Delinquencies jump even more for prime jumbo loans
Started by stevejhx
almost 18 years ago
Posts: 12656
Member since: Feb 2008
Discussion about
The next wave of mortgage defaults More borrowers with good credit are defaulting on their home loans, and that's going to make it even harder for the staggering housing market to recover. NEW YORK (CNNMoney.com ) -- Prime mortgages are starting to default at disturbingly high rates - a development that threatens to slow any potential housing recovery. The delinquency rate for prime mortgages... [more]
The next wave of mortgage defaults
More borrowers with good credit are defaulting on their home loans, and that's going to make it even harder for the staggering housing market to recover.
NEW YORK (CNNMoney.com ) -- Prime mortgages are starting to default at disturbingly high rates - a development that threatens to slow any potential housing recovery.
The delinquency rate for prime mortgages worth less than $417,000 was 2.44% in May, compared with 1.38% a year earlier, according to LoanPerformance, a unit of First American (FAF, Fortune 500) CoreLogic that compiles and analyzes residential mortgage statistics.
Delinquencies jumped even more for prime loans of more than $417,000, so-called jumbo loans. They rose to 4.03% of outstanding loans in May, compared with 1.11% a year earlier.
http://money.cnn.com/2008/08/12/real_estate/prime_defaults_price_drops/index.htm?postversion=2008081208
Fortunately, NO effect on Manhattan.
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Response by dco
almost 18 years ago
Posts: 1319
Member since: Mar 2008
I have said this from the beginning. It's not just a sub-prime problem. There in lies the bigger danger. All loss models have been for sub-prime losses. Now factor in the 100's of billions in prime loan losses.
Some say the worst is behind us, I say we still haven't seen the worse. JM mentioned on another site about people's predictions and the 30-40% RE declines in NYC. Many people were calling him a lire. However I'm hear to tell everybody that he is 100% correct. I have stated that the NYC RE market will fall 30-40%. Today I'm more convinced then ever this will occur.
Housing is still falling and model losses used by the banks are for 15% decrease in home values. Now the numbers are looking more like 25-35%. This is just for sub-prime. Now figure all the other bad debt that is being low balled and the numbers are going to be 3X as much as we have already seen. Why do you think Thain got rid of that paper for 3 cents on the dollar. Because in a few months it's going to be worth ZERO. All of these banks are going to have to write down 2x as much.
Wallstreet layoff's will accelerate in Nov and Dec. It's not going to be pretty for several years.
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Response by dco
almost 18 years ago
Posts: 1319
Member since: Mar 2008
How can there be a recovery in housing when people can't get loans to begin with? It will be 10 years before price get back to the same levels.
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Response by ritchi
almost 18 years ago
Posts: 61
Member since: Aug 2008
10 whole years? wow
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Response by dco
almost 18 years ago
Posts: 1319
Member since: Mar 2008
If your property value drops 30-40% during this crisis, it will take easily 10 years to get back to those levels.
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Response by EddieWilson
almost 18 years ago
Posts: 1112
Member since: Feb 2008
If you "break even" after 10 years, you actually lost money. In this era of inflation, likely a lot. If you were leveraged 5x or 10x, a hell of a lot.
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Response by dco
almost 18 years ago
Posts: 1319
Member since: Mar 2008
EddieWilson- I think you understood, the underlining message, what I was saying. However your 100% correct in your statement.
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Response by junkman_r_u_serious
almost 18 years ago
Posts: 230
Member since: May 2008
Eddie, actually it is advantageous to lever up in a high inflation environment since you are able to borrow todays dollars and pay back later with tomorrows pesos. If you truly believe that 10%,20%,30%,3945345394% inflation is on the horizon the best thing you could possibly do is get fixed rate interest only bullet loans and buy as much property as possible. Once the hyperinflation has settled, you could possibly pay off $X millions of debt with pocket change.
It's the people with actual equity in their houses that are going to get killed in an inflationary scenario since asset prices will not be increasing and the value of the currency will be decreasing.
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Response by EddieWilson
almost 18 years ago
Posts: 1112
Member since: Feb 2008
> Eddie, actually it is advantageous to lever up in a high inflation environment
> since you are able to borrow todays dollars and pay back later with tomorrows pesos
Not when you used the loan to buy a declining asset...
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Response by junkman_r_u_serious
almost 18 years ago
Posts: 230
Member since: May 2008
depends on the differential between asset price and inflation. IMO everything the fed and treasury have done to date has been to preserve asset prices at the expense of potential future inflation.
I have said this from the beginning. It's not just a sub-prime problem. There in lies the bigger danger. All loss models have been for sub-prime losses. Now factor in the 100's of billions in prime loan losses.
Some say the worst is behind us, I say we still haven't seen the worse. JM mentioned on another site about people's predictions and the 30-40% RE declines in NYC. Many people were calling him a lire. However I'm hear to tell everybody that he is 100% correct. I have stated that the NYC RE market will fall 30-40%. Today I'm more convinced then ever this will occur.
Housing is still falling and model losses used by the banks are for 15% decrease in home values. Now the numbers are looking more like 25-35%. This is just for sub-prime. Now figure all the other bad debt that is being low balled and the numbers are going to be 3X as much as we have already seen. Why do you think Thain got rid of that paper for 3 cents on the dollar. Because in a few months it's going to be worth ZERO. All of these banks are going to have to write down 2x as much.
Wallstreet layoff's will accelerate in Nov and Dec. It's not going to be pretty for several years.
How can there be a recovery in housing when people can't get loans to begin with? It will be 10 years before price get back to the same levels.
10 whole years? wow
If your property value drops 30-40% during this crisis, it will take easily 10 years to get back to those levels.
If you "break even" after 10 years, you actually lost money. In this era of inflation, likely a lot. If you were leveraged 5x or 10x, a hell of a lot.
EddieWilson- I think you understood, the underlining message, what I was saying. However your 100% correct in your statement.
Eddie, actually it is advantageous to lever up in a high inflation environment since you are able to borrow todays dollars and pay back later with tomorrows pesos. If you truly believe that 10%,20%,30%,3945345394% inflation is on the horizon the best thing you could possibly do is get fixed rate interest only bullet loans and buy as much property as possible. Once the hyperinflation has settled, you could possibly pay off $X millions of debt with pocket change.
It's the people with actual equity in their houses that are going to get killed in an inflationary scenario since asset prices will not be increasing and the value of the currency will be decreasing.
> Eddie, actually it is advantageous to lever up in a high inflation environment
> since you are able to borrow todays dollars and pay back later with tomorrows pesos
Not when you used the loan to buy a declining asset...
depends on the differential between asset price and inflation. IMO everything the fed and treasury have done to date has been to preserve asset prices at the expense of potential future inflation.