Posted on 07/13/2009 4:08:51 AM PDT by TigerLikesRooster
UPDATE: Option-ARM Mortgages Turning Worse Than Subprime
(Updates with companies declining to comment and further details in first, second, fourth and 13th paragraphs.)
NEW YORK (Dow Jones)--For the third straight month, option adjustable-rate mortgages are generating proportionally more delinquencies and foreclosures than subprime mortgages, the scourge of the housing crisis.
A further acceleration of troubles among the loans could mean higher-than-expected losses for Wells Fargo & Co. (WFC) and JPMorgan Chase & Co. (JPM), as well as the Federal Deposit Insurance Corp.'s own insurance fund.
"The realization of the issues related to option ARMs is just beginning," says Chris Marinac, director of research at Atlanta-based FIG Partners.
(Excerpt) Read more at online.wsj.com ...
Ping!
But every said the housing market has already bottomed out? /SAR
This looks to me like another of those situations best described by the old joke with the punch line “The cat’s up on the roof and won’t come down.”
Some preliminary artillery fire to soften up the target.
More info here;
http://www.market-ticker.org/archives/1206-Banks-Here-Come-The-OptionARM-Blowups!.html
Just wait until interest rates start to rise due to all the government printing and borrowing...
The morons at the helm are going to cause substantial inflation by debasing the dollar while at the same time competing for buyers of their debt forcing up interest rates and that in turn will cause mass defaults from people with adjustable rate mortgages already living on the edge... Well done to the geniuses in charge...
If people think actual recovery is coming they are sadly deluded.
LLS
Can anyone say “state bailout”?
Both of these are worse than the subprime fiasco.
No problem, though, Bawney Fwank will simply figure out a way to continue giving federally backed loans to people who cannot afford them and without having to produce any paper work (such as proof of citizenship).
Fascist financial oligarchs Fascinating. Educational.
That's why the SEC declared their IOU's to be securities rather than DOA.
The supremacy of finance capital over all other forms of capital means the predominance of the rentier and of the financial oligarchy; it means that a small number of financially “powerful” states stand out among all the rest. The extent to which this process is going on may be judged from the statistics on emissions, i.e., the issue of all kinds of securities. - Vladimir Ilyich Lenin, "Finance Capital and the Financial Oligarchy"
“Let the free market forces make the correction...”
I agree with you 100%. Putting it off will only make it worse. I know things are going to be bad for an extended period, but let’s go ahead and bottom out, we can’t really start rebuilding until we do.—JM
“That’s why the SEC declared their IOU’s to be securities rather than DOA.”
I’m not sure I follow your point. Can you elaborate?
So...are JPMorgan and Wells Fargo too big to fail? Will Bank Bailout II be as debated as Stimulus II?
Good article...here...
http://www.forbes.com/feeds/ap/2009/07/09/ap6638832.html
Appropriate comments...here...
http://www.freerepublic.com/focus/f-news/2290775/posts
LLS
Is that the one with the option to pay interest only, or the one with the option to convert to a fixed rate at particular times in the life of the loan?
I’ve been a real estate agent for 24 years and still get them mixed up...
1. People overpaid their taxes.
2. The government OWED those people REAL US Dollars.
3. The state was so reckless in its spending and budgeting that it is now, essentially insolvent.
4. Rather than declare insolvency, it issues IOUs (to only one small sector of its debtors)
5. I thought that the IOUs would become a sub-currency within the state of California and that the Federal Reserve would clamp down on that alternate currency as it always has in the past. But it hasn't. Yet.
6. Banks decide NOT to accept the IOUs, because, we assume, they understand that money taken wrongly yesterday and converted into an IOU today is based on the promise to pay tomorrow with money it does not have and has no foreseeable means of attaining
7. So the SEC “ALLOWS” these non-backed IOUs to be traded on a market.
8. Which would make them, as a financial instrument, some sort of bastard hybrid offspring between a true stock and a government Bond, inheriting the bad side from both types of instruments (high risk with little yield but no foreseeable backing).
So my point is this:
Is this not fraud?
If I try to sell stock on the market for a company that does not really exist or with a promised yield that is based upon cooked books, how is this not fraud?
Governmental fiat (”Each IOU is a valid share to trade” because “it will yield 3.xx%”) does not mean these “Involuntary Bondage” can actually pay what they are promised.
And I coined that term deliberately, because it is no less a form of slavery for the government to steal the life energy or the citizenry. So I suppose I do understand how this plays out eventually. Stall until the Federal Government steals from the citizens of other states to bail out California, thus spreading the "Involuntary Bondage" throughout the middle-class citizenry.
Thanks for the links, by the way.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.