Housing Lenders Fear Bigger Wave of Loan Defaults

[babylonsister]

Housing Lenders Fear Bigger Wave of Loan Defaults

By VIKAS BAJAJ
Published: August 4, 2008

The first wave of Americans to default on their home mortgages appears to be cresting, but a second, far larger one is quickly building.


Homeowners with good credit are falling behind on their payments in growing numbers, even as the problems with mortgages made to people with weak, or subprime, credit are showing their first, tentative signs of leveling off after two years of spiraling defaults.

The percentage of mortgages in arrears in the category of loans one rung above subprime, so-called alternative-A mortgages, quadrupled to 12 percent in April from a year earlier. Delinquencies among prime loans, which account for most of the $12 trillion market, doubled to 2.7 percent in that time.

The mortgage troubles have been exacerbated by an economy that is still struggling. Reports last week showed another drop in home prices, slower-than-expected economic growth and a huge loss at General Motors. On Friday, the Labor Department reported that the unemployment rate in July climbed to a four-year high.

While it is difficult to draw precise parallels among various segments of the mortgage market, the arc of the crisis in subprime loans suggests that the problems in the broader market may not peak for another year or two, analysts said.

more...

http://www.nytimes.com/2008/08/04/business/04lend.html?_r=1&hp&oref=slogin

[BlooInBloo]

1. God bless the irresponsible lenders and irresponsible borrowers....

The responsible part of the population LOVES paying for their bullshit.

[KharmaTrain]

2. A Real Scary Report I Heard

The average home price has fallen 20-25% this year alone...in some areas that number exceedes 40%...and that this means that if you bought your home in the last 5 years, there's a real good chance you've already lost on your equity...and the prediction is that prices may never get back to the level of two years ago for another 5 or more...similar to the building and housing bust that hit during the Great Depression.

The other time bomb is the growing default on credit cards...those also have reset in many cases into double digits. The banks are trying to hide all this mess, but more and more people are stopping payments and putting even more pressure on a credit market that is out of both money and time.

Ironically, with yesterday's Sunday fishwrap was a big ad about the "great opportunities" in buying foreclosed homes. Made me sick.

[rox63]

5. I know I've lost all of my equity

I bought a condo in 2005, and recent sales of similar units in the same complex have been for less than I still owe on my mortgage. It's scary and depressing. :(

[Skink]

3. Maybe if you are a day late they shouldn't charge you 40 bucks and

raise your rates to 30 percent.

[SoCalDem]

4. Once the cycle starts, it won't stop easily..

There are still many bad loans, due to "settle" this coming year, and look at all the jobs that have been lost during this past year...these folks have probably just about maxxed out their plastic by now, they cannot do the 3-4 re-fis per year to keep paying down the plastic, so they will have to face the music soon..

Everything costs more, and if you were just barely getting by with an interest only mortgage, before, you sure as hell won;t be able to make it now..

What should have happened LAST YEAR..or the year before, was to have required ALL lenders to have a severe audit, so we would have knows where they really stood.. the ones who deserved to fail, should have... The big shots at all these companies knew that the musical chairs game would end eventually, so they kept grabbing all they could while they could, which only made it worse.. ALL CEOs should have had their accounts frozen until the audits were done, and then some jail time for fraid should have been the outcome.. There would be fewer banks by this time, but there would also be fewer bad loans still hanging around..

Georgie knew this was coming too, but I think he hoped he could hold on for a few more months before people started opening up those beautifully wrapped loan packages, only to find out they were filled with shit... Once the first box got opened,everyone else wantred to open their boxes too, or at least try to pawn them off quickly...but people wised up..