Comments on: The Growing Foreclosure Crisis http://www.ritholtz.com/blog/2009/01/the-growing-foreclosure-crisis/ Macro Perspective on the Capital Markets, Economy, Geopolitics, Technology, and Digital Media Tue, 14 Feb 2012 20:08:08 +0000 hourly 1 http://wordpress.org/?v=3.0.5 By: zorkon http://www.ritholtz.com/blog/2009/01/the-growing-foreclosure-crisis/comment-page-1/#comment-140129 zorkon Mon, 19 Jan 2009 16:18:10 +0000 http://www.ritholtz.com/blog/?p=16629#comment-140129 I am thankful I am not underwater on my house, but if you are six figures under you have to seriously consider stopping payment on the mortgage. If you know you're going to be in the house for 5+ years and you can afford the payments, keep at it, but otherwise it's crazy and ultimately destructive. If you know you will need to move and you won't be able to sell the house, you may as well stop making payments and start saving for a downpayment for a new place or a rental deposit. If you can afford it, go and buy a new house before stopping payments on the old one. Otherwise, get your affairs in order such that you can avoid major credit purchases for 5-7 years (auto and furniture), live in the house as long as the bank will let you, and fight the foreclosure as much as the law permits. The sooner the credit gets ruined, the sooner it will roll off the record. I am thankful I am not underwater on my house, but if you are six figures under you have to seriously consider stopping payment on the mortgage. If you know you’re going to be in the house for 5+ years and you can afford the payments, keep at it, but otherwise it’s crazy and ultimately destructive.

If you know you will need to move and you won’t be able to sell the house, you may as well stop making payments and start saving for a downpayment for a new place or a rental deposit. If you can afford it, go and buy a new house before stopping payments on the old one. Otherwise, get your affairs in order such that you can avoid major credit purchases for 5-7 years (auto and furniture), live in the house as long as the bank will let you, and fight the foreclosure as much as the law permits. The sooner the credit gets ruined, the sooner it will roll off the record.

]]> By: Thisson http://www.ritholtz.com/blog/2009/01/the-growing-foreclosure-crisis/comment-page-1/#comment-140111 Thisson Mon, 19 Jan 2009 15:38:52 +0000 http://www.ritholtz.com/blog/?p=16629#comment-140111 When are our idiot leaders going to realize that they have to let housing prices drop to the market-clearing price instead of propping housing up? If housing gets cheaper, Americans can work for lower wages. As commercial Real Estate declines, corporations will pay less rent. This makes American businesses more efficient and competitive with the rest of the world. We MUST get more efficient. And the final step will have to be throwing off the yoke of excessive government taxation. When are our idiot leaders going to realize that they have to let housing prices drop to the market-clearing price instead of propping housing up?

If housing gets cheaper, Americans can work for lower wages. As commercial Real Estate declines, corporations will pay less rent. This makes American businesses more efficient and competitive with the rest of the world.

We MUST get more efficient. And the final step will have to be throwing off the yoke of excessive government taxation.

]]> By: Mannwich http://www.ritholtz.com/blog/2009/01/the-growing-foreclosure-crisis/comment-page-1/#comment-140102 Mannwich Mon, 19 Jan 2009 14:53:55 +0000 http://www.ritholtz.com/blog/?p=16629#comment-140102 @SB: We are all insolvent now! @SB: We are all insolvent now!

]]> By: Mannwich http://www.ritholtz.com/blog/2009/01/the-growing-foreclosure-crisis/comment-page-1/#comment-140101 Mannwich Mon, 19 Jan 2009 14:52:18 +0000 http://www.ritholtz.com/blog/?p=16629#comment-140101 The was a similar article here in the Twin Cities yesterday. And why is this a shock to some people again? The was a similar article here in the Twin Cities yesterday. And why is this a shock to some people again?

]]> By: danm http://www.ritholtz.com/blog/2009/01/the-growing-foreclosure-crisis/comment-page-1/#comment-140093 danm Mon, 19 Jan 2009 13:18:42 +0000 http://www.ritholtz.com/blog/?p=16629#comment-140093 What gives you the impression that our collective minds are now tinkering with this thought? Maybe it’s a California thing but most people I know are stuck in the Woodstock spirit… ------------ I think it's majorly a California thing 1st, then an American thing 2nd. America is the 800 pound gorilla throwing its weight around and Americans don't care about the effect it is having on the ROW. Generally speaking, I find Americans have been completely oblivious to what has been happeneing. Why would you worry when the world is at your beck and call? Us foreigners, no matter where tend the share the same opinions and see the world in pretty much the same way. I love reading blog comments because it makes me realize how out of touch Americans are and helps me understand their psyche a little better. It is so easy to tell apart the American posters from the foreigners. America takes up so much space that we can not do anything but follow. So here in Canada, we've been talking about American excess for a LONG time but in the last 2 years the conversation has really taken a turn. These are some of the app0roached subjects... 1. Boomers saying they are happy they won't be here when the environmental SHTF. 2. Parents thinking of having their kids learn mandarin to get an edge. 3. Skepticism towards the oil sands. Comments about the environmental devastation of Alberta. If you map out the announced projects, you will see that they could potentially mine a huge percentage of Alberta. 4. If 1 billion consumers can create such environemental havoc, imagine 2B and world population is going to 10 billion. 5. Muslim fertility and huge population gowth. In 15-20 years when these children grow up, will we end up with hundreds of angry men or will we be able to find jobs for them? Will they be emigrating to Canada? Will we be accepting Sharia? 4. In the best of times, they could not maintain our infrastructure, how is that going to change now that the economy is tanking AND that we don't have enough trained engineers/scientists? Are we going to import them from China? 5. With the expansion of real estate in inhospitable areas, the US will surely find a way to get to our water. 6. With those hundreds of billions , the Chinese will fight for their rights. A shift in power must be happening from West ot East. That would implicate energy and resources. 7. From executives and blue collars: the middle class will contract or disappear as the world's rich get more evenly distributed around the world and not only in developed countries. I don't hear this so much from whitecollar/middle managers, I think 99% of them have bought into the idea that with a little more effort, they could be in the 1%. What gives you the impression that our collective minds are now tinkering with this thought? Maybe it’s a California thing but most people I know are stuck in the Woodstock spirit…
————
I think it’s majorly a California thing 1st, then an American thing 2nd.

America is the 800 pound gorilla throwing its weight around and Americans don’t care about the effect it is having on the ROW. Generally speaking, I find Americans have been completely oblivious to what has been happeneing. Why would you worry when the world is at your beck and call? Us foreigners, no matter where tend the share the same opinions and see the world in pretty much the same way. I love reading blog comments because it makes me realize how out of touch Americans are and helps me understand their psyche a little better. It is so easy to tell apart the American posters from the foreigners. America takes up so much space that we can not do anything but follow.

So here in Canada, we’ve been talking about American excess for a LONG time but in the last 2 years the conversation has really taken a turn. These are some of the app0roached subjects…

1. Boomers saying they are happy they won’t be here when the environmental SHTF.
2. Parents thinking of having their kids learn mandarin to get an edge.
3. Skepticism towards the oil sands. Comments about the environmental devastation of Alberta. If you map out the announced projects, you will see that they could potentially mine a huge percentage of Alberta.
4. If 1 billion consumers can create such environemental havoc, imagine 2B and world population is going to 10 billion.
5. Muslim fertility and huge population gowth. In 15-20 years when these children grow up, will we end up with hundreds of angry men or will we be able to find jobs for them? Will they be emigrating to Canada? Will we be accepting Sharia?
4. In the best of times, they could not maintain our infrastructure, how is that going to change now that the economy is tanking AND that we don’t have enough trained engineers/scientists? Are we going to import them from China?
5. With the expansion of real estate in inhospitable areas, the US will surely find a way to get to our water.
6. With those hundreds of billions , the Chinese will fight for their rights. A shift in power must be happening from West ot East. That would implicate energy and resources.
7. From executives and blue collars: the middle class will contract or disappear as the world’s rich get more evenly distributed around the world and not only in developed countries. I don’t hear this so much from whitecollar/middle managers, I think 99% of them have bought into the idea that with a little more effort, they could be in the 1%.

]]> By: shiers2 http://www.ritholtz.com/blog/2009/01/the-growing-foreclosure-crisis/comment-page-1/#comment-140085 shiers2 Mon, 19 Jan 2009 07:36:30 +0000 http://www.ritholtz.com/blog/?p=16629#comment-140085 I will pay that inflated price resulting from overheated mortage lending, real estate markets and 30 to 1 Wall Street leveraging. I agreed to the price and I will pay it. However, I was also told I could refinance at a better rate at the end of a 3 year prepayment penalty period. 25% ($110,000) of that over priced value of the this property has already been received in interest by the Wall Street drivative lenders - poor dears. The prepayment penalty in our agreement requires this. Wall Street got theirs. Now that our credit scores meet the refinance requirements (720) there is not a lender around that will refinance. The property is upside down by almost 50% . Can you say "bait and switch?" If we are unable to work with lenders to obtain a reasonable loan (lower interest/40 years) - we will also be unable to provide for retirement. My special ed teacher wife and I are now on a path to spend our last years in financial destitution paying off this 10.8% note. Wall Street already helped themselves to 50% of retirement savings - so we need to re-double our savings efforts. With health issues we are feeling our age, however must somehow make it to 70 before retiring. Real Estate has not seen, in 80 years, a time when housing, nationwide, have lost such a large percent of value. Up until lately real estate was considered to be a sound investment. No one could have predicted a 50% loss in value. How many others like us out there. I estimate 20% of existing mortgages? In the late 1940's, our nation began to repaya 120% debt to gross domestic product 9(GDP) ratio after World War 2. It was done by a "middle class" economy of producers and taxpayers. Presently we are at only 100% of GDP. (Yes $14 trillion is a lot - but that is also our GDP capability) if we don't let it slip. We can repay this also. I already stated that we will pay our note off, if it can be made do-able. So will the rest of the middle class. We don't want to sack our debts. We want to pay them. Middle class America wants to live within their means, raise families, and enjoy stable lifestyles. When we save for retirement we will re-energize and re-build the stock markets. Empower the middle class. Lower interest rates and collect the full value of the loans for EVERYONE and get this problem behind us. Together, ALL of us can re-build the economy quicker than a just a FEW of us that were somehow more succesful or fortunate and have paid off houses. And your houses will be worth more. Can't be stingy and make this work for just a few. All ships will rise on this tide. I will pay that inflated price resulting from overheated mortage lending, real estate markets and 30 to 1 Wall Street leveraging. I agreed to the price and I will pay it. However, I was also told I could refinance at a better rate at the end of a 3 year prepayment penalty period. 25% ($110,000) of that over priced value of the this property has already been received in interest by the Wall Street drivative lenders – poor dears. The prepayment penalty in our agreement requires this. Wall Street got theirs. Now that our credit scores meet the refinance requirements (720) there is not a lender around that will refinance. The property is upside down by almost 50% . Can you say “bait and switch?” If we are unable to work with lenders to obtain a reasonable loan (lower interest/40 years) – we will also be unable to provide for retirement. My special ed teacher wife and I are now on a path to spend our last years in financial destitution paying off this 10.8% note. Wall Street already helped themselves to 50% of retirement savings – so we need to re-double our savings efforts. With health issues we are feeling our age, however must somehow make it to 70 before retiring. Real Estate has not seen, in 80 years, a time when housing, nationwide, have lost such a large percent of value. Up until lately real estate was considered to be a sound investment. No one could have predicted a 50% loss in value. How many others like us out there. I estimate 20% of existing mortgages?

In the late 1940′s, our nation began to repaya 120% debt to gross domestic product 9(GDP) ratio after World War 2. It was done by a “middle class” economy of producers and taxpayers. Presently we are at only 100% of GDP. (Yes $14 trillion is a lot – but that is also our GDP capability) if we don’t let it slip. We can repay this also. I already stated that we will pay our note off, if it can be made do-able. So will the rest of the middle class. We don’t want to sack our debts. We want to pay them. Middle class America wants to live within their means, raise families, and enjoy stable lifestyles. When we save for retirement we will re-energize and re-build the stock markets. Empower the middle class. Lower interest rates and collect the full value of the loans for EVERYONE and get this problem behind us. Together, ALL of us can re-build the economy quicker than a just a FEW of us that were somehow more succesful or fortunate and have paid off houses. And your houses will be worth more. Can’t be stingy and make this work for just a few. All ships will rise on this tide.

]]> By: constantnormal http://www.ritholtz.com/blog/2009/01/the-growing-foreclosure-crisis/comment-page-1/#comment-140078 constantnormal Mon, 19 Jan 2009 05:53:52 +0000 http://www.ritholtz.com/blog/?p=16629#comment-140078 As California goes, so goes the nation ... It no longer matters what kind of mortgage one has, ARM, subprime, prime -- they're all the same when they encounter plummeting housing values combined with a severe economic contraction (soaring unemployment and business swirling down the toilet). We no longer need to worry about stopping the Great ARM Engine of Destruction, we must now concentrate on developing a mechanism of restructuring failing mortgages of any kind, stretching out payment streams to ensure that the lenders don't take all the pain, but allowing as many to hang onto their homes as possible. The alternative is some sort of full nationalization of the mortgage industry, with the government owning all mortgages. We're probably halfway to that already. People will come to discover that the only protection from foreclosure is complete ownership, free of any liens/mortgages, as average national home values drop past 70% of peak values and unemployment heads up towards (past?) 20% over the next several years. I know how extreme this sounds, but the kind of relentless deflationary contraction we are likely to see as this mess unfolds will bring about exactly these kind of conditions. Of course, I could be wrong, and we could have bottomed last fall. Everyone who believes we are not poised to go over the waterfall, raise your right hand. I hope you are right. As California goes, so goes the nation …

It no longer matters what kind of mortgage one has, ARM, subprime, prime — they’re all the same when they encounter plummeting housing values combined with a severe economic contraction (soaring unemployment and business swirling down the toilet).

We no longer need to worry about stopping the Great ARM Engine of Destruction, we must now concentrate on developing a mechanism of restructuring failing mortgages of any kind, stretching out payment streams to ensure that the lenders don’t take all the pain, but allowing as many to hang onto their homes as possible.

The alternative is some sort of full nationalization of the mortgage industry, with the government owning all mortgages. We’re probably halfway to that already.

People will come to discover that the only protection from foreclosure is complete ownership, free of any liens/mortgages, as average national home values drop past 70% of peak values and unemployment heads up towards (past?) 20% over the next several years.

I know how extreme this sounds, but the kind of relentless deflationary contraction we are likely to see as this mess unfolds will bring about exactly these kind of conditions.

Of course, I could be wrong, and we could have bottomed last fall.

Everyone who believes we are not poised to go over the waterfall, raise your right hand. I hope you are right.

]]> By: Samuel D. Bornstein http://www.ritholtz.com/blog/2009/01/the-growing-foreclosure-crisis/comment-page-1/#comment-140066 Samuel D. Bornstein Mon, 19 Jan 2009 02:51:47 +0000 http://www.ritholtz.com/blog/?p=16629#comment-140066 The upcoming "Tsunami" Wave of Foreclosures is very different from the previous Subprime Wave. Whereas, the Subprime were mostly to borrowers with lowest credit scores, the next wave will consist of ALT-A, Option ARMs, and Interest-Only Mortgages who were taken out by Prime and Near-Prime Borrowers with very good credit scores. The problem with these ALT-A is that the borrower was able to qualify for the mortgage with no income verification. They were willing to pay a higher mortgage rate of interest for that luxury. In fact, these mortgages were targetted to Self-Employed Small Business Owners because they were most willing to get these mortgages which didn't require tax returns or any other form of proof of income. Most of these small business owners chose the most flexible type of ALT-A mortgage that allowe d them to pay little if any of the Principle portion of the loan. Everyone can understand that if you pay only interest or make a "minimum payment" (similar to the "minimum payment" of credit cards) the Principle is barely touched. Therefore, upon "reset", which will arrive in 2009 and continue through 2012 for many Borrowers, the new and revised monthly payment be determined by dividing the remaining Principle over the remaining term of the mortgage. It is a known fact that 80-90% of all ALT-A Borrowers selected the Option ARMs and Interest-Only type. With $1 Trillion in ALT-A and $5oo-600 Billion in OPtion ARMs and Interest-Only, now you can see why experts are worried. Allow me to add another worry.. I authored an NASE Survey which provided evidence that 3.7 Million small business owners had these "Toxic" Mortgages; 3 Million were "Very Worried" that they would not be able to afford the "reset" monthly mortgage payment: and most shocking is the fact that in Mid-November, 2008, there were 1.3 Million small business owners who were already 1-3 months DELINQUENT on their "ALT-A mortgages!! So, here we have a major problem… Since these businesses employ from 1-10 employees, not only will these small business owners lose their homes, but there will be the resulting JOB LOSSES on their business failure. Prof. Samuel D. Bornstein The upcoming “Tsunami” Wave of Foreclosures is very different from the previous Subprime Wave. Whereas, the Subprime were mostly to borrowers with lowest credit scores, the next wave will consist of ALT-A, Option ARMs, and Interest-Only Mortgages who were taken out by Prime and Near-Prime Borrowers with very good credit scores. The problem with these ALT-A is that the borrower was able to qualify for the mortgage with no income verification. They were willing to pay a higher mortgage rate of interest for that luxury. In fact, these mortgages were targetted to Self-Employed Small Business Owners because they were most willing to get these mortgages which didn’t require tax returns or any other form of proof of income. Most of these small business owners chose the most flexible type of ALT-A mortgage that allowe d them to pay little if any of the Principle portion of the loan. Everyone can understand that if you pay only interest or make a “minimum payment” (similar to the “minimum payment” of credit cards) the Principle is barely touched. Therefore, upon “reset”, which will arrive in 2009 and continue through 2012 for many Borrowers, the new and revised monthly payment be determined by dividing the remaining Principle over the remaining term of the mortgage. It is a known fact that 80-90% of all ALT-A Borrowers selected the Option ARMs and Interest-Only type. With $1 Trillion in ALT-A and $5oo-600 Billion in OPtion ARMs and Interest-Only, now you can see why experts are worried.
Allow me to add another worry.. I authored an NASE Survey which provided evidence that 3.7 Million small business owners had these “Toxic” Mortgages; 3 Million were “Very Worried” that they would not be able to afford the “reset” monthly mortgage payment: and most shocking is the fact that in Mid-November, 2008, there were 1.3 Million small business owners who were already 1-3 months DELINQUENT on their “ALT-A mortgages!!

So, here we have a major problem… Since these businesses employ from 1-10 employees, not only will these small business owners lose their homes, but there will be the resulting JOB LOSSES on their business failure.

Prof. Samuel D. Bornstein

]]> By: wunsacon http://www.ritholtz.com/blog/2009/01/the-growing-foreclosure-crisis/comment-page-1/#comment-140048 wunsacon Mon, 19 Jan 2009 00:48:52 +0000 http://www.ritholtz.com/blog/?p=16629#comment-140048 Er, “The Detroitification of America”. Er, “The Detroitification of America”.

]]> By: wunsacon http://www.ritholtz.com/blog/2009/01/the-growing-foreclosure-crisis/comment-page-1/#comment-140047 wunsacon Mon, 19 Jan 2009 00:47:53 +0000 http://www.ritholtz.com/blog/?p=16629#comment-140047 Let's call it: "The Detroitification of American" or "We're All Detroit Now". (Except anyone who can live off interest and dvidends from companies free of debt.) I imagine the super wealthy forming an enclave to themselves, protected by sentry robots. Not sure if that'll be NYC or Hawaii. Maybe the reverse of "Escape from New York". Let’s call it:
“The Detroitification of American”
or
“We’re All Detroit Now”.

(Except anyone who can live off interest and dvidends from companies free of debt.)

I imagine the super wealthy forming an enclave to themselves, protected by sentry robots. Not sure if that’ll be NYC or Hawaii. Maybe the reverse of “Escape from New York”.

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