Posted on 07/11/2009 10:59:24 AM PDT by Steelfish
Mortgage Defaults Spread As Even 'Safe' Borrowers Falter
Jim Wasserman and Dale Kasler Jul. 11, 2009
The mortgage default crisis has an ominous new face. It's your neighbor with a traditional fixed-rate loan.
No longer is the real estate bust simply the result of exotic, subprime loans that doubled payments and blew up in homeowners' faces. As the Sacramento economy buckles, even the safest mortgages have become part of a new wave of loan defaults, experts say.
With capital-area job losses reaching 45,000 in the past year and unemployment at 11.1 percent, lenders, bankruptcy attorneys and debt counselors all say they're seeing rising delinquencies among prime borrowers with fixed-rate loans and good credit.
Many of those slipping into trouble are state workers, the mainstay of Sacramento's economy.
"The tide has definitely shifted," said Pam Canada, executive director of the Neighborworks Homeownership Center of Sacramento, a nonprofit loan counseling firm. "We're seeing more people with a loss of income."
Prime fixed-rate mortgages, with the most favorable interest rates and 15-, 20- or 30-year terms that guarantee the same monthly payment for the life of the loan, have long been the bulwark of American homeownership.
(Excerpt) Read more at sacbee.com ...
My heart goes out to people who have lost their jobs, their savings, and are struggling. This will get a lot worse.
Unemployment is on the rise, and I wonder how many people out there would go far out of their way to give money to banks given all of the bailouts. Combine that with many homes being worth much less than what is owed on them, and it creates a scenario where many people will see it best just to ‘walk away’ from their home and mortgage obligations.
I know if my family were in a tough spot, we wouldn’t break our necks just to give money to a bank. We never use credit anyway, paying for most everything we buy with cash, so a hit on the FICA score wouldn’t cause us to lose any sleep. We’ve rented before, and could easily do it again if we HAD to.
We haven’t seen anything yet. In the next 3 years, there are 1 million option ARM loan resetting where the monthly payment will go by 5 to 10 times! Add in the coming train wreck in commercial real estate mortgages and the soaring credit card losses from high unemployment, and you’ll realize why banks are not lending but trying to preserve capital. Last month, over 350,000 people dropped out looking for a job and thus were not included in the unemployment rate (which only counts people actively looking for work). If you include the 350,000 along with the people working part-time because they can’t find full-time employment, the unemployment rate is 16.2% (compared to 25% in 1930’s). It is going to get a lot worse.
This is the beginning of the next great depression. The sub-prime borrower defaults have run their course. But they were just a small fraction of the total. Now begins the prime loans going into default, which will be much more devastating to the economy. We’re in for a period of strong deflation, just like post-1929. There’s nothing Obama can do about it and he’s going to be a one-term President.
Thank you for your concern. I got a new job that started this week, just as things were getting scary. I know way too many that still need the concern and prayers, however.
This is the end result from America changing from a producer economy to a consumer economy. Americans like to consume very nice things but we have neglected producing them. We sent so many industries off shore. We thought we would be a white collar economy. All these people sitting at desks in offices and doing “useful things”. Adding value. All these maggot lawyers and politicians. All these Wall Street thieves like Goldman Sachs
What a joke
And this great depression is the punch line
Congratulations on the new job. I am very happy for you.
I’m now working in the computer area for a large/successful hospital chain. Hopefully, the stability there will continue.
Let’s back up a moment. A bureaucrat at the DMV makes $200/day keeping records on his computer! So 2 days of furlough each month have cost him 400 bucks and make it impossible to pay his mortgage. Nearly a $60,000/yr job working at the DMV??!!
Indeed this is the summer of our discontent.
Your tax dollars at work...
The unions thought they could outlaw the moms and they would force people into buying union made wool caps. The cost of production was far lower in other countries, so the distributors just started outsourcing.
Proper tariffs would have been far cheaper to the American citizen/consumer than the countless trillions in bailouts. Instead the free traitors believed in making America a beggar nation by shifting production abroad and bringing in cheap imports. Who was going to buy that stuff, the critics said, as good paying jobs were sent abroad? It took a long time to screw Joe sixpack but now you have the answer. Which is, no one is going to buy that stuff.
Our major corporations got rich via lower labor cost. Their stock prices went up and that’s all anyone cared about
In retrospect all that cheap stuff isn’t so cheap after all
The free traitors lied about getting all the cheap stuff. There is a cost to de-industrialization and it is staring right at you
Nearly a $60,000/yr job working at the DMV??!!
I have no problem with struggling to make a mortgage payment, even while under water on the loan. However, when the bank in question has already been given billions of our tax dollars via a bailout, I'd be MUCH less motivated to do so. If being 'old fashioned' means breaking your neck to pay off a bank that's already screwed you over once by getting billions from you, and a few generations of tax payers, I guess that means I'm not old fashioned, because I probably wouldn't do it. Have a nice day.
Sigh. Where's the "Not this Sh@t Again" graphic? If only consumers could have been socked with tariffs, and producers coddled with protectionism, over the years everything would be just fine. We could all work our 9-5 factory jobs, stop our horse at the general store on the way home, and enjoy the simple life.
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