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| Subject: Re: This debt bubble is about to blow! | |
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Author: Oropan |
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Date Posted: 08:03:26 03/08/07 Thu In reply to: jw 's message, "Re: This debt bubble is about to blow!" on 20:02:45 03/07/07 Wed The numbers I've seen from economists say that the total subprime mortages that might end up in default is around 1.5%. The assumption you are using is that all of them will default....that is where you are going wrong. As for the couple with the $190,000 mortage and $83,000 income. If they have a 30 yr. fixed, their payments per year would be 13,668 and add 3000 property tax and you get 17,268 per year. That's around 20% of their income....well in the ballpark of what is acceptable. I might add that they will get a nice tax refund off those house payments. If they are having trouble it's not because they bought too much house. > The article says it is 13%, compared to 3% just 7 >years ago, 10% of the housing market is a huge amount >of our economy, and this is on top of what already has >declined, real estate is over a trillion dollars a >year. > > As for the 83,000 a year having trouble with a >190,000 mortgage, they have 2 children, we don't know >if they have medical coverage from their job, or if it >is sub-standard coverage, if it is 2 working parents >there may be huge child care costs, do they live in an >expensive metro area? It is possible these people >need help, it is also possible they need to live in a >real country where the government's responsiblity is >to the people, not big business. > >>This will turn out to be not much. The subprime market >>is but a tiny percent of the total mortage market. >>In fact, this will probably prove to be the bottom of >>the real estate market and a good time to buy. >>$83,000 income and a $190,000 mortage and can't make >>the payment????? That person needs help but I not sure >>what kind!!!!!! >> >> >> >> >> >>> Looks like the bill is finally comming due, and >our >>>bubble economy is not prepared to handle it. If the >>>real estate crash spreads to wall street, look out >>>below! >>> >>>Lenders Take Beating in Subprime Fallout >>>Monday March 5, 2:25 pm ET >>>By Joe Bel Bruno, AP Business Writer >>>Lenders' Stocks Take Beating As Investors, Worried >>>About Defaults, Flee From Subprime Sector >>> >>> >>>NEW YORK (AP) -- Mounting concerns on Wall Street >that >>>mortgage lenders might be hurt by increasing defaults >>>and delinquencies sent investors fleeing Monday from >>>some of the biggest names in the industry. >>>ADVERTISEMENT >>> >>> >>>The meltdown among lenders that specialize in home >>>loans to people with weak credit, known in the >>>industry as subprime lenders, again ravaged stock >>>prices. Financial institutions from Britain's HSBC >>>Holdings PLC to subprime leader Countrywide Financial >>>Corp. sank amid reports of strained portfolios as >>>loans went bad. >>> >>>The latest to rattle the markets was New Century >>>Financial Corp., the nation's second-largest subprime >>>lender. The Irvine, Calif.-based company disclosed a >>>criminal probe into the trading of its securities, >and >>>into the lender's accounting procedures. >>> >>>Already beleaguered investors were swift to react. >New >>>Century's shares lost 60 percent on Monday -- wiping >>>$532 million from its market value. Wall Street, >still >>>wobbly after last week's huge plunge, also punished >>>the rest of an industry blamed for loosening their >>>lending standards amid an eroding housing market. >>> >>>"We see increasing evidence that this industry is now >>>in a downward spiral whereby each negative >development >>>fuels additional deterioration in key fundamentals >>>including origination volume, pricing, credit and >most >>>importantly funding," Stifel Nicolaus analyst >>>Christopher Brendler said. >>> >>>The troubles at New Century had been mounting since >>>February, when it announced that it lost track of how >>>severely the loans in its portfolio were losing >value. >>>The company on Friday disclosed it is being >>>investigated the Securities and Exchange Commission >>>and the U.S. Attorney for the Central District of >>>California on its accounting methods and the trading >>>of its securities ahead of a Feb. 7 earnings >>>restatement announcement. >>> >>>Investors who buy the company's mortgage loans in the >>>secondary market have been selling the loans back >when >>>borrowers default, New Century said. The company said >>>that because of accounting errors, it underestimated >>>how many loans would be resold and how much value >>>those loans would lose before ending up back in New >>>Century's portfolio. >>> >>>Concerns of a meltdown at New Century include the >>>possibility it will not be able to meet covenants >with >>>major financial backers, the company said. Subprime >>>lenders enter into agreements with big banks to >>>finance their operations. These backers require >>>subprime lenders meet minimum financial targets, or >>>face breaching loan agreements that would force banks >>>to pull out of the deals. >>> >>>This dragged down shares of some of the top U.S. >banks >>>and investment banks. >>> >>>Morgan Stanley Inc., which had a 5.5 percent stake in >>>New Century as of Dec. 31, dropped $1.33, or 2 >>>percent, to $72.03. State Street Corp., with a 3.8 >>>percent stake, shed 12 cents to $64.96. Citigroup >>>Inc., with 3.5 percent stake, traded as low as $49.56 >>>before recovering to post a 27-cent gain, at $50.24. >>> >>>Other subprime lenders also tumbled. Countrywide >>>Financial fell $1.03, or 2.8 percent, to $35.99, and >>>is down about 14 percent since January. Novastar >>>Financial Inc. shares plunged $2.17, or 30 percent, >to >>>$5.07, and are down about 40 percent this year. >>> >>>Higher U.S. interest rates and a stagnant housing >>>market began to take their toll on borrowers who had >>>been relying on the rising value of real-estate >>>markets to help them refinance their mortgages. >>> >>>Last year, 13.5 percent of mortgages originated in >the >>>U.S. were subprime, according to the Mortgage Bankers >>>Association. This is up from >>> >>>2.6 percent in 2000. The subprime market accounted >for >>>about 20 percent, or $600 billion, of the $3 trillion >>>mortgage market. >>> >>>The New Century case is of particular concern because >>>of fears that trouble in the subprime business could >>>spread to prime mortgages, causing pain for many more >>>lenders. Leading those concerns was HSBC, Europe's >>>largest bank with significant operations in the U.S., >>>which warned in February its profits would be weaker >>>because of subprime lending. >>> >>>The world's third-largest bank on Monday reported its >>>highest annual profit of $15.79 billion for 2006. >>>Bad-debt charges jumped 36 percent to $10.57 billion, >>>roughly in line with expectations. >>> >>>Chief Executive Michael Geoghegan attempted to fend >>>off criticism that the bank had provided loans in the >>>United States to people who were not in a position to >>>pay their debts. >>> >>>"This is not trailer park lending," Geoghegan said, >>>adding that the typical HSBC Finance customer has >>>average household income of $83,000, is 41 years old, >>>has two children and a home worth $190,000. "This is >>>Main Street America." >>> >>>Concern about subprime exposure also has spilled into >>>major U.S. investment houses. Standard & Poor's on >>>Monday downgraded Lehman Brothers Holdings Inc. and >>>Merrill Lynch & Co., partly on subprime mortgage >woes. >>>S&P noted that subprime loans are a small piece of >the >>>company's overall assets, but was still concerned >>>about recent market trends. >>> >>>Merrill Lynch fell 73 cents to $81.34, and Lehman >rose >>>9 cents to $72.19. >>> >>>Business Writer Jane Wardell contributed to this >story >>>from London. [ Next Thread | Previous Thread | Next Message | Previous Message ] |
| Subject | Author | Date |
| Re: This debt bubble is about to blow! | jw | 06:47:44 03/12/07 Mon |
| The fit hits the shan | jw | 06:51:06 03/12/07 Mon |