Expect Two More 'Waves' of U.S. Foreclosures, Economist Warns

RE:Expect Two More 'Waves' of U.S. Foreclosures, Economist Warns

anon — Sat, 23 Aug 2008 11:00:00 GMT

As an international macro-economist wth 40 years plus experience I am surprised there are not more bank failures. Comparing internationally, there are far more banks in US relatively than elsewhere. A lot is due to limitations on interstate banking, a lot due to state politics (state officials like having their own banks). Add in that regional banks hold worthless "preferred" stock in Fannie and Freddie and can't raise capital on their own, and you have more bank failures in the future. I don't know which ones, but I'd recommend people check the FDIC website insurance calculator to see if their deposits at FDIC-insured financial institutions are fully covered.

RE:Expect Two More 'Waves' of U.S. Foreclosures, Economist Warns

Jose — Thu, 21 Aug 2008 11:00:00 GMT

I guess we are all screwed just to be very conservative. When are the federal Government and local governments and even businesses start realizing that the free market is fine and all, but if you keep busting the pockets of the consumers, the free market economy has no meaning. I do not necessarily believe in the government getting involved in everything, but they must make sure people, government officials, industry and financiers take responsibility for their decisions. Why should my kids have to bail out Bear Stearns for their bad business decisions and their unmeasured predatory desire of profits. Maybe its time to change the quarterly profit formula and start doing the reporting on an annual basis, may be forcing these crooks to look more into the long term will make them try to be more conservative and less willing to put our economy in the tank. Forget about Russia, China, Iran and Venezuela as potential threats to the USA, when we have our own masters of finance and spineless officials burying our country, our hopes and financial freedom for a quarterly profit. Today my mom an 87 year old lady received a Phone call from Countrywide offering her a refi loan, they approved her over the phone for a 30 year mortgage without checking her income or ability to repay the loan. By the way I forgot to tell you she hardly speaks English. God have mercy on all of us!

RE:Expect Two More 'Waves' of U.S. Foreclosures, Economist Warns

joebhed — Thu, 21 Aug 2008 11:00:00 GMT

More economist-type whistling past the graveyard. Like, we're in for a couple of waves, folks, no need to worry about the tsunami. Wave 1 was not caused by a bunch of bad loans. The bad loans were caused by the last-gasp efforts of the economy-controlling "bubble-ists" in trying to "delay" the onset of the tsunami. And, it worked. These global capitalists needed to prevent the financial depression caused by the global debt-money system. Their only recourse - MORE debt-money. Their efforts are now manifesting in the form of a small slide down the back of the first wave, also known as the sub-Prime crisis. M. Newport correctly notes that general economic feedback in the form of higher unemployment from this first wave will undoubtedly cause more people to lose their homes. Hey, it was a great ride. But we have stacked up a few more waves in ALT-A, Option ARMs (including JUMBOs and PRIMES) and Commercial real estate lending. Considering that there are very real economic feedback loops existing between these housing and financial related failures, and the ability of the economy to employ people and then support the unemployed, and the profile of the tsunami becomes clearer on the horizon. While people are focusing on the "housing" numbers, they are being misled in looking for the "bottom" of today's evolving economic crisis. They need to look for the cumulative economic and financial losses in their totality. From my perspective, the American people will be burdened with between $50 and $60 TRILLION in public and consumer DEBT liabilities, as we begin to face the new tomorrow. While economists try to find some useless index to peg that debt as not significantly outside some textbook norm, I am stuck on this observation. ALL new money in this country is created as DEBT. If every dollar that comes into existence to PAY OFF that $50 TRILLION debt begins as a new DEBT, then the faster we go, the further we get behind. We can continue to borrow our great-grandchildren's inheritance into the ground. Or, create a new debt-free money system. I prefer the latter. Read up on the Chicago Plan.

RE:Expect Two More 'Waves' of U.S. Foreclosures, Economist Warns

Money Man — Wed, 20 Aug 2008 11:00:00 GMT

Jack-That is the primary reason for the high % of foreclosures in the "bubble states. A borrower of age range 45-55 could possibly be around 65-75 before the loss in value can be recouped, given the market stays relatively flat. There is little hope on the horizion for future wealth creation. It is not jobs because the avg. household income has remained flat for the past several years and there have been so many exported jobs. Technology has also reduced the need for many of the "expendable" salaried employees. Many of them are sub-contractors or consultants. The Fortune 500 companies have trimmed their workforce to reduce labor and benefit costs. That in itself is a major factor for current job losses. We cannot flip homes between each other to gain income anymore. That was the driving force in the economy for the past decade. Good luck AMERICA!

RE:Expect Two More 'Waves' of U.S. Foreclosures, Economist Warns

A. Syed — Wed, 20 Aug 2008 11:00:00 GMT

I strongly feel that so much good paper is being issued right now and with FHA increasing options for what were typical subprime borrowers, that by 2010 and 2011, new products will be introduced allowing such interest only loans to have refinancing access. Their may be a second wave of foreclosures due to the Alta-A fallout (negative amortization), but if gas prices reduce, jobs are created, the housing market will correct in a vast majority of the national markets. California, Arizona, Nevada, and Florida markets will take longer regardless however. In sum, to think a recovery is in sight for 2008 is wildy optimistic. Look for summer of 2009 for a light at the end of the tunnel. The biggest question when we reach bottom is if the bottom will be V shaped or have a bathtub effect.

RE:Expect Two More 'Waves' of U.S. Foreclosures, Economist Warns

Michael — Wed, 20 Aug 2008 11:00:00 GMT

this economist has it wrong. the Alt A market is at least 3 to 4 times bigger than the sup prime market. most subprime borrowers switched to the neg am pick-a-pay loan the last 2 to 3 yrs...yrs 2005-2007 for the lower payments. payments lower than interest only...these loans are set to recast from 2009-2012. so the next wave will be a lot bigger! count on it.....

RE:Expect Two More 'Waves' of U.S. Foreclosures, Economist Warns

chris — Wed, 20 Aug 2008 11:00:00 GMT

You silly people, you have no idea how bad it is going to get- the next wave will be worst and if there is even a 3rd wave left that will be it- depression. Alt A loans, and option arms are coming due-very soon and with declining values and the lost of loan programs will prevent most from refinancing or purchasing so they will walk - these count a lot more than the subprime loans that were out there- ripple effect throughout every aspect of the economy is about to happen, on top of this gas will probably hit 150- merry christmas scruge

RE:Expect Two More 'Waves' of U.S. Foreclosures, Economist Warns

Amy — Wed, 20 Aug 2008 11:00:00 GMT

The third wave will more likely be related to the negative amortization loans or "option ARMs" that were being shoved down the throats of mortgage brokers and borrowers alike for a few years. Promises of future increases in real estate values and the ability to refinance at any time were part of how these became so popular. When these loans are "recast", there is a double whammy the principal balance has increased by 10% to 25% AND the monthly payment will usually increase by at least 100% (and sometimes 200%) the existing minimum payment. That combination is deadly and will SURELY be a catalyst for many, many more foreclosures. Subprime crisis MOVE OVER... make room for the new option ARM crisis!

RE:Expect Two More 'Waves' of U.S. Foreclosures, Economist Warns

Emily — Wed, 20 Aug 2008 11:00:00 GMT

What amazes me is how many in the industry bought into the "Be Donald Trump Through Debt," scenerio..now those mortgage brokers and realtors are trying to dump their own McMansions along with the other properties that they own. You would have thought they would realize that being rich through debt isn't being rich at all...image isn't everything..you just end up 1)owing alot of money 2)ruining your credit and 3)affecting the lives of yourself and your loved ones...Hope a lesson was learned from this...

RE:Expect Two More 'Waves' of U.S. Foreclosures, Economist Warns

Jack — Wed, 20 Aug 2008 11:00:00 GMT

I recall overhearing the conversation in 2005 of a young 30 something in a bar talking to a mortgage broker about his home purchase and loan. He was telling the mortgage broker that he was was going with an interest only loan and did not need to concern himself with principal reduction as the house would appreciate and that would deliver much faster equity build up than paying on principle. That kind of thinking was pervasive and also an indication we were at the top. My guess is that as home prices continue to fall, many people with negative equity will just walk away and give the keys back even it they can still swing the payments.