Housing Lenders Fear Bigger Wave of Loan Defaults

Source: The New York Times

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.

Read more: http://www.nytimes.com/2008/08/04/business/04lend.html

they're going to have to start working with homeowners instead of evicting them.

If they want to have housing stock that is livable instead of destroyed by vandals and squatters, they're going to have to figure out how to keep people in those houses instead of throwing them out on the street.

Right now, they're still pretending that the economy is good and that responsible buyers are all over the place, get the deadbeats out. One wonders just what it's going to take to wake these people up and get them to follow a more rational course of action than a short sighted, punitive, and ultimately self defeating one.

It's time for some new rules, and as you pointed out, responsible buyers are clearly NOT all over the place. The bottom feeders, who like to swoop in and snap up depressed properties, just can't absorb all the stuff coming on the market.

may prove to be one hairy year.:hide:

No one wants to buy. I'm glad I chose not to buy in 2005.

Save your money, you'll be able to rent fine living quarters with a year's worth of mortgage payments saved up.

Don't be embarrassed for falling for the american dream of home ownership, it happened to millions of others.

But it's over now, time to act like a grownup.

If you know that foreclosure is inevitable, you are right on the money.

There are $3 trillion in those toxic joke "Option ARM" loans set to recast starting later this year on through 2011. Over 2/3 of those who have them were making only the pretend "minimum payment," meaning negative amortization. All of those houses are way upside down now because they weren't even worth half of what they sold for, and the vast majority of those who have them can't make a real payment. (These were those 'pretend' mortgages where you could lie about what your income was. So the WalMart employee could easily "buy" a $750,000 house and pay less than even the accrued interest on their "payment option.")
.
Housing is still way overpriced and will be so for at least another two years. In 2011 or 2012, when housing prices are probably half of what they are today, people will be able to afford to buy houses again.

with these type of loans.

Works great if the market is always up. Just flip you house in a few years, take the profit and upscale your house again.

That, however, is now gone with the wind.

Source: International Herald Tribune

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

After two years of upward spiraling defaults, the problems with mortgages made to people with weak, or subprime, credit are showing the first, tentative signs of leveling off.

But with the U.S. economy struggling, homeowners with better credit are now falling behind on their payments in growing numbers. The percentage of mortgages in arrears in the category of loans one rung above subprime, so-called alternative-A, or alt-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.



Read more: http://www.iht.com/articles/2008/08/03/business/mortgage.php

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I was watching CNBC Asia, overthere they are talking about, ultimately, 2 trillion dollars in defaults among credit card, above sub-prime mortgages, student loans and car loans. They were also talking about a number of increasingly bad numbers in commercial real estate.

...who is heading there within the next month.

Bought a house with zero down and a partial interst payment. When they made the purchase five years ago, I thought they were insane at the time, but their broker insisted it would all be golden -- they were planning on an early retirement and the booming CA real estate market would make for great appreciation.

Five years later, their monthly payment went up 400%, they owe $200k mnore than the house is currently worth, and thery have been pulling cash from their IRA to keep up with the mortgage payments the past few months.

They are in talks right now to give up their house. :(