Nofsdad
Joined: 06 Jul 2003
Posts: 7087
Location: Central CA
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Posted: Tue Aug 05, 2008 2:20 pm Post subject: Wait untile you see the PRIME moan meltdown.
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| The first wave of Americans to default on their home mortgages appears to be cresting, but a second, far larger one is quickly building. Homeowners with good credit are falling behind on their payments in growing numbers, even as the problems with mortgages made to people with weak, or subprime, credit are showing their first, tentative signs of leveling off after two years of spiraling defaults. |
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| The percentage of mortgages in arrears in the category of loans one rung above subprime, so-called alternative-A mortgages, quadrupled to 12 percent in April from a year earlier. Delinquencies among prime loans, which account for most of the $12 trillion market, doubled to 2.7 percent in that time. |
Is anybody beginning to see a pattern here?
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| While it is difficult to draw precise parallels among various segments of the mortgage market, the arc of the crisis in subprime loans suggests that the problems in the broader market may not peak for another year or two, analysts said. |
So let's make all the money we can before the crap hits the fan again, eh?
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| Defaults are likely to accelerate because many homeowners’ monthly payments are rising rapidly. The higher bills come as home prices continue to decline and banks tighten their lending standards, making it harder for people to refinance loans or sell their homes. Of particular concern are “alt-A” loans, many of which were made to people with good credit scores without proof of their income or assets. |
And none of the those financial "gurus" could see that this was going to come back and bite them in the ass when the downturn was already in progress on the next tier downward? Amazing.
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| “Subprime was the tip of the iceberg,” said Thomas H. Atteberry, president of First Pacific Advisors, a investment firm in Los Angeles that trades mortgage securities. “Prime will be far bigger in its impact.” |
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| In a conference call with analysts last month, James Dimon, the chairman and chief executive of JPMorgan Chase, said he expected losses on prime loans at his bank to triple in the coming months and described the outlook for them as “terrible.” |
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What will sting borrowers more than rising interest rates, analysts say, is having to pay interest and principal every month after spending several years paying only interest or sometimes even less than that. Such loan terms were popular during the boom with alt-A and prime borrowers and appeared appealing while home prices were rising and interest rates were low.
But now, some borrowers could see their payments jump 50 percent or more, and they may not be able to sell their properties for as much as they owe. |
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Many borrowers who got these loans during the boom had good credit scores, but many of them owe more than their homes are worth. Analysts believe that many will not be able to or want to make higher payments.
“The wave on the prime side has lagged the wave on the subprime side,” said Rod Dubitsky, head of asset-backed research at Credit Suisse. “The reset of option ARM loans is a big event that will drive the timing of delinquencies.” |
What they're very carefully NOT mentioning is the effect that massive price increases and profiteering in other sectors, mainly energy, is having on the ability of many mortgage holders at the lower end of the prime spectrum to make the payments they have now, let alone the ones they're most likely to have.
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dictators_rule
Joined: 08 Jul 2003
Posts: 5005
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Posted: Wed Aug 06, 2008 2:03 am Post subject: Everybody wants = OVER PAYING
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Everybody wants their piece of the pie.Everybody wants in on the action.Everybody wants to be hip and cool.Except they can't afford to do it-Oooops,forgot there's that thing called credit.
Credit does funny things to people-one is the idea of getting used to instant gratification and NOT thinking about the CONSEQUENCES.I don't care if you have a triple A rating-if you try to keep up with the Joneses or buy the latest and greatest irreguardless of price things like this will happen.
And this IS EXACTLY what the financial industry is counting on and EXPLOITING.Sooner or later you have to pay.People WANT a house,an SUV,a bigscreen,cable WITH hbo,laptop.blackberry etc.But most can't even afford one of the above but the desire,the urge,the want to have these things and fit in not only makes people use credit but creates artificial inflation because with credit too many DO NOT THINK about the consequences of their purchases.
I don't care if you had triple A credit and bought a house with a standard mortgage.Chances are if you bought any of the above items over the last 5 years or so you OVER PAID,especially the houses.And you probably bought under the premise you could sell higher even though you bought high and since you got a raise this year you would get one 5 years from now.
Instant gratification in combination with credit.Think what would happen if drug dealers gave junkies this much credit.And again,who is there to pounce-the banks.REMEMBER they don't call em TEASER RATES for nothing.
DESIRE will lead to the use of credit,the UNnecessary use of credit leads to overpaying,overpaying leads to artificial inflation,artificial inflation means the COST W I L L CATCH UP TO YOU,
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