According to Countrywide, 60% of their ARM loan clients wouldn't qualify at the fully indexed rate! OUCH! :eek:
this alone should send shills up anyones spine...thats not including other lenders which probably have a higher rate they wouldnt be able to qualify..but then again that could be a bogus number ....
Blast and ElCubano... so what's the deal with Volente ? Is he playing or being serious ? I mean no disrespect Volente.....but i don't understand your logic or reasoning.
Cubano, that number was from Sandy Samuels mouth during that Senate Committee meeting last week...who knows how they hide the truth....but from their record I'd say almost none of these companies is coming out and admitting how bad things are. 2ez: I have no idea...I was going to lose my mind discussing it with him. The most vehement deniers of there being a lending industry problem that I've seen seem to use negative data as their way of saying that there's no problem. It's like dressing up like a clown and trying convince someone that you're the most serious person they'll ever meet...their data and their point of view are totally contradictory. Who knows.
you are on point here my financial savy friend... and you see how they are tightening up on the HELOC and HEL
Supposedly 22% of loans last year in CA, FL, AZ, and another few states were speculative buying. Ouch! :eek:
Even the Million Dollar homes are feeling it: http://news.yahoo.com/s/nm/20070329/us_nm/usa_subprime_foreclosure_dc Mortgage crisis hits million-dollar homes By Walden Siew 12 minutes ago Sheriff Leo McGuire presides over foreclosure auctions in Bergen County, New Jersey, where the bidding for a home reached $1.2 million last June -- a record for one of the wealthiest counties in the nation. Homes sold on the auction block for as much as $852,000 this month -- more than quadruple the median home price in the United States. County officials believe they are close to setting another record soon. In Troy, Michigan, Dorothy Guzek, a credit counselor since 1988, has also seen the changing face of foreclosure. Her clients, while predominantly poor and minorities, increasingly are neither. Nowadays, homeowners holding professional careers with six-figure salaries regularly drop by her office. More and more they come from upscale Michigan communities such as Independence and Clarkston -- once the summer retreat for Henry Ford, founder of Ford Motor Co. "Because of the financing that was possible, so many people bought the bigger house, the million-dollar house with the bowling alley or the tennis court outside," says Guzek, who works for GreenPath Debt Solutions, a nonprofit service based in Farmington Hills, Michigan. "People across all income brackets are having financial hardship." For those on the frontlines of the growing U.S. mortgage crisis, these are the early signs that the explosion of subprime loans made to mostly poorer borrowers is reaching higher ground. The damage is hitting homes financed through jumbo loans for more than $400,000 and so-called Alt-A loans that are a notch above subprime and a step below prime. Americans already are facing foreclosure at a record pace, according to the Mortgage Bankers Association. Lenders started foreclosure actions against more than one in every 200 U.S. mortgage borrowers in the last quarter of 2006. About 2.2 million foreclosures due to bad mortgage loans may cost U.S. homeowners $164 billion, mostly from lost home equity, according to the Center for Responsible Lending, a Durham, North Carolina-based research group. In the last three months, the percentage of foreclosures for U.S. homes valued at more than $750,000 has climbed to 2.5 percent, the highest since early 2005, when RealtyTrac, a online marketplace for foreclosed properties, began tracking data. The overall rate of foreclosures also is on pace to increase by a third this year. "Everyone's looking at subprime. The rock they aren't looking under are the adjustable rate mortgages and teaser rates and low money-down loans," said Mark Kiesel, a portfolio manager for Pacific Investment Management Co., the world's biggest bond manager. "It's going to affect prime as well." Kiesel said he sold his Newport Beach, California, home for more than $1 million in May last year after the property appreciated more than 20 percent in two years. He believes delinquencies and defaults will rise, weighing down most of the housing market. California, with 3,384 foreclosures of higher-scale homes since December, is leading the nation, followed by Florida and New York, according to RealtyTrac. The MBA doesn't track foreclosure data by home value. ICEBERG Josh Rosner, managing director at investment research firm Graham Fisher & Co., says the growing numbers of foreclosures outside the subprime market is just the start. "To define the problem as a subprime problem is short-sighted," Rosner said. "It's really seeing the tip of the iceberg as the iceberg." Compounding the risk is the nature of homebuyers of higher-end homes, says Rosner. About 40 percent of homes bought last year were second homes or investment properties. Speculative buyers may be more at risk, he said. Standard & Poor's said on a conference call on Thursday that foreclosure rates are likely to surpass levels last seen during the 2001 recession. "That giant ATM you've been living in has just shut down," said David Wyss, chief economist at S&P in New York. "Consumers are in debt and we've been living beyond our means for some time." CDOs The latest foreclosure data also may spell trouble for Wall Street, where pools of bonds may be susceptible to nonperforming loans that underpin debt vehicles known as collateralized debt obligations. CDOs group debt based on credit quality and are similar to mutual funds in packaging securities to help diversify risk. In CDOs, the strongest debt is at the top of the capital structure, helping to smooth out any drag on performance from weaker debt, such as subprime loans. Just as more expensive homes are beginning to fall through the cracks, the fear is higher-rated bonds within CDO structures may be vulnerable. The declining performance of subprime loans have resulted in CDOs losing about $20 billion in market value, according to investment bank Lehman Brothers. UBS Securities said in a report last month that rising delinquencies may cause losses within some subprime mortgage bonds rated as high as the "A" category. FRAUD-FUELED At the Justice Center in Hackensack, New Jersey, on Friday, the wood-paneled room is filled with about 40 people and the auction is routine. The first property on the sales sheet lists a Korean homeowner with $509,000 of outstanding debt. There are no bidders. Deutsche Bank, holder of the busted loan, buys the property with a quick $100 bid. Sheriff McGuire calls the process "one of the most distasteful parts of my position." He places most of the blame on bankers who allowed questionable lending practices. "This might not have happened if not for these new type of loans," McGuire said, minutes before the auction. The loans also have helped millions of Americans purchase new homes, he concedes. "The banks took a chance on the future, and the homeowners took a chance so there's enough blame to go around," McGuire said. Still, "the banks and lenders have largely set them up for this downfall." Adding to the grief, mortgage scams and con artists trying to take advantage of distressed homeowners abound, boosting foreclosure rates, county workers said. "It's not the American Dream anymore," said Fran Napolitano, a county clerk in Hackensack. "It's 'who can I stab next."' In Detroit's suburbs, hit hard by the U.S. auto industry downturn and financial troubles at General Motors Corp. and Ford Motor Co., the story strikes home each day for GreenPath's Guzek. "It's sad. It's just an awful feeling," she said. "You hope that you can come up with a financial plan to help people remain in their homes, but sometimes it's not the best thing for them." These days, her calendar of eight counseling sessions a day, 40 a week, remains full. Increasingly, she offers different advice than devising financial plans to save her clients' homes. "If they can't afford it, sometimes the best thing for them is to walk away," Guzek said.
Second Great Depression, indeed. Seems inevitable. What is most surprising here is that how can the banks possibly gotten into such a bad situation. IF it is true that a 20% fall in house prices at the top of a bubble can bankrupt the entire banking system, there is something seriously wrong in American capitalism. Expect the belief in free markets to fall hard in the next recession. So how is the credit quality of the banks? Do they hold also the worst subprime junk, or do they concentrate on the better loans? If rated like the ABX-HE indices, what would be their loan books' rating? http://www.markit.com/information/affiliations/abx For example, if the banks' loans were on average equal to A-rated ABX-HEs issued 06/07, their market value would be around 95 now. With a 22% equity ratio, almost a quarter of the banks' equity would be wiped out already. And the housing downturn has just barely begun...
What don't you understand ? For those with these arms, what does the rate change to ? The one I was offered 3 years ago was a 3/1 and it started at 4 back when 30 year rates were 5.25. So if I had taken it 3 years ago, my rate would jump to 6 % right now or I could just refinance it at a fixed 6%. On a 500k loan, your payment will now be roughly $600 more. I agree there are those who maxed out their loan because they figured they would be able to pay it later and perhaps through job changes that is not the case but you act like everyone who bought a house is in an ARM and is going to default.