The banks just got wiped by current foreclosures and the next round dwarfs this one

If we don’t stop the balloon bursting the banks will dry up. Frozen credit ultimately brought on the Great Depression

From some financial info I saved:

June 2007 in its 2007 Annual Report the BIS (Bank of International Settlements) described as “the ultimate bank of central bankers” warned that the credit boom could spark a Depression

Aug 2007 Countrywide (CFC), the nations largest mortgage holders announced it’s drawing down an entire $11.5 credit facility from a group of 40 banks to shore up liquidity to make loans

Lehman Bros closed its subprime lending unit and took a $52 mil loss

Nov 2007 Wachovia takes a $1 billion losss

Nov 2007 Deutsche Bank analyst estimates sub prime losses for last qtr of 2007:
Barclays, Royal Bank of Scotland, UBS each $5 billion
Merrill Lynch $1 billion, Bank of America $4 billion

Nov 13 2007 Bank of America (our 2nd largest bank) announced 3rd qtr loss of $3 billion
Morgan Stanley announces estimated 3rd qtr write down of $6 billion etc

Nov 26 2007 economist from Bank of England states he believes banks have reported only a small fraction of the subprime losses. In a report to its investors a Goldman Sachs analyst states that lenders will reduce lending by $10 for every dollar of loss

When does a Bank except at gunpoint cancel a mortgage contract and give the homeowner a break?

Never

They do it to save themselves. I suspect we will have to print a whole lot of money if the banks fail on this

Whatever the Fed decides to do, I just want them to act prudently and not make things worse!

Buy Danish on December 7, 2007 at 4:15 PM

No one thing ever stays the same price, its all about supply and demand.

If your last dollar goes to the mortgage your not going to spend much on gas, the supply goes up and the gas price goes down.

It balances out and so does inflation.

If the Fed has to respond to market pressure by lowering rates the economy gets a boost and right now that’s not a bad thing.

The Fed makes enough money, gasp, did I say that? Shame on me.

Let’s fix the problem first then we can/will go after those responsible. We need to stem the bleeding NOW. The regs can wait

The enron collapse did not cause the ENTIRE AMERICAN/WORLD ECONOMY to go into a MAJOR DEPRESSION. There is no tax money being SPENT. Those that have no understand of the risks and depth of this problem should take the time to study the problem instead of posting.

I don’t know about that. You can still have inflation from higher oil prices, higher wages, and so forth even if one sector has declining prices.

Anyway, the subprime mortgages are due to go up at a much higher rate than any Fed reduction would cover anyway.

Whatever the Fed decides to do, I just want them to act prudently and not make things worse!

If you lower interest rates across the board too much, don’t you end up with inflation?

Buy Danish on December 7, 2007 at 3:06 PM

Not when its a natural occurrence such as a housing slump or a credit crunch.

Let the market force the Fed to lower interests rates.

Speakup on December 7, 2007 at 2:58 PM

If you lower interest rates across the board too much, don’t you end up with inflation?

unseen on December 7, 2007 at 2:09 PM

Buy Danish on December 7, 2007 at 2:49 PM

Let the market force the Fed to lower interests rates.

The inherent problem of putting long-term debt in the hands of people who a) shouldn’t be here and might be forced to leave at any time and b) probably committed some form of ID theft to stay here seem not to have been an issue.

I have no idea how much of the housing problem is fed by this. I suspect that it’s a small percentage in the grand scheme of things, but even that might be sufficient to tilt the scales enough to cause wider problems. Maybe our resident housing experts can weigh in.

Bryan on December 7, 2007 at 9:34 AM

I don’t believe the administration nor many members of government considers extending credit to illegal aliens any kind of problem as there never has been any intention to let them go home.

unseen on December 7, 2007 at 2:09 PM

I agree that these rates need to be frozen and that doing nothing probably would lead us into a recession (at least regionally) and possibly a depression.

However, the fact remains that the banks (with perhaps , little encouragement from the government) pushed these loans, invented new lending formulas like “interest only loans”, and ultimately all of us were hurt by this virtual ponzi scheme.

Would it be wrong to take some steps to tighten rules so this doesn’t happen again? I most definitely not someone who favors a lot of government regulation, but in this case it seems to be warranted.

Today is a good day for me because I have just discovered that the corporations that I believe started this “ball” rolling downhill and lost total control due to greed, are being subpoenaed by Cuomo in New York…let the action begin. I, for one will be paying attention, closely.

The only thing being considered is to freeze the rates which are usally 7-9% at their current rates and to increase the amount of loans the FHA can buy. These rates are suppose to go up to 12-15%. I don’t know about you but I bet not many on this board has a 14% rate on their home loan. That type of loan with the FED rates at 4.5% is nothing but loansharking. That is as bad as 30% credit card rates. It is no wonder that people are having problems paying.

2) The government is giving no one any money. No one is getting ahead of the line.

3) without this we WILL go into a recession. The dot.com bubble will look like child’s play when the market sells off because noone can get credit.

4) People that are saying “but I saved I lived within my means” why don’t I get something? You are. You are getting to save your jobs, your house, your pensions,ira,401ks. Because without this freeze there is a very,very,very, good chance we will go into a major DEPRESSION not a recsession but an honest to goodness 1930′s style DEPRESSION.

5) why don’t all you outraged people take a minute and study the market, the economy, and the cliff on which this economy is on and take another moment to thank GOD that Bush had enough political courage to do what is needed to save this country’s economy from total collapse, instead of saying selfishly “but what about me?”

Each customer seeking help/bailout should be held accountable if they turned in fraudulent numbers on their 1003 in order to qualify for a loan. THAT should be the first criteria for offering assistance. I’ve talked many clients out of option arms, etc….trying to show them the dangers. Most people wanted immediate gratification, took out the loans (with FULL understanding, I hit them over the head with the facts)…I guess they thought tomorrow would never come.
Personally, I’ve gone a little overboard on my Christmas spending, and I don’t know if I can make my payments next month. HELP, FEDERAL GOVERNMENT! Can you make the CC companies lower interest rates for me?

We have to pay capital gains taxes if we make money on a sale (under certain circumstances) but there is no corresponding vehicle to take a loss.

Am I happy about this? Yes and no. I am a homeowner who has always played by the rules and also a casualty of this catastratrophe. I have been in the Industry from the early ’80′s and went into subprime 10 yrs ago. Unless you have been in the trenches – completely lived and breathed this – you have no idea of all the components that have led to where we are today. Most people are observing from the “nose bleed” section of this “event”, giving their commmentaries and fingering pointing. Enough –

In the last 15 months I have been involved in 3 closures of major Companies. I am currently in jeopardy of loosing my home in the next several months. I have embraced the fact that I may just have to walk away. Do I deserve this? Hell no but neither do the tens of thousands of my peers. Not all of us sold our souls. We are normal people just like you who now have nothing to turn to and are being black listed. Having to start over when we should be focusing on our retirements.

What we should be questioning is who is being allowed/approved for these extensions? What is the list of criteria? For example, some very savvy Brokers and borrowers were refinancing (aka churning) their Option Arm’s loans over and over again to take advantage of the teaser rate and going “stated”/”NINA”/No Doc (they were not required to provide income documentation – before you jump, there was typically nothing wrong with this because of their much higher ficos, credit depth/excellent payment histories, etc etc) and are they now being required to provide income documentation and are the Lenders processing a 4506? (form used to validate income reporting through the Government) If they can qualify to make the higher payments then they should not be allowed? Are they a United States Citizen?
I could go on and on…but I think that is where the focus needs to be. This newly founded “process” should be for the borrower(s) who truly cannot afford the higher payment now.

This is my daughter commenting and I agree 100%!

Maybe I misunderstand this, but isn’t this really a re-negotiating of credit terms and not a taxpayer bailout? The fewer houses that are foreclosed on the better for everyone who owns a home as it helps stabilize property values.

That being said, I am very angry at the banks because I have been negatively impacted by their actions. Thousands of homes were built in my area that targeted sub-prime borrowers, and all that extra inventory has pulled down the value of everyone’s home precipitously yet no remedies are available to those of us who played by the rules with down payments and traditional mortgages.

Yes, we’ve experience a similar thing in our neighborhood (which is a nice area). There’s many high end houses sitting empty and foreclosing because the builders keep building and there are no buyers. Our property values have plummetted. We couldn’t give our house away today if we wanted too. I’d support this legislation if I thought it would help stabilize property values. The bleeding has to be stopped somehow.

I’m kind of amazed at all the people here that think we should just let it play out, let the chips fall where they may. A recession will effect all of us–we are all in this together.

Not all of the borrowers were greedy jerks. Some, like my cousin, were just not savy enough to figure out that they were put in a bad position by their lender should the market go bad. Her husband is a Marine that served 3 tours in Iraq and she works full-time to support her family. They will probably lose their house, which is nothing fancy, just a one story 3-bedroom home in a neighborhood full of young families.

If this bill will help out just a few hard-working people like my cousin, and not effect me negatively, what’s the big deal? The truth is, the lenders used very shady business practices to make a profit off of many Americans that really wanted their own home, were marginally capable of affording it, and probably not sufficiently educated on the potential pitfalls.

Paul

“You get a carbailout, you get a carbailout, everyone gets a carbailout!”