Posted on 12/15/2008 10:35:10 AM PST by Lorianne
When it comes to bailouts of American business, Barney Frank and the Congress may be just getting started. Nearly two trillion tax dollars have been shoveled into the hole that Wall Street dug and people wonder where the bottom is.
As correspondent Scott Pelley reports, it turns out the abyss is deeper than most people think because there is a second mortgage shock heading for the economy. In the executive suites of Wall Street and Washington, you're beginning to hear alarm about a new wave of mortgages with strange names that are about to become all too familiar. If you thought sub-primes were insanely reckless wait until you hear what's coming.
(Excerpt) Read more at cbsnews.com ...
They are beyond under water. They are at the bottom of the ocean.
A new wave of mortgages with strange names?............
One thing that tempers my pessimism, though, is this:
Regardless of how many mortgages "fail," people have to find a place to live anyway. It's not as if we're dealing with a system of 100 families, where 10 have been foreclosed out of their homes and we now have 90 families living in 100 homes. There's still a need for those 10 "extra" homes, though not at the prices they were at before the foreclosures.
I think we're going to end up in a situation where the family that walks away from a $500,000 mortgage is going to end up living in a $250,000 home (probably as renters for a while), and the home with that $500,000 mortgage will be sold for $375,000 . . . or maybe occupied by renters whose monthly rent is comparable to the carrying cost of a home with a $375,000 mortgage.
Am I missing something here?
One thing you’re missing is that many of these properties stand empty for extended periods and the idiotic mortgage-holders don’t bother to maintain them.
So a property loses $100,000 of “real” value in a few months in addition to the hundreds of thousands in phony value they have lost.
People are so damn stupid. When I purchased my home I was given all these options — actually, the one guy pushed them so much I said “goodbye”. I stuck with the traditional 20% down, 30 year fixed with an extra payment or two every year.
Why would anyone settle into something exotic mortgage like that??? Some of those mortgages had pre-payment penalities, too! Again, people are dumb.
I just want to say thank you to all of you idiots out there that bought more house than you could afford under what used to be normal circumstances, because you were either incapable or unwilling to understand the contracts you were signing. As long as you were getting the dream home for zero down, and a low low introductory rate, LET THE GOOD TIMES ROLL!
Thanks so much for contributing to the rape of our economy, and leaving those of us who did it right, took our time, saved and scrimped for our down payments, paid our bills on time to build our credit, and after 5-10 years bought our first modest homes within our means, in fear of losing everything along with you.
Thanks that your stupidity and greed now means that young people that are starting out and want to do things right to build up cash and credit to buy a house can now look forward to living in a rental instead, because YOU wanted a dream home when all you could afford was an apartment.
“They are beyond under water. They are at the bottom of the ocean. “
I wonder if it’s wise to continue making payments and living in the house when the outlook is so bad. Some people are so far behind that it will take a decade to balance out the loan and the price their house can sell for.
“Regardless of how many mortgages “fail,” people have to find a place to live anyway.”
In my area, we are seeing multiple families living under the same roof.
Anyone who finances a home purchase with an adjustable-rate mortgage when interest rates are at or near historic lows is a moron. That's the time to lock in a long-term FIXED rate.
An ARM eventually becomes an ARM and a LEG.
It's getting worse," Egan says. "There are some statistics from the National Association of Realtors, and they track the supply of housing units on the market. And that's grown from 2.2 million units about three years ago, up to 4.5 million units earlier this year. So you have the massive supply out there of units that need to be sold."
"The same craziness that occurred in the mortgage market occurred in the commercial real estate markets. And that's taking a little longer to show. But there are gonna be big losses there. Credit cars, auto loans. You name it. So, we're still, you know, we're maybe halfway through the mortgage bubble. But we may only be in the third inning of the overall bursting of this asset bubble," Tilson says.
Agree....I refi’d my house twice since 1998. Both times were for lower interest rates or shorter terms. NOw more than half way through a 15 yr fixed 4.875% mortgage.
The only solution is for the gov’t to print more money and offer all these losers a fixed 30 or 40 yr mortgage at 4% or 4.5%, regardless of equity. Otherwise the downward momentum may be unstoppable.
Much as I hate gov’t intervention, I would rather see them invest in housing than banks or insurance companies or car companies. Soon, maybe the gov’t will own everything and all will be great.
Soviet-style apartments for everybody!
People ARE dumb; or maybe their greed makes them dumb. Or their “it can’t happen to me, I’m invincible” hubris. I’ve told my kids; if you can’t afford a conventional fixed-rate mortgage with at least 5% down, you can’t afford a mortgage. An ARM is playing Russian Roulette with your home. Dumb.
AMEN!
My roommate is a Mortgage Broker.I havee expressed interest in buying a home next year and he keeps pushing me to do 100% financing first time buyer BS. I kept telling him I was going to put 20% down and he keeps telling me not to. I tell him I need the mortgage payment down enough where I can pay it and I want to build up equity. He keeps pushing me the other way. I will not go to him when it’s time.
Make that latter number 200,000 , and you'll see why the administration would rather just monetize the debt ,inflating the currency enough so that the 25 % of mortgagees with underwater loans won't have to mail their keys to the bank.
Not only is new home construction virtually dead, but we have millions of homes instrinsically worth less than it cost to build them..Happy days..
Good thoughts.
Unfortunately, banks aren’t selling off foreclosed properties at rational market rates to get them occupied again.
They are sitting on them, asking excessive prices, hoping for federal billions to bail them out. If they were to sell, they guarantee a big loss, and have no hope of getting the bailout bucks.
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