48% of subprime ARM are behind or in foreclosure

[GeezerMan]

LINK

WOW, that's a stunning % . At least the ARM problem is waning.
A total of 12% of all mortgages are in trouble now.

 

[StageLeft]

12% seems kind of OMG wth number to me. 1/5th of homeowners upside down doesn't concern me because that's easy to happen with 100% loans and all that, but 12% in foreclosure is bad, especially since unemployment is still very low. This foreclosure number, unless the gov does something very strange, is going to greatly increase. 20% would not surprise me before this is all said and done.

 

[LegendKiller]

Originally posted by: Skoorb
12% seems kind of OMG wth number to me. 1/5th of homeowners upside down doesn't concern me because that's easy to happen with 100% loans and all that, but 12% in foreclosure is bad, especially since unemployment is still very low. This foreclosure number, unless the gov does something very strange, is going to greatly increase. 20% would not surprise me before this is all said and done.

That number is 12% is DELINQUENT AND FORECLOSURE. I am sure a large amount of that is actually just delinquent. While that is alarming, the amount in delinquent buckets can move up or down quickly depending on roll and cure rates, especially with the measures coming out from loan servicers.

 

[Genx87]

There is an article on CNN Money about people letting themselves go into forclosure even when they can make payments. They will take a hit on their credit because the losses they have seen will never be made up. Think about some schmuch who makes 80K a year buying a 500K home that is now at 350K and dropping fast. When the hell is he going to make up that 150K? Walk away, rent for 6-8 years, and get back in. I'd be interested in seeing how many of these people can afford the loan but are walking? See if as a % it grows over the next 12 months as people make financial decisions.

 

[daniel49]

Originally posted by: Genx87
There is an article on CNN Money about people letting themselves go into forclosure even when they can make payments. They will take a hit on their credit because the losses they have seen will never be made up. Think about some schmuch who makes 80K a year buying a 500K home that is now at 350K and dropping fast. When the hell is he going to make up that 150K? Walk away, rent for 6-8 years, and get back in. I'd be interested in seeing how many of these people can afford the loan but are walking? See if as a % it grows over the next 12 months as people make financial decisions.

I like the cnn story about the Washington DC bus driver who is struggling with the mortgage on her $800,000 dollar home. What the,,,doesn't say what her and her husbnd are making but Holy Moly. aren't we required to have some common sense and responsability concerning what we can afford?Text

 

[JSt0rm]

Daniel49: I find it really funny and ironic that your "America the beautiful" youtube link has been removed for copyright infringement. lol

 

[MooseNSquirrel]

I hate that they pick the most glaring examples.

Whats been common in Silicon Valley is for people to be so under the value of their house (which they can't sell) that it simply no longer makes sense for them to pay their mortgage, even if they can afford it and they bought something within their reach.

If you only put a few percentage points down why not? All this was completely beyond your control. Certainly you bear responsibility for buying in the first place, but so does the bank for lending the money to you without requiring a big deposit.

When the banks lowered their lending standards they sent off a big fuck you to any house owner who was financially responsible.

S&M

 

[jpeyton]

Yep, I have a friend who is an engineer for a biotech company in CA. He has a fat salary, great stock options, great credit, lots of cash; he had no problem buying a house for $500k last year.

A year later, he's looking to relocate to Boston, but his house is worth $300k and nobody is buying.

He will probably walk away from his mortgage as soon as his transfer to Boston comes in. It makes no financial sense holding onto a property that he's upside down on by $200k.

This crisis didn't just hit poor people living beyond their means; even well-to-do people are walking away from dead properties.

 

[Fern]

Yeah, first thing I thought is how many people are intentionally falling behind to get in on some 'bailout action' under Obama's recently announced plan.

Fern

 

[heyheybooboo]

I'd walk (and have suggested same to others - but it was 20 years ago).

I did some data crunching for the Mellon Bank on a big 12-story condo project at a ski resort. People bought in at over $100k, and when real estate crashed during Bush I they couldn't sell at $.50 on a dollar (which is generally what the 'comps' in the area were going for). It was all absentee owners except for 1 unit - essentially short-term rentals for the ski bunnies. Folks were just handing in their keys ...

The technical term is ""deed in lieu of foreclosure""

 

[Firebot]

Originally posted by: Genx87
There is an article on CNN Money about people letting themselves go into forclosure even when they can make payments. They will take a hit on their credit because the losses they have seen will never be made up. Think about some schmuch who makes 80K a year buying a 500K home that is now at 350K and dropping fast. When the hell is he going to make up that 150K? Walk away, rent for 6-8 years, and get back in. I'd be interested in seeing how many of these people can afford the loan but are walking? See if as a % it grows over the next 12 months as people make financial decisions.

That's the biggest problem out of all this. Housing prices are not getting higher, and more and more people are choosing to get foreclosed. The banks take the hit on the foreclosure, credit crunches down a bit more, house prices drop again due to the high supply, more house owners decide that it's easier to get foreclosed then pay, etc.... It's a vicious cycle caused by the lack of any regulation in lending practices.

 

[dardin211]

Originally posted by: Genx87
There is an article on CNN Money about people letting themselves go into forclosure even when they can make payments. They will take a hit on their credit because the losses they have seen will never be made up. Think about some schmuch who makes 80K a year buying a 500K home that is now at 350K and dropping fast. When the hell is he going to make up that 150K? Walk away, rent for 6-8 years, and get back in. I'd be interested in seeing how many of these people can afford the loan but are walking? See if as a % it grows over the next 12 months as people make financial decisions.

I am wondering the exact same thing, as it's something that has crossed my mind with my own home. I have a 780 credit score, 30yr fixed at a 5.62% rate, always paid on time, have no problems making the payment each month. The house next door as well as one across the street foreclosed and one sold recently for about 50% less then what I currently owe on my own home, the other is on the market for about 40% less then what I currently owe. So this puts me quite a ways upside down on my home, as I am only a few years into owning it. Being so far upside down, probably wouldn't bother me, if this was the house I wanted to die in, however it is not. The wife and I planned on owning this for about 7-10yrs and then getting something slightly bigger, as our family will have grown in size by then.

I doubt I would do this, even though I know walking away is the correct choice financially, but morally I am not the person to do this.

 

[ElFenix]

thanks california

Originally posted by: Firebot It's a vicious cycle caused by the lack of any regulation in lending practices.

the lax regulation is necessary but not sufficient. lax regulation doesn't cause people to take up smoking any more than lax regulation caused banks to offer mortgages to people who couldn't pay them and people who couldn't pay them to take the mortgages.

 

[jpeyton]

Originally posted by: dardin211

Originally posted by: Genx87
There is an article on CNN Money about people letting themselves go into forclosure even when they can make payments. They will take a hit on their credit because the losses they have seen will never be made up. Think about some schmuch who makes 80K a year buying a 500K home that is now at 350K and dropping fast. When the hell is he going to make up that 150K? Walk away, rent for 6-8 years, and get back in. I'd be interested in seeing how many of these people can afford the loan but are walking? See if as a % it grows over the next 12 months as people make financial decisions.

I am wondering the exact same thing, as it's something that has crossed my mind with my own home. I have a 780 credit score, 30yr fixed at a 5.62% rate, always paid on time, have no problems making the payment each month. The house next door as well as one across the street foreclosed and one sold recently for about 50% less then what I currently owe on my own home, the other is on the market for about 40% less then what I currently owe. So this puts me quite a ways upside down on my home, as I am only a few years into owning it. Being so far upside down, probably wouldn't bother me, if this was the house I wanted to die in, however it is not. The wife and I planned on owning this for about 7-10yrs and then getting something slightly bigger, as our family will have grown in size by then.

I doubt I would do this, even though I know walking away is the correct choice financially, but morally I am not the person to do this.

What kind of money are we talking about here? 50% is quite a lot to be upside down. I'd walk away.

 

[dardin211]

Originally posted by: jpeyton

Originally posted by: dardin211

Originally posted by: Genx87
There is an article on CNN Money about people letting themselves go into forclosure even when they can make payments. They will take a hit on their credit because the losses they have seen will never be made up. Think about some schmuch who makes 80K a year buying a 500K home that is now at 350K and dropping fast. When the hell is he going to make up that 150K? Walk away, rent for 6-8 years, and get back in. I'd be interested in seeing how many of these people can afford the loan but are walking? See if as a % it grows over the next 12 months as people make financial decisions.

I am wondering the exact same thing, as it's something that has crossed my mind with my own home. I have a 780 credit score, 30yr fixed at a 5.62% rate, always paid on time, have no problems making the payment each month. The house next door as well as one across the street foreclosed and one sold recently for about 50% less then what I currently owe on my own home, the other is on the market for about 40% less then what I currently owe. So this puts me quite a ways upside down on my home, as I am only a few years into owning it. Being so far upside down, probably wouldn't bother me, if this was the house I wanted to die in, however it is not. The wife and I planned on owning this for about 7-10yrs and then getting something slightly bigger, as our family will have grown in size by then.

I doubt I would do this, even though I know walking away is the correct choice financially, but morally I am not the person to do this.

What kind of money are we talking about here? 50% is quite a lot to be upside down. I'd walk away.

I should of made it clearer, these two homes are in not as good condition and other factors. My own home is actually estimated around 32% upside at the start of 2009.

 

[conehead433]

What gets me is how many people would sign up for an ARM when interest rates were historically near their bottom. I also definitely don't have any sympathy whatsoever for any lender who would push someone into an ARM. That said, I think part of the solution is to make ARMs against the law. Everyone can borrow at a fixed rate and if interest rates go down then they can refinance and the bank picks up a little extra for refinancing.

 

[BoberFett]

Originally posted by: Firebot

Originally posted by: Genx87
There is an article on CNN Money about people letting themselves go into forclosure even when they can make payments. They will take a hit on their credit because the losses they have seen will never be made up. Think about some schmuch who makes 80K a year buying a 500K home that is now at 350K and dropping fast. When the hell is he going to make up that 150K? Walk away, rent for 6-8 years, and get back in. I'd be interested in seeing how many of these people can afford the loan but are walking? See if as a % it grows over the next 12 months as people make financial decisions.

That's the biggest problem out of all this. Housing prices are not getting higher, and more and more people are choosing to get foreclosed. The banks take the hit on the foreclosure, credit crunches down a bit more, house prices drop again due to the high supply, more house owners decide that it's easier to get foreclosed then pay, etc.... It's a vicious cycle caused by the lack of any regulation in lending practices.

Cities could start condemning foreclosed properties. Demolish a bunch of empty houses and dwindling supplies will start stabilizing prices.

Fuck the bank who owns the property, they should have been more careful about who they loan to. It won't help credit liquidity because the bank is still screwed, but at least it would slow down these walkaways.

 

[mugs]

People who walk away from mortgages they can afford are some of the lowest scum who are contributing to the problems we're having now. :thumbsdown: We need recourse mortgages in this country so the banks can take these people's assets.

 

[StageLeft]

Originally posted by: jpeyton
Yep, I have a friend who is an engineer for a biotech company in CA. He has a fat salary, great stock options, great credit, lots of cash; he had no problem buying a house for $500k last year.

A year later, he's looking to relocate to Boston, but his house is worth $300k and nobody is buying.

He will probably walk away from his mortgage as soon as his transfer to Boston comes in. It makes no financial sense holding onto a property that he's upside down on by $200k.

This crisis didn't just hit poor people living beyond their means; even well-to-do people are walking away from dead properties.

I actually don't blame him. If he has to move, where could he make that 200k up? Truly where? If he sells the house he cannot take out an unsecured loan for $200k to pay the bank, so what happens? He really ought to buy a new house while this is still his and his credit is ok, then just forget the first one.

I am now less tolerant of the idea people should live up to their obligations to pay a mortgage. WHen a person takes out a mortgage they and the bank agree to make payments or else the house is gone. This is a decision among adults and the repercussions are known. If the house loses value, either the owner gets hosed or the bank does. The law, the contract says if the home owner stops paying they lose the house/get dinged credit. If they can take that repercussion, it is what it is. They fvcked up buying that house and the bank fvcked up lending the money to them, right?

dardin111 I'd stay in the house until you need to sell it. Clearly there's no point to walking away now if you don't need the money unless you think--and this would be difficult--you can buy another house now at its proper cost and kind of "reset", but get your credit clean in 7-10 years when you plan on upgrading.

 

[BoberFett]

Originally posted by: mugs
People who walk away from mortgages they can afford are some of the lowest scum who are contributing to the problems we're having now. :thumbsdown: We need recourse mortgages in this country so the banks can take these people's assets.

So people who are walking away from their home because it's not worth it should be in debt for life, but those who walk away because they can't afford it just get a temporary credit ding?

When we start instituting garnishment on these morons who bought more than they could afford, then maybe we can think about punishing those who are simply doing what is in their family's financial interest.

 

[mugs]

Originally posted by: BoberFett

Originally posted by: mugs
People who walk away from mortgages they can afford are some of the lowest scum who are contributing to the problems we're having now. :thumbsdown: We need recourse mortgages in this country so the banks can take these people's assets.

So people who are walking away from their home because it's not worth it should be in debt for life, but those who walk away because they can't afford it just get a temporary credit ding?

When we start instituting garnishment on these morons who bought more than they could afford, then maybe we can think about punishing those who are simply doing what is in their family's financial interest.

You can blame the banks for lending to people who couldn't afford what they were buying. It's not the bank's fault if someone is capable of paying but chooses not to.

I don't like seeing people get out of repaying their debts, but you can't get blood from a stone. With a recourse mortgage it'd be up to the bank to decide whether to try to recover the money they lost.

 

[Fern]

Originally posted by: conehead433
What gets me is how many people would sign up for an ARM when interest rates were historically near their bottom. I also definitely don't have any sympathy whatsoever for any lender who would push someone into an ARM. That said, I think part of the solution is to make ARMs against the law. Everyone can borrow at a fixed rate and if interest rates go down then they can refinance and the bank picks up a little extra for refinancing.

Re: Your remark I underlined: Agree 100%. That's when you 'lock in' a low rate.

Re: The bolded remark: Forgetting about the stupidity of giving mortgages to people who can't afford them, I suspect banks have a big incemtive to deal in ARMs.

If you're a bank and make fixed rate mortgages, you potentially lose if the interest rate later skyrockets. I've never clearly understood how banks can afford NOT to make only ARM loans.

If they keep the mortgage, they must have some way to lock in their interest rate (and profit on the spread). If they use their own capital, instead of borrowed funds, to provide the mortgage funds to client, they're gonna get creamed when rates increase substantially (their RoR on the outstanding mortgages will plummit, along with their profits and stock value). Of course, if they can package and sell off the mortgages it's not their problem any more.

Fern

 

[daniel49]

Originally posted by: JSt0rm01
Daniel49: I find it really funny and ironic that your "America the beautiful" youtube link has been removed for copyright infringement. lol

Fixed with bigger and better. Thats America

 

[frostedflakes]

Originally posted by: Genx87
There is an article on CNN Money about people letting themselves go into forclosure even when they can make payments. They will take a hit on their credit because the losses they have seen will never be made up. Think about some schmuch who makes 80K a year buying a 500K home that is now at 350K and dropping fast. When the hell is he going to make up that 150K? Walk away, rent for 6-8 years, and get back in. I'd be interested in seeing how many of these people can afford the loan but are walking? See if as a % it grows over the next 12 months as people make financial decisions.

Crap like this pisses me off to no extent. I don't care how much a person is upside down on their home, they signed on the dotted line and are obligated to pay off their mortgage.

People invested in homes hoping they could sell in 5-10 years and net a nice little profit, but the bubble burst. Sucks that they chose a bad time to buy a house, but that's not a good enough excuse to walk away from a mortgage.

 

[Craig234]

Originally posted by: frostedflakes

Originally posted by: Genx87
There is an article on CNN Money about people letting themselves go into forclosure even when they can make payments. They will take a hit on their credit because the losses they have seen will never be made up. Think about some schmuch who makes 80K a year buying a 500K home that is now at 350K and dropping fast. When the hell is he going to make up that 150K? Walk away, rent for 6-8 years, and get back in. I'd be interested in seeing how many of these people can afford the loan but are walking? See if as a % it grows over the next 12 months as people make financial decisions.

Crap like this pisses me off to no extent. I don't care how much a person is upside down on their home, they signed on the dotted line and are obligated to pay off their mortgage.

People invested in homes hoping they could sell in 5-10 years and net a nice little profit, but the bubble burst. Sucks that they chose a bad time to buy a house, but that's not a good enough excuse to walk away from a mortgage.

While I'm usually on the side arguing against bankruptcy (mostly those with catastrophes) laws being harsher, maybe in this case the people should be required to pay for the loan.