http://news.yahoo.com/s/ap/20070918/ap_on_re_us/foreclosure_rates;_ylt=An_4mlq.MVvReOxnTwYiYLBH2ocA
It is interesting that these notes are coming due and the fingers are being pointed at sub-prime lending institutions as the problem. (Preditory Lending Practices) How can one expect to keep a #
The interest only and ARM's sold then, are now coming due and the low rates that attracted marginal buyers back then, are leaping upward. However, real wages have not kept pace with inflation in food, fuel and energy costs. Real Estate Taxes in some parts of the country have risen dramatically too.
How can one of "modest means" hope keep up a $300,000 + property note that can change by several hundred dollars in a matter of time? Sure, it's nice to live in a larger home, have access to better schools and city ammenities, but the taxes are a real kick in the butt later? Plus, there is little or no equity value to the home buyer. The lender holds the note, but there is little principle to build personal wealth and equity off of. (Interest only loan are great for lenders, but not so hot for buyers)
I disagree... the root cause is not just these lending practices. It has a deeper root cause... Lower Real Wages cannot sustain the boom of houses sold in these interest only loans. They may get in the door, but when the new rates hit, many cannot make that leap to higher monthly payments on such low wages.
Also, when many "stressed local economies" get hit with job losses and pay reductions, (well-paying job losses) they are soon in foreclosure mode. That puts a lot of homes at risk and families are now forced out and have a big mark on their credit scores and have to search for affordable housing. (That's not a good think)
Who's really behind all this? Follow the money trail... Bankers, Lenders and financial people of coarse. They make their money up front and just repeat the process until the bubble busts.
Wake up America!!! This is just the tip of the iceberg. Who knows what other plans are in store for low income families and singles? Many good people are just a few missed paychecks away from a major finacial meltdown.
End Rant! MAD
Swez
PS Mr. B, you know this industry well from previous work in this field. What's your read on the "Big Picture" and the trickle down affects that will come from this reshuffling of the deck?
Replies (8)
gearhead on 09/18/2007 19:00:56
I'll throw my .02 in here, even though it might not be popular. The main reason for the foreclosure "problem" is the borrowers, not the lenders. Any borrower that doesn't know & understand the terms of the note they are signing, is a fool. Any borrower that thinks they can afford a mortgage payment of $xxxx/mo, just because the lender says they can, is a fool. Most homebuyers didn't buy what they needed, or what they could "really" afford, they bought as much house as a lender would qualify them for. It doesn't take a lot of brains to know that you can't borrow $300,000 and end up with a $1200/mo payment on a 30yr note. Sorry, I have very little sympathy for those that are facing forclosure because "It's all the lenders fault".
MrBrownstone on 09/19/2007 01:41:30
Oh ...where to start?
What has transpired, in a nutshell, is lenders have issued loans to people that did not deserve credit.
swez on 09/19/2007 09:05:25
Spot on.... greed and lack of financial management is why too many fell for this one. When buying a home, it was pretty good practice to keep the house note below 30% of ones net income per month. That assumes also that one carries very little debt as well. (Car note(s), credit cards, misc loans)
Truth and wisdom are not always welcome to some peeps. They want what they want and want it now. Too many folks want the same lifestyle they enjoyed growing up. However, they don't realize it took 25-30 years for their parents to get to that level. (Instead, many want it all right now and mortgage their futures to get it)
Bad idea huh?
Swez
MrBrownstone on 09/19/2007 19:14:56
I have a really detailed response, but wasn't finished with it. It borders on an encyclical. when it's finished, I'll post it.
I was writing a timeline analysis for an emag article and a response to the ludicrous congressional ideas of what to do about the crisis. Essentially, idiot banks gave money to people that couldn't even save face, yet alone $1000.
Much more later
swez on 09/19/2007 20:11:04
Bring it here when you're done... am sure you know a lot on this topic after several years in the biz and let's hear the view from that side of the table... am sure it will be a good eye-opener.
Swez
MrBrownstone on 09/20/2007 15:20:30
here's one of the contributing factors, typified in this article:
http://money.excite.com/jsp/nw/nwdt_rt_top.jsp?news_id=ap-d8rp9pa00&
For the 1st time in my LIFE, we must admit Canadians aren't just 67% or 78% as good as Americans. Thanks to Bush's fantastic overspending AND ridiculous Fed monetary policy, the Canuck dollar is on par with US dollars.
For 27 of the 36 yrs of my life, Canadians got ~75cents for every one of their dollars when they exchanged it for US dollars. This is very fair since we provide a military blanket over them and provide jobs to produce 1/3 our cars over the border from Michigan. All we expect in return is they send us their Comedians like John Candy, Mike Meyers and Beauties like Shania Twain.
One of the great marketing ploys for bars in cities like Grand Forks, ND and other bordertown areas was the offering of 'Canadian at Par'. This meant that the bar would take Canadian money as if it were US$. Yeah, the bar was getting 75cents on their dollar, but when their drinks were 350% mark-up, it was worth attracting Canadians to cross the border. Now, Canadian money IS at par with US, so WTF!?!?!
Back when I was in grade school, the Mexican Peso was 1/22 to US$. Now, it's ~1/10. All this happened in such a short time of bargain basement fed policy and reversal of budget surplus/balance to crippling debt.
Essentially, the US dollar is in the same jeopardy it was back in Nixon's days--consequently he was forced to remove the gold standard in order to keep our government running.
In a nutshell, in the years prior to 1973, your $ stood for gold in reserve either in Fort Knox or one of the Federal Reserves. You could take a $100 bill, and exchanged it for $100 in gold. Although noone did it, that one symbol of economic might that propelled American in world markets as we could back up our $. Also, in world markets, gold was what was traded...that or gold certificates..much like a check.
http://en.wikipedia.org/wiki/Image:One_dollar_1928.jpg
When budget deficits loomed, year after year after year after year...(you know what I mean) and our government was printing more money (bonds) than it could cover in gold, we had to simply remove the requirement that our money be backed in gold.
Remember folks, I really don't care what political stripe or non-stripe you hold. The worst financial crisis since the Great Depression was the Currency debacle of the 70s. This was all deposited on Jimmy Carter's lap, and there wasn't much he could do about it but let our economy swallow the loss. The greatest financial crisis since the Currency Debacle is this one.
We are headed for some very profound times in our monetary system. Don't go stocking up canned food underground in the mountains just yet, but be prepared for a much longer than 'recession' typed conditions.
It's so funny, but a President can't have a major positive impact on a government as they don't legislate, but they can sure FUNK it up with sniper-like precision.
Whomever gets elected in 2008 will have to deal with this his or her whole 1st term...and we can't do a thing about it.
Just think, over $500Billion will be spent in the desert, and 0% of that will return an investment to us, ever. Gas at $3/gal (up from $1.25) will never give us a rebate. We can't recycle our car's & truck's exhaust, so that's all lost. What could we do with $1,000,000,000,000??? That's trillion if some of you have to take off your shoes to count all the zeros.
If you think Detroit is in a tizzy now, wait til 2010.
In a word, damn. In 2 words, God Damn. USFLAG
swez on 09/20/2007 18:44:18
Is is not interesting what fear, rumor and erronous projections can do to an economy like the once mighty US dollar? Look at Wall Street these days and we get the picture. A storm prediction in an oil rich section of the world makes the price of crude oil jump up and down like a kid on a pogo stick on steroids?
Actually, there are a growing number of farmers and other groups that are beginning to stock pile food staples like corn, wheat, barley and other such things. Some folks are using their land to grow organic food only and are getting very proficient at it too. The theory behind this, is as you say, things are going to be very tough in the coming years and some groups see this and are banding together to leverage their products when our system does finally crash. They'll have a buffer and some tangible barter power in real currency... "food".
The good people of this United States are not aware of all that is taking place behind closed doors in Washington DC, the EU and other parts of the world as well. Most just figure if their lives are perking right along, everything is just fine and dandy. But that is just a panecea for those who choose not to read the signs of the times. Things are tough now, but this is just the beginning. Things may taper off for a time and seem to stabilize, but soon after that, the real bottoming out will come.
Although we have different backgrounds and insights, I have to agree with you Mr. B. This is just the tip of the iceberg. This very complex shell game will event
MrBrownstone on 09/21/2007 01:43:27
Here's a crazy factoid, the current administration (since 2001) has run up more debt than the past 42 presidents combined!!! How do you stop an Elephant from charging? Take away Bush's credit cards.
The reason the partisans are getting involved in this War On Debt (WOD) is because investors are in an invisible panic, borrowers are in a very VISIBLE panic, and there looms a day of reckoning. That day of reckoning will come once we actually find out just how large our exposure is to the mortgage crunch.
Foreign banks and hedge funds are just beginning to announce their exposure. We don't even know WHO has money invested in mortgage backed securities...even though a lot of us believe our 401(k) are invested in stocks immune to that whole industry.
Keep in mind, if Asia calls in our ~$3T debt they hold in US currency, we'll all be driving Hondas. That statement is tempered with the same regard as, "..had Hitler won WWII, we'd all be speaking German, driving BMWs, and there would be no Jews.." "..If Asia calls in our debts, we'll all wish we were Canadian.."
People have NO IDEA how profound our monetary crisis is until they are LIVIN' IN A VAN, DOWN BY THE RIVER!!! My estimation is that 3% of homeowners will be in jeopardy of foreclosure once those variable mortgages reset. When the meat of the order comes due by 1st quarter next year, we'll have a great idea of the scope of our despair. My estimation is that we are 50% exposed. Double our current mess, and that'll be the totality of it all. When that happens, we can do an autopsy of our US economy.
Either we create a mass refinance to a fixed rate program (like VA loans), and guarantee them with government backing and no underwriting...merely convert the loan from ARM to Fixed; or, we let millions of people fall by the wayside. I personally, as a non-partisan, believe that it is NOT our government's responsibility to get involved. If we don't, generations may pay an even worse debt that what is owed now.
Does anyone remember the Great Depression? Other than Swez.
Essentially, we had
-25% Unemployment
-Banks going broke
-Sky High deficits
-Whole families driving around in the family vehicle looking for day labor
-Massive foreclosures
Essentially, Americans were living in a 3rd world country. See any similarities?
If we don't deal with:
-Ending Illegal Immigration
-Mandatory Balanced Budgets--or Congress is locked in the Capitol
-Squelch all government spending that doesn't get invested domestically
-Develop a plan to get rid of our foreign debt
-Get a fair shake in foreign trade deals
-Reverse the trade deficit
-Convert alternative fuels into reality in 3 years
We'll be in serious trouble.
Keep in mind, Brazil converted to ethanol in 2 years. Please don't tell me a great nation like ours can't do it as well? A country where people are living in bamboo huts and Fez, from That 70s Show grew up, is actually a folk hero.
At any rate, more and more is coming together. I should have it by the weekend.
It is interesting that these notes are coming due and the fingers are being pointed at sub-prime lending institutions as the problem. (Preditory Lending Practices) How can one expect to keep a #
The interest only and ARM's sold then, are now coming due and the low rates that attracted marginal buyers back then, are leaping upward. However, real wages have not kept pace with inflation in food, fuel and energy costs. Real Estate Taxes in some parts of the country have risen dramatically too.
How can one of "modest means" hope keep up a $300,000 + property note that can change by several hundred dollars in a matter of time? Sure, it's nice to live in a larger home, have access to better schools and city ammenities, but the taxes are a real kick in the butt later? Plus, there is little or no equity value to the home buyer. The lender holds the note, but there is little principle to build personal wealth and equity off of. (Interest only loan are great for lenders, but not so hot for buyers)
I disagree... the root cause is not just these lending practices. It has a deeper root cause... Lower Real Wages cannot sustain the boom of houses sold in these interest only loans. They may get in the door, but when the new rates hit, many cannot make that leap to higher monthly payments on such low wages.
Also, when many "stressed local economies" get hit with job losses and pay reductions, (well-paying job losses) they are soon in foreclosure mode. That puts a lot of homes at risk and families are now forced out and have a big mark on their credit scores and have to search for affordable housing. (That's not a good think)
Who's really behind all this? Follow the money trail... Bankers, Lenders and financial people of coarse. They make their money up front and just repeat the process until the bubble busts.
Wake up America!!! This is just the tip of the iceberg. Who knows what other plans are in store for low income families and singles? Many good people are just a few missed paychecks away from a major finacial meltdown.
End Rant! MAD
Swez
PS Mr. B, you know this industry well from previous work in this field. What's your read on the "Big Picture" and the trickle down affects that will come from this reshuffling of the deck?
Replies (8)
gearhead on 09/18/2007 19:00:56
I'll throw my .02 in here, even though it might not be popular. The main reason for the foreclosure "problem" is the borrowers, not the lenders. Any borrower that doesn't know & understand the terms of the note they are signing, is a fool. Any borrower that thinks they can afford a mortgage payment of $xxxx/mo, just because the lender says they can, is a fool. Most homebuyers didn't buy what they needed, or what they could "really" afford, they bought as much house as a lender would qualify them for. It doesn't take a lot of brains to know that you can't borrow $300,000 and end up with a $1200/mo payment on a 30yr note. Sorry, I have very little sympathy for those that are facing forclosure because "It's all the lenders fault".
MrBrownstone on 09/19/2007 01:41:30
Oh ...where to start?
What has transpired, in a nutshell, is lenders have issued loans to people that did not deserve credit.
swez on 09/19/2007 09:05:25
Spot on.... greed and lack of financial management is why too many fell for this one. When buying a home, it was pretty good practice to keep the house note below 30% of ones net income per month. That assumes also that one carries very little debt as well. (Car note(s), credit cards, misc loans)
Truth and wisdom are not always welcome to some peeps. They want what they want and want it now. Too many folks want the same lifestyle they enjoyed growing up. However, they don't realize it took 25-30 years for their parents to get to that level. (Instead, many want it all right now and mortgage their futures to get it)
Bad idea huh?
Swez
MrBrownstone on 09/19/2007 19:14:56
I have a really detailed response, but wasn't finished with it. It borders on an encyclical. when it's finished, I'll post it.
I was writing a timeline analysis for an emag article and a response to the ludicrous congressional ideas of what to do about the crisis. Essentially, idiot banks gave money to people that couldn't even save face, yet alone $1000.
Much more later
swez on 09/19/2007 20:11:04
Bring it here when you're done... am sure you know a lot on this topic after several years in the biz and let's hear the view from that side of the table... am sure it will be a good eye-opener.
Swez
MrBrownstone on 09/20/2007 15:20:30
here's one of the contributing factors, typified in this article:
http://money.excite.com/jsp/nw/nwdt_rt_top.jsp?news_id=ap-d8rp9pa00&
For the 1st time in my LIFE, we must admit Canadians aren't just 67% or 78% as good as Americans. Thanks to Bush's fantastic overspending AND ridiculous Fed monetary policy, the Canuck dollar is on par with US dollars.
For 27 of the 36 yrs of my life, Canadians got ~75cents for every one of their dollars when they exchanged it for US dollars. This is very fair since we provide a military blanket over them and provide jobs to produce 1/3 our cars over the border from Michigan. All we expect in return is they send us their Comedians like John Candy, Mike Meyers and Beauties like Shania Twain.
One of the great marketing ploys for bars in cities like Grand Forks, ND and other bordertown areas was the offering of 'Canadian at Par'. This meant that the bar would take Canadian money as if it were US$. Yeah, the bar was getting 75cents on their dollar, but when their drinks were 350% mark-up, it was worth attracting Canadians to cross the border. Now, Canadian money IS at par with US, so WTF!?!?!
Back when I was in grade school, the Mexican Peso was 1/22 to US$. Now, it's ~1/10. All this happened in such a short time of bargain basement fed policy and reversal of budget surplus/balance to crippling debt.
Essentially, the US dollar is in the same jeopardy it was back in Nixon's days--consequently he was forced to remove the gold standard in order to keep our government running.
In a nutshell, in the years prior to 1973, your $ stood for gold in reserve either in Fort Knox or one of the Federal Reserves. You could take a $100 bill, and exchanged it for $100 in gold. Although noone did it, that one symbol of economic might that propelled American in world markets as we could back up our $. Also, in world markets, gold was what was traded...that or gold certificates..much like a check.
http://en.wikipedia.org/wiki/Image:One_dollar_1928.jpg
When budget deficits loomed, year after year after year after year...(you know what I mean) and our government was printing more money (bonds) than it could cover in gold, we had to simply remove the requirement that our money be backed in gold.
Remember folks, I really don't care what political stripe or non-stripe you hold. The worst financial crisis since the Great Depression was the Currency debacle of the 70s. This was all deposited on Jimmy Carter's lap, and there wasn't much he could do about it but let our economy swallow the loss. The greatest financial crisis since the Currency Debacle is this one.
We are headed for some very profound times in our monetary system. Don't go stocking up canned food underground in the mountains just yet, but be prepared for a much longer than 'recession' typed conditions.
It's so funny, but a President can't have a major positive impact on a government as they don't legislate, but they can sure FUNK it up with sniper-like precision.
Whomever gets elected in 2008 will have to deal with this his or her whole 1st term...and we can't do a thing about it.
Just think, over $500Billion will be spent in the desert, and 0% of that will return an investment to us, ever. Gas at $3/gal (up from $1.25) will never give us a rebate. We can't recycle our car's & truck's exhaust, so that's all lost. What could we do with $1,000,000,000,000??? That's trillion if some of you have to take off your shoes to count all the zeros.
If you think Detroit is in a tizzy now, wait til 2010.
In a word, damn. In 2 words, God Damn. USFLAG
swez on 09/20/2007 18:44:18
Is is not interesting what fear, rumor and erronous projections can do to an economy like the once mighty US dollar? Look at Wall Street these days and we get the picture. A storm prediction in an oil rich section of the world makes the price of crude oil jump up and down like a kid on a pogo stick on steroids?
Actually, there are a growing number of farmers and other groups that are beginning to stock pile food staples like corn, wheat, barley and other such things. Some folks are using their land to grow organic food only and are getting very proficient at it too. The theory behind this, is as you say, things are going to be very tough in the coming years and some groups see this and are banding together to leverage their products when our system does finally crash. They'll have a buffer and some tangible barter power in real currency... "food".
The good people of this United States are not aware of all that is taking place behind closed doors in Washington DC, the EU and other parts of the world as well. Most just figure if their lives are perking right along, everything is just fine and dandy. But that is just a panecea for those who choose not to read the signs of the times. Things are tough now, but this is just the beginning. Things may taper off for a time and seem to stabilize, but soon after that, the real bottoming out will come.
Although we have different backgrounds and insights, I have to agree with you Mr. B. This is just the tip of the iceberg. This very complex shell game will event
MrBrownstone on 09/21/2007 01:43:27
Here's a crazy factoid, the current administration (since 2001) has run up more debt than the past 42 presidents combined!!! How do you stop an Elephant from charging? Take away Bush's credit cards.
The reason the partisans are getting involved in this War On Debt (WOD) is because investors are in an invisible panic, borrowers are in a very VISIBLE panic, and there looms a day of reckoning. That day of reckoning will come once we actually find out just how large our exposure is to the mortgage crunch.
Foreign banks and hedge funds are just beginning to announce their exposure. We don't even know WHO has money invested in mortgage backed securities...even though a lot of us believe our 401(k) are invested in stocks immune to that whole industry.
Keep in mind, if Asia calls in our ~$3T debt they hold in US currency, we'll all be driving Hondas. That statement is tempered with the same regard as, "..had Hitler won WWII, we'd all be speaking German, driving BMWs, and there would be no Jews.." "..If Asia calls in our debts, we'll all wish we were Canadian.."
People have NO IDEA how profound our monetary crisis is until they are LIVIN' IN A VAN, DOWN BY THE RIVER!!! My estimation is that 3% of homeowners will be in jeopardy of foreclosure once those variable mortgages reset. When the meat of the order comes due by 1st quarter next year, we'll have a great idea of the scope of our despair. My estimation is that we are 50% exposed. Double our current mess, and that'll be the totality of it all. When that happens, we can do an autopsy of our US economy.
Either we create a mass refinance to a fixed rate program (like VA loans), and guarantee them with government backing and no underwriting...merely convert the loan from ARM to Fixed; or, we let millions of people fall by the wayside. I personally, as a non-partisan, believe that it is NOT our government's responsibility to get involved. If we don't, generations may pay an even worse debt that what is owed now.
Does anyone remember the Great Depression? Other than Swez.
Essentially, we had
-25% Unemployment
-Banks going broke
-Sky High deficits
-Whole families driving around in the family vehicle looking for day labor
-Massive foreclosures
Essentially, Americans were living in a 3rd world country. See any similarities?
If we don't deal with:
-Ending Illegal Immigration
-Mandatory Balanced Budgets--or Congress is locked in the Capitol
-Squelch all government spending that doesn't get invested domestically
-Develop a plan to get rid of our foreign debt
-Get a fair shake in foreign trade deals
-Reverse the trade deficit
-Convert alternative fuels into reality in 3 years
We'll be in serious trouble.
Keep in mind, Brazil converted to ethanol in 2 years. Please don't tell me a great nation like ours can't do it as well? A country where people are living in bamboo huts and Fez, from That 70s Show grew up, is actually a folk hero.
At any rate, more and more is coming together. I should have it by the weekend.
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