Fears over subprime mortgages and the health of the broader loan industry contributed to a turbulent week on Wall Street. Countrywide, the nation's largest mortgage lender warned of subprime default rates approaching 20%, leading many to refer to the high risk end of the market as a "toxic mess".
So what advice do the experts give concerned homeowners? Sneaky Business spoke with Russell Gant, a mortgage expert from Leeward Stochs, on his sailboat in Chelsea Harbor. "My basic advice is don't panic……unless things get worse. If you already have a loan, then focus on making the payments. If you're looking for a new loan – then consider renting for another five to ten years."For owners facing mounting payments on adjustable rate loans, Gant's advice was practical but sanguine. "Cut costs on non-essential items such as your live-in chef, stables' staff and any personal pet psychologists. But don't go too far – it's important to maintain good mental health, even in times of financial stress."
A new source of help may also be at hand for homeowners at risk of defaulting. RoomLoan.com, a Tacoma-based startup, is offering to buy out high risk loans – one room at a time. "We provide a capital injection for homeowners who just need a little extra cash to get through the monthly payments." said co-founder and CEO Sarah Tully, "We usually take ownership of a lesser-used room such as the spare bedroom or spare bathroom. All that we ask in return is full access to the space, and a proportional share in the home-equity for the dwelling."
Early customers seem pleased by the novel service that RoomLoan offers. "It's a weight off" said one owner, speaking under anonymity, "We get to afford the monthly payments – and don't have to worry about redecorating the upstairs bedroom". Another customer was less enthusiastic, "They come in at all hours – storing boxes in my bathroom. It's just not right. But it does pay the bills."
RoomLoan currently operates in the greater Seattle area, but hopes to expand nationally by the end of the year.