Risky mortgages threaten a squeeze(500,000 homeowners )

[RedEarth]

A great shift toward adjustable mortgages helped push America's housing boom into high gear. Now, as the boom unwinds, the riskier side of those mortgages is coming home to roost.
The ultimate impact of all those "teaser" interest rates, the "no money down" mortgages, and exotic loans where homeowners' debt can rise over time will be muted somewhat, economists say, because it will be spread over the rest of this decade.

But that doesn't necessarily mean the mortgage shakeout will be easy. And for many individual borrowers, finance experts say, the sad result will be foreclosure.

"We just really don't have any precedent to say, 'This is how bad it can get,' " says Rick Sharga of RealtyTrac, which follows trends in foreclosure. "The homeowner who stretched to buy a house in the first place could find himself or herself in very serious financial trouble very quickly."

Economists generally don't believe the soaring popularity of "exotic" or nontraditional mortgages since 2004 will cause the kind of problems that push the nation into a recession. But foreclosure rates are already rising, and federal regulators are moving to develop new rules in a bid to keep banks from making loans to people who can't pay.

http://www.csmonitor.com/2006/0929/p01s02-usec.html

[OhioChick]

1. Foreclosures are

through the roof around here, with no end in sight.

[maseman]

2. just the tip of the iceburg

[OrangeCountyDemocrat]

3. Don't Worry.....Be HAPPY!!

www.thehousingbubbleblog.com

[TomInTib]

4. While I feel terribly sorry for these 'homeowners' (who don't own homes)

They just were not paying attention.

This is not the first time that variable rate mortgages have wiped out thousands of buyers.

[PeaceProgProsp]

10. Putting off home-ownership is not a reasonable option for

a lot of people, and it's hard for one buyer to hold down purchase prices when the banks (through 110% mortgages for $500,000 to people making $60,000 a year) and everyone else (media, realtors) is aligned in an effort to inflate prices -- especially, if you have children who need to go to a public school. Then the pressure is really on to stretch your budget to buy a home close enough to work in a nice neighborhood. Although my urge is to think people are crazy to stretch their budgets so far that they risk financial ruin (and, effectively, end up renting their houses from banks), I still don't blame buyers as much as a blame state and federal legislators for not stepping up to protect society from this bubble.

[msongs]

5. refinance nt

[OrangeCountyDemocrat]

6. They Announced Today They've Run Out Of Land Here In CA

There is NO MORE LAND to build ANYWHERE in California. It was just on the news today.

That means you had better buy right away, because otherwise you won't be able to live here ever again. Because once the land is all gone, the prices will surely skyrocket!!

Remember, they're not making anymore land. And what with places like New Orleans risking being underwater, you know how important it is to hold land.

I'm so convinced, that I think I'll buy an investment property, even though I currently have a condo in the OC. I'm thinking about some boom place like Bakersfield or perhaps Corona. With the way these markets have risen, I expect them to double in value by the time 2010 arrives. That WILL be a great return on my investment.

Of course, to afford it, I might have to take out an ARM of some sort, but interest rates are always going to be low, and probably drop back down to 2%, so there's little risk there.


<do I need the sarcasm tag?>

[Theodolite]

7. Home-debtors

They signed the papers, they are responsible. I would love to buy a home ( or condo ), but when I run the numbers I know that renting is the best choice for me.

[cliss]

8. ok ~warning~ This article gets my 'rant of the day'

"We just really don't have any precedent to say, this is how bad it can get".

What is wrong with this man? Did he never hear of the GREAT DEPRESSION? Or the stock market crash, that left untold numbers absolutely destitute? What about all the roller coaster ups and downs of the real estate market?

Have people completely dumped the past? History books get thrown in the Bar B Que?

I have a little news for Mr. Naive: YOU HAVE NO IDEA HOW BAD IT COULD ACTUALLY GET. Those earlier versions were just A PRELUDE to the current mess. There are far greater numbers involved now; millions of people are at risk. The numbers are greater, too. I believe the risk level is even higher today than back then.

History, anyone?

[PeaceProgProsp]

9. The depression was caused, initially, by

farmers, at a time when agriculture was 50% of the US economy, not making enough money from their labour while retailers and financiers were getting a big chunk of the profits from the agriculture business.

I think what this article is saying is that we don't know what will happen if a lot of people can't pay their mortgages. I don't think there's a precedent for this since, historically, banks have been more circumspect about to whom they issue mortgages.

[Barrett808]

11. Nouriel Roubini on the housing crash and coming recession

Must read:
http://www.rgemonitor.com/blog/roubini