General Discussion
Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsREady for another mortgage bomb to go off?
The loans are a problem now because an increasing number are hitting their 10-year anniversary,
at which point borrowers usually must start paying down the principal on the loans as well as the interest they had been paying all along.
More than $221 billion of these loans at the largest banks will hit this mark over the next four years, about 40 percent of the home equity lines of credit now outstanding.
For a typical consumer, that shift can translate to their monthly payment more than tripling, a particular burden for the subprime borrowers that often took out these loans.
And payments will rise further when the Federal Reserve starts to hike rates, because the loans usually carry floating interest rates.
http://www.reuters.com/article/2013/11/26/usa-mortgages-homeequity-idUSL2N0J724D20131126
On top of that, these are "second mortgages" which means any mortgage defaults, any attempt to foreclose on a house, results in the FIRST mortgage getting paid off before the 2nd. And a lot of these homes are underwater.
FreakinDJ
(17,644 posts)MADem
(135,425 posts)It's the oddest thing.
FarCenter
(19,429 posts)They are unrelated except for property taxes being allocated on the basis of relative values of property in the community.
MADem
(135,425 posts)the value of the home. You don't pay the same taxes on a 100K house as you do a 200K one--in fact, the cost is exactly double. And the tax rate is usually a percentage of a thousand bucks, but they sure manage to bump those taxes up even as the value of the property goes down.
I rarely see local governments working terribly hard to find economies. Instead of reducing overtime, fixing things instead of buying new, turning out a few lights, doing those stupid "little" things that can add up, they always threaten to cut school funding if they don't get their increases and freak people out who give a damn about decent education.
FarCenter
(19,429 posts)For example, if Hurricane Sandy wipes out 10% of the assessed value of property in town, everyone's mill rate goes up 10% to make up the difference.
SoCalDem
(103,856 posts)A large portion of the tax bill is on the land the house sits on, which rarely goes down in value..
Even when our house was seriously upside down a while back, our taxes never went down a penny..
Regular appraisals are often based on what houses are selling for in an area and are a guideline for banks when it comes to lending..
MADem
(135,425 posts)The taxes never follow the appraisals. Once they go up, they stay up!
snooper2
(30,151 posts)You in a bad neighborhood?
Shit, even in Vegas one of the cities hit the hardest prices are going back up-
http://www.trulia.com/real_estate/Las_Vegas-Nevada/market-trends/
FreakinDJ
(17,644 posts)For 5 straight months now
Le Taz Hot
(22,271 posts)Pretty drastically as a matter of fact. My neighbor is a real estate agent and she says she can find low-income housing and upper-income housing but nothing in the middle. A couple of weeks ago one of the houses in my neighborhood (working-class neighborhood) went up for sale and the next day it was sold.
Of course, we're experiencing another bubble and home values will plummet again but this time the predatory lenders won't be a factor as the credit requirements have tightened up.
FreakinDJ
(17,644 posts)The valus went up pretty drasticly here too. But if no one can get a loan to buy them - what then
Le Taz Hot
(22,271 posts)so it's the spec buyers buying the mid-ranged-priced homes.
FarCenter
(19,429 posts)At least at JPMC the short term delinquencies have been trending down, while 150+ day delinquencies have remained flat.
A few years ago, the banks took action to winnow out their HELOCs and to withdraw unused lines of credits. I doubt they are in that much trouble.
See page 18 of http://files.shareholder.com/downloads/ONE/2810165706x0x696269/53cac7f7-de8d-4e28-aeeb-412271c2d40b/3Q13_Earnings_Presentation.pdf
Note also that HELOCs are only one type of second mortgage.
Yo_Mama
(8,303 posts)The really bad ones are already gone for the most part.
These loans can be rewritten to vastly lower the repayment rates, and you can expect that to happen.