US subprime loans face trouble

http://news.yahoo.com/s/ft/20061208/bs_ft/fto120720062004177556

You KNOW Corporate America isn't going to pick up the tab for this crap. There will be another taxpayer bailout down the road...!

Mortgage brokers should work harder to work out payment arrangements with these folks, too, since it's a lot more expensive for them to foreclose than it is to sort out some way for the homeowner to pay.

But they'd never do that. That would help the "regular" folks...

This is a calculated event. Mortgage Brokers have nothing to do with the borrower after the loan is closed.
If problems arise, it's between the borrower and the lender. It looks like the banks are beginning to build strong
inventory portfolios picking up properties at foreclosure for resale to private investors at wholesale pricing.

If the lender is unwilling to work with the borrower if the borrower has a viable plan, then it is up to the borrower
to report the lender to the Banking Commission to extract relief.

Your suggesting that the for closures are calculated by the lenders to obtain the property? Nothing surprises me anymore, but won't it be some time before resale would net more than the mortgage balance?

The foreclosures are due to the downturn of market value and the flood of inventory in the real estate market.
Over the last 5 yrs, the real estate growth has been phenomenal. RE flippers have been making money hand over fist.
Making huge profit gains anywhere from 20% to 50% on their initial investments within a short period of time.
Now that the market surge has cooled quite a bit in some areas, ie. Florida and the NE... Banks are pulling back
from sub prime loans because the market has cooled raising their risk factor of over investing in properties that
within a year might be worth less than the value they were appraised the previous year.

This last line in the OP link is the telling sign:

"Ownit closed down this week after JPMorgan Chase, its main lender, cut off its funding."

Ownit, is/was a satellite branch of JPMorgan Chase, subprime lending division.
What this closure means is property values will go lower still and prime pickups for private investors buying on the cheap.

good reading here:

http://thehousingbubbleblog.com/?p=1951

What Morgan Chase has done is incorporate a new satellite sub prime lender (owned by them), transferring and wholesaling these loans AT A LOSS to the parent Co. Yep, we'll have to wait and see if my hunch is right.

What a racket. If bankers had to stand behind the loans they made, we wouldn't have this problem. But, as per usual the neo-economy, a bunch of crooks will make a bunch of money and the pension funds and taxpayers will bear the cost. Free market my ass.

If the mortage industry had any responsiblity, there would be no such thing as a sub-prime loan. If there were such a thing as industry regulations, anything except fixed-rate mortages would be illegal.

Ownit Mortgage Solutions — the 11th largest subprime lender — just closed its doors and fired 800 employees this week. It made more than $8 billion in mortgages last year and basically shut down overnight when it ran out of cash because of a surge in bad loans.


http://www.moneyandmarkets.com/press.asp?rls_id=614&cat_id=6

And they're right to be nervous... the way the financial markets are tied together with all of these new and often unregulated "products," it's become a house of cards.

Kevin Phillips wrote about it in "American Theocracy," and if and when the crash happens, the US may never pull out of it.