Worse than subprime? Other mortgages are imploding slowly
WASHINGTON — Call it son of subprime. Experts warn that a new wave of mortgage foreclosures may be coming soon and could rival the default rates for subprime mortgages and slow efforts to find bottom in a prolonged national housing slump.
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The mortgages in question are $230 billion of option adjustable-rate mortgages, creative lending products that flourished at the height of the housing boom. In an option ARM, a borrower can opt to pay less than his or her monthly balance due, and the difference is tacked onto the outstanding loan balance.
Many experts had expected an explosion of defaults in the springtime on these roughly 564,000 outstanding mortgages. However, interest rates dropped to historic lows, and that delayed the detonation of what many housing analysts still see as a ticking time bomb.
“They’re probably going to default at a rate that makes subprime look like a walk in the park,” warned Rick Sharga, senior vice president for RealtyTrac, a foreclosure research firm in Irvine, Calif.
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Bank Of America Is Playing Games
My original mortgage deal provided for daily compounded interest. However, I renegotiated it and got one that provides for simple annual interest. Well, even though I complained that it should be changed I have been ignored.
See, the daily rate depends on how fast you get them a payment. They, of course, want you to let them take the money from your account. Later payment equals more interest. Early less. I started looking into this when they twice skipped sending me a bill. Fortunately, I sent my payment without a bill.
I'd like to kinow if anybody on this site has had a similar problem because I'm getting cranked for a class action lawsuit because I have a belief that I'm not the only one being cheated.
Sheldon Waxman
sheldonw72@gmail.com
www.independentcontractor...
That reminds me of a quote
Einstein said that compounding interest is the most powerful force in the universe.
Thomas Jefferson once said, "The natural progress of things is for liberty to yield and government to gain ground."
Well, I guess he called that one.
The Bank of America is doing hedge bets....speculations...
Speculation by speculators, is worse than any other man made goal these bunch of crooks could probably carry out...
It looks like the option
It looks like the option ARMs will be particularly nasty in California, Nevada, and Florida. I'd look to short housing markets there with a bottom in prices occuring sometime in late 2011 and early 2012, just based on the chart. I'd say 2012, but the market tends to anticipate and is forward looking, so by late 2011 people will notice the light at the end of the tunnel and start getting back in.
They don't mention Alt-A
They don't mention Alt-A loans, which will see a lot of defaults as well. Alt-A includes those of us that got 100% financing a few years ago, which most banks will not do. Only FHA allows you to finance 105%. About the best you can do in LTV is 97.75% in some rare cases. Most banks are back to 80-90% LTV, so if you don't have the equity, you are screwed unless you can get an FHA loan.
Also, assuming your home's value remains unchanged, it would take at least 5 years of payments to build up 20% equity in your home. But, the people that bought in at the height of the bubble are now under water, as home prices have fallen. And, even to get an FHA loan, your home must appraise at least as high as the amount of the loan, which for a lot of people that's no longer true.
Between option ARM's, Alt-A, and CRE, we have quite the storm brewing. This is the scenario that the stress tests did not adequately account for, and I believe Celente's timing was off by a year. He said retail would stink last year. I think it happens this holiday season. Rates are back on the rise, and they must go higher for the dollar to retain any semblance of credibility as a reserve currency. Many more will default. Foreclosures will skyrocket at least to subprime levels, and I think even worse than that.
It's difficult to see the timing of all of this. I saw a chart that showed ARM, Alt-A, CRE peaking in 2010 and 2011.
http://bp3.blogger.com/_p...
It looks like defaults will have bottomed with the recent wave of refinancing to lower rates and the dip in the chart regarding rates adjusting. If you look at the chart, July is the bottom as far as rates adjusting with $15 billion due to reset. Then, they pick up towards November of this year.
Again, the question to me is whether the CRE bubble pops first, or if it will be the housing. There is a symbiotic effect whereby the troubles from one exacerbates the other. And, there is still a bond bubble brewing as well with the hyperinflation threat, which to me is sort of a wild card with it being so heavily manipulated by central banks and also by diplomacy and trade relations.
Back to the chart, you'll notice rate resets bottom this July, and then they rise into November of this year. This will cause more pain in the markets, when these reset and the borrowers are unable to refinance. Then, it gets UGLY in 2010 and 2011. A huge wave of the option ARM's and Alt-A's will reset in both years.
the problem
While the media focuses on this program or that program, webpence nicely summarized the overall program that is going to keep the real estate bubble deflating. The more home prices fall, the more pain for those barely above water in terms of equity to loan value.
"assuming your home's value remains unchanged, it would take at least 5 years of payments to build up 20% equity in your home. But, the people that bought in at the height of the bubble are now under water, as home prices have fallen."
bump
.
do remember
rates are now lower then they were when sub prime collapsed and we have new lending facilities in place... this next wave has been predicted for almost 6 months so its not real news.
it will cause another leg down in the market but it is not a surprise and you will even hear it discussed on cnbc and cnn...
I think it is news. Lower rates don't matter much if one
has 30% negative equity and can't get refinanced. My sister in law's adjustable goes from 4% to 7.8% in November. She can't find refi because her home is valued 75k below what she paid. She will most likely default and walk away.
low rates, high rates
Yes, low rates don't help those who are underwater because those folks CAN'T REFINANCE TODAY with the stricter lending guidelines.
And when rates go up to 10% or 15% (think of the 1970s) there will be even less people getting loans for houses which will push housing prices lower.
Bernanke and The Fed are desperate to keep interest rates low because if they don't the household debt will be unmanageable and the federal government debt will blow up sooner.
Sooner or later higher rates will arrive and the real pain will arrive.
We're doing a Short Sale...We Hope
We tried renting our house out for the amount of the mortgage..Good idea huh...yeah..well..lets see...The tenants trashed and I do mean TRASHED the house...We owe 70,000.00 on it..the tax office has it listed value as 62,500.00...the tenants decided not to pay rent and when we evicted them..they did 60,000.00 in damages and stole 10,000.00 in property...
I hate courts but thats where we're going on 07-10.
We had AllState Ins. and always made our payments..but guess what they refused to pay?...Yep..the claim..and no lawyer will go against them here.........the ones we found in large cities that said they would want 5000.00 up front and 500.00 an hour...I told them all...yeah well as soon as I get my BAILOUT I'll let ya know..
My daughter..g/son..and the idiot shes married to..had to walk away from their house. They both work for the state...and where told 3 months ago..want to keep your job..ok..your working 3 hours a week for NO PAY plus..we're cutting your pay..you will not get a raise AND they now have to pay more for their health insurance.
I spoke to a friend a few weeks ago..He thought he was getting his moms house when she died..WRONG..the bank took it...she was 2 months behind on the payment...They didnt care it was because she was a bit busy..in the hospital...dying from cancer....They took the house and EVERYTHING in it...and her car..which was paid...Stated they where selling everything to make up the payments and taxes.
God Bless America huh
Freedom is another way to God...A corrupt government is a straight way to hell.
Such sad stories,
I fear we'll hear more and more of them until we boot out the monsters at the top.
What a horrible situation.
What a horrible situation. Sorry to hear.
Misfit
All of the above makes ill-tailed. I hope you get things cleared up to your satisfaction.
That thing about "Granny's house" makes me madder 'n a wet setting hen!!
***
Freedom is not: doing everything you want to.
Freedom is: not having to do what you don't want to do.
~ Joyce Meyer
Also Commercial mortgage
Also Commercial mortgage defaults are going to rise.
http://www.bloomberg.com/...
"U.S. Commercial Mortgage Defaults May Rise to 17-Year High"
"June 9 (Bloomberg) -- The default rate on commercial mortgages held by U.S. banks may rise to the highest in 17 years in the fourth quarter as debt for refinancing remains scarce and the recession drags down rents."
Gerald Celente said this will cause more harm than the subprime debacle.