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10/26/2007 10:27 AM ID: 65940 Permalink   

2 Million American Families Face Mortgage Foreclosures


An influential congressional committee warned yesterday that 2 million US families face losing their homes in a "tidal wave" of foreclosures with an estimated cost of $71bn.

The figures are far greater than those estimated by the White House and are likely to heighten concern that America is slipping into recession pushed by a housing slump.

Democratic senator Charles Schumer told the committee: "From New York to California, we are headed for billions in lost wealth, property values and tax revenues. The current tidal wave of foreclosures will soon turn into a tsunami”.

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  Greatest Quote EVER!!!!  
""People should not be lent money that's beyond what they can be expected to pay back," said Mr Frank this week, though critics contend that the measure could make it too difficult for low-income people to get mortgages."
  by: AnsweringQuestions     10/26/2007 10:35 AM     
oh dear.

Well they better start working a bit harder, they have another war to fund yet! Well, that and 2 current ones spiralling out of control.
  by: Maxx20     10/26/2007 02:53 PM     
  I'm waiting for Dubya-chimp's statement on this.  
<popcorn at thr ready>
  by: redstain   10/26/2007 03:29 PM     
  Sharks just can't give up the taste of blood...  
critics contend that the measure could make it too difficult for low-income people to get mortgages.

...Isn't there a concept known as "renting" that fills that niche rather nicely?
  by: brinlong     10/26/2007 04:26 PM     
I dont think thats the problem at all. I think the problem is the fact that americans are getting loans for 4-7% and then the bank rockets it up to 12-15% after 2-3 years.

I would think that most americans dont know what an ARM loan is. So technically they can afford the loan with no problem. The problem is these loans that the new rates are 12+% kill them.

I admit I got an ARM to start with also. But I was smart enough to know when to change to a fixed rate. I just feel like most americans dont know about these things and as a result of being in the dark, they make bad decisions. If they knew they would probably try to get fixed rate loans after the 1st year or so of being with an ARM.
  by: slavefortheman     10/26/2007 04:56 PM     
  I was thinking more  
buy a smaller house, but yeah, that too.

I just dont see how you can possibly defend lending people more than they can afford.
Not checking sure, sort of.
But actualy being for it, I just cant see the logic
  by: AnsweringQuestions     10/26/2007 04:58 PM     
My rates only fixed for 5 years, but I know, roughly, what it will be in 5 years time.
Didnt realise rates were going up that high, SVR's are usualy 2-3% over base, in the UK anyway
  by: AnsweringQuestions     10/26/2007 05:02 PM     
  no problem  
every day i get emails "barrow money, no s.s needed. no matter what you qualify." great.. so with the mantality in loaning, the line is forming for 21 million illegal aliens to get loans for these homes and the loan payment failure will start all over again. it used to be to get a home loan, only 1.4 of the income was used as what could be paid as a home payment. that allowed for food and other things in life. it changed to almost all income for the home and with that, no wonder the system failed.
  by: shannon853   10/26/2007 06:35 PM     
Am in an apartment right now, hate it. I am trying to save up for a house and am doing research (GOD THE R IS KILLING ME!). I am NOT a financial whiz, so all I know is "go for a fixed rate!" So yeah I'm one of those Americans who doesn't know any better (as of yet, like I said, doing research)...
But so far, I'm liking the fact that the hosing market (yes hosing, NOT A TYPO) is getting "fixed". No piss-ant definitely fixer-upper 1,000 sq. ft. home should be going to $100/ft!
Then again, I don't truly understand the housing market, or why brokers get to charge b.s. fees for printing out the paper work, mailing the paper work, add nauseum...
  by: Allanthar     10/26/2007 06:44 PM     
  This is  
why I don't blame Greenspan for the mortgage crisis. He did keep lowering interest rates, but the mortgage companies had no business loaning all this money to people that couldn't pay it back. That falls directly on unethical (or inept) business practices.
  by: Lurker     10/26/2007 07:43 PM     
  I'm going to be pissed...  
... if there is a federal or state bail out for these people who were stupid and took out loans they could not afford.

Those of us who are responsible and live within our means *could* have gone out and joined the house-buying frenzy but we didn't because we knew that after a few years we'd not be able to afford the rates. So no we're thinking about rewarding those that were too stupid to see the writing on the wall? Infuriating.

I also blame the lenders. They were trying to make a quick buck and based all of their assumptions on a continually growing economy with people getting predicatble, high scale raises over the next few years that would keep their clients' incomes in step with the rising interest rates.

That, of course, didn't happen. The economy cooled off, people didn't get the expected raises, and now are not earning enough to pay their mortages.

And as a related aside, hey stupid people who took loans they shouldn't have -- you didn't NEED to outfit your house with big flat screens, remodel the kitchen, or buy new washers and dryers when you moved into your new home. Maybe if you hadn't have blown so much money filling your house with luxury goods you could actually afford to pay your bills.

/rant off
  by: Dedolito     10/26/2007 08:02 PM     
In a lot of cases you cannot blame people who bought the houses. I have been listening to NPR about many of the larger lenders such as Country Wide and many others that would fudge the numbers just to get people into bigger loans than they could technically afford.

IE: Person makes 35k a year but they put down 45k. This apparently was happened quite often just so the banks could close more loans.

Also at the same time the lenders need to educate people as to the terms of their loan. I forced my lender to go through every detail with me so I knew what I was getting into. I knew that after the 1st year my rate would start jumping which it did. I was able to then get a loan from another bank on a fixed rate. However this usually is skipped right over when the person is applying for the loan. They really dont have a clue what an ARM is and how it could greatly affect them 2 years later.

These people CAN afford their loans just fine. They really dont have a problem paying them off in most cases. The problem is the astronomical jump in the interest rate adds hundreds or sometimes even thousands extra onto their loan. They might be paying 850$/month but after 2 years their loan is now $1800/month because of the terms.

I look at this whole thing as a big scam by the banking industry to make some short term gains at regular peoples expense in a lot of cases. The people that educate themselves usually turn out OK though so it is also partly their fault.
  by: slavefortheman     10/26/2007 08:42 PM     
  has anyone heard..  
the predicted 2008 great depression. I've known this prediction since the 90's. Basically history is repeating itself, and will do so faster and faster until Dec. 21st 2012. People say this is bogas, until it happens? So still, I guess we'll see..
  by: Vhan     10/26/2007 09:24 PM     
Then do you buy a house you cannot afford? they are not victems of anything they are just stupid
  by: FatherCampbell   10/26/2007 10:18 PM     
"In a lot of cases you cannot blame people who bought the houses"

I disagree, vehmently. Yes the lenders were not entirely forthright in what might happen to rates a few years down the road, but FFS it's called an ADJUSTABLE rate loan! "Adjustable" means change. Which way were people thinking the rate would change?? Lower???!

They were given ARMs because they couldn't afford a high enough down to qualify for fixed rate loans. "Danger Will Robinson, Danger!" should have been blaring in their heads. There's a reason it's a good idea to put 20% down on a home. If you can't afford to do that you probably can't afford the mortgage.

It is entirely the responsibility of the person(s) taking out the loan to fully understand the contract they are putting their names on. If they fail to educate themselves, that's not the lender's fault. It IS the lender's fault for giving money to people under the false pretense that the economy would keep going up and the lendee would be able to afford the interest spike.

It's not only people with ARMs that were stupid. People were buying houses with 0% down. With ballon payments. By taking loans to pay the downpayment. All without any sort of forward-thinking plan. People were spending like there was no tomorrow, and guess what, it's tomorrow.

They put sunk money on over-priced homes during a period of low interest rates. So not only have they lost the ability to make their payments because of the now-higher rates, but by and large their houses are worth less than they were when they made the purchase so they are screwed even if they manage to sell their houses now.

I don't know about the rest of the country, but here where I live it's the slavering moronic "buybuybuy at all costs" attitude that has driven the CA Bay Area housing prices into the stratosphere. People with $60k anunnal salaries buying $700,000 homes. It's lunacy!
  by: Dedolito     10/26/2007 10:43 PM     
  Without wanting to sound like a conspiracy nut...  
I have that movie Zeitgeist shouting at me in the back of my head.

Someone, please correct me if I mis-understand any of the following, for I'd hate to be mis-informed.

The US economy is on a downward spiral (anyone know why roughly?)... So the Federal Reserve increases the money supply to 'lessen the blow'. If that Zeitgeist movie was explaining things truthfully... then now the debt owed to the Fed is larger again.

Isn't this a cycle? Depressions happened before the Federal Reserve was created, they happened after, and they are still happening. Obviously they are not possible to avoid completely but... agh I think my paranoia is getting the better of me. I can't help but think it's all part of some master plan.
  by: daniel2508     10/27/2007 01:23 AM     
Can someone please explain to me what part of the economy is in the slumps?
These people will lose their houses because their stupid, so that doesnt work.
Where else is the economy bad?
Unemployment almost doesnt exist - Thats including the millions of illeagle workers we have.
The stock market hits a new high every week.
What part of that is bad? Are your wages to low to buy food? That cant be, because no restaurants are losing money.
So could somone please explain this bad economy thing to me?
  by: FatherCampbell   10/27/2007 01:50 AM     
"The stock market hits a new high every week."

And it also tumbles a couple hundred points every couple of weeks. I don't like that instability. Suggests to me that investors are nervous.
  by: Dedolito     10/27/2007 01:56 AM     
Still not enough to say the whole U.S. economy is in the tubes like i always hear.
And as for this housing market thing you hit the nail on the head when you say its the indaviduals responsibility to know what their signing. Thats not the economy, thats just plain stupid people
  by: FatherCampbell   10/27/2007 02:03 AM     
My wife and I attended a homeowner's class that was offered through the Housing a Urban Developement Department to help educate ourselves and they were a huge help in giving us loads of knowledge about how to prepare ourselves and what questions to ask and what kind of prices for different things we should be expecting.
  by: Rislone   10/27/2007 02:14 AM     
.. the forclosure thing is going to have a domino effect and I think that's why people are nervous about it. Lenders back a lot of the economy, from private citizens to corporations. If they start going under because the gave a loan that enabled someone to buy a house, then that house is forclosed on, given the current housing market a lot of those houses will go for less than the loan ammount, which means the lender is going to lose money.

Housing prices were already slumping off the high they were at when most of the current forclosures. Whit a glut of new forclosed homes hitting the market, the prices should drop even lower, meaning the lenders lose even more money.

The housing market is one of the cornerstones of the private citizen economy. If it gets shakey (and it is) people start getting nervous. And nervous people spend less.

This is apparent with the low retail sales this year. Also at fault are the high gas prices which have left consumers with less money to buy other items.

And with less retail sales, owners can't afford to give additional raises/compensations to their employees, which means even less retail sales. Etc, etc.

I also have issue with the offical unemployment figures since they don't measure at all the number of citizens that are out of work and have exhausted their unemployment eligibility. With no tracking of this metric at all I don't see how anyone can publish a real unemployment figure...
  by: Dedolito     10/27/2007 02:22 AM     
  @Lurker - Greenspans problem  
It is, partly, Greenspans fault.

He cut interest rates too much, in relation to inflation.

Lets say you have $100, and a months food costs $100.

You leave your money in the bank for a year.

You now have $100, plus $1 in interest.
However that shopping basket now costs $105.

By taking low interest, you lost money, relative to other goods.

Now, its not all Greenspans fault, the gulf states and China were, for reasons unbeknowst to me, happy with that, and allowed it to carry on.
Forcing people who werent to work their money harder to keep up.

People didnt lend to sub prime because they wanted to, they did so because they had run out of other people to lend to and were making a loss if they just kept money in a treasury bond.
  by: AnsweringQuestions     10/28/2007 04:29 PM     
Its just as stoppid as signing one of thoose "no paymests for 2 years!" at a furniture store. Why sign if u cant pay?
  by: zortona   10/28/2007 05:04 PM     
Because thats a problem for two years in the future.
  by: AnsweringQuestions     10/28/2007 08:30 PM     
  Another thought  
What about those that are losing their homes because of job losses? I am not talking small ones either. Michigan is 5th in the nation for foreclosures, my county last I knew was #1 for Michigan.

Even the GOP candidates admitted when they were here that Michigan is in a recession, the only state out of all. Months ago I posted a article about how Detroit and it's suburbs were having trouble selling off forclosures.

It's nice to call the people buying homes stupid when many had no reason to no think they would be employed until they retired. With the State prison closing here there are yet another 350+ jobs to add to the many that have to go to other countries, in particular Mexico.

So while some people may have over extended thier credit, many just lost the only home they had that they were not putting in new pretty things.
  by: TaraB     10/28/2007 08:50 PM     
  Been there done that  
: [
  by: Zmethod     10/29/2007 02:41 AM     
  my older adopted brother  
was about to lose his house to forclosure, due to some bad managing on his part. however, with the fires in Ramona, CA. and rancho bernardo, CA, his house burnt to the ground. ... where does that leave him, i wonder?
  by: elijah4twenty     10/29/2007 02:49 AM     
  people want big  
well its pretty simple. people making 30-50k a year living in 300k houses what do you expect? u get these teaser rates at 2% and then they shoot up after a few years. people want the biggest and the best and if the banks want to throw money at them people are going to take it. a little self restraint is needed here. you know what you can personally afford. its not the feds responibilty to lower rates or make more money. its the peoples faults here.
anyone who says different is plain dumb. you have to know what your signing. you mean to tell me the bank didnt tell you the rates were going to go up?
  by: cray0la     10/29/2007 07:40 AM     
Did he have mortgage insurance!?
  by: Zmethod     10/29/2007 08:28 AM     
  Problem as I see it.  
I agree with AQ for the most part on this one. I think to some degree you are right on the money. The banking industry wanted new fresh customers and so they started targeting the lower income spectrum.

I think this in part is what is causing this problem. When I purchased my house I would consider myself as part of that spectrum. However in the past 5 years since then I have gotten newer and higher paid jobs. So I no longer consider myself part of this. Normally these people would be unable to get a house whatsoever. However with the banks changing the rules it enabled a huge influx of people to purchase homes and for the banks to make billions more.

I made sure that when I went in to sign those closing papers I knew what I was getting myself into. I see the problem like this. The bank wants fresh meat and as a result targeted these lower income people. Some were good for the money and others were good but only up to a certain point. I think the banks wanted to get some quick cash and were depending on a lot of these people eventually switching to Fixed rates 2-3 years after the initial loan. The banks could cash in even more so after people started doing this. This is where the problem occurred. I think most Americans, smart or stupid probably couldn't tell you the difference between a fixed and ARM loan. They only see that the ARM is cheaper and immediately went with that not knowing that 2 years later their rate with hike up by 10% in addition to the rate they already have.

I did this simply to get the house I wanted. After 3 years I got a fixed mortgage. Its about 100$ more than the ARM per month but my rate will never change.

The theory works well in concept. Get an ARM now and switch to a fixed rate later. In both instances the banks will be making money off of you. However I think most people got lazy and never actually switched to the fixed rate and ended up staying on the ARM way to long and now are facing huge interest rates.

If you plan on refinancing or using the property as an investment (renting/leasing/flipping), then an ARM is great. However if you plan on living in the house, I would suggest only temporarily staying with the adjustable rate and refinancing after the 1st or 2nd year.

Also since many of these banks are using criminal means to obtain customer. IE: Fudging the numbers (this is illegal and can result in prison time if convicted), this problem is in a huge respect the banking industries fault.

The fault is 2 part. One its the fault of lazy people that didnt educate themselves on how their loan works. The 2nd part is the criminal actions taken by many banks to falsify prospective customers income.

I have no problem with allowing lower income people to buy houses. The problem I have is with the banks lying and also not educating these people to the terms of their loans. If these 2 things were corrected, a lot more people would be switching to fixed rate loans and simultaneously the banks would be turning down people that really couldn't afford the homes they wanted.
  by: slavefortheman     10/29/2007 06:32 PM     
yes he did. thats part of what was causing the problems.. the insurance, and upkeeps of his place. he was broke because he made sure his insurances for EVERYTHING was up to date.
  by: elijah4twenty     10/30/2007 06:12 AM     
  Well he should cash in on his  
mortgage insurance etc. Was his home insured for fire? Collect and pay the banks off
  by: Zmethod     10/30/2007 06:21 AM     
  In my opinion...  
I wouldn't mind the first home buyers getting help....if it even happens.

But if any of those that own a house already and can't afford the second one they bought....i say screw them, they are the ones that were trying to take advantage and buy and resell.
  by: sp00ky187   10/30/2007 06:21 AM     
  I wish someone would burn my house down  
Its insured for £40k than I payed for it
  by: AnsweringQuestions     10/31/2007 11:41 AM     
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