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The Housing Crisis is About to Get Worse - Much Worse

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posted on Jan, 12 2010 @ 02:51 PM
I came across this Article on, usually the doom and gloom naysayers. It illustrates the MAJOR wave of problems coming for US banks in the coming months.

Here are some highlights from the article.

First, Amherst Securities Group took a look at Pay Option ARMs. These are the adjustable rate loans so popular in 2006 that allowed you to choose your monthly mortgage payment, while tacking what you don't spend on to the principal of your loan. Only 9 percent of these loans had full documentation from the borrower and 76 percent were originated in California, Florida, Arizona and Nevada, our four disaster states for housing. It should therefore come as no shock that they are suddenly approaching subprime in their delinquency status. So while we all sit around saying that the subprime loans have already worked their way through the system, they're fast being replaced by POA's. "For 2006 securitized issuance, 61% of subprime loans have defaulted, as have 49% of the option ARMs," according to the Amherst report.

Got mortgage backed securities?

Not soon after I saw that report, another flew into my "In" box from Fitch ratings: "Overall, prime RMBS 60+ days delinquencies rose to 9.2% for December 2009, up almost three times compared to the same period last year (3.2% in December 2008). The 2006/2007 vintages combined rose to 12.7% from 4.3%." They're talking about residential mortgage backed securities, which of course are pools of residential loans.

My personal favorite...

"Total delinquencies, excluding foreclosures, increased to a record high 9.97 percent, representing a month-over-month increase of 5.46 percent and a year-over-year increase of 21.29 percent. Loans rolling to a more delinquent status totaled 5.01 percent compared to 1.52 percent of loans that improved. Of loans that were current in December 2008, 4.37 percent were either 60 or more days delinquent or in foreclosure by the end of November 2009, a rate higher than any other year for the same period."

So instead of diving into a bottle of Ketel One, I jumped on a conference call with the Mortgage Bankers Association that included their chief economist Jay Brinkmann's economic forecast. Brinkmann spoke quite a bit about unemployment, noting that while the rate of job losses is definitely slowing, the already-unemployed are not getting back into the job market at a healthy rate. He noted specifically that this would mean many more prime loan defaults by borrowers in financial trouble as opposed to borrowers who took out loans they never should have been offered.

Folks - if you are drinking the "economic reovery" kool-aid, you might want to put your cups down. One year later and $2 Trillion plus down the tubes and we are WORSE off than we were in September of 2008.

posted on Jan, 12 2010 @ 02:54 PM
Sad to say but I agree with the OP. We havn't seen the full onslaught of bankruptcies and foreclousers yet.

posted on Jan, 12 2010 @ 02:59 PM
On the last Sunday of the year, our local paper listed 192 foreclosures filed in our county for that week. So, yeah, the market is going to get worse.

posted on Jan, 12 2010 @ 03:01 PM
reply to post by daddyroo45

Nor have we seen the full onslaught of unemployment. The war in Afghanistan is going to ramp up and become a lot more deadly this spring as winter over there subsides. Buckle up folks the crises we were all predicting and many of us hoping for will come true this year I'm afraid. Well I'm not really afraid. I'm sick of the government artificially inflating everything. The house of cards has to will be bad but not nearly as bad as to keep prolonging it.

LOL.......haha oh great.......TB patient just boarded a plane despite being on the no fly list. HAHA our country can't even keep a TB patient off a plane yet they will keep us safe from terrorists? LMAO! WOW>!

posted on Jan, 12 2010 @ 03:03 PM
reply to post by kosmicjack

What is the relative population/number of homes in your county? That's a pretty big number any way you look at it.

posted on Jan, 12 2010 @ 03:07 PM
reply to post by TruthWithin

Well I'm not sure about any other stats but conventional wisdom says that the bigger the boom, the harder the bust. We were the fastest growing county in the U.S. a few years ago and now we have unfinished neighborhoods everywhere.

posted on Jan, 12 2010 @ 03:18 PM
When you think about it, worsening unemployment and housing foreclosures are good for military recruitment.

posted on Jan, 12 2010 @ 03:33 PM
Articles like the one below will only embolden people to walk away. It makes some good points. I don't necessarily agree, just saying:

There are two reasons why so-called strategic defaults have been considered antisocial and perhaps amoral. One is that foreclosures depress the neighborhood and drive down prices. But in a market society, since when are people responsible for the economic effects of their actions? Every oil speculator helps to drive up gasoline prices. Every hedge fund that speculated against a bank by purchasing credit-default swaps on its bonds signaled skepticism about the bank’s creditworthiness and helped to make it more costly for the bank to borrow, and thus to issue loans. We are all economic pinballs, insensibly colliding for better or worse.

The other reason is that default (supposedly) debases the character of the borrower. Once, perhaps, when bankers held onto mortgages for 30 years, they occupied a moral high ground. These days, lenders typically unload mortgages within days (or minutes). And not just in mortgage finance, but in virtually every realm of our transaction-obsessed society, the message is that enduring relationships count for less than the value put on assets for sale.

Think of private-equity firms that close a factory — essentially deciding that the company is worth more dead than alive. Or the New York Yankees and their World Series M.V.P. Hideki Matsui, who parted company as soon as the cheering stopped. Or money-losing hedge-fund managers: rather than try to earn back their investors’ lost capital, they start new funds so they can rake in fresh incentives. Sam Zell, a billionaire, let the Tribune Company, which he had previously acquired, file for bankruptcy. Indeed, the owners of any company that defaults on bonds and chooses to let the company fail rather than invest more capital in it are practicing “strategic default.” Banks signal their complicity with this ethos when they send new credit cards to people who failed to stay current on old ones.

posted on Jan, 12 2010 @ 03:40 PM
Americ a slides deeper into depression as Wall Street revels

And, more worrying, China has raised the deposit of banks by 50 bases points in fear a credit bubble is emerging within the Chinese economy. If it bursts, then the US shall find China investing within herself instead of Treasuries.

posted on Jan, 12 2010 @ 03:50 PM
Not a big fan of reading tea leaves.

I think the worst is over for awhile.

Cause and effect, when you sell someone a house they cannot afford, well, this is what you get..

If anything I beleive this catastrophy WE created will defile the whole capitalistic controling structure. How so I do not know. Their has been no total collapse, I think what we will witness and go thru the next decade is stagnation, raised taxes and a harder time to live the good life idea.

Not sure if we will see uncontrollable inflation, also how it effects people personally will be differant, some people may not even notice this stagnation or weak world economy yet others will be begging for socialistic ways to survive I suppose.

I am under the impression that many of the homes sold in the 2000's will end up going default, just based off of the mess from the subprime. We'll just have to see. I don't think its time to think of boobies and butterflies and beleive everything is going to be ok now.

[edit on 12-1-2010 by Bicent76]

posted on Jan, 12 2010 @ 04:25 PM

Originally posted by Bicent76
Cause and effect, when you sell someone a house they cannot afford, well, this is what you get..

The problem I have with that is it is only applicable to the initial wave of foreclosures we saw last year. People who had bought homes based on lies and fudging the information about their incomes (allbeit with the full knowledge and capitulation of many of their lenders) did purchase homes they could not afford. This is a different can of worms, however. Individuals who could afford the payments, even after the higher rates kicked in, are in default because of lengthy unemployment. We've got well trained/educated professionals who cannot find work in fields which, just 3 years ago, were booming but are now deader than dead.

Last year's mortgage crisis was a symptom, not a cause of the recession/depression. This year's mortgage crisis will be part of a cause of a double dip, further deteriorating the fragile economy. We're looking at a death spiral right now. Worsening unemployment = a deepening glut of vacant, foreclosed homes = no reason for new homes to be constructed = more construction/fabrication jobs being lost = even worse unemployment = less consumerism = retail, service, and manufacturing jobs lost = still more unemployed = higher drain on state budgets combined with lower incoming tax revenue = states laying off employees and reducing or eliminating many construction/design projects = still more unemployment... ad infinitum. There is no way out of this. Once the federal government shuts off the stimulus tap (either voluntarily or because nobody will buy their debt anymore) it will all come crashing down.

God help us all.

posted on Jan, 12 2010 @ 04:48 PM
More on the foreclosure relity,

Second Consecutive Year for Record Foreclosure Filings

Nearly one-third of American homeowners, or 16 million, are currently underwater on their mortgages. That is an early sign that 2010 could be yet another disastrous year for the already beleaguered housing market.

On top of that, interest rates are expected to rise in 2010, making it less enticing for potential buyers to purchase a home. A government tax credit for first time homebuyers is also set to expire this spring, which is expected to sap demand from the housing market. Both those factors will lead to a glut of homes on the market, further driving down home values.

There are currently 3.2 million new and existing single-family homes on the market, a nearly seven month supply.
And, over the next 12 months, that number is expected to increase significantly. A total of 2.4 million homes are expected to be foreclosed in 2010. That could lead to home prices falling by as much as another 10 percent. At that rate, homeowners will have lost 40 percent of the value of their homes since the pricing peak in 2006.
While, tax credits, prices and inventory have a major effect on the housing market, the biggest factor of all is unemployment.

posted on Jan, 12 2010 @ 05:37 PM
reply to post by burdman30ott6

Aye, but it began X. It started with people getting loans they could not afford. Say John is working at a plant that makes orange juice in oh say California, John has been living in a apt. with girlfriend and oh say a 3 month old baby. Girlfriend is a secretary at oh say a painting comany or something, John been working at the orange factory for about a year has good credit and is in his early 20's or so. Girlfriend starts whining about the camarro so John goes out and trades it in and leases or whatever a suv. Girlfriend whines about apt. So john and girlfriend start looking at houses say 175000 dollar range. John only makes oh say 35 grand a year with ot maybe 45, girlfriend maybe 10-15 grand. They find a house for 175ooo, find a mortgage loan shark, he or she sells them a ARM. John and family can afford house for 1st year all is well all is happy, then the next year comes ot interest rate goes up, things are still ok, another interest rate change it goes up again, daycare or babysitter goes up, another interest rate change. My point both john and girlfriend are working and now they are in the black, what they were making a couple years ago does not cover the expense of their bills, and worse it happens to thousands, or evern millions all over the country. John call the bank and says he needs help paying loan, bank says so, pay or else. Calls the bank for the car loan or lease same answer.. Girlfriend loses job painters getting laid off new construction growth collapses. John gets hours cut back due to slow sales due to others like john and girlfriend. Baby gets taken out of daycare girlfriend at home on unemployment.

Now john gets laid off, or fired. Unemployment, house goes into default John and girlfriend lose house. John finds another less paying job. Now john and girlfriend back in the Apt. they started in. With less credit and less money. This is a Worldwide event..

Present day..

This is not just John's fault. Its the banks, wall street and the lack of government regulation, and importantly education and common sense..

[edit on 12-1-2010 by Bicent76]

posted on Jan, 12 2010 @ 05:53 PM
I'm going to go with what I see. I see, on the Ohio/Pa North Central-Central border, buildings becoming more vacant, stores closing up, people moving away in droves, houses sitting empty and projects coming to a halt.
All sales are down, and for the life of me I dont know where the money will come from to pay for these goofy programs theyre creating.
I'm not a doom and gloom anticipator yet I do not see any recovery or a slowing of the collapse, at all. Yes like the man said earlier, buckle up.

posted on Jan, 12 2010 @ 05:59 PM
reply to post by HappilyEverAfter

with the little bit of money we are making or have or are rich.. we need to buy local, thats a start. Try to buy made in the whatever country u live in. WE have to get ourselves out of this. America simply needs to start building stuff again.. Besides cars... We lost that export war but thats another thread...

posted on Jan, 12 2010 @ 06:21 PM

Originally posted by infinite
Americ a slides deeper into depression as Wall Street revels

And, more worrying, China has raised the deposit of banks by 50 bases points in fear a credit bubble is emerging within the Chinese economy. If it bursts, then the US shall find China investing within herself instead of Treasuries.

This is exactly what the US needs to do instead of changing interest rates.

100,000 foreclosures in Miami Dade County. They are going to run online auctions for them. Could be a deal of a lifetime or not.

posted on Jan, 13 2010 @ 03:04 PM
That's a great article and I also believe that this year will be the kiss of death for markets across the board.

Also, not everyone who's home was or is being foreclosed was irresponsible. Two people I know lost their homes when they lost their middle management jobs at large national banks. They didn't do anything wrong or irresponsible but when you have a mortgage and lose your job, you're most likely going to lose the house.

Then you have the greedy SOB's who took out 2nd mortgages on their home to finance another home (or multiple homes) as an 'investment' and when interest rates went up and/or home prices started to fall they went bust. No sympathy there. All of those people along with the bankers were the major cause of the mortgage crisis.

THEN, we have the coming commercial real estate crisis which is ready to replace the headlines altogether

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