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| Subject: Re: This debt bubble is about to blow! | |
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Author: jw |
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Date Posted: 06:47:44 03/12/07 Mon In reply to: Oropan 's message, "Re: This debt bubble is about to blow!" on 08:03:26 03/08/07 Thu Add 12,000 a year for health care, at least 10,000 a year for child care, rapidly rising energy and food costs, maintenence and upkeep on a typical wood frame house with a large lawn, clothing, etc, it's not alot of money, they are probably living paycheck to paycheck at best. I just heard reports of 600,000 dollar mortgages in my neighborhood with no money down, the mortgage companies get much higher interest rates, which greately increases there profits until the bubble bursts. Now that the bubble is bursting, these compnanies are going belly up. >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 |
| The fit hits the shan | jw | 06:51:06 03/12/07 Mon |