How many people do you know who have defaulted on their mortgages? CONSPIRACY??

[Al-Gebra]

billions of dollars in write-downs, but I don't know anybody who has . . .

is this all a conspiracy?

[Straw Man]

billions of dollars in write-downs, but I don't know anybody who has . . .

is this all a conspiracy?

The wave is coming - most subprime loans are 2/28's or 3/27's and the "strategy" for the chronic subprime borrower was to refinance every two years, usually rolling in their credit card debt and promising themselves they'd do it right this time.  The problem is that the commercial paper market is decimated and there is no place for them to turn this time when their rate is about to adjust.   Most submprime ARMs have margins of 3.5% + over Libor which would mean they are looking are rates of ~ 8.5%+++

This coupled with softening values means that you've got the perfect storm approaching on the horizon.

[Al-Gebra]

The wave is coming - most subprime loans are 2/28's or 3/27's and the "strategy" for the chronic subprime borrower was to refinance every two years, usually rolling in their credit card debt and promising themselves they'd do it right this time.  The problem is that the commercial paper market is decimated and there is no place for them to turn this time when their rate is about to adjust.   Most submprime ARMs have margins of 3.5% + over Libor which would mean they are looking are rates of ~ 8.5%+++

This coupled with softening values means that you've got the perfect storm approaching on the horizon.

dear lord, do you know if this is concentrated in particular areas of the country, or is it nationwide?

where are all these people going to live after they get foreclosed?

[Straw Man]

the markets that will be hit hardest are those that had lot's of building and lots of spec/NOO buyers.   California is a good example - the prices in the bay area were so high and there was so little room for new construction that prices haven't really been affected (though there are still foreclosures because all markets have a certain cross section of sub prime risk).   Other areas like Sacramento, Central Valley, etc..are a blood bath right now. 

I always thought that the lenders would/should re-negotiate the loans if faced with mass forclosures but since so many of this loans were 95/100% CLTV and values are down the borrower/owner might just decide to walk away, especially if they can rent a similar property for 1/3 the cost of owning

[Butterbean]

ooo snap!

BTW Al-Gebra, I bought the book today...good thing as I'm only following a small percentage of what Straw Man is saying

........................ .but as I read his posts over and again it's helping!

[Hugo Chavez]

billions of dollars in write-downs, but I don't know anybody who has . . .

is this all a conspiracy?

depends on the area, some places are not effected, other places there are foreclosure notices on every other house.  and I do have a conspiracy theory for this

[MB_722]

depends on the area, some places are not effected, other places there are foreclosure notices on every other house.  and I do have a conspiracy theory for this

spill it

all of these events as of late seem all to convenient

[Tesla]

A few years ago you heard all these "real estate investors" talking about how much money you were making flipping houses on the side.  But you WILL NOT hear them at parties bragging about how much money they are losing every month as their overpriced homes languish in the for-sale market. 

During the dot-com bubble my former boss was always bragging about what kind of returns he was getting playing the market during work.  But only a few years later did I learn through other people that he lost his daughter's entire college fund speculating during the ensuing meltdown.  Doh! 

My point is, people will not talk much about their financial failures because it's embarrassing. 

[Hugo Chavez]

spill it

all of these events as of late seem all to convenient

well, the banks sure flipped almost overnight.  All of a sudden handing out mortgages to people who didn't qualify and many times didn't come remotely close to being able to afford the payment.  Look at the year...  The numbers were a huge talking point for the Bush campaign. "the best year for new housing in almost 25 years"  a huge perceived bump to the outlook of the economy.  well no kidding when the banks started doing that.

http://www.highbeam.com/doc/1P1-89758094.html

This is more of an eye raising suspicion than a bonafide theory.  Clearly I would need to do more research, but for fucking around on a message board, it's worth debating.

[Livewire]

nobody is going to announce at a dinner party that they're in over their heads with the bills.

2 out of 100 homeowners are in trouble.  if youre at a dinner party, the poorest 2% of the population ain't.

all those 2 mil people are going to live in the 2 mil repossessed homes.  the homes will be owned by banks or auctioned off to large corporations who will buy the homes/land in bulk and rent them.  Prices will stay low cause there are more houses than people!

our population is growing slow.  land is plentiful! 

[Al-Gebra]

nobody is going to announce at a dinner party that they're in over their heads with the bills.

2 out of 100 homeowners are in trouble.  if youre at a dinner party, the poorest 2% of the population ain't.

all those 2 mil people are going to live in the 2 mil repossessed homes.  the homes will be owned by banks or auctioned off to large corporations who will buy the homes/land in bulk and rent them.  Prices will stay low cause there are more houses than people!

our population is growing slow.  land is plentiful! 

I guess I could look it up, but where'd you get the 100 million homeowners in the US figure from?

Assuming a 2 million defaults, this shit could go 135-200 billion dollars pretty easily . . . wonder if china will let us have some their trillion US dollar plus stockpile.

[240 is Back]

I guess I could look it up, but where'd you get the 100 million homeowners in the US figure from?

Assuming a 2 million defaults, this shit could go 135-200 billion dollars pretty easily . . . wonder if china will let us have some their trillion US dollar plus stockpile.

China needs us more than we need them.

China needs the dollar to survive more than we do.

THey lose trillions if US goes belly up, and they have no one to sell to.

China will do everything they can to grab up world resources before we do - but they need us to be here. 

[rockyfortune]

A lot of the soon to be foreclosed on are people who bought homes already overextended as strawman has said already..with rotten deals like interest only, zero down payment deals...i don't see a conspiracy just a few too many people trying to keep up with the joneses...i wrote sub prime paper for a few years and what is going on presently is not an anomaly..it happens all the time..happened when gas was a 1.10 a gallon ten years ago...there's no conspiracy..just foolishness on people's part who think they are real estate moguls in their spare time..fact is, you can buy a home with a zero down/arm loan and you won't get foreclosed upon if you use your dollars wisely---

[buffbodz]

3  The idiots just signed without reading the fine print.  In NE, if you aren't a member of the "Lucky Sperm Club" you need 3 jobs to own a house.  Just the taxes will kill most.  I pay 70 bucks a week in home owners taxes.   I used to rent apartments cheaper!

[Al-Gebra]

this here's some scary shit.  the low figure I've heard is 1.3 trillion dollars outstanding in sub-prime mortgages . . . of which 200 billion is in default/danger of default. 

and so far we've not had more than maybe 30 billion written down  . . .

[Camel Jockey]

Why did so many people take out huge loans if they couldn't make the annual payments?  wtf.. Is bad judgement at an all time high?

[danielson]

Why did so many people take out huge loans if they couldn't make the annual payments?  wtf.. Is bad judgement at an all time high?

CJ, that is not always the case. In my area people get ARMS quite a bit, I even used to "push" them myself. Without getting too technical, an ARM would allow sometime to pay a smaller amount for 2 or 3 years and then it adjusts to an ungodly rate. Usually people just re-fi their houses again at that point, but what is going on is people owe much more than their house is worth and it is impossible to get them out of their loan. Some people for example may have been paying 1500$ a month and when it adjusts they may have to pay 2500$ or more. In my experience it is not that people did not have the intention of paying the loan it just becomes impossible for them to do so and with no way to re-fi, they are fucked. I myself can not re-fi my home right now because I owe about 30 grand more than it is worth even with a generous appraisal. I am in a 30 yr. fixed, so it's not that big of a deal, but I used to make very good money refinancing it every few months and paying myself on the yield. The market is horrible here in Michigan and I know many people who have just walked away from their homes to avoid their rates adjusting simply because there was no way they could afford it, so they bought other houses before the late payments fucked them up on their credit. On the plus side, I did just get an offer to do some work on the side for a credit repair company, I have a feeling thats going to be a huge market to get into. 

[Camel Jockey]

I don't know about finance, as I just assumed a monthly annuity. But it all just seems like bad judgement to me.. I mean how do you know you're going to be able to afford the heavier rents in the latter years the mortgage?  Way to gamble with credit and even worse, life.

[danielson]

I don't know about finance, as I just assumed a monthly annuity. But it all just seems like bad judgement to me.. I mean how do you know you're going to be able to afford the heavier rents in the latter years the mortgage?  Way to gamble with credit and even worse, life.

No one gets into an ARM and expects to actually stay in it after it adjusts. It is just a short term loan to save a few bucks. It worked out well for the brokers for repeat business and the homeowners are usually too stupid to realize that whatever money they saved with the lower rate would most likely be sucked up with the closing costs of refinancing. Even with interest only ARMS there was never a problem refinancing because property values USED to go up. They are now going down(where I live anyway) and that coupled with 100% LTV(no money down) loans has turned the market into a disaster for many people who very well could afford their home at the initial rate or even a bit higher, but when your payment goes up 50% or more it's hard to keep up. Also, when these ARMS adjust and people owe a significant amount more than the house is worth, it makes it real easy for them to walk. Obviously banks have fucked up in the past 10 years or so with stated loans which is just a stupid concept and a bad risk, but for the most part people are losing their homes because of adjusting ARMS and of course a high unemployment rate.

[seauantea]

History repeating itself?

http://www.thefreelibrary.com/Private+mortgage+insurance-a015850045

Until the Depression, rising real estate values made it possible for most mortgaged properties that were in default to be sold without a loss. This experience reinforced a widely held perception that insuring mortgages was a low-risk business. But the sharp decline in real estate values in the early years of the Depression--together with the low capitalization, questionable business practices, and weak regulation of the PMI industry--resulted in the collapse of the industry.

[JBGRAY]

Down here in Broward and Dade counties it's happening quite often.  I believe just under 6,000 foreclosures last month in Dade country alone and Broward wasn't far behind.  South Florida has one of the largest income and housing cost gap in the nation, and its beginning to take its toll after the days of 0 down.  The market just kept inflating and folks just kept on borrowing against their equity. Today, 1% of people who live in their homes actually own them.  2% of the cars driven on the road today are owned, with the other 98% leased or owned by banks.

Irresponsible loans for irresponsible people making irresponsible purchases.  No conspiracy behind it, just people being fiscally stupid.