Housing market set to cause trouble

[dixiegrrrrl]

The problem:
2 types of Mortgage loans are fixing to re-set.

HAMP loans are good for 5 years only. First HAMP loans were made 5 years ago.
Almost 90% of HAMP loans will see increases, over the next 5 years.

HELOCS, which were good for 10 years, are now ready to start re-setting.
(Home Equity Line of Credit)
AKA 2nd mortgage.

Once the loan turns 10 years old, these so-called Helocs begin to add principal to the interest-only payments homeowners have been accustomed to paying. For some, those reset payments will be in the neighbourhood of $500 to $600 more each month.

http://www.fool.com/investing/general/2014/04/05/mortgage-resets-are-beginning-and-things-could-get.aspx

Since the REAL economy, the one we have to live in day to day, has gotten so much worse from 2008,
many of these increased housing loans will not be affordable.

[MindMover]

1. Not to mention student loans ... nt

[dixiegrrrrl]

2. Those are forever.

they actually are a long term "investment" for banks, who have sold them off in securitized bonds,
then sold the loans to servicers, just like mortgage and car loans.
the servicers are debt collectors also, they will chase people down for decades over student loans.

At least in first mortgage housing, one can, if necessary, go bankrupt, leaving an unpaid debt.
I think I read that 2nd mortgages are not discharged in bankruptcy, I might be wrong about that.

and you can bet the banks are working overtime to change the bankruptcy rules for mortgages.

[Travis_0004]

3. You can discharge a second mortgage in bankrupcy.

The biggest difference, is that the owner of the second mortgage can foreclose on the owner of the second mortgage. So if you first mortgage is through Bank A, and your second mortgage is through bank B, if you default on both, then bank B gets nothing, unless there is enough equity in the house left for them.

[dixiegrrrrl]

5. Thank you for that clarification.

I knew there was some line of first dibs on a default..could not remember what is what.

[Johonny]

4. The housing prices near me are going up, up, up again

So the house that was impossible to afford pre-2008, underwater but still too expensive 2008-2013, is now going into impossible to afford again. Meanwhile my earning power hasn't done a damn thing. Who the hell is buying these houses is beyond me, but I imagine they won't do any better than the people did in 2005-2008.

[dixiegrrrrl]

6. big banks and hedge funds are buying them...for cash.

In the so called "hot" markets, like SF, regular home buyers are finding themselves out bid by the newly formed hedge funds, who are snapping up hundereds of homes, for rental markets.
Then they sell off the income of those rentals, in securitized bonds...just like they do with student loans and car loans.

Here is a post I did on them last week:
Billion-dollar club: Rent companies form massive trade group ( 920 billion)
http://www.democraticunderground.com/10024731437