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I have always said that lenders targeted homeowners in the Golden State of California. The reason that lenders made more loan here is simple, more money per unit.
Why set up operations in Alaska or New Mexico, when you can open up several mortgage chop shops in Cali, place your street level dealers on every corner (mortgage brokers) and make gazillions in commission and loans?
I want to explain why California has 8 of the 10 worst real estate markets in the country and why we need to look no further than lenders and mortgage servicers to find out the simple reason why…..
Lenders and mortgage brokers over the last 5 years operated like neighborhood gangs. Many set up their operations in areas that were based on a simple formula. They targeted certain geographical areas based on how much money they could make per loan in that state, county or city.
Much like drug gangs target areas where they are going to sell the most amount of crack on the street corner.
NOT by how many people they can help realize the American Dream!
Here is an example of the amount of money that can be made on a home mortgage in the state of California as opposed to say New Mexico.
The average commission per home loan is and was approximately 2.5%.
In New Mexico during the housing boom you could find a nice home for $100,000 and that same home in California would cost $500,000.
A loan in New Mexico would net Countrywide = $2,500
A loan in California would net Countrywide = $10,000
That is 75% less revenue per unit. My guess is a toxic company like Countrywide Home Loans would have NEVER, EVER rose to such billion dollar heights without this business formula of targeting high priced areas with their mortgage thugs.
10 worst real-estate markets for 2009
The housing market hasn’t bottomed out yet. For the third quarter, the closely-watched S&P Case-Shiller national home-price index fell 16.6%, and experts are predicting further declines. Of the top 100 markets, here are 10 with the worst forecasts.
1. Los Angeles
Los Angeles
2008 median house price: $375,340
2009 projected change: -24.9%
2010 projected change: -5.1%
The median home price in the L.A.-Long Beach-Glendale metro area is projected to fall nearly 25% in 2009 – the biggest drop in the country.
Read about the other 7 California cities that are on this disgraceful list from CNNMoney
