Pundits Are Apprehensive Of another Foreclosure Storm Rising
December 22nd, 2008
Pundits are apprehensive of another foreclosure storm rising in the horizon. The fear is triggered by the new set of adjustments in rates of mortgages. It could well cause many borrowers to default on their house loans. As such it seems that bailouts have only just started!
The bailouts have pushed two trillion taxpayer’s dollars into a hole and the bottom of it cannot be seen as yet. Already in Wall Street and the corridors of power alarm bells can be heard that one can hear the galloping rumble of more foreclosures coming.
One of the best authorities on the subject is Whitney Tilson who is an investment fund manager. He said, “We had the greatest asset bubble in history and now that bubble is bursting. The single biggest piece of the bubble is the U.S. mortgage market and we’re probably about halfway through the unwinding and bursting of the bubble.” Tilson feels that there is still a lot of pain from foreclosures yet to come and counting of the losses has not yet started.
Tilson teaming up with investment firm Amherst Securities in 2007 found that the prime culprits were sub-prime loans given to people with questionable credit history. It is these that are defaulting the most today. Not content with this survey,the numbers of high quality mortgages were also scrutinized. It is this that made Tilson sit up and say, “It was data we’d never seen before and that’s what made us realize, Holy cow, things are gonna be much worse than anyone anticipates.”
The fear is that the madness did not end with the sub-prime mortgages. There were two other types of super mortgages that had become popular known as Alt-A and option ARM. The latter was particularly dangerous as it lured in borrowers with low rates known as teaser rates. Sometimes it was as low as 1%. After a couple of years (2 or 3 or sometimes 5) these rates started to ‘reset’. Naturally the monthly payment began to increase. For instance a payment of $800 per months high jumped easily to $1,500.
These two types of loans, made during the booming days of the housing zoom, are now about to reset. Mortgage payments will go up and invariably the borrowers will default and face foreclosures. Tilson concluded that the defaults at the moment are very high – having reached record levels. There is no sign as yet of the numbers diminishing. More foreclosures seem inevitable.
- Bouncing Cheques Issued by Title Companies Lead to Foreclosures
- Increase in Foreclosures Prompting Class Action Legal Suits
- Avoiding Foreclosures by Walking Away From Loans are not Without Problems
- Foreclosure Assistance Being Taken on Tour by Housing Advocate
- Washington Mutual, the Symbol of the Foreclosure Crisis, Continues to be in Trouble
- The Consequences of not Paying Mortgages Can be Grim
Related Posts
Posted in
Foreclosure |
No Comments »
Comments
Leave a Reply
Search
