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Many people who took out mortgages during the recent housing boom are now feeling the heat NBC Today ShowMarch 06, 2007 MEREDITH VIEIRA MEREDITH VIEIRA, co-anchor: Well, it's been a tough couple of days for investors in the stock market. The pain doesn't end there. Many people who took out mortgages during the recent housing boom are now feeling the heat as well. But as CNBC's Diana Olick will tell us, we could all end up paying the piper.DIANA OLICK reporting: Carmen Maldonado is in danger of losing the first home she ever owned. Her monthly mortgage payment is about to increase by almost $1,000, far more than she can afford. Ms. CARMEN MALDONADO (Homeowner): I never thought this would happen. We realized that our mortgage was going to go up. I almost started to cry. OLICK: Carmen has a subprime mortgage, a loan for those with weak credit or high debt. The subprime market took off during the latest housing boom, rising from 5 percent of the loan market in 2001 to 20 percent of it today. Mr. GUY CECALA (Inside Mortgage Finance): Home price appreciation, particularly the phenomenal rates we've seen over the last five years, cover up for a lot of mistakes that are made in terms of risk management, underwriting or whatever. OLICK: But home prices are now flat in much of the country and are going down in some spots. Unable to refinance, many homeowners are now defaulting on their loans. Thirty-one mortgage companies that specialize in subprime mortgages have gone belly-up in just the last few months. And federal regulators are calling for tougher lending standards for all types of loans. Mr. CECALA: I don't think there's any question it's going to be harder to get a mortgage these days. You're going to see lenders go back to saying we want to see some money put down on a home, plus more verification of income and assets. OLICK: With many borrowers unable to afford that, it's no surprise that defaults and foreclosures are way up compared to just a year ago. And all those homes are going right back onto an already glutted market. Mr. BOB MOULTON (Americana Mortgage Group): The ripple effect into real estate prices elsewhere could happen, and you could see a possible further softening in real estate prices. OLICK: More bad news for a housing market that is struggling to come back and for recent buyers like Carmen, who may soon have to sell. For TODAY, Diana Olick, NBC News, Washington.
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