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cashinmattress

About Half Of U.s. Mortgages Seen Underwater By 2011

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About half of U.S. mortgages seen underwater by 2011

The percentage of U.S. homeowners who owe more than their house is worth will nearly double to 48 percent in 2011 from 26 percent at the end of March, portending another blow to the housing market, Deutsche Bank said on Wednesday.

Home price declines will have their biggest impact on prime "conforming" loans that meet underwriting and size guidelines of Fannie Mae and Freddie Mac, the bank said in a report. Prime conforming loans make up two-thirds of mortgages, and are typically less risky because of stringent requirements.

"We project the next phase of the housing decline will have a far greater impact on prime borrowers," Deutsche analysts Karen Weaver and Ying Shen said in the report.

Of prime conforming loans, 41 percent will be "underwater" by the first quarter of 2011, up from 16 percent at the end of the first quarter 2009, it said. Forty-six percent of prime jumbo loans will be larger than their properties' value, up from 29 percent, it said.

"The impact of this is significant given that these markets have the largest share of the total mortgage market outstanding," the analysts said. Prime jumbo loans make up 13 percent of the total market.

Deutsche's dire assessment comes amid a bolt of evidence in recent months that point to stabilization in the U.S. housing market after three years of price drops. This week, the National Association of Realtors said pending home sales rose for a fifth straight month in June. A widely watched index released in July showed home prices in May rose for the first time since 2006.

Covering 100 U.S. metropolitan areas, Deutsche Bank in June forecast home prices would fall 14 percent through the first quarter of 2011, for a total drop of 41.7 percent.

The drop in home prices is fueling a vicious cycle of foreclosures as it eliminates homeowner equity and gives borrowers an incentive to walk away from their mortgages. The more severe the negative equity, the more likely are defaults, since many borrowers believe prices will not recover enough.

Homeowners with the riskiest mortgages taken out during the housing boom have seen the greatest erosion in equity, in part because they were "affordability products" originated at the housing peak, Deutsche said. They include subprime loans, of which 69 percent will be underwater in 2011, up from 50 percent in March, Deutsche said,

Of option adjustable-rate mortgages -- which cut payments by allowing principal balances to rise -- 89 percent will be underwater in 2011, up from 77 percent, the report said.

Regions suffering the worst negative equity are areas in California, Florida, Arizona, Nevada, Ohio, Michigan, Illinois, Wisconsin, Massachusetts and West Virginia. Las Vegas and parts of Florida and California will see 90 percent or more of their loans underwater by 2011, it added.

"For many, the home has morphed from piggy bank to albatross," the analysts said.

Couldn't have said it better myself.

http://en.wikipedia.org/wiki/Albatross_%28metaphor%29 <= for the dim folk like Sibley who won't understand the reference.

Anyhow, we are already at 20% plus in the UK. I reckon we neck and neck all the way, only we won't have an ecomony to restart at the end of it all. The Yanks, for all their faults, do have an immense pool of talent, patriotism, and the will to succeed.

We are just a puny nation in comparison, and just want to look out for ourselves while watching everbody else fail. Plus, America won't have the shackle of the EU like we will soon.

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America also has nutty religious cults, a huge pool of assault rifles, a long history of racial strife, an unsustainable suburban living arrangement, and a bunch of unstable drug economies on its southern border.

How anyone could think it's a good bet is beyond my comprehension.

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America also has nutty religious cults, a huge pool of assault rifles, a long history of racial strife, an unsustainable suburban living arrangement, and a bunch of unstable drug economies on its southern border.

How anyone could think it's a good bet is beyond my comprehension.

Gosh, you just described Switzerland!

:lol::lol::lol:

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America also has nutty religious cults, a huge pool of assault rifles, a long history of racial strife, an unsustainable suburban living arrangement, and a bunch of unstable drug economies on its southern border.

How anyone could think it's a good bet is beyond my comprehension.

We have nutty religious cults, lots of guns and knives, are inherently bigoted, the most corrupt banks and politicians in the democratic political sphere.

The average Briton is out of work, drinks too much, is overweight, and has a poor/non education. Not much difference there I’d say.

In America you have more social mobility than the UK, plus you get the chance to start over again. You fail here, and you are done for life.

It's easy to point out the Yanks faults dude, but without them you'd be speaking German. Your response just epitomises the tunnel vision and bigotry which is so prevalent in this little island nation. Break out of the mold.

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We have nutty religious cults, lots of guns and knives, are inherently bigoted, the most corrupt banks and politicians in the democratic political sphere.

The average Briton is out of work, drinks too much, is overweight, and has a poor/non education. Not much difference there I’d say.

In America you have more social mobility than the UK, plus you get the chance to start over again. You fail here, and you are done for life.

It's easy to point out the Yanks faults dude, but without them you'd be speaking German. Your response just epitomises the tunnel vision and bigotry which is so prevalent in this little island nation. Break out of the mold.

Hey cashinamattress, I like you too much to have an argument with you.

I'm just saying there are severe problems with the US - it's not a case of the grass being greener. And as for the US having more social mobility, have you ever read Charles Hugh Smith? http://www.oftwominds.com/blogaug09/obstacles08-09.html

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Hey cashinamattress, I like you too much to have an argument with you.

I'm just saying there are severe problems with the US - it's not a case of the grass being greener. And as for the US having more social mobility, have you ever read Charles Hugh Smith? http://www.oftwominds.com/blogaug09/obstacles08-09.html

Thanks for that link. I agree with the concepts in there, but I hold out hope that America will come out on top. Yes we all know that there is very little space at the top of the pyramid, but hey, sometimes things happen.

I have proof. In two words.... Black President.

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If you accept that we lag the US by 18 months, we could be in for an interesting ride here.

They were at 26% in March. We are at around 20% now. If they can almost double by 2011, why can't we?

From memory, the average household financial position here is worse than it is in the US but I could be wrong.

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