Who watched 60 minutes? Another mortgage meltdown coming

[luvthatdisney]

I watched 60 minutes last night - usually I dont - but I was waiting for the Survivor finale. I was horrified to see a story about a new mortgage crisis that should start affecting the economy in 2010. It was a very scary story and is the headline on CBSnews. com if you want to check it out.

It all stems from "Alt-A" and "option ARM" loans that were taken out in the last few years. They are another aspect of the sub prime lending debacle, which most news stories I have seen show to be on the downswing now. The person interviewed stated that some of these loans have already defaulted and the reset date has not even arrived. They stated the reset dates of these loans would begin in 2010 and with the track record for defaults they already have on them - once the payment grows at reset - about 50% to 70% of people with these loans will default. So we have not seen the end of the mortgage mess.

It really worries me as these mortgage industry gurus forcast the economy to get even worse in 2010 due to this. Not just the huge amount of defaults/foreclosures, but the influx of property for sale will cause the property values to severely decline.

I am not the most financially savy person, but I feel worried about this. Did anyone else see this last night? How do you feel about it. I know I can only watch out for me and my family, but just another thing to worry about.

 

[dclfun]

I saw the show too. It appeared that most of these loans were sold to investors buying multiple properties on the hopes that real estate prices would continue to escalate before their interest rates reset. Most were interest only loans with nothing going toward principle. Although it WILL hurt housing prices and values further I don't feel sorry for investors- they gambled and lost.---Kathy

 

[rentayenta]

I saw it and I don't feel sorry for some investors either. Those that bought with the intention of riding the housing wave and sticking it to the buyer did this to themselves. Karma.

 

[cats mom]

I didn't catch the segment on 60 minutes, but I've been keeping my eye on this for awhile since there's no doubt it will hit my area big time.

Investors involved in it; yes, but Alt A and option ARM loans were huge in parts of the country with high prices as well.

IIRC the average price to income ratio in my area hovered around 9x at the height of the frenzy and LTV percentages were way high too. People were buying far more house than they could legitimately afford and with none of their own money in the game. Crazy stuff!

Not many people can afford to hold onto a house that costs 9x their income long term, unless they're counting on insane rates of appreciation to keep them afloat that is. The re-fi business was huge here.

The scary thing is, contrary to what I keep hearing on the news, the insanity seems to be continuing here. My neighbor is a realtor and he knows of folks who are still getting 100% financing deals at crazy high price to income ratios. Just more poor, unsuspecting, duped homeowners; who are foreclosures waiting to happen, that taxpayers will get to bail out.

 

[pandora174]

I try not to judge but this happened to my on last 2 houses that I rented (so I'm a little irritated). The first townhouse the owner assured us he bought 2 townhomes as long term investmenets. When the lease was up for renewal, he stopped returning my calls. I had to send a certified letter until he fianlly told me he had to sell b/c he misjudged the market & couldn't afford the 2 mortgages. So we moved, the 2nd homeowner, told me nothing & one day I was served with his foreclosure papers. Turns out he had 5 properties, all rentals & the tenants knew nothing about this. He was pocketing the rent money. I was lucky in the sense that on the first one I got my deposit back in full & on the 2nd house (owner had no money ) but he agreed to let me live out the last month instead of paying rent. Mind you I found these brand new homes through a reputable real estate agent & this all happened in the first YEAR . I am thankfully renting now from a building co. directly that built new homes expressly for leasing & is run by their own property management co. But for some of these investors I don't feel sorry for at all.

 

[sb1997]

I don't know a lot about the ins and outs of mortgages, but if these ARM's are scheduled to reset around 2010 and they are expecting a large portion of the mortgages to default once the payments increase, then the lenders need to be proactive not reactive. Mortgage rates are very low right now and lenders could develop incentives for consumers that will refinance with a fixed rate mortgage. It may cost the lenders/ borrowers money now, but imagine what it could save in the long run. Financial institutions depend on the profit from interest and if a large portion of the mortgages default, then the financial institutions won't have the earnings and the cycle will repeat the 2008 financial mess.

 

[JonS99]

I saw it and I don't feel sorry for some investors either. Those that bought with the intention of riding the housing wave and sticking it to the buyer did this to themselves. Karma.

So the Barry Obama message is to pick and choose who we feel sorry for in economic hard times???

 

[Princess_Michelle]

.

 

[Kay1]

So the Barry Obama message is to pick and choose who we feel sorry for in economic hard times???

What a rude and inapprorpriate remark! I believe the poster was expressing her own opinion which she should be allowed to do without harrassment.

 

[eliza61]

I saw it and I don't feel sorry for some investors either. Those that bought with the intention of riding the housing wave and sticking it to the buyer did this to themselves. Karma.

Unfortunately Rentayenta, we all end up paying the cost some kind of way.

So the Barry Obama message is to pick and choose who we feel sorry for in economic hard times???

Ok we get it, you don't like Obama, he's the Antichrist. He's responsible for every thing from global warming to my too tight girdle. Ok, but could you please stop using him for an answer for each and every single topic. Rentayenta said absolutely nothing about BUSH, OBAMA, Republican or Democratic. She made a reply about irresponsible behaviour which is the one thing that is bipartisan.

Give it a rest. PLEASE

 

[mjh8955]

I saw the segment last night. One woman that was interviewed said she had bought several properties over the last few years as investments and when asked if she had read the contracts before signing her answer was no, she was too busy. Now she is losing them due to the type of financing she agreed to. ????

 

[mombare]

I saw the segment last night. One woman that was interviewed said she had bought several properties over the last few years as investments and when asked if she had read the contracts before signing her answer was no, she was too busy. Now she is losing them due to the type of financing she agreed to. ????

This is the part I saw also...really annoyed me. I don't care who is to blame, but if you purchase a property without reading or understanding what you are agreeing to, you need a sign. My husband is a builder and we have worked really hard to make responsible decisions. There is a lot of personal responsibility/greed involved in the decisions many people made, at least in that specific situation.

 

[prncess674]

I haven't read the rest of the replies, and I don't want to offend anyone, , BUT, I'm glad this is happening, I live in suburbs of DC and house prices are still outrageous.... I can't WAIT for them to hit rock bottom so I can buy one... we have been renting b/c we know we can't afford a nice house with me staying home AND sending DS to private school AND take vacations every year, so we wait.... I'm not going to put my child in daycare, or in public school, or not take any vacations just to buy an overpriced house.... so we wait. And it's about time, is all I have to say...

Don't count on DC prices hitting anything close to a bargain basement price. DC is amazingly resistent to the market. Good or bad the government will always be here. If you want bargain basement housing move to Detroit.

 

[eliza61]

I saw the segment last night. One woman that was interviewed said she had bought several properties over the last few years as investments and when asked if she had read the contracts before signing her answer was no, she was too busy. Now she is losing them due to the type of financing she agreed to. ????

This is the part I saw also...really annoyed me. I don't care who is to blame, but if you purchase a property without reading or understanding what you are agreeing to, you need a sign. My husband is a builder and we have worked really hard to make responsible decisions. There is a lot of personal responsibility/greed involved in the decisions many people made, at least in that specific situation.

Unfortunately guys personal responsibility left the building (bad pun, sorry).

The big problem is that these loans were bundled and sold as investments so when they begin to default the investments they were tied to go under. The banks that own these properties go under and the ripple effect begins. Stock market loses value, corporations that brought these investments go under, so forth and so on. Just think, if you have a 401K or a college fund that is tied to the stock market and you've just lost 30% of your value. That's what we are seeing now. What do you do, you stop spending, companies start laying off, credit cards start uping intrest rates or cutting limits. It's all entwined.

 

[TheRustyScupper]

1) Actually, the story only told part of the story.
2) There several different foreclosure triggers coming.
. . . as weird mortgages, like Alt-A hit, mortgages will foreclose
. . . as people are laid-off, even 30-yr, mortgages will foreclose
. . . as business owners are laid off their homes,mortgages will foreclose
. . . as businesses close the commercial properties, mortgages will foreclose
. . . as people cna no longer handle their credit card load and/or car loans, mortgages will foreclose


It is certainly a bad thing. However, this realignment was necessary.
. . . Real estate has been over priced for far too long.
. . . People who should never been able to qualify for mortgages had money heaped upon them.
. . . People traded cars far too quickly due to cheap money, and are now upside-down on their car loans.
. . . The bubble HAD to burst sometime.
. . . It is time for folks to live within their means, like many of their parents told them to do.
. . . It is not just a case where people can blame the credit crunch on ARM's.
. . . The loans issue now is that entities like pension funds do not want to buy car loan paper - it isn't even a bank issue anymore.

 

[MickeyMomOfThree]

I didn't see it wither but I have to amke one comment.
We live in a 1000 sf house. It is old, needs lots of work that we have been doing very slowly over the almost 13 years we have lived here. When we bought the house we had one child, we now have 3. We are very overcrowded and the neighborhood isn't the best BUT, it's what we can afford. Would I love a bigger house, would I love one that is fully functioning not needs everything worked on, would I love more than 1 bathroom (I have 3daughters, I think you know the answer! )
I would love all of that but we were realistic when we bought our home. We feel as though we are lucky to have a home, many are not so lucky. It is sad when people loose their house, but you have to be honest about what you can afford morgage wise and I hope these bad times teach younger generations this lesson.
My house is worth just over what my husband makes in a year (I am a SAHM). Even with that our budget is still tight between taxes, insurance, cars, and all the other bills we all have, plus the cost of haing 3 kids. I can't imagine some of those morgages that are many times what we have.

I hate to think of things getting any worse, but maybe this will teach a valuable lesson to those younger generations so they don't repeat our mistakes.

 

[Strangeite]

I work for a law firm in which we represent many of the nations largest banks in their multi-milliondollar commercial real estate loan transactions. Let me tell you the last month has been weird. At the height of the "credit freeze" we were slow but still doing two or three loans a week, but now I have had only one in the last three weeks. And it was for a regional bank and only for $1,750,000.00. That is a very small amount to be crossing my desk.

I was talking to a VP of a large national bank and there was almost panic in his tone. I hope we come out of this soon, but I am afraid it's going to get worse. I don't think we have seen the start of the collapse of the commercial real estate market.

 

[DawnM]

Well, what upsets me is that people who DID buy what they COULD afford are losing jobs and still losing homes. It isn't just the "stick it to the guy who over-bought!" We are ALL affected by this.

Dawn

 

[MickeyMomOfThree]

Well, what upsets me is that people who DID buy what they COULD afford are losing jobs and still losing homes. It isn't just the "stick it to the guy who over-bought!" We are ALL affected by this.

Dawn

I agree with you on this, I guess I lost sight of this because lately you hear so many stories of the "overbuyers". We are fortunate, our morgage is backed by the VA so we have a bit more help should anything ever happen. When DH lost his job suddenly years ago they suspended our payments until he found work. Yes, it accumlated moreinterest for those few months, but it was nice to know we didn't have to worry.

 

[Kay1]

http://calculatedrisk.blogspot.com/2007/10/imf-mortgage-reset-chart.html

Above is a link to the mortgage reset chart. It looks like a false bottom for 2009, then it starts up again.