Posted on 09/18/2007 7:20:16 AM PDT by Hydroshock
NEW YORK (CNNMoney.com) -- Late summer brought no relief from soaring foreclosures. The number of homes in some stage of default jumped 36 percent month-over-month in August, according to a regular monthly survey.
Delinquencies and defaults more than doubled year over year to 243,947, according to August figures released Tuesday by RealtyTrac, a marketer of foreclosed properties. RealtyTrac's forecast is for total foreclosure filings to exceed 2 million this year.
"The jump in foreclosure filings this month might be the beginning of the next wave of increased foreclosure activity, as a large number of subprime adjustable rate loans are beginning to reset now," James Saccacio, chief executive of RealtyTrac, said in a statement.
Caught in a toxic mortgage October is expected to be a peak month for hybrid adjustable rate mortgages (ARMs) to reset, with the interest rates on some $50 billion worth of loans poised to go up dramatically.
In the past few months, the foreclosure story has become a tale of two regions. Some of the hardest hit states have traditionally been in the Midwest, where plant closings and job losses have hit the economy there hard.
(Excerpt) Read more at money.cnn.com ...
In a perfect world whomever invented the zero down loan would be doing 20 to life right now. I can’t imagine a more stupid idea.
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How about equity loans for 120 percent of appraisal, I was seeing ads for those in this area not too long ago.
Or mortgages for borrowers who's identities are unclear, who took out seconds and then skipped town?
Now there's a bright idea.
Its happening wholesale in my neck of the woods.
I heard of theis scam, someone files a quick claim deed on a house that is paid off. The then take out as much of a loan on it they can pocket the money leaving the real owner to clear up the mess.
How do they get the grantor to quitclaim the property?
Forge a signature, and file it in the country courthouse.
Well I’ve been saying it for quite a while too...
I have no doubt the overall impact to the economy will be far far larger than the S&L crisis, and bigger than anything this nation has seen since the great depression when all is said and done in terms of the numbers.
The only question is how fast it deflates... if the deflation remains slow enough so that the rest of the economy can absorb it, things won’t be horrible. If however it deflates quickly, a lot of people are going to see things they have never seen in their lifetimes.
lovely
"People no longer believe their house will be worth more tomorrow than it is today"??? Which people?? The parsing of the facts is great for the "going to hell in handbasket" media but far from reality. Why? What's the worst form of lie? A direct falsehood? No, that is most often readily recognized. The worst lie is a half-truth and in the above statement, it is far, far less than even a half-truth.
Who are the vast majority of those who will be affected?
Here are the facts.
Where is the subprime "crisis"? Only about 20% of existing mortgages (nationally, as of March 2007) were in the "subprime" category. However, that fact also hides the fact that that 20% is not evenly distributed around the nation. The 10 metropolitan areas with the highest % of sub-prime loans had an average level of 22.35% of its mortgages in the sub-prime category, with the highest at 26.8% and the lowest of those ten at 20.20% [McAllen TX - 26.8%, Memphis TN - 24.0%, Sharon PA - 23.1%, Miami FL - 23.0%, Richmond VA - 22.3%, Brownsville TX - 21.6%, Merced CA - 21.6%, Sumter SC - 20.7%, Bakersfield CA - 20.2%, Jackson TN - 20.2%; Source:First American LoanPerformance].
Another thing that shows is that only three states, TX, TN and CA have six of the top ten metropolitan areas with above average levels of subprime loans. In affect, there is pockets with higher levels of subprime loans and broad stretches with much lower levels. For instance, 4.9 % of mortgages are subprime mortgages in Lawrence KS and they are 10.53 % of mortgages in Topeka KS and 10.95% in Wichita. [http://findarticles.com/p/articles/mi_qn4179/is_20070429/ai_n19050931
How many of the subprime mortgages were written on ARM terms (low initial interest rate, with higher interest rates starting in some year after the mortgage begins? About 80% of subprimes were written as ARMs [http://www.npr.org/templates/story/story.php?storyId=9085408]
So, if subprime mortgages represent 20% of all current mortgages and those with the most danger of default are subprimes written as an ARM, that's 80% of that 20%, or 16% of ALL mortgages are in the subprime-ARM category.
But, is every subprime ARM mortgage in default or even entering into default? No. While many who took subprime mortgages (because prior bad credit history or zero credit history told lenders to only offer a subprime loan) not everyone who did was, or is now, in bad financial situation, in terms of handling their mortgage. If we take the average of the ten highest subprime default rates, by metropolitan area, we'd get an average default rate of about 21.69% [http://money.cnn.com/2007/03/21/real_estate/subprime_vulnerable/index.htm. ]
If we take recent remarks by the Fed Chairman and the criticism of them we get a figure in the neighborhood of 20% to 22% [http://blogs.ocregister.com/mortgage/archives/2007/05/subprime_delinquencies_higher_1.html]. So lets say its even higher by 25%, to somewhere in the area of 25% to 28%. Even if we adjust that to a 30% delinquency rate, what are we talking about? We are talking about 30% of 16% of all mortgages, or 4.8% of all mortgages.
So, the article even tells you the low-degree of impact this "major crises" has, in the numbers, but it presents the numbers in a meaningless fashion, so that you can't see it.
It tells you: "Nevada led all the other states in the rate of August foreclosure filings: one for every 165 households for a total of 6,197. Other hard-hit, Sun Belt states were California (one in 224), Florida (one in 243), Georgia (one in 271), Arizona (one in 289), Colorado (one in 312) and Texas (one in 532)......Rust Belt states in the top 10 included Ohio (one in 281), Michigan (one in 288) and Indiana (one in 544).
And what do those doom and gloom numbers (1/165, 1/244, etc., etc. tell you? They tell you that the people affected by foreclosures in each of the reported areas are: Nevada 0.6061%, California 0.4464%, Florida 0.4115%, Georgia 0.3690%, Arizona 0.3460%, Colorado 0.3205%, Texas 0.1812%, Ohio 0.3559%, Michigan 0.3472%, Indiana 0.1838%. They tell you that even if mortgage foreclosure rates doubled (not likely) in those areas, then in all but Nevada they would represent less than 1% of the people and all of 1.2% in Nevada.
How does that translate into the value of your home, mortgages in general and even subprime mortgages equaling the financial crisis of the century?? It doesn't.
The real crisis is in the doom and gloom hype in reporting the facts. In addition to the above scare tactics with "facts", try these on:
"Subprime Mortgages Creating High Default Rates"......"In San Diego, homeowners are defaulting on their loans at an increasing rate. At the moment the default rate is 3.3 homes per thousand. The increasing default rate is a nationwide phenomenon and there are cities and regions that are doing much worse. San Diego's default rate, for instance, pales in comparison to Cleveland's rate of 25 homes per thousand.[http://www.kpbs.org/radio/these_days;id=7848]
And those "high" rates amount to 3.3/1000 = 0.33%, 25/1000 = 2.5%.
"Rise forecast in company default rates"......[speculative grade bonds]..."...."Company default rates are forecast to rise nearly 300 per cent as the credit squeeze hits the wider economy and raises the prospect of a global recession."............"Moody’s predicts that the global speculative-grade default rate will rise from 1.4 per cent – meaning only 1.4 per cent of the companies rated have defaulted in the past year – to 4.1 per cent in a year’s time and 5.1 per in two years’ time.".........."Moody’s said Wednesday’s figure of 1.4 per cent was a 20-year low and showed that companies had so far stood up well to the recent volatility.[http://www.ft.com/cms/s/0/7092e8c0-6097-11dc-8ec0-0000779fd2ac.html]
So the headline reports: "Rise forecast in company default rates"...does not say, off the bat, rise in default rates for speculative grade bonds. Then it hypes more with that rise reported as a whopping 300% (enough to scare anyone to death). But, finally (knowing 80% read only the headline, and less than 1/5 of the remainder read more than the first paragraph (the 300%), they had to tell you the actual facts. Defaults on speculative grade bonds could rise from 1.4% last year to 4.1% and even 5.1% in two years. They could have reported that, even in the present crisis, 95% of speculative grade corporate debt is likely to still be secure over the next two years. At least they had the decency to tell you that the current rate of 1.4% was a 20-year low. What does that say? It says the normal long-term rate of defaults on speculative grade corporate debt is closer to what it will return to over the next two years. Is that a crisis?
The entire subprime, liquidity, real estate "crisis" reporting is rife with the parsing of facts to hide their true meaning and hype the degree of crisis they represent. The vast, very vast majority of homeowners and mortgage holders are not headed to default or seeing their equity turned to dust. Most of those that do, a small fraction of all homeowners and buyers, will go back to renting, start saving again, and return to the house marker sometime down the road. I suggest you turn off the TV and quit reading the mainstream news. Neither is designed to provide accurate information.
I’m in SoCal and you are correct. It is getting bad here in the inland empire. This is just the first wave. This is going to, if not already, effect how people spend their money. Luxuries and entertainment will go first. Monies used for necessities only.
I like watching current ‘Flip the House’ shows now b/c people are starting to lose money big time. The flippers deserve to lose their shirts
I have only watched that show once...will have to tune in and see what’s happening. Pop some popcorn...enjoy the show.
“The flippers deserve to lose their shirts.”
I agree. They’re the ones largely responsible for this crash.
With loan brokers & banks pushing value and bending rules to lasso customers by any means as co-conspirators.
Have to say it’s a clear sign that housing is done when you see all those shows- there’s about 4 or 5 of them now.
Also in 2000 (I think) BusinessWeek or one of the other financial mags had “How To Trade Options” on the cover right before that bubble blew.
I hate it when people say “here” and don’t say where “here” is. Like we can read your mind.
and I don't see a lot of problems around where I live...
yes, the developers are building little houses anywhere they can, and some are just sitting there, but there always seems to be a lot of houses for sale..
there is a BIG differanc between the present and the depression era.....over 50% of people get some kind of money from the govt....either SS or Pensions or paychecks etc....
that's 50% that will never have to worry about where their money is coming from.....
North Carolina
Thank you.
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