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We have 600 trillion in world liabilities plus more than a 400 trillion-derivatives neutron bomb, all of which will go off when the Westerners (from EU and US) will no longer be able to borrow.
With $361 billion in subprime loans made to borrowers with weak credit resetting at higher interest rates next year, foreclosures will peak in the third quarter of next year and won't drop back to more normal levels until 2011, said a Blank of America Securities report out last month. The report also estimated the median U.S. home price would fall 15 percent over the next four years and not rebound until 2012.
November 8, 2007 -- Connecticut Governor M. Jodi Rell today announced “CT FAMLIES” -- a new $50 million refinancing program to address the subprime mortgage crisis in Connecticut. There are approximately 71,000 active sub-prime mortgages in Connecticut and many are delinquent and in danger of default. Approximately 21,000 of these adjustable rate (sub-prime) mortgages are scheduled to reset at much higher rates between October 2007 and December 2009
“Many of these families are low- and moderate-income households and many were first-time buyers. This issue is about protecting the most important investment many of these families have ever made. Homeownership is the American Dream and it is a dream we have an obligation to protect and secure.”
Battle Lines Form Over Mortgage Plan
In unveiling a plan to help more than one million struggling homeowners, the Bush administration and the mortgage industry have embarked on a controversial project: picking winners and losers from the rubble of the subprime-mortgage meltdown.
...the industry would voluntarily help as many as 1.2 million homeowners who are heading for trouble paying their subprime mortgages but aren't yet lost causes. For some homeowners, loan-servicing companies will agree to freeze mortgages at their low introductory rates. In other cases, credit counselors or loan servicers will walk mortgage holders through refinancing processes.
The deal won't provide relief to many subprime-mortgage holders: These include borrowers who are now in foreclosure, have already refinanced their homes or are more than 60 days delinquent on more than one payment over the past year. In some cases, people with good credit scores will be excluded. Also left out are those deemed able to afford the higher interest rates scheduled to replace their introductory rates over the next two years.
...1.2 million borrowers relatively current in their mortgages will be considered .... Some 600,000 borrowers are expected to qualify... 600,000 of the subprime borrowers ... are likely to lose their homes, or, in Mr. Paulson's words, "become renters."
A New American Entitlement: Eisenhower Interest Rates
The White House is set to endorse a bank-engineered plan ['nuf said!] to freeze interest rates on high-risk mortgages, and altogether ratchet up the level of nanny statism in a housing market already awash in Federal cronyism.
The negative implications of this rescue are hard to overstate.
Billions of dollars of contracted loan payments are going to be forgiven at the stroke of a pen for the supposed cause of keeping people in their homes. Distressed but responsible borrowers have exited the market or reduced their exposure already. Now they find out that they should have gamed the system a little longer. After all, the benefits will accrue overwhelmingly to those who least deserve it, chief among them the lenders who established the loans.
Stay away from these securities. This mess is far from cleaned up, and the distortions resulting from government intervention on this scale cannot be understood without hindsight.
Bush's Subprime Mortgage Freeze Stymies Bond Market
President George W. Bush's plan to freeze interest rates on some subprime mortgages may prove to be a cure that breeds another disease.
"If the government goes in and changes contracts it will definitely have a chilling effect on the securitization of mortgages," said Milton Ezrati... "When the government comes in and says you have contracted to have this arrangement and you can no longer have it, I think it opens the door for lawsuits."
"...there's less confidence in the viability in the bond markets and the mortgage markets going forward and it could lead to higher interest rates and higher mortgage rates for everybody,'' said Kenneth Hackel
"We do not think it is hyperbolic to say that the sanctity of such contracts, entered into in good faith, is at the cornerstone of capitalism,'' Deutsche Bank AG analysts Karen Weaver, Katie Reeves and Ying Shen, based in New York, said in a note to clients today. "And if we are to in anyway devalue that sanctity, we face a far greater liquidity crunch than the one in which we currently find ourselves.''
"We have a voluntary program that is mostly smoke and mirrors and probably won't freeze enough mortgages to make a difference, but the bond market is reacting negatively, which will make it harder to sell mortgage backed securities,'' Bob Yopko"