely.

About the author

Linda Y. Leitz, CFP®, EA, CDFA

Linda Y. Leitz is a fee-only Certified Financial Planner™ and has been in the financial industry since 1979. She is also enrolled to practice before the Internal Revenue Service. Before becoming a financial professional, Linda held several executive positions in the banking industry. She began her career as a bank examiner. Linda has a BBA in Business Administration from Principia College and an MBA from Southern Methodist University.
As a fee-only financial planner Linda is a member of the National Association of Personal Financial Advisors, the Financial Planning Association, the National Association of Tax Professionals and the Alliance of Cambridge Advisors. As a leader in the financial planning industry, Linda is the author of the book titled "The Ultimate Parenting Map to Money Smart Kids". She has been quoted in several national publications including the Wall Street Journal, U.S. News and World Report, and Morningstar Advisor and she has appeared on CSNBC. She also works as a volunteer instructor to new financial advisors with the Alliance of Cambridge Advisors.

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