Reuters:
"Payment option ARMs are about to explode," Iowa Attorney General Tom Miller said after a Thursday meeting with members of President Barack Obama's administration to discuss ways to combat mortgage scams.
Adjustable-rate mortgage - Wikipedia, the free encyclopedia
Calculated Risk: Fitch on Option ARM Recasts
$134bn of Option ARMs to Recast by 2011: Fitch : HousingWire ...
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I call these idiot mortgages, where all reason and financial prudence is thrown out the window. I still can't wrap my head around why this is ALL the mortgage industry's fault.
#1: The Option Arms are the type of mortgage financing that Alan Greenspan praised for being "innovative" (implying they were beneficial to borrowers, but beware of the imprecise language which leaves open the possibility of alternative interpretation).
#2: Option Arm borrowers were not "subprime" borrowers: unlike the so-called "subprime" borrowers, these individuals had decent credit ratings, solid employment histories, US citizenship, and otherwise appeared credit-worthy and able homeowners.
#3: Not anymore: Option Arms have now effectively created a whole new population of "subprime" borrowers, as these loans create new mortgage delinquiencies, short-pays, and foreclosures.
Viola!! The Banksters boost revenue streams as a result of their own deceptive practices. Now if these folks have credit cards, or want to buy a car, or finance anything in the near future, they will pay a higher rate . . . . . because they were foolish enough to buy the Option Arm fantasy that they could really have their cake and eat it too . . . . and as a result, their credit score has been destroyed.
So the lender can charge a higher interest rate and less favorable terms, because now they are "subprime" borrowers.
Talk about creating your own market.
"RIGHT TO RENT" people!!!
There is a bill STALLED in the banking and finance committee that will help foreclosed homeowners given a FAIR MARKET RENT to stay in their home.
CALL Chris Dodd's office and tell him to get this bill out of stall and into the Senate for a vote___________THIS BILL PASSED IN THE HOUSE________________
The action's that prevent many problems in our bellowed country is not just laws and regulations, it is punishment eg. you drive drunk big fine loose license 2+ in the slammer. Steal $1,000 from the company welfare fund 6 months jail time . Actual cases. Surly what the Wall St. crooks did Thousands of American's fired , our country still heading over the cliff, possibly non stoppable deserves punishment big time.
The absolute worst kind of mortgage. Keep in mind also STILL there are plenty of securitized bonds sitting in portfolios worldwide ready to be worth spit. Wonder if the banks will write these down or will they just say screw it and continue to et tax money? Stupid question!
The Alt-A, Option ARM, and Commercial real estates markets will crash in 2010 and continue through 2013, taking MANY banks down in the process, all with mathematical certainty. The Government would have to deficit spend about $2 trillion per year just to slow it down. We will either sink into debt deflation or destroy our currency with massive deficits. Either way America is headed into a depression. Brace yourself for the impact.
##### Free speech -- it's not just for liberals #####
What is so hard about making some changes?
Make it illegal to give loans on interest only.
Make it illegal to give a loan to somebody who can't afford it. Set a standard and stick to it.
Make it illegal to sell American loans in packages to banks in God knows where. That way, the bank that made the loan actually can modify it/re-fi it.
During a decade-long orgy of deregulation, banks and mortgage brokers have left all these little turds around. Like irresponsible dog owners in the park, they don't care who steps in them.
SEe the guy in the photo? He's rubbing his bald head?
That's the way most Americans feel about their country.
They know the country has been hijacked, but by whom?
What they really fear is that no one is doing anything about it!
Or is that top secret?
No, that's just your opinion.
The numbers are staggering for California. The average loan balance for SF, San Mateo, Oakland, and Fremont area will rise in the next few years from $500,000 to %660,000.
Too many banks, etc. are foreclosing themselves out of business. Instead of refinancing a loan so that they continue to receive INCOME, they foreclose and the income goes to ZERO. And guess what, they cannot sell the house at anywhere close to the loan because of all of the foreclosed houses on the market.
They need to pass a law that stops ALL foreclosings for the next two years and force the banks etc. to negotiate.
Banks learn slowly, thanks to a shared cult of belief. Foreclosing on one house is no big deal in an average market. It's disastrous in this market. Bankers still haven't figured that out.
makes no difference if you have no job to pay the mortgage! modified loans are still failing pretty high.
I believe the banks do better on a foreclosure than on a refi because most houses will not appraise high enough on the refi to pay off the old loan. The get 80% of the mortgage on because of PMI - the private mortgage insurance you pay when you have less than 20% down. I don't get why they won't do loan modifications, but there has to be an economic reason in their favor.
I'm no insider, and this was common knowledge a year ago - this, and the looming collapse of personal, unsecured credit (credit cards). The variable rates were "supposed" to be re-fi'd into long-term mortgages based on the anticipated gains in equity relative to pre-note mortgage principal, and the same appreciation was supposed to cover the binge of buying people put on their cards (a chicken in every pot, and a big-screen TV in every living room) - before their homes LOST value and they lost their jobs. No matter how you slice it - you can't spend the same money twice - especially if it never shows up to be spent the first time. At least you can watch the game in hi-def while you're waiting for the sheriff to begin the auction...
Professor Richard Wolff and others says:
1. Over decades Americans have been forced, due to lack of wage growth, to employ all able family members to work, and even that is not enough to avoid the dysfunctional spiraling need of borrowing and debt!
2. Jobs were shipped out of America to enlarge Corporate Profits, so instead of Americans building their own wealth using hard work, the R1CHEST Corporate members built the largest wealth in history using the cheapest available labor found around the world!
3. Banksters soon realized it’s far MORE PROFITABLE to loan money to Americans at high interest rates than it is to PAY THEM DECENT INCOMES! So Banksters used Low Rates from the FED to become much R1CHER by loaning to Americans making them more indebted. America’s Government also becomes more indebted from loss of tax on manufacturing and the lowest Top TAX Rates (35%) in Modern American History! For 50 years prior to Reagan the rate ranges from 63% to 94% on incomes over $400,000/year.
4. Wolff and others argue Americans are stretched to the limit on the hours they can work and the debt they can absorb. So America has arrived at the largest Historic Income Discrepancy between Corporate EL1TISTS and Average Americans.
5. Capita1ist Banksters’ GREED1LY used Americans’ loans to produce $700 Trillion in Fa_ke inf1ated wealth Products sold as low-risk “AAA” Products all over the World. To further profit Banksters placed Massive $Tens of Billions in Bets that Americans would default on their loans.
6. So the Crash in home prices meant Bigger Profits for these EL1T1STS but also since they still owned an inventory of the bad loans the EL1T1STS convinced the government, who they had donated $Billions, to the Bail the Banksters 0UT with Taxpayer Money and FED Debt Printing.
7. Efforts to prop up this downward spiri1ing American system may result in one more BIG PROFIT CYCLE OF THE Banksters but will further damage Most Americans. Dramatic changes are needed that allows average Americans to share in what is Created and the resulting Wealth. An 0wnership society in which Average People own part of the rewards of their work must replace the d0ination by the EL1T1STS.
Phillip, you're right on! In your second paragraph you realize that the savings in labor end up as profits, not lower costs for consumers. This is great for profits in the short run, but it's self destructive in the long run. Countries that provide low wage labor cannot build a sufficient consumer base to support their own economy while at the same time they are destroying the consumer base in America which they are dependent upon. In the end, everyone loses!
I don't fear that our country will go broke, however. Congress, specifically the house of representatives, does have the power to "coin" money. That's why all money bills must originate in the house. So as long as our money woes are based on deflation where falling prices destroys business, causing further unemployment and falling demand, congress can slow or even stop that process by printing more money and putting it into circulation. This will increase demand and stop the downward spiral, hopefully.
If the current bunch of crooked bankers are not jailed
There will be no recovery for the middle class.
They are planning the next heist.
I've been trying to point this out for what must be going on a year now, so what I whan to know is where is my #@!& %$^%ing headline! ;-)
Obama needs to take over ALL of the financial institutions, not just the banks. He can seize banks that are failing but there are not enough ways to control what mortgage houses and other lending institutions do. The consumer protection tools that have been talked about have been too long in the making.
Notice, it took about 30 days to give away 800 billion dollars to Wall Street but no prosecutions are forthcoming in the foreseeable future and none of the bad practices have been stopped.
The stocks that were rated AAA that were actually FFF by ratings houses contributed to this nightmare. This problem is yet to be fixed and no one has gone to jail.
Risky mortgages repackaged and resold as securities are still being repackaged and resold as great investments and no one is going to jail.
Wages and housing prices are still not tied together as they should be. No one seems concerned.
I'm sure Obama would like that very much . . . as would all his cronys that he has to pay off for putting him into office.
Maybe it would be better if TAXPAYERS take over the instituions that we have effectively purchased with our good money, and then we can sell of the assets we don't want, but which can raise us money to pay back our BAILOUT.
I think that's a great idea. Especially since the Bailedout institutions have plenty of real assets that could repay the debt of the public's largesse.
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First Posted: 09-18-09 01:43 PM | Updated: 09-18-09 04:30 PM