New Wave of Alt-A Foreclosures to be Worse than Subprime Wave

[Zoocat]

I did look at it. It looks like sound bite news to me. Almost anybody can find a quote to support thier opinion, even take it out of context.

I understand your point of view on blogs. Most are mere opinion. But take a look at this one. Dr. Housing Bubble Blog It is research based and all the facts are sourced to well recognized media. As a university writing instructor, I taught research and I understand how to source information. This blog is very well done, using research as a basis for his analysis in an honest manner.

 

[barbarus]

I taught research and I understand how to source information. This blog is very well done, using research as a basis for his analysis in an honest manner.

In MLA style I trust.

 

[Notmuchlonger]

What the hell is he taking donations for a blog? LOL..ok

 

[HFWR]

Guess the Google ads weren't working.

 

[Notmuchlonger]

Oh maybe this quality research takes a good deal of money. My mistake.

 

[honobob]

I understand your point of view on blogs. Most are mere opinion. But take a look at this one. Dr. Housing Bubble Blog It is research based and all the facts are sourced to well recognized media. As a university writing instructor, I taught research and I understand how to source information. This blog is very well done, using research as a basis for his analysis in an honest manner.

And in Dr. Housing Bubble Blogs own words.....

"The ideas expressed on this site are solely the opinions of the author(s) who may or may not have a position in any company or advertiser referenced above."

Bubble Blog Buyer Beware!

 

[barbarus]

Looking at things from the other side of the coin...

...does anyone here put much stock in information that comes from politicians, bureaucrats or the main stream media?

 

[siamamerican]

I'm right in the middle of this mortgage mess. Everyday I have to deal with delinquent loans. Interest rates and subprime borrowers have very little to do with the rise in foreclosures. Loan to value is the main culprit. Most of the subprime borrowers had high loan to value loans and when house prices plummeted were left owing more than the house was worth.

In California, Arizona, Nevada and Florida, many borrowers are 40% underwater. Ethics aside, the best choice is to turn in the keys. The scary thing is that homes are still substantially overvalued from a historic perspective. Like the tech bubble, this housing crisis still has a long way to go before it gets better.

As for a second wave of alt A borrowers going into foreclosure, it will happen. It has already started and if values drop more, many more of these borrowers will choose to walk away from a bad investment. Most these borrowers can make their payments, but like subprime borrowers, choose not to.

In my opinion, the only option in the short term would be banks reducing loan amounts. Some are already doing this and it is a hard pill to swallow. Regardless, this crisis will end and house prices will rise, but not this year and probably not next.

 

[cute fuzzy bunny]

In California, Arizona, Nevada and Florida, many borrowers are 40% underwater.

That would be surprising since many areas havent declined by that much, and most borrowers in the borrower universe didnt buy or refinance during the peak period.

Could it be possible that in the borrower universe, some total morons who had their loans done by complete idiots in 2004-2005 are 40% underwater?

 

[Notmuchlonger]

Looking at things from the other side of the coin...

...does anyone here put much stock in information that comes from politicians, bureaucrats or the main stream media?

Actually I think there is a grain of truth in most sources. The danger is when you find one source and claim it as gospel

 

[cute fuzzy bunny]

Ding ding ding!!!

 

[UncleHoney]

I've started to take a new position about the economy.

I don't believe any of what I read, none of what I hear.

Wednesday CNN told me OIL was down because of excess supply and soft demand.

Oil closes lower after the government's weekly supply report - Aug. 6, 2008

Thursday they tell me OIL is going back up because of concerns about supply.

Oil edges higher - Aug. 7, 2008

Now what the hell did they do with the oil they FOUND the day before?

And then Friday OIL is down again for reasons that would have made it go up if the wind shifted after midnight the day before.

http://money.cnn.com/2008/08/08/markets/oil/index.htm

The only thing you can be sure of is the smoke all these writers blow out their YOU-KNOW-WHATS.

 

[siamamerican]

That would be surprising since many areas havent declined by that much, and most borrowers in the borrower universe didnt buy or refinance during the peak period.

Could it be possible that in the borrower universe, some total morons who had their loans done by complete idiots in 2004-2005 are 40% underwater?

First, 2004-2005 loans aren't the problem. 2006-2007 loans are creating most the problems. You would have to be a complete fool to be underwater on a pre-2005 refinance. Home values peaked in 2006.

Many, not all or most, borrowers that purchased there homes are 40% underwater. Google home values in Stockton and Tracy California. It isn't rare to find houses selling for 40% less than what they were purchased for in 2005.

Take a chill pill. I just expressed an opinion based on my personal experiences.

 

[cute fuzzy bunny]

No reason to get your panties in a bunch. I just expressed my own opinion based on your use of the word 'many', which IMO made the problem sound worse than it is.

You also ought to have a talk with the buyer who bought my wifes old house in 2004 for $240k and its worth maybe $130k right now. That seems to be a problem.

I live just north of stockton and tracy. In this high bubble area most prices were peaking in 2004/2005 and were already falling by 2006.

Unless you bought in a six month window of peak prices, you cant really have experienced a 40% drop. Further, not that large a percent of homes are transacted in any one year. So what you're looking at is a fraction of homeowners who bought at or near the peak.

The dictionary defines the word 'many' as
1. A large indefinite number
2. The majority of the people; the masses

Hence, its unreasonable to say that 'many' people are 40% underwater on their homes. Its feasible to say that many peoples homes are worth 40% less than the peak value was at one time, but not to imply they're 40% underwater on their loans.

 

[Retire Soon]

I believe housing prices peaked in late 2005 or early 2006. These Alt-A loans won't be resetting until late 2010 until early 2013, if they have 5 to 7 years until reset, so there's still quite a bit of time left for the housing market to recover before they reset. The ones that are resetting in the next couple of years would have been taken out in the 2002-2004 period. Those homes likely benefited from the large price increases of 2003, 2004, and 2005, so I would think those folks would still have a good bit of equity left in their homes, and could refinance.

Many of these Alt-A loans are payment option ARM's with negative amortization whose payments will actually need to be reset prior this 5 to 7 year period. This is because there is a clause in the loan documents known as a "recast trigger" that requires that the payments become fully amortized when the balance reaches 110% of the original loan amount. The new payment would then reflect what is necessary to pay the loan off on its 30-year anniversary. The payment would then be higher than if the borrower had started with a 30 year fixed loan in the first place.

10 must-know ARM reset terms (Page 2 of 2)

 

[siamamerican]

No reason to get your panties in a bunch. I just expressed my own opinion based on your use of the word 'many', which IMO made the problem sound worse than it is.

You also ought to have a talk with the buyer who bought my wifes old house in 2004 for $240k and its worth maybe $130k right now. That seems to be a problem.

I live just north of stockton and tracy. In this high bubble area most prices were peaking in 2004/2005 and were already falling by 2006.

Unless you bought in a six month window of peak prices, you cant really have experienced a 40% drop. Further, not that large a percent of homes are transacted in any one year. So what you're looking at is a fraction of homeowners who bought at or near the peak.

The dictionary defines the word 'many' as
1. A large indefinite number
2. The majority of the people; the masses

Hence, its unreasonable to say that 'many' people are 40% underwater on their homes. Its feasible to say that many peoples homes are worth 40% less than the peak value was at one time, but not to imply they're 40% underwater on their loans.

Try this - a large indefinate number (many) of borrowers are 40% underwater. You state, "unless you bought in a six month window of peak prices, you cant really have experienced a 40% drop". Many other borrowers are facing this challenge.

The majority of US home owners owe less than 60% of the value of their homes. It only took a small fraction of the borrwers to foreclose to create the current market conditions. I understand the financial pain of owning a home where you live, but why avoid reality. The bubble burst in your backyard and it will be many years till prices recover.

Many (few or some doesn't work) more borrowers will foreclose in the next year.

 

[al_bundy]

No reason to get your panties in a bunch. I just expressed my own opinion based on your use of the word 'many', which IMO made the problem sound worse than it is.

You also ought to have a talk with the buyer who bought my wifes old house in 2004 for $240k and its worth maybe $130k right now. That seems to be a problem.

I live just north of stockton and tracy. In this high bubble area most prices were peaking in 2004/2005 and were already falling by 2006.

Unless you bought in a six month window of peak prices, you cant really have experienced a 40% drop. Further, not that large a percent of homes are transacted in any one year. So what you're looking at is a fraction of homeowners who bought at or near the peak.

The dictionary defines the word 'many' as
1. A large indefinite number
2. The majority of the people; the masses

Hence, its unreasonable to say that 'many' people are 40% underwater on their homes. Its feasible to say that many peoples homes are worth 40% less than the peak value was at one time, but not to imply they're 40% underwater on their loans.

until 2007 or 2006 an average of around 10 million homes a year were sold with most of them being resales. figure an average household size of 3 gives you around 100 million households. figure around 30% would be renters. at the peak of the bubble that was around 15% of the US home market being transacted in a year

 

[cute fuzzy bunny]

Try this - a large indefinate number (many) of borrowers are 40% underwater.

Lets try this a different way. To be 40% underwater a homeowner would have had to have bought in one of a handful of bubble areas, financed 100%, and have bought within a six month period two years ago.

Thats a small single digit percentage of total homeownership in the US.

Thats not a large indefinite number, many, a lot, or any other characteristic that makes this problem sound worse than it is.

Now...many homeowners in those bubble areas have homes worth 40% less than the value they reached. This does not make them "underwater" in any manner.

In fact, many, if not most, of the homeowners in those bubble areas bought prior to 2004 or in the past year and are either above water or right about at the waterline.

Here's some real personal experience. I bought a house in one of the biggest bubble areas in 2003 and sold it in 2007 for a 24% profit. I bought a house in another major bubble area early in 2007 and its worth about 8% less than I paid for it. The profit I made on the first house is dollarwise twice my paper loss on the second house.

So unless you can point me to some real data that says that a large double digit percentage of US homeowners are ~40%+ underwater in their loan to value calculation...I'm not buying it.

Sorry if you feel like I'm picking on you, but I hate dataless fearmongering. We've got enough problems without people claiming the sky is falling. Especially when its not.

About the only people who got really sporked were people who bought more house than they can afford with a bad loan product over a short time period from 2004-2005, and people who paid way too much for an overinflated house and then couldnt sell their old house and rode the curve down on both.

 

[Marquette]

FNMA requires you to disclose if you are buying as an investor, but back in 2003-2005 i used to read mortgage brokers would tell people to just lie on the application because no one would ever find out

We went to a mortgage broker for a loan on a rental property. We told him multiple times that it was a loan for an investment property.

Imagine our surprise when we showed up at closing and, as we were signing papers, we got to the disclosure stating it was a second home to be used only by us and that we swore we would not be renting it out. I almost walked out, and probably should have, but that felt like it'd create an even bigger mess. And, of course, the broker was out of town that day and unreachable.

The closers pushed us to sign and move on.

After I chewed out the broker he put something in the file to notify the loan purchaser that it was, in fact, a rental property. I'm guessing the papers were never scrutinized; but it was there.

Given the difference in rates (should have shopped around, that would have led me to ask why his rate was so much better), it probably would have been worth it for someone to lie.

 

[ladelfina]

It's obvious it was worth it for that broker to lie..!

I think people are missing the point a little. To me the problem is not the sheer number of foreclosed homes and the effects on the defaulters and their community/economy.. but the fact that those defaults remove the underpinning for 10x, 60x, 1000?x that weight of financial debt instruments that someone is on the hook for, be it a municipality or a pension fund or China or the US Treasury, i.e., all of us. While the immediate defaults are merely bad, the default of the inverted debt pyramid based on these is far graver.

I came across these excellent posts:
London Banker: Fisher's Debt-Deflation Theory of Great Depressions and a possible revision
London Banker: Snake Oil and Deflation

lest anyone be put off by the word "blog".. the writer is (or claims to be) a former central banker and securities regulator.

 

[kcowan]

So unless you can point me to some real data that says that a large double digit percentage of US homeowners are ~40%+ underwater in their loan to value calculation...I'm not buying it.

Me neither. I think the original poster was referring to his personal experience and he was working out bad mortgages. Things are bad but the "badness" comes form the lack of confidence in the financial system. Depositors are withdrawing their money. Pension funds are not buying mortgage-backed securities. Banks are afraid to make new bad loans. They have been lied to before and they are gunshy.

It is this "confidence game" that is the fundamental problem.

So why is the banking sector rebounding? This makes no sense to me.

 

[siamamerican]

Lets try this a different way. To be 40% underwater a homeowner would have had to have bought in one of a handful of bubble areas, financed 100%, and have bought within a six month period two years ago.

Thats a small single digit percentage of total homeownership in the US.

Thats not a large indefinite number, many, a lot, or any other characteristic that makes this problem sound worse than it is.

Now...many homeowners in those bubble areas have homes worth 40% less than the value they reached. This does not make them "underwater" in any manner.

In fact, many, if not most, of the homeowners in those bubble areas bought prior to 2004 or in the past year and are either above water or right about at the waterline.

Here's some real personal experience. I bought a house in one of the biggest bubble areas in 2003 and sold it in 2007 for a 24% profit. I bought a house in another major bubble area early in 2007 and its worth about 8% less than I paid for it. The profit I made on the first house is dollarwise twice my paper loss on the second house.

So unless you can point me to some real data that says that a large double digit percentage of US homeowners are ~40%+ underwater in their loan to value calculation...I'm not buying it.

Sorry if you feel like I'm picking on you, but I hate dataless fearmongering. We've got enough problems without people claiming the sky is falling. Especially when its not.

About the only people who got really sporked were people who bought more house than they can afford with a bad loan product over a short time period from 2004-2005, and people who paid way too much for an overinflated house and then couldnt sell their old house and rode the curve down on both.

I give up! and no I don't think you are picking on me. As you state the 2004-2005 loans are an issue. The foreclosure data shows a different story, but why not just ignore the facts.

Also, the following statement you made is completely ridiculous:

"So unless you can point me to some real data that says that a large double digit percentage of US homeowners are ~40%+ underwater in their loan to value calculation...I'm not buying it".


Hmm, it has to be double digits to constitute many. That sound more like an incredible catastrophy. Less than 2% of loans are in foreclosure, and look at the issue these loans have caused.

Keep ignoring the facts. MANY home owners are in trouble and many MANY more will follow. House prices were extremely inflated and they will work there way down to historic close to historic averages.

One last point - you claim house prices peaked in Stockton 2004-2005. Really, again the data shows prices peaked in 2006-2007 in Stockton.

Agree, the doom and gloom gets tiring, but so do people that ignore reality.

 

[cute fuzzy bunny]

The foreclosure data shows a different story, but why not just ignore the facts.

Super! Show me this data that claims that many homeowners are 40% LTV underwater on their loans. I'm very eager.

Hmm, it has to be double digits to constitute many.

Lets revisit the definition of "many" once again...

The dictionary defines the word 'many' as
1. A large indefinite number
2. The majority of the people; the masses

So yes, single digits and low double digits would not constitute "many".

I believe that what you're looking for is "few" or "some", rather than "many"?

Keep ignoring the facts. MANY home owners are in trouble and many MANY more will follow. House prices were extremely inflated and they will work there way down to historic close to historic averages.

Show me these facts. Some homeowners are in trouble and a lot of people are very upset as a result of the real problems and a whole lot more are far more upset as a result of ridiculous overstatements like "many homeowners are 40% underwater on their loans".

They arent. A few are. Some are 30%. Some more are 20%. Many who bought in the last few years are 10-20% under. I'm quite sure that a very small percentage of homeowners are 40% underwater LTV. They made a very bad decision. There arent "many" of them.

One last point - you claim house prices peaked in Stockton 2004-2005. Really, again the data shows prices peaked in 2006-2007 in Stockton.

Actually I made no such claim. You spoke of a variety of bubble RE areas and I made note that most of the "bubble" areas peaked in late 2004-early 2005 and specifically made note of my own area, north of stockton, which peaked late in 2004. I actually have no interest in when a bubble occurred in one of the armpits of the universe. I'm pretty sure "many" americans dont live in stockton.

Oh, and you have a nice life now...

 

[siamamerican]

Super! Show me this data that claims that many homeowners are 40% LTV underwater on their loans. I'm very eager.



Lets revisit the definition of "many" once again...



So yes, single digits and low double digits would not constitute "many".

I believe that what you're looking for is "few" or "some", rather than "many"?



Show me these facts. Some homeowners are in trouble and a lot of people are very upset as a result of the real problems and a whole lot more are far more upset as a result of ridiculous overstatements like "many homeowners are 40% underwater on their loans".

They arent. A few are. Some are 30%. Some more are 20%. Many who bought in the last few years are 10-20% under. I'm quite sure that a very small percentage of homeowners are 40% underwater LTV. They made a very bad decision. There arent "many" of them.



Actually I made no such claim. You spoke of a variety of bubble RE areas and I made note that most of the "bubble" areas peaked in late 2004-early 2005 and specifically made note of my own area, north of stockton, which peaked late in 2004. I actually have no interest in when a bubble occurred in one of the armpits of the universe. I'm pretty sure "many" americans dont live in stockton.

Oh, and you have a nice life now...

You're an odd dude. You ask me to revisit the definition of many. By your own definition from the dictionary, many constitutes a A large indefinite number. Somehow you take that to mean majority, which isn't the case. For example, many people in this world are as crazy as you. This, thank god, doesn't mean the majority of people in this world are like you.

The next statement makes no sense:

"Actually I made no such claim. You spoke of a variety of bubble RE areas and I made note that most of the "bubble" areas peaked in late 2004-early 2005 and specifically made note of my own area, north of stockton, which peaked late in 2004".


Hmmm, so what the heck are you trying to claim. You claim not to have made the claim that Stockton peaked in 2004-2005, then state most of the bubble areas peaked in 2004-early 2005. Which is it?

Please eat some brain food and make a coherent post.

 

[cute fuzzy bunny]

Goodbye, troll...