Time to stop blaming the housing mess on the interest rate increase!

[scooterbug44]

The problem isn't the rates on ARMs, it's that they loaned money to people who couldn't afford the loans to begin with!

Subprime loans defaulting even before resets

It turns out that massive interest rate spikes aren't the problem -- many borrowers couldn't afford these mortgages even at the low, introductory interest rates.

By Les Christie
February 20 2008


NEW YORK (CNNMoney.com) -- For months, we've fretted about the Armageddon that will hit when subprime adjustable rate mortgages start resetting to much higher interest rates.

What's happening is even worse: Many of these loans are defaulting well before their rates increase.

Defaults for subprime loans issued in 2007 - none of which have reset yet - hit 11.2 percent in November. That represents perhaps 300,000 households, and is twice the default rate that 2006 loans had 10 months after being issued, according to Friedman, Billings Ramsey analyst Michael Youngblood.

Defaults are spiking well before resets come into play thanks to the lax lending environment of the past few years. Many borrowers were approved for mortgages that they had little chance of affording, even at the low-interest teaser rates.

full article: http://money.cnn.com/2008/02/20/rea...g_pre_resets/index.htm?postversion=2008022010

 

[SHELLY]

Commissions.


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[Mango]

I'm convinced the writers of these mortgage articles at CNN are the faux news reporter equivalents. Have you seen their other articles? How to get the best jumbo rate is one of my personal favorites.

This part is absolutely brillant.............:roll:
"Defaults for subprime loans issued in 2007 - none of which have reset yet - hit 11.2 percent in November. That represents perhaps 300,000 households, and istwice the default rate that 2006 loans had 10 months after being issued, according to Friedman, Billings Ramsey analyst Michael Youngblood."

We all know that most subprime borrowers couldn't afford these loans to start off with. This is nothing new. But to make it sound like that's the reason loans written in 2007 (which BTW, I stricter u/wing guidelines came into play as well strings of subprimate shops closing) is not logical.
Economic conditions are playing a huge role in this. Even though these Borrowers may not be the sharpest crayons in the box, they can see the writing on the wall, taking their mattress money or what little savings they have, moving it elsewhere, and walking now. It's the herd mentality.

 

[SHELLY]

Even though these Borrowers may not be the sharpest crayons in the box, they can see the writing on the wall, taking their mattress money or what little savings they have, moving it elsewhere, and walking now. It's the herd mentality.

They also know that the "tax break" for the forgiven portion of the loan from a foreclosure/short sale runs out in 2009. Why should they sit tight and continue feeding a depreciating beast when they can walk alway now with their savings intact and a tax-free forgiven loan. The government is providing incentives for people to foreclose sooner rather than later.


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[Mango]

They also know that the "tax break" for the forgiven portion of the loan from a foreclosure/short sale runs out in 2009. Why should they sit tight and continue feeding a depreciating beast when they can walk alway now with their savings intact and a tax-free forgiven loan. The government is providing incentives for people to foreclose sooner rather than later..

Exactly. Including all this in the article would have been more accurate reporting and shown some intellect.

 

[SHELLY]

Exactly. Including all this in the article would have been more accurate reporting and shown some intellect.

And who should we blame for this?

------------------------------------------

This house was a steal

The new buyers of a rundown graystone on the South Side showed up Jan. 9 to look at the house they won at a foreclosure auction. They took the plywood off the front door and went inside to make sure the utilities had been shut off. Then they called the police.

Sitting upright in the corner of a bedroom off the kitchen was a human skeleton in a red tracksuit. Next to him lay a dead dog. Neighbors told police the corpse was almost certainly Randy Johnson, a middle-age man who lived alone in the North Kenwood house.

The cause of Johnson's death has not yet been determined, but it is just one of the mysteries about 4578 S. Oakenwald Ave. Somehow, Johnson's house was transferred three times to new owners without anyone noticing he was inside. It's a story involving forged deeds, a corrupt title company and a South Side family that has been under investigation for mortgage fraud.

Left holding the bag is Countrywide Home Loans, the nation's largest mortgage lender and a company whose practices are being scrutinized by the Illinois attorney general's office. Countrywide made mortgages of $450,000 on the property. Now it is likely to lose it all because it financed the sale of a home whose rightful owner was in no condition to sell. .............

http://www.chicagotribune.com/business/chi-sun_fraud_0224feb24,0,3601248,full.story

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[Linda]

Blame seems to me to go to greedy mortgage companies that clearly knew what they were doing and greedy buyers who clearly didn't know what they were doing.

 

[Yellow Hammer]

It turns out that massive interest rate spikes aren't the problem -- many borrowers couldn't afford these mortgages even at the low, introductory interest rates.


Other news stories.......the sun is hot and water is wet.

The only encouraging news I can find is that economists are almost all in agreement that we are approaching a recession, and usually that means that we are in the middle of one so, the end is that much closer.

 

[spinDrAtl]

No one ever seems to mention that a lot of times these idiot borrowers COULD afford their mortgages when they got them, but then proceeded to go out and buy a new car with a $600 monthly payment, then maybe even a 2nd car after that, because the auto companies will make loans to just about anybody, due to the fact that it's fairly easy to take a car back if the borrower doesn't pay.

However, when times get tough, the idiot borrowers would rather have their sweet ride than pay their mortgage. I don't know how many times I've seen a borrower with large past due balances on their mortgage but those suv payments are right on time.

 

[Here4Good]

Left holding the bag is Countrywide Home Loans, the nation's largest mortgage lender and a company whose practices are being scrutinized by the Illinois attorney general's office. Countrywide made mortgages of $450,000 on the property. Now it is likely to lose it all because it financed the sale of a home whose rightful owner was in no condition to sell. .............

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Sounds like they had some thorough appraisals on the property, and the title work was top-notch!