Monday, Aug 16, 2010
One rule for Americans and another everywhere else
New York Times: Debts Rise, and Go Unpaid, as Bust Erodes Home Equity
“When houses were doubling in value, mom and pop making $80,000 a year were taking out $300,000 home equity loans for new cars and boats,” said Christopher A. Combs, a real estate lawyer. “Anything over $15,000 to $20,000 is not collectible,” Mr. Terry of Utah Loan Servicing debt collectors said. “Americans seem to believe that anything they can get away with is O.K.”
Posted by enuii @ 06:36 PM (1347 views) Add Comment
14 Comments
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1. miken said...
I love the final paragraph:
“I’m kind of banking on there being too many of us for the lenders to pursue,” he said. “There is strength in numbers.”
It could never happen in the UK, could it?
Who are the biggest losers in this game if debts are not collected?
Do we care here in the UK?
2. sovietuk said...
"Who are the biggest losers in this game if debts are not collected?"
all of us - the £ will be toast.
3. miken said...
@2, actually I was looking at the UK's exposure to US debt.
On 15 June 2010 it was reported by a CNBC article:
(http://www.cnbc.com/id/29880401/The_Biggest_Holders_of_US_Government_Debt?slide=9)
that UK debt to the US is:
"Britain currently holds $321.2 billion (207 billion pounds) in US debt, but the country's investment has fluctuated dramatically throughout the past 2 years, currently at its all-time high (and rapidly increasing) the UK's holdings were as low as $55 billion in June 2008."
Even from these figures it's not clear what our exposure to the mortgage market is.
So I don't see how you can say the pound is toast if mortgage holders in the US do not pay up.
And 207 billion in debt compared to the UK's total debt isn't all that big.
4. drewster said...
If everybody defaults, the banks will collapse. So the real question is: Who are the biggest losers if the banks collapse?
The big losers will be anybody who has money in a bank. That's not just rich individuals; it's companies too. A company with 1,000 employees, each paid on average £2,000 a month, will have at least £2,000,000 in its bank account just before every pay-day. It could be double that amount if it's the Christmas bonus month. A company facing its end-of-year tax bill will also have millions in the bank, waiting to be paid out.
A person who is moving house might have a lot of cash in his account for a day or two. If the bank collapses on that day, he loses the money (and house). This is why banks basically aren't allowed to collapse.
5. Crunchy said...
Blackmail.
No wonder the ever growing monster wants centralisation.
6. a saver said...
'Since the lender made a bad loan, Mr. Hairston argues, a 10 percent settlement would be reasonable. “It’s not the homeowner’s fault that the value of the collateral drops,”
That attitude is just scary and unfortunately seems to be common is this country too-even when the house is bought as an 'investment'. Obviously the guy would have happily taken the profit if there was one but since there's a loss instead it's someone else's.
7. Simon said...
A Saver @5
Sure he makes jolly sure he is going to get more than 10% of his fee before he takes a case .
8. mrmickey said...
I suppose the biggest losers will be the Chinese as they lent us the money in the first place.
9. Simon said...
Lack of regulation and front loaded bonuses .
You generally have little choice but to borrow for a home or to capitalise a business but can anyone explain to me why people want to borrow to support their lifestyle ? Are they just weak minded ?
10. mark said...
Virgin airlines was nearly history when northern rock and halifax collapsed
11. mark said...
Fannie and Freddie have guaranteed $5 trillion or so of mortgages. The companies' bonds now reside in banks and insurance companies all over the country, as well as at the Federal Reserve and overseas.
Foreigners held $1.28 trillion of agency debt at the end of the first quarter, Fed data show. That's down from $1.58 trillion at the peak of the debt bubble in 2007
12. uncle tom said...
In simple terms..
Two thirds of US homes are privately owned.
Of those, two thirds are mortgaged.
Two thirds of mortgagees have never re-mortgaged.
Two thirds who those who have re-mortgaged have financial difficulties.
Two thirds of those in difficulty have, or are likely, to default
The proportion of US households who have defaulted, or are likely to do so; is in the order of 10%, and not as high as if often suggested by the headlines. However, some of the amounts involved are huge, and the defaultees are not confined to lower earners.
There also some huge losses arising from US BTL and other real estate speculation.
13. miken said...
Thanks UT. So the current UK exposure to very bad debt must be relatively small at no more than 20bn pounds.
So why do we care here in the UK? There's far too many articles about the US on this site IMO.
I believe there's a disconnect happening. Europe is becoming much stronger and the US is becoming much less significant.
14. Fubared said...
uncle Tom - and just how many of those homeowners are now unemployed? It doesn't matter what you payment history is like, without a job - you're future payment history is non-existant.
You also musn't underestimate the subsidy of Government which has been 'propping up' this market which has been falling anyway!
http://seekingalpha.com/article/220721-residential-housing-underwater-for-how-long