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One Quarter Of All Us Mortgages In Negative Equity

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That sinking feeling

So you think things might be on the slide here? Once again, America gives us cause both for relief (it’s not happening here) and shock (but could it?).

Across the Atlantic there is a repossessions crisis, the like of which has not been seen before.

One in every 139 American homes received a foreclosure notice during the third quarter of this year, and some 2.5 million properties are currently in the process of being repossessed, with the same number again in serious arrears.

One-quarter of all mortgaged properties – 11 million altogether – are in negative equity.

So many borrowers are failing, that lenders can’t keep up with their foreclosure notices.

One Florida law firm manager was caught signing off cases at a rate of 1,000 files a day. When her hand hurt, a paralegal took over and forged her signature.

Mortgage firms hired temporary staff – hairdressers, burger flippers, factory workers – to sign documents stating records had been checked and properties were ready for foreclosure. Some later admitted to not knowing what a mortgage was, and to changing dates on documents when necessary.

Soon to hit our shores.

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There is a very good comment in the source article .....

http://www.citywire.co.uk/money/how-the-foreclosure-crisis-has-swept-across-america/a444175?re=11598&ea=245278

William Phillips

Oct 28, 2010 at 16:55

What you won't read in coverage of incidental thrills and spills as deleveraging gets underway-- e.g. this 'foreclosure crisis'-- is a main cause of the housing bubble: political correctness, which forced lenders to tee up unsuitable customers.

For years the courts and government were pressing lenders not to 'redline' whole districts because their denizens were too flakey to repay debts or hold down steady jobs. It was every Amurrikan's birthright to own a mansion like Southfork, or at least the Little House on the Prairie. If you supplied the bucks the underclass wouldn't welsh; they'd rise to the challenge and become good little bourgeois like us white middle class suburbanites.

Disagree with this a priori contention, no matter how much experience of deadbeats you could pray in aid, and your institution was deemed 'institutionally racist'. Poor blacks and Latinos *must* become homeowners, then they won't riot or screw around, see?

Didn't work out. Nature beat nurture yet again. The race hustlers could sue every lender in sight and compel him to scatter funds broadcast, underwritten by taxpayer guarantees. But the lobbyists couldn't make their people give back the money-for-mansions.

And so vast tracts of inner cities are ghetto or barrio wastelands, with not one decent house left standing or one reliably creditworthy family to move in. Lots of illegal immigrants, welfare check recipients and other types of fly-by-night who got huge, soft loans are squatting or flitting. It'll get far worse before it gets better. Already latter-day Hoovervilles have sprung up under flyovers.

For now Uncle Sam goes on picking up the tab, and the liberal media continue to shut down discussion of the innate fitness of some kinds of physically adult human to lead useful existences in a high-IQ, post-industrial society. Moral hazards stalk the Land of the Free... and the Far East laughs behind its hand at the spectacle of a country so soft in the head. so far removed from the pioneer spirit that built it. (OK, some got 40 acres and a mule, but after that they were on their own.)

The reigning delusion of the US politcal elite is that abilities and moral qualities are randomly distributed, and can be topped up for all by generous infusions of preaching, handouts and prohibition: choose your blend according to whether you are a Democratic or Republican brand of semi-socialist, . All parties subscribe to this sentimentality for fear of being called 'mean-spirited'. It is part of the denial of innate and irreducible differences among men that will kill the USA. Liberal egalitarianism is the social expression of a collective death wish.

Edited by LuckyOne

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The comment is a load of horse manure. Sub-prime lending was invented by financial institutions who had run out of prosperous people to lend to. They targeted the less well-off with teaser rates, knowing that by the time the rates rose and the borrowers were unable to pay, they would have sold on the debt to other mugs, making loadsamoney in the process and losing nothing. It wouldn't affect them one iota if the loan wasn't repaid or the collateral wasn't worth the sum they'd lent.

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Sorry, but thats a load of right wing nutjob PR rubbish. The evidence is that lenders needed no encouragement whatsoever to lend to these individuals. In fact they were positively eager to do so.

These individuals were financialy clueless and so easy to get hooked on mortgages with high charges or ones with low teaser rates with high interest rates on reset. They didnt care that they could not make payments since securitization meant they sell them on to some sucker before the losses crystallized.

There is for example, masses of evidence of countrywide specifically targeting low income borrowers in a predatory manner, steering low income borrowers to high cost loans by misrepresentation and out-right deception/lying. The countrywide touts would go from door to door or bombard certain districts with phone calls or mail trying to flog their loans. Doesnt sound like they needed any encouragement does it? The AG's of many states have brought lawsuits against countrywide for these practices.

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The comment is a load of horse manure. Sub-prime lending was invented by financial institutions who had run out of prosperous people to lend to. They targeted the less well-off with teaser rates, knowing that by the time the rates rose and the borrowers were unable to pay, they would have sold on the debt to other mugs, making loadsamoney in the process and losing nothing. It wouldn't affect them one iota if the loan wasn't repaid or the collateral wasn't worth the sum they'd lent.

We can all do our own research.

My read of the situation is that Barney Frank and his ilk bear more responsibility than any banker for the implosion in MBS.

They were the ones that forced banks to lend to people who were unlikely to be able to repay their debts. To defend themselves, banks who were forced to make bad loans chose to reduce their balance sheet exposure through securitisation rather than keeping the assets on their own balance sheets as they had traditionally done.

Truth, like beauty, is in the eye of the beholder.

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We can all do our own research.

My read of the situation is that Barney Frank and his ilk bear more responsibility than any banker for the implosion in MBS.

They were the ones that forced banks to lend to people who were unlikely to be able to repay their debts. To defend themselves, banks who were forced to make bad loans chose to reduce their balance sheet exposure through securitisation rather than keeping the assets on their own balance sheets as they had traditionally done.

Truth, like beauty, is in the eye of the beholder.

Please point us to the legislation that countrywide and the other subprime lenders were under that forced them to make subprime loans.

And that legislation won't be the Community reinvestment act since countrywide and the other major subprime lenders were not covered by it.

Edited by alexw

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Please point us to the legislation that countrywide and the other subprime lenders were under that forced them to make subprime loans.

And that legislation won't be the Community reinvestment act since countrywide and the other subprime lenders were not covered by it.

You are missing the point that banks and bankers are essentially sheep who watch and match each other's behaviour and lose sight of reality.

The CRA forced some lenders to lend to people who were ultimately unable to repay their debts. Bankers being bankers, saw their market share declining and their margins weakening compared to other lenders and followed suit by going downmarket.

The CRA set the competitive landscape for bankers who think quarter to quarter and ultimately led to their downfall.

I recognise the contradiction in my views. I believe in a competitive landscape but also believe in a framework which protects taxpayers from exposure to silly behaviour of market participants. Sound lending rules are a price that I am willing to pay to protect taxpayers from lenders' follies. The CRA created a very unsound market environment.

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You are missing the point that banks and bankers are essentially sheep who watch and match each other's behaviour and lose sight of reality.

The CRA forced some lenders to lend to people who were ultimately unable to repay their debts. Bankers being bankers, saw their market share declining and their margins weakening compared to other lenders and followed suit by going downmarket.

The CRA set the competitive landscape for bankers who think quarter to quarter and ultimately led to their downfall.

I recognise the contradiction in my views. I believe in a competitive landscape but also believe in a framework which protects taxpayers from exposure to silly behaviour of market participants. Sound lending rules are a price that I am willing to pay to protect taxpayers from lenders' follies. The CRA created a very unsound market environment.

Err no. The banks covered by the CRA were the small savings and thrifts, they comprised ~25% of all mortgages to low income households, and the mortgages they made were of MUCH higher quality than those made by those not covered by the CRA. The CRA incentivized loans to low income households but the oversight that CRA involved meant they couldnt get away with the abuses of countrywide et al. The banks covered by the CRA were in no way shape or form competition for the subprime lenders because the CRA institutions could not have made those loans.

So how exactly did CRA force countrywide et al to make high-cost unsound loans when that very same CRA oversight prevented its CRA competitors from doing so??

Also there was no decline in market share by non-CRA institutions. In fact CRA lenders saw their market share decline, because they could not make the stupid loans the non-CRA institutions did, nor use their high pressure high sales tactics. And their margins were lower too since CRA oversight did not let them gouge their customers, much much lower margins than those of countrywide et al in fact.

Edited by alexw

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I wonder if there will be some sort of backlash to housing benefit over there (section 8, i think it is called). Ive seen videos of 'poor' folks living in very nice gated communties with access to communal pools, gyms etc

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There are only 44 million properties in the US with mortgages?

Really?

seems pretty low to me.

Quite. If so then ditching the rest of the eoconomy to bail out duff mortgages and duff banks seems even more insane than it already appears.

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Err no. The banks covered by the CRA were the small savings and thrifts, they comprised ~25% of all mortgages to low income households, and the mortgages they made were of MUCH higher quality than those made by those not covered by the CRA. The CRA incentivized loans to low income households but the oversight that CRA involved meant they couldnt get away with the abuses of countrywide et al. The banks covered by the CRA were in no way shape or form competition for the subprime lenders because the CRA institutions could not have made those loans.

So how exactly did CRA force countrywide et al to make high-cost unsound loans when that very same CRA oversight prevented its CRA competitors from doing so??

Also there was no decline in market share by non-CRA institutions. In fact CRA lenders saw their market share decline, because they could not make the stupid loans the non-CRA institutions did, nor use their high pressure high sales tactics. And their margins were lower too since CRA oversight did not let them gouge their customers, much much lower margins than those of countrywide et al in fact.

Opinion is still divided.

I am not sure that the attached supports your notion that large banks weren't covered by the CRA. When interstate banking was reintroduced, CRA scores were a prime consideration for interstate branch licencing.

There is also a definitional problem with "subprime" according to the attached.

http://www.city-journal.org/2009/19_4_snd-cra.html

Did the Community Reinvestment Act—the 1977 federal law pressing banks to lend to low- and moderate-income borrowers—fuel toxic lending and thus play a significant role in causing the financial meltdown? “CRA was not the cause of the crisis,” Comptroller of the Currency John Dugan maintained this past August. Though he had little quantitative detail about the performance of CRA-related loans, Dugan claimed that they had performed better than loans made by lenders not subject to the CRA. Further, he contended, borrowers of CRA loans had defaulted at much lower rates than borrowers of subprime mortgages. Other defenders of the act assert that almost all CRA loans originated at “prime” interest rates, rather than the higher rates that lenders offered risky “subprime” borrowers. And they add that the mortgages made under CRA were almost entirely fixed-rate, not the notorious adjustable-rate mortgages with quick rate resets and high payment shock that led so many borrowers to default.

The question of how well CRA loans have performed is of vital importance because of the trillions of dollars in such lending. During the first 15 years of the act’s existence, total announced commitments under the CRA totaled $9 billion. But starting in 1992, volume exploded. Over the next 16 years, from 1992 to 2008, announced CRA commitments totaled $6 trillion. And incredible though it may seem, the same federal regulators who forced the CRA on banks have neglected to track the performance of trillions of dollars of loans made to satisfy it. But there is a strong prima facie case that they constitute toxic lending—that is, lending that leads to unsustainable loans, resulting in an unacceptable level of foreclosures.

To begin with, the CRA defenders’ claim that CRA lending mostly wasn’t subprime is highly misleading. It would be more accurate to say that 90 percent of CRA lending wasn’t classified as subprime. CRA lenders, along with Fannie Mae and Freddie Mac—the two government-sponsored entities that bought loans from lenders, enabling them to make more loans—commonly classified CRA loans as “subprime” only if they contained such features as high fees, high rates, or low initial payments with adjustable interest rates. But approximately 50 percent of CRA loans for single-family residences were nevertheless made to borrowers who made down payments of 5 percent or less or had low credit scores—characteristics that indicated high credit risk. Whether or not anyone called these loans “subprime,” in other words, the chances are good that many of them have defaulted or remain at high risk of doing so.

Though the feds, again, haven’t collected figures for CRA loans’ performance as a whole, we do have statistics from a few lenders that are troubling indeed. In Cleveland, Third Federal Savings and Loan has a 35 percent delinquency rate on its CRA-mandated “Home Today” loans, versus a 2 percent delinquency rate on its non–Home Today portfolio. Chicago’s Shorebank—the nation’s first community development bank, with largely CRA-related loans on its books—has a 19 percent delinquency and nonaccrual rate for its portfolio of first-mortgage loans for single-family residences. And Bank of America said in 2008 that while its CRA loans constituted 7 percent of its owned residential-mortgage portfolio, they represented 29 percent of that portfolio’s net losses.

Whatever the precise magnitude of the CRA’s role, there is no question that as the government pursued affordable-housing goals—with the CRA providing approximately half of Fannie’s and Freddie’s affordable-housing purchases—trillions of dollars in high-risk lending flooded the real-estate market, with disastrous consequences. Over the last 20 years, the percentage of conventional home-purchase mortgages made with the borrower putting 5 percent or less down more than tripled, from 8 percent in 1990 to 29 percent in 2007. Adding to the default risk: of these loans with 5 percent or less down, the average down payment declined from 5 percent to 3 percent of the loan’s value.

As for Fannie and Freddie, most of the loans with 5 percent or less down that they had acquired by 2005 had down payments of 3 percent or even no down payment at all. From 1992 to 2007, the two entities acquired over $3.1 trillion in low-down-payment or credit-impaired loans and private securities backed by credit-impaired loans—and these are performing horribly: the delinquency rate on Fannie’s and Freddie’s remaining $1.1 trillion in such high-risk loans is 15.5 percent as of this past June 30, about 6.5 times the rate on the entities’ traditionally underwritten loans. All this risky lending, of course, drove the nation’s homeownership rate up and inflated a housing-price bubble.

Taxpayers deserve to know why not one regulator had the common sense to track the performance of CRA loans. They also deserve to know why the Federal Reserve, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and other regulators appear to have no idea how trillions of dollars in CRA loans are performing now. But above all, they deserve to know that the damage done by the CRA won’t happen again. Incredibly, the House Financial Services Committee is considering legislation that would broaden the scope of the CRA. Before it takes any action on HR 1479—which would expand the CRA’s mandates from banks to bank subsidiaries, mortgage bankers, credit unions, insurance companies, and other nonbank financial institutions—the committee should demand that regulators request detailed CRA performance data from Fannie Mae and Freddie Mac, as well as from the four banks that have announced 94 percent of the nation’s $6 trillion in CRA commitments: Wells Fargo, JPMorgan Chase, Citibank, and Bank of America. These six institutions should be able to provide performance information for an estimated 70 percent of outstanding CRA loans.

The pain and hardship that CRA has likely spawned are immeasurable. What is measurable, though, is exactly how the trillions in past CRA loans are performing and what we can learn from this debacle.

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That sinking feeling

Soon to hit our shores.

They are already here I am afraid. estimated at about 1 in 3:

http://www.propertycommunity.com/property-in-the-uk/225-the-rising-threat-of-negative-equity-to-the-uk-property-market.html

How many homes in the UK are affected by negative equity?
The Council of Mortgage Lenders in the UK recently confirmed that by their own calculations there are around 900,000 homes in the UK which are caught in the negative equity trap. However a moiré recent report by the ITN News Channel has revealed this figure could be anywhere up to 3.5 million homes as a number of properties are still falling in price and official revaluations have not been carried out.
While it must be said that the figure of 3.5 million homes is a little on the excessive side at first glance,
representing around one third of all UK homes
, there is no doubt that negative equity is set to be a major issue in the months and years to come.

And they are still at it:

http://www.guardian.co.uk/money/2010/jun/27/negative-equity-mortgages-ireland-uk

Negative equity mortgages are not an Irish joke – UK lenders do them too
Three Irish lenders are launching negative equity mortgages but many UK banks and building societies are already offering them. They're just not shouting about it
Lisa Bachelor The Observer, Sunday 27 June 2010

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Truth, like beauty, is in the eye of the beholder.

The fact that you can say that speaks volumes. Truth is not subject to interpretation.

What you are talking about is nothing more than faith. The ability to take insufficient information, leap to a conclusion and then treat that conclusion as 'the truth'.

Forming nothing more than an opinion about something will never make it 'true'.

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The fact that you can say that speaks volumes. Truth is not subject to interpretation.

What you are talking about is nothing more than faith. The ability to take insufficient information, leap to a conclusion and then treat that conclusion as 'the truth'.

Forming nothing more than an opinion about something will never make it 'true'.

The power of the pen should not be underestimated. Words can alter perception (or opinion) which can, in turn alter reality. Believing a lie has caused lots of problems int e world and when enough people believe in the words bad things can happen.

The biggest question of them all is: what is truth?

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There are only 44 million properties in the US with mortgages?

Really?

seems pretty low to me.

Just guessing, but I would imagine that the average mortgaged property has four occupants. US cities tend to be mostly rental properties not owned by someone with a mortgage. Putting those two factors together makes 44 million seem about right to me.

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The power of the pen should not be underestimated. Words can alter perception (or opinion) which can, in turn alter reality. Believing a lie has caused lots of problems int e world and when enough people believe in the words bad things can happen.

The biggest question of them all is: what is truth?

The biggest question for me is "Why can't people accept that they don't have or need an answer to every question?"

By all means, try to find an answer. But please, don't make one up when you fail to find one.

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The fact that you can say that speaks volumes. Truth is not subject to interpretation.

What you are talking about is nothing more than faith. The ability to take insufficient information, leap to a conclusion and then treat that conclusion as 'the truth'.

Forming nothing more than an opinion about something will never make it 'true'.

In an idealised world with perfect information, truth exists.

In reality, we have imperfect information and many filters through which we gain access to the imperfect information. Truth does not exist. Many people claim that it does.

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The biggest question for me is "Why can't people accept that they don't have or need an answer to every question?"

By all means, try to find an answer. But please, don't make one up when you fail to find one.

Sometimes, the least wrong answer is better than no answer at all.

Sometimes, only the correct answer will do.

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  • 150 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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