I agree.
This entire thing is not about out-of-whack mortgages. I’ve check on realty sites, and the national annual rate of foreclosure is not strikingly different than it’s ever been.
It is much worse in California, Nevada, and Florida. I suspect that what’s happened is that the banks made loans in a hyper-inflated market, and THOSE loans cannot be recovered because the house value bubble burst. The banks loaned 300 grand for a house worth 150 grand, but that the bubble had priced by appraisers for 300 grand.
The banks then sold these loans to Fannie & Freddie who bundled them for sale to fiancial institutions. Along come derivative speculators, and then at a MACRO level they paralleled the house-flippers at a smaller level. The house flippers would buy 4 or 5 of these inflated houses intending to flip them for a huge profit in that inflated market. The bubble burst and they got stuck with their 4 or 5 houses that were now worth about half of what they paid for them. They bankrupted.
At the macro level the bundle purchased was suddenly worth half what was paid, and no one wanted to speculate anymore. These folks were left holding worthless bundles, or in the case of derivative speculators, they were left on the short end of a bad bet.
So, in sum if we give money it HAS TO BE at the bundler and higher because the banks have already been paid for the houses by the freddies and fannies and are paid about 25points a year to service the loan. They no longer have interest in those mortgages.
The money, we’re told, is to put credit into the system, but it is money for the benefit of whom? Not the borrower, not the bank because they have been paid by Fannie/Freddie.
Someone up high ate a bunch of inflated house prices that they were gambling on, and now they need money to....????
“This entire thing is not about out-of-whack mortgages. I’ve check on realty sites, and the national annual rate of foreclosure is not strikingly different than it’s ever been.
It is much worse in California, Nevada, and Florida. I suspect that what’s happened is that the banks made loans in a hyper-inflated market, and THOSE loans cannot be recovered because the house value bubble burst. The banks loaned 300 grand for a house worth 150 grand, but that the bubble had priced by appraisers for 300 grand.”
Maybe what makes it much worse for the banks is that in prior foreclosures you never had the fall in house value as well. So you foreclose and resell at maybe 70% of original listed value. Now those numbers could be at 40% or even less if the house is trashed.
You are correct that foreclosure numbers are high but not huge (around 1-2% or ~1 million homes), and this is localized. At the same time, it is spilling over nationally in terms of home sales, new home building etc.