A Second Mortgage Disaster On The Horizon?

CBS News ^ | Dec. 14, 2008 | Scott Pelley

[SFR]

Exactly, we went the conventional route and like you pay about 10% extra every month that is going to get us out a few years early. It is easy to do if you have no credit card payments (other than food and that is just so we get free airline miles) and no car payment.

[Cyclone59]

I thought that ARM’s were based on prime and I know that prime is based on the govt rate and that rate is in the toilet, so that goes without saying - mortgage rates should be decreasing, shouldn’t they?

[Badeye]

Back in 2004 and 2005 I mocked quite a few who were posting about the coming housing/mortgage crisis.

Just a public acknowledgement they were right, and I was wrong.

Didn’t happen here at FR, but they do monitor whats posted here.

[Alberta's Child]

In my area, we are seeing multiple families living under the same roof.

That's a good point. I considered the factor related to extended families moving in together, but only in terms of grandparents living with their adult children and perhaps helping to raise the grandkids (like "the good old days").

[Cyclone59]

Exactly, we went the conventional route and like you pay about 10% extra every month that is going to get us out a few years early. It is easy to do if you have no credit card payments (other than food and that is just so we get free airline miles) and no car payment.

well, you sure as hell ain’t helping the economy! I am with you on that except I do have a car payment - when the interest rate is less than the cost of money you buy.

[Paul Ross]

I thought that ARM’s were based on prime and I know that prime is based on the govt rate and that rate is in the toilet, so that goes without saying - mortgage rates should be decreasing, shouldn’t they?

They are only partly based on the prime rate. They are also SUPPOSED to be based on a real-world risk-assessment. (Which of course the Feds and their bailouts are in complete denial of...and they likely have already totally lost that "investment" of $700+ billion of our money)>

Based on the facts alluded to in this report, we aren't even half way through the mortgage crisis...which actually has been ongoing since the mid part of 2006. 2011 is the time line for most of these bad loans to have erupted, foreclosed, liquidated... if the free market were allowed to work...so as to be cleared from the system...and allow prices to resume growth.

[Rocky Mountain High]

Amen!

No politician or pundit wants to blame the consumers who got us into this mess! A bunch of morons hit the equity lottery once or twice and thought they could keep doing it forever.

[DB]

“This all just goes to confirm that Peter Schiff Was Right”

Really.

Did he not say oil wasn't coming back down?

Didn't he tell all his followers to pull their money from the US and invest in Asia and in Scandinavian countries?

How “right” was all of that???

[GonzoGOP]

Am I missing something here?>
Four factors.
Lones to illegal aliens. So if you forclose on their house they just move home.

People move from an owned property (House Condo) into rentals.

I know a lot of younger people who are boomeranging. In other words selling or being foreclosed out of their condos and moving home with mom and dad.

Finally many people bought second homes. My brother in law has a house in the suburbs, and a one room condo down on the Chicago Lakefront. Seemed a good investment when property values only went up. Not so much now. If he looses his job that condo is going to go away.

[crghill]

This is the “3rd world” trend setting itself up here. We Americans laugh when we hear of 12 people living in 600sq ft. However, that’s what it comes down to when mom and dad have the only paid off house and the kids can’t afford a place of their own.

[DB]

Oh, and didn’t he say to invest in commodities?

How’s the working for him - and his followers...

[LomanBill]

>>Why would anyone settle into something exotic mortgage like that??

 

 

 

Unfortunately the "flippers" responsible for the much of the housing bubble were less benign than the TV Show character.

 

Liar Loans?  

 

§ 4. Misprision of felony

 

Whoever, having knowledge of the actual commission of a felony cognizable by a court of the United States, conceals and does not as soon as possible make known the same to some judge or other person in civil or military authority under the United States, shall be fined under this title or imprisoned not more than three years, or both.

Rut Roh!

 

Ah what a wicked web....

[Alberta's Child]

Right. But at some point these properties will be subjected to SOME kind of transaction (sale, loan write-down, purchase by another bank or Uncle Sam, etc.) that will establish a new (and more realistic) market value.

[DB]

Sometimes it is a good lesson to learn, even if the hard way...

[ladyjane]

There are some excellent programs for first-time buyers out there. Before deciding on any program you should run the numbers.

When mortgage rates are really low you pay off your principle very fast. Use your computer and run off the payment schedules on a 5% versus a 7% mortgage. There’s a big difference.

Also factor in PMI if you are required to take it.

[dragnet2]

In my area, we are seeing multiple families living under the same roof.

That's becoming the norm. Nothing wrong with families coming back together, as long as everyone pulls their own weight, helping out one way or another.

[DB]

Assuming that the property isn't destroyed in the meantime.

“People” usually of south of the border ethnicity, have been stripping empty houses of all the copper and other valuable materials leaving the houses virtually destroyed for a quick buck. The cost of fixing them is then huge.

[Alberta's Child]

Loans to illegal aliens. So if you forclose on their house they just move home.

Right. I suspect most of these will have been washed out of the system before 2010-11.

People move from an owned property (House Condo) into rentals.

Right again. My point was that many of these "rentals" may actually be condos or detached single-family homes that were owner-occupied until the last year or two. The housing is still there -- it's just not owned/occupied under the same conditions.

I know a lot of younger people who are boomeranging. In other words selling or being foreclosed out of their condos and moving home with mom and dad.

That's something I hadn't factored into my assessment, but it may be a bigger issue than a lot of folks had considered.

Finally many people bought second homes. My brother in law has a house in the suburbs, and a one room condo down on the Chicago Lakefront. Seemed a good investment when property values only went up. Not so much now. If he looses his job that condo is going to go away.

This is another big factor. If he loses his job, that condo is probably going to become somebody's rental property.

[Paul Ross]

Did he not say oil wasn't coming back down? Didn't he tell all his followers to pull their money from the US and invest in Asia and in Scandinavian countries? How “right” was all of that???

He just addressed those points this weekend. The dollar spike is primarily responsible for the negative performance in those issues, and the dollar spike (post-crash) was not forseen by him.

Nor by anyone or anybody else for that matter. And it merely postpones the inevitable, while confusing the short-sighted who aren't keeping their eyes on the main sources of wealth.

His conclusion is that there are a number of foreign investors who are improperly knee-jerk going to the U.S. as the best "port in a storm".

Before the Xlintons and Bush, that would have been a sound bet. Reagan always called inflation the "cruelest tax". But as we have seen, the Bushes and Cheney are not Reagan.

Thus...those foreign investors will ultimately see with the huge inflation of the printing press money that the Feds are pumping out, their investments vanish...which will then trigger a more rational response. They will then flee the U.S. and the dollar will then collapse completely.

Don't be fooled by the temporary dollar bubble. Just as you should not have been fooled by the Real Estate Bubble, and the phoney U.S. industrial claims of the inflaters. Schiff will be proved to still be right. And it would not surprise me that if those who are still laughing about the dollar collapse will be groveling for their supper in soup lines.

[Alberta's Child]

I think mortgage rates ARE decreasing. What’s also decreasing, though, is the likelihood that a potential buyer will actually qualify for such a mortgage.