[pieceofthepuzzle]

All of this seemed so inevitable. I remember reading a few years ago that something like 50% or more of mortgages in San Diego were ‘interest only’. How does that make any long term sense? As the economy worsens and the people living in those homes have trouble paying the interest only rent on homes, in which they have no equity, what are they going to do? I fear many will just walk away. We may have just seen the tip of the iceberg regarding defaults.

[AmericanInTokyo]

Yes, many knew is it was coming.

But you see, we wanted to be kiiiiiiiiiind and incluuuuuusive, and divvvvvvvvvvverse and compassssssssionate and make it a politically correct "kinder/gentler" United States of America where EVERY MAN IS A KING, EVERY MAN OWNS A HOME, whether they can afford it or not, whether they are legal or not, whether they are honest (or the mortgage houses they would deal with) or not.

Now the chickens are coming home to roost on all of the interest only, subprime crap out there, and bring down the world economy as a result. But, hey, we were compassssssionate, right, and gave everyone a chance at golden altar of American Home Ownership.

[bruinbirdman]

"what are they going to do? "

Those who bought for speculation are not in trouble.

Those first time buyers who had no down and interest only will go ack where they were - renting and still with no equity. They lost their house, or walked away from it; they didn't lose their job.

Those who sold and bought up and can't afford new adjusted payments, can, just, sell down. That's the way it works.

yitbos

[AmericanInTokyo]

That is exactly what happened. There is a thing called "jingle mail". You just fill out a form letter, enclose all copies of the keys of the home you are in, clear out, and then mail off the letter with the keys in the envelope, with no forwarding return address, and just skip town. Simply put, you just walk away from your mortgage, other obligations, taxes, etc. "Hey, **I** dont have to pay for this stuff!" is sadly, the low class, sub prime, irresponsible attitude out there, illegal aliens and (some) citizens alike. There are actually companies springing up advising people how to ditch their homes this way. It is almost like a whole bunch of overweight people shifting to the right side of a life boat moving away from the Titanic, even in light of the yelling and urging (not to do so) by others on the little boat. They will take us all down into the drink through their self-centeredness.

[topher]

In Orange County, South of Los Angeles, and North of San Diego, people bought houses with 100 year leases on the land.

This is on the Irving Ranch properties near Newport Beach.

It has been 40 years ago since people have been buying such homes. So some people only have 60 years left on the leases on the land their houses (which they own) are on...

[ninonitti]

We may have just seen the tip of the iceberg regarding defaults.

The issue is no longer hanging on individual mortgages but on the banks that are leveraged out. Bear Stearns got caught in a classic bank run and the open question is who's next and who's after that

Until confidence (yes as in con game)is restored the dominoes will continue to fall.

This is capitalism at it's finest

[Ernest_at_the_Beach]

Think,....CRA...Community Redevelopment Act behind some of this...I think....