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Thread: 7.5%+ of Alt-A mortgages now in default

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    Default 7.5%+ of Alt-A mortgages now in default

    http://www.nytimes.com/2007/04/10/bu...=1&oref=slogin

    Make sure you click the graph, I wonder what it was before 2004.

    I guess it's not deceptive loan practices used on the poor and minorities with bad credit. It's too many stupid Americans who talked themselves into buying more than they should have, or even buying when they shouldn't have.

    What do you expect from a nation that has a noteworthy percentage of people that can't even point out the two countries we are at war with on a world map?

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    Featured Member Vamp's Avatar
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    Default Re: 7.5%+ of Alt-A mortgages now in default

    I have said this before, but the cause of all this to me is deregulation. In the 1980s many checks and balence regulations on lending were in place. Those were removed. Lenders have been taking advantage of it ever since.

    Only now after the damage has been done is the goverment calling for those regulations to be put back in place.
    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Default Re: 7.5%+ of Alt-A mortgages now in default

    ^^^ in fairness, much of the reason for easing of previously existing regulations was court decisions re the 'equal treatment' overtones of redlining mortgages in 'risky' neighborhoods, active policy by HUD to promote increased minority home ownership at any cost, etc. And as Vamp points out, post S&L bailout regulation changes which basically forced local mortgage lenders to 'resell' mortgages instead of holding them to maturity to minimize their risk of default opened the door to the whole concept of 'transferring' risk to somebody else.

    While it's not highly publicized, the largest change in the mortgage lending market since 1980 has been the ability for mortgage brokers and regional banks to 'repackage' mortgage loans into mortgage backed bonds/securities ... which were snapped up like hotcakes by institutional investors and foreign investors. However, those foreign investors are now taking a huge beating because of the US$ to Euro exchange rate (among other currencies). This was bad enough when the mortgage backed bonds/securities were considered to be very safe investments. But with today's rapidly increasing default rates across the board, those foreign investors are starting to judge the risk no longer commeasurate with the reward, and are moving their money into different sectors (with many now lying outside of the USA).

    This has all of the makings of a liquidity crisis with resulting nasty deflation ... unless of course the Fed tries to print new money to make up for foreign investors running for the exits, which will precipitate an inflationary crisis instead.

    As to the reason for rising delinquencies among Alt-A rated homeowners, you can start the list with rising energy prices, rising property taxes, rising food prices, rising insurance costs, rising state and local income/sales taxes on the expenditure side, and job insecurity / outsourcing / renegotiations on the income side.

    Ultimately, Americans making assumptions that economic conditions that existed yesterday will continue or improve over the 20-30 year term of their mortgage, thus Americans committing a huge percentage of their income to mortgage payments while saving nothing for a 'rainy day', is the result of two things. First is a near total lack of formal education by the US public school system on the subject of economics. Second is an 'entitlement' mindset that no matter what sort of trouble their irresponsible behavior eventually brings down on their heads, the government or some attorney will take care of their problem.

    On the latter subject, this could still happen. The state of Ohio just enacted state taxpayer subsidized low interest mortgage refis, with other states discussing similar possibilities. Civil rights advocates are calling for a moratorium on foreclosures at the expense of the lending bank / investors.

    ~
    Last edited by Melonie; 04-10-2007 at 03:07 PM.

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    Default Re: 7.5%+ of Alt-A mortgages now in default

    I agree with the comments about the attitude of entitlement. Guess what? There is no God given right to a gigantic house. When I was looking for a house we set a buget that we stuck to - despite the fact we could have "afforded" a lot more. But instead we picked a house that we could afford based soley on my boyfriend's income (75k a year) so that way we could save my income.

    Everyone tried to convince us that we should get "more" house - our real estate agent, our mortgage lender, even some of our friends. Instead, we bought a nice, sensible house, in a nice, sensible middle class neighborhood. And we won't be defaulting on our mortgage any time soon.

    People act as though they are entitled to drive expensive SUVs, own gigantic houses and have a wardrobe of designer clothes. Please. Debt will eat up this nation if we aren't careful.

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    Default Re: 7.5%+ of Alt-A mortgages now in default

    ^^^ in point of fact, debt has already eaten up this nation ! It's simply that the resulting foreclosures and bankruptcies haven't percolated through the 'system' yet, as everybody from the Alt-A homeowner to the big banks to the US gov't itself 'rob Peter to pay Paul' in order to buy more time.

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