New foreclosures at record high
Submitted by
CalculatedRisk on Tue, 03/13/2007 - 10:18am (47 comments)
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And now this!!!!!!!!!!!
Senate Weighs Aid to 2.2 Million Subprime Borrowers (Update4) - Bloomberg.com
"Senate Weighs Aid to 2.2 Million Subprime Borrowers (Update1)
By James Tyson
March 13 (Bloomberg) -- U.S. lawmakers will have to consider providing aid to about 2.2 million subprime mortgage borrowers who are at risk of defaulting and losing their homes, Senate Banking Committee Chairman Christopher Dodd said today.
``The impact of losing 2.2 million homes I suspect will be in a lot of areas of our cities and towns that are already pretty hard hit, so we clearly want to look at that and legislate,'' Dodd, a Democrat from Connecticut, told reporters in Washington after a speech to the National League of Cities.
Foreclosures involving homeowners who took out subprime loans from 1998 until 2006 could cost $164 billion, Dodd said, quoting a December study by the Center for Responsible Lending in Durham, North Carolina. The government needs to provide at- risk homeowners ``forbearance or something like that to give them a chance to work through and get a new financial instrument here that they can manage financially better,'' Dodd said."
Ridiculous! Just buy more house than you can really afford with nothing down and shitty credit, and you too can get a federal bailout. Damn, I wonder sometimes why I don't follow the herd, apparently they have nothing to lose.
Dow down 192 points at this time.
This makes my blood boil. I think I might have to stop reading today.
"I wonder sometimes why I don't follow the herd"
I hear you on that one. I hope this does not see the halls of congress...
Sorry, just saw someone posted that on the last thread. But riddle me this--if the borrower can't afford the house, then no amount of manipulation, outside of total debt forgiveness, will allow them to pay off the loan. So what can be done?
let's give them all candy!
candy for everyone!
more candy!
I'm with Geoff.
Rescaps numbers are out loss of $651MM in Q4 vs gain of $118 in 2005 (and their FYE is Nov I believe so the worst is yet to come). Tanta, they are "expanding remediation activities in subprime loans" - hold out for a big bid when they call asking for help.
"Ridiculous! Just buy more house than you can really afford with nothing down and shitty credit, and you too can get a federal bailout."
Not much different than what they did for the airlines!
I read somewhere that the GSE's or HUD studied bailouts of people facing foreclosure and the conclusion was that it doesn't work for a large percentage. It just prolongs the foreclosure until a later time frame.
Why does everyone assume these people will be homeless? The rent they will be paying would be much cheaper than an inflated mortgage!
Cosmo Dog, it could be the the other side of the fence too. Those holding the bag and the ones who traded the notes. Think big banks.
On the subject of state aid for bad debtors, what happenened in Japan when the government kept all the indebted banks on life support after their bubble burst?
Fourth quarter...as in ending December?
Wait till they get a load of the numbers for the first quarter of 07.
This makes my blood boil. I think I might have to stop reading today.
Now, now, Geoff. The US govt. guarantees a successful outcome in speculation. If you make reckless gambles, you can keep the profits, and the govt will pay for your losses.
How can it be any better? I don't know why you don't like it - do you hate America?
They tried this once before and the result was, after much delay, resolution trust corp essentially bailed out those still hanging on. Everyone should write senator Dodd and tell him how angry we feel, that the unjust go unpunished. He is borried that sities will be blighted. Then tey will stop approving so many construction permits.
Never fear, it is all talk, the real bad stuff will be over by the time this divided government takes action.
But note a capitalist fallacy as applied to the use. Profits are private, Losses are public. So folks can with impunity make bad decisions get paid for them and the public has to foot the bill for the cleanup.
Tanta,
Picking up from the last thread and the comments above, a bailout will just extend and enlarge the moral hazard issue. The people that bought these loans (a goodly portion of whom do not call the US home) need to have their fingers burned down to the bone, not just toasted lightly on the surface. That is the only thing that will make people think twice the next time around.
There are some innocent victims here, but fewer than the Chris Dodd's of the world will make you think. Many people who did know better put their home equity on red and spun the wheel hoping that capture all the HPA upside with nothing down. As well, there were a lot of people who had no business being homeowners given what they broght to the closing in terms of equity and capacity. They should rightly be renters until they have the requisite financial status to be homeowners. It would be a big policy mistake to keep them in homes they shouldn't have been in to start with. It will also be very difficult to distinguish between the people that were truly taken and couldn't be expected to know better and those who don't deserve a bailout. For the innocents that are out on the streets with their clothes and four kids, there are groups like the red cross and public agencies who should get some extra funding to avoid a big homelessness problem, but no money should be used to help the capital markets. Everyone in these trades was an adult and needs to be treated as such with respect to the liquidation of capital in the mortgage sector.
You'll see a lot of increase in California in '07 and beyond. A lot of people took out the Option-ARM that allows the minimum payment and I/O payment for 5-years. We're coming up on that 5th year. I imagine '08 % '09 will be greatly increased in CA.
Yes it does suck -- the thought that you do wrong and bid daddy govt. say's all is ok and screws those who did the right thing in the first place.
But I think that the bailout will be as effective for individuals as the FEMA role in NO. The problem is just too big for the Feds to do more than a program this is mostly fluff.
And ultimately all the bailout will do is prolong the down side slide. They can slow the rate of decent but I doubt the ultimate amount of decent in pricing.
Bingo, Anthony.
God have mercy, Brian.
I said a while ago that if Rescap had it that bad, certain other parties were going to need life support. Surpise, surpise--certain other parties are on life support.
I'm not sure I'd be accepting employment contracts with anyone these days until I got the BK judge to sign off on the expense. Just sayin'.
My "defense" of Dodd's ideas--the details of which I still don't know--was rather tongue-in-cheek.
I meant to make more or less the point that, well, we didn't get FIRREA, as an example, until we had the S&L bailout. If bailout of someone is on the table, I'm saying, at the very least it had better be used as the opportunity to put the right regulations in place. I am not predicting that anyone is going to do that.
My own personal memory of the period in which the regulation forming the RTC was hammered out was that the biggest lobbying was on the part of the RE business--brokers, investors--who wanted to make sure that the RTC wouldn't liquidate all that REO too fast, as it would "hurt their investments." So they came up with a bunch of compromises that meant the RTC liquidated much too slowly, which hugely increased the costs to the taxpayers.
Does anyone on this blog really think, at the end of the day, that it's all bleeding heart liberals behind this bailout idea? If so, you want to buy some loans? I understand HSBC has a big porfolio on the market.
Tanta,
Amen, sister. Make sure your salary comes out of the DIP financing and not whatever they get for the residuals! They may be paying people in second lien notes before this is all over.
New foreclosures at record high
Er, slightly misleading headline on Marketwatch's part, nu? The absolute number of foreclosures may, in fact, be at a record, but the rates aren't even up to the 2002 levels overall, much less any sort of record. And the stress on the sub-primes segment would actually appear to be a great deal lower than '02.
I understand that reservations for position in the gallows are filling up.
Right now, Paulson is right next to Cheney, and Gonzales has been shifted to a back row.
It looks like the active Senators are pushing and shoving to get in that front row.
Calm down, Senators, the event will likely cause us to hold this in several arenas at once, giving you all ample opportunity for front row spots.
It looks like the organizers will probably have to order more rope. And for optimal symbolism, they will use hemp, not cotton or polymer-based, thereby supporting only high-quality foreign industry.
A fair amount of the pattern you are seeing in foreclosures is due to the laws particular to that state. The highest areas have the fastest foreclosure proceedure laws. Foreclosure laws - State foreclosure laws - Foreclosures.com
Most of the western states are more consumer friendly and have about twice the amount of time for the home owner to avoid foreclosure (~120 days vs 60 days)
-Alex
Looking at the table CR posted from the MBA, it strikes me that across both prime and subprime, there seems to be a clear trend in the numbers. They seem to drop as one goes down the columns till around the 4th quarter of 2004, and then start rising again.
IIRC, the nadirs are when ARMs were being offered with the lowest introductory interest rates. Presumably this means these folks currently have the lowest monthly payments normalized by the value of the homes they've bought.
If this is true, this is a statistical demonstration of how close to the financial the edge recent buyers have been, regardless of whethter they were in the prime or subprime category.
I to am sorry I did not jump on the Free Money band wagon...unfortunately I work for a living!!
Tanta,
Just say, "Physical bullion in advance, please."
Or land if you like.
LOL about the bailout. A bailout isn't the government's expense its ours. Yeah, yeah, you all got that, I know.
You/we are in a collective agreement with thieves and idiots. Their mess is your/our mess.
Thank you for your calm careful appraisal of those tabled stats, BG.
Mark Zandi, chief economist for Moody's Economy.com, is also concerned. "I think the subprime problems will take housing activity to a whole other level," he says.
Zandi is projecting a doubling of subprime defaults this year to 800,000. "Those homes will go on the market at a discount and will weigh on the market," he says. He also believes that 500,000 fewer Americans will be able to obtain financing because of the tighter standards.
All that has led Zandi to alter his projection of a 3 percent decline in housing prices this year to a mid-single digit decline. The hardest hit areas, which he thinks will be Arizona, Nevada, parts of California and Florida, which will absorb high single digit or even double-digit punches.
Not everyone paints as bleak a picture. "We don't know how many subprime mortgage holders will actually default," says Christopher Mayer, an economist at Columbia University. "Banks are working with borrowers [so they can keep their homes]. Plus, there's plenty of liquidity around for people looking for mortgage loans."
That's not to say he sees everything as hunkey-dorey - Mayer
How long can FHA keep up with delinquencies that high?
Leave you comments on Reuters about Too easy to get a home loan in recent years?
Reuters.com
Business & Financial News, Breaking US & International News | Reuters.com
Mozillo saying mortgages are in a liquidity crisis
Any amount of money Uncle Sam is going to be able to pay to the hoards who will be facing foreclosure in the next 2 years will only postpone the inevitable. Give the mortgagees $20,000 each and they will be foreclosed upon 8 months later and take 8 months longer to get their lives back in order.
Oh wait, there is another difference. The banks will get 8 more months' payments at taxpayers' expense. Huh.
Isn't it the name of the game for the Fed and government to prolong the crisis and create the Great Depression II
US Stock Markets are down on average 2%.
The amusing thing is that the NYSE stopped (down)trading by computer at 3PM. Let's put off the bad news.
Business & Financial News, Breaking US & International News | Reuters.com
Bail out the little guy!
Puhleese! Dodd's constituents include some of the whitest shoes on earth.
Those guys taking off their golf shoes after a hard day on the links want a little back-up from their man in Washington.
Dodd is running for President (he was on the Daily Show last night) and also represents the hedgies and bankers in Connecticut. This crisis response allows him to appear to be standing up for the little guy in public and also backstopping the big boyz in private. I'll bet Dodd has been on the phone all day asking for campaign donations from those who stand to take loses.
I don't want to make this analysis too complex, but Connecticut senators suck for all twelve calendar months.
Name wrote:
IIRC, the nadirs are when ARMs were being offered with the lowest introductory interest rates. Presumably this means these folks currently have the lowest monthly payments normalized by the value of the homes they've bought.
If this is true, this is a statistical demonstration of how close to the financial the edge recent buyers have been, regardless of whethter they were in the prime or subprime category.
I don't have anything to add. This is an incisive and, IMO, extremely accurate observation.
BG said: "Er, slightly misleading headline on Marketwatch's part, nu? "
Facts: The new foreclosure rate is a record: From the MBA: ..the SA rate of loans entering the foreclosure process was 0.54 percent, eight basis points higher than the previous quarter and a record high."
Not everyone paints as bleak a picture. "We don't know how many subprime mortgage holders will actually default," says Christopher Mayer, an economist at Columbia University. "Banks are working with borrowers [so they can keep their homes]. Plus, there's plenty of liquidity around for people looking for mortgage loans."
Plenty of liquidity for subprime borrowers? In my articles, I wouldn't quote a guy who said something so silly. Politely hang up and find someone who understands what's going on in the subprime market.
Back around late 2001, early 2002, interest-only loans were fairly rare. Then mortgage brokers in the Atlanta area started marketing them heavily. I don't know why -- maybe it had something to do with troubles at Delta after Sept. 11, 2001. But the point is that this trend began in Atlanta and spread from there. A rare instance of a fad not starting in California.
Georgia's delinquency rate on all mortgages is 7.49 percent. The only states with higher delinquency rates are Louisiana and Mississippi (Katrina) and Indian and Michigan (disappearing manufacturing jobs).
Georgia embarked on the nontraditional mortgage experiment before the rest of the country. CR says delinquency rates will rise in California, Nevada, Arizona and Florida. That sounds plausible. They'll end up where Georgia is now. Georgia merely got a head start.
Rex: Facts: The new foreclosure rate is a record: From the MBA: ..the SA rate of loans entering the foreclosure process was 0.54 percent, eight basis points higher than the previous quarter and a record high."
True enough, homeboy. And a whole 4 bps higher than 2nd quarter '02. But, as I said, slightly misleading. Take into account the 90+ delq and the picture looks a touch better than it did in '02. Look at the inventory and it looks decidedly better. And the 8 bps qtr-on-qtr increase is also within the range of recent history. And sub-prime, the story of the day, is nowhere near a record. Like I said, misleading.
Note to Dodd:
Team America: World Risk Police
America, F*CK YEAH!
Coming again, to save the motherf*cking day yeah,
America, F*CK YEAH!
Freedom is the only way, yeah,
Risk your game is through / 'cuz now you have to answer to...
America, F*CK YEAH!
So lick my butt, and suck on my balls!
America, F*CK YEAH!
Watcha gonna do when we come for you now?
It's the dream that we all share, it's the hope for tomorrow,
F*CK YEAH!
America, TOO BIG TO FAIL!
F*CK YEAH!
JPMorgan gets a credit rating upgrade because it is too big to fail and now we are going to bailout the banks AND save the poor? Be sure to look out for your Risk Insurance withholdings on your upcoming paychecks.
Cowards, FCK YEAH!
Freedom is the only way, yeah,
Free Lunch, FCK YEAH!
Coming again, to save the motherfcking day yeah,
Inflation, FCK YEAH!
Risk your game is through / 'cuz now you have to answer to...
Socialism, F*CK YEAH!
So, let me see if I understand this. Lending standards are returning to sanity, and it's a liquidity crisis?
This POS better shut his F"""" mouth. People played the game now let the free markets reward those that had the patience to keep away from this ponzi gimmick housing market.
Socialism, F*CK YEAH!
dr strangemoney
Disappointing conclusion there, Doc. Pretty sad.
Socialism would have imposed regulations which would have prevented the greedy capitalist bankers from the BS excesses in the first place.
Proactive regulation---the kind the FED are now being asked why they didn't have and are distancing themselves from responsibilities thereof.
Socialism doesn't only surface to correct the egregious mistakes of wanton capitalist excesses. Properly organized, it prevents horrific disequilibrium in the first place. As if the pig capitalists were in the dark about the end result. BS!!!
Very disappointing, Doc.