As real estate "boom" cools, borrowers who fueled it get in hot water

[BurtWorm]

http://www.usatoday.com/money/perfi/housing/2006-04-03-arms-cover-usat_x.htm

...America's five-year real estate boom was fueled partly by a tempting array of cut-rate mortgages that helped millions of Americans qualify for home or refinance loans. To afford soaring home prices, many turned to adjustable-rate and other, riskier loans with low initial payments. The homeownership rate hit a record 70%.

Now, the real estate market is cooling, interest rates are rising and tens of thousands more Americans are starting to have trouble paying their mortgages. Nearly 25% of mortgages — 10 million — carry adjustable interest rates. And most of them went to people with subpar credit ratings who accepted higher interest rates, according to the Mortgage Bankers Association.

"Within the last year, I would say 60% to 70% of calls to our hotlines are issues related to ARM (adjustable-rate mortgage) loans," says Chris Krehmeyer, executive director of Beyond Housing, a non-profit group that offers homeownership support services in St. Louis. "That's significantly higher than in years past, because the ARMs are coming home to roost."

Last week, the Federal Reserve raised interest rates for the 15th time since June 2004 and signaled that at least one more increase is likely. That trend is ominous for borrowers who were seduced by adjustable-rate loans that offered interest-only payment options or teaser rates below 2% or that let the borrower pay less than the interest owed. They will face bigger payment shock once their loans reset to higher rates.

The number of borrowers in trouble will rise this year and peak in 2007 and 2008 as the largest number of mortgages reset to higher rates, according to First American Real Estate Solutions, a real estate data provider....

[MadMaddie]

1. There was a story of a family that got one of these loans

their monthly mortgage started at $1200.00 by the time the home was forclosed on the monthly payment was $3500.00....they were barely making the initial payment...

There will be many more of these cases.....

[Beelzebud]

2. And with no bankruptcy alternative, the plan comes into view.

Create a class of people that are modern day indentured servants for the creditors.

Another great aspect of Bush's "Ownership Society".

[Dr. Jones]

5. Exactly.

There's a whole lot of people who will be simply up a creek. With U.S. salaries being pushed down and the cost of oil, gas, and just about everything else going up, we're left holding the bag.

And yes, with the new Bankruptcy laws, one is forced to pay some of that money back. So what will happen is that people WILL become slaves to the companies they owe money to, and thus slaves to those they work for.

Thanks so much to the bankers, corporations, realtors, Bush, and right wing economists for continuing to push people into buying homes...they ought to be hung out to dry!!

[KansDem]

21. We'll see the beginning of an "economic archipelago"

As more and more homeowners lose their homes, corporations will enter the "second-chance housing" industry. Just like "second-chance financing" and "second-chance loans," "second-chance housing" will be similar to controversial "public-housing" complexes, although the newer version will be "better" because corporations will own them. Don't look for these complexes anywhere near "nice" parts of town! The wealthy won't want them around where they live! All the financial "losers" (you know, the ones who either didn't work hard enough, or were irresponsible with their finances) will be crammed into dorm-/apartment-like units built cheaply in order to maximize profits. We're on the precipice of a kind of "indentured servitude" where those of us on the edge will live and work only to service our debts.

[GreenPartyVoter]

22. The new "projects" yes?

[KansDem]

24. Perhaps the "New and Improved Projects."

Market it as nostalgia.

That would be the corporate way...

[lapislzi]

9. Maybe the "ownership society" means ownership of human beings

by corporations.

So glad I managed to become debt-free last year. All I have is my (fixed rate) mortgage. My heart goes out to people who were suckered in by those interest-only or no-down-payment deals.

[atreides1]

11. Bush did have help from the Democrats

So let's not forget that 18 of our Democratic members of the Senate voted for that bankruptcy bill as well as 73 Democrats in the House!!!!

Harry Reid, the Senate Minority Leader was one of those that voted in favor of this bill.

So, it's not all Bush and the Repukes fault, they had a little help from the man who wants to keep his powder dry!!!!

[Beelzebud]

13. Oh I know. Most D.C. dems are members of the Corporate Party.

We don't have 2 parties in D.C.

We have The Corporate Party.

[jody]

15. Agree!

:thumbsup:

[physioex]

7. Yes....

I think I saw that story as well. She had her house up for sale and was crying. This may sound mean but I really lack pitty when people don't live within their means....

[BurtWorm]

10. Yes, it does sound mean.

The American economy is all about living beyond your means. Why blame people for trying to be good Americans?

[ClintonTyree]

16. What was bush's advice immediately after the 9/11 attack?

"Go shopping". :eyes: Yes, everyone. Get out there and imitate your federal government. Spends money you don't have, put it on the credit card. Only thing is, the government gets to print more money to pay off their enormous credit card bills, Joe and Sally Sixpack don't have that option. Not only are their mortgage rates going through the roof, but the credit card companies are now required to make their cardholders pay off more of the principal, not just the interest. But again, interest rates keep rising and soon these folks won't be able to make the minimum payments. All of this just HAPPENING to coincide with the new bankruptcy laws. I'm sure it's just a coincidence! :eyes:

[physioex]

18. Well.....

The stupid ones that fell for that nonsense deserve what they get........

[BurtWorm]

20. If you say so.

:patriot:

[Dr. Jones]

3. Yep, and those who pushed unwary buyers into this

ought to be tarred, feathered, and hung out to dry. At least this is what homebuyers will WANT to do to them when they find out they've been lied to and snookered, all to keep Bush's "wonderful growing economy" going.

[MadHound]

4. The housing market is the last prop holding up the economy

When that fails completely, our economy is going to sink so far that it will make the Great Depression look like the Roaring Twenties.

They're going to try and prop this up, at least until beyond the '06 elections, and possibly the '08 ones if they can. But somehow I think this whole house of cards is going to come down quite soon, no matter how much they cook the books.

[MadMaddie]

6. I fear you are right....the dollar is losing value as we speak...

the housing market is headed towards disaster...more Americans are in debt than ever before....

It's going to be bad....

[physioex]

8. Hi there Washingtonian......

Yea the market here is still very tight, if you noticed all the properties up for sale are way overpriced.....

[MadMaddie]

12. Absolutely...we are staying put in our apartment for now...

The new houses where we are have no yards...you can literally touch the house next to you....and they are selling for $500,000.. a friend of mine was given notice by her apartment complex that she had to move because they are turning the complex into a condo...he.he..they offered to sell it to her...she said, "hell no"....

Yup...We are just going to wait and see...:hi:

[physioex]

17. I think that is a good approach as well.....

:)

[jody]

14. I wonder if the majority of home owners at risk vote Republican? n/t

[MissB]

19. I'm still stunned at the 25% figure.

[Nay]

25. Me, too. Good God. What are people thinking? I would live in a VW

van before I would touch an ARM. It just would never happen. One of these people couldn't refinance because there was a $20,000 penalty for doing so before 3 years!! Holy shit!! Why didn't those folks run away screaming when they heard those numbers?? Couldn't they hear the steel jaws of the trap springing shut right at that moment??

[lovuian]

23. People are going to realize we are in a depression when

they see for sale signs all over...

Bush has put us in this just like the robber barons and Coolidge in the 1920's