Economic Neutron Bomb You Should Have All Seen Coming: Interest Rate Cuts Won't Help

[FanOfFridays]

Quote from ByLoSellHi:
Joe Ripplinger took out a $184,000 mortgage in 2006 and makes his payments every month.

He makes which payment? His mortgage payment or the "I can't afford to pay my mortgage or else I'd rather use the money on a new fishing kit' payment?

Quote from ByLoSellHi:
It allows him to write a check for $565 a month even though he owes $1,300. The difference is added to the mortgage, and when his total debt reaches $212,000, or after five years have passed, he said his monthly minimum could jump to about $2,800, which he can't afford.

So he went ahead and wrote checks for $565? And now he's in trouble? He can't afford to pay $2800?

So what? All of this means that he's either an idiot or badly advised.

This kind of thing won't bring an Economic Neutron Bomb. Let him crash, let them all crash and let the markets work it out. Does anyone seriously think that after the past 20 years of boom (who am I kidding, the past 150 years of boom), there isn't enough liquidity washing around to pick up these assets before an 'Economic Neutron Bomb' explodes?

 

[makloda]

Quote from ByLoSellHi:

mak, please. Don't be naive enough to claim mortgage rates are indicative of anything other than fudged government policy and lack of economic clarity.

Also, tell your story to those who have ARMs resetting HIGHER.

All I am doing is asking how you explain the fall in mortgage rates if its not due to the Fed cutting rates. These are market rates, not anecdotal evidence.

 

[ByLoSellHi]

Quote from makloda:

All I am doing is asking how you explain the fall in mortgage rates if its not due to the Fed cutting rates. These are market rates, not anecdotal evidence.

1) Mortgage rates have only fallen for new buyers with excellent credit and cash down for a conventional mortgage. What % of buyers qualify by those standards? I would argue not many, but I don't have the exact %.

2) Mortgage rates are not falling for ARM holders - they're going up; often dramatically.

3) Look at the article above - look at the evidence of people who bought recently, during the boom, who are already upside down, and actually have to come up with cash to sell their homes or refinance.

4) Credit is being tightened, even if advertised rates are falling.

5) There isn't even a proportionate % shaved off mortgage rates when the Fed cuts the overnight fed funds rate (that it charges participatory banks and bank holding companies).

I don't know how, given these circumstances, among many others, you can credibly argue that advertised "falling" mortgage rates are indicative of much of anything. It's almost an illusion.

 

[frostydc4]

Quote from makloda:

If rate cuts don't help and have ZERO EFFECT as you say, then how do you explain why 15y and 30y mortgage rates are down big time on average over the last 6 months: http://www.bloomberg.com/markets/rates/

Weakness in the stockmarket is the main catalyst for the falling mortgage rates

 

[1flyfisher]

We have record foreclosures. Record numbers of families and individuals can not make their payments on their homes.

Can someone Explain to me How this does not cause a deep prolonged recession due to consumers cutting back spending?

 

[TradEStar]

Quote from Mercor:

These ARMS should be converted to 40 year fixed. this will save the banks lots of trouble.

Or..they could set up a new fixed rate longer term product called, "Til Death Do Us Part" loan, where you keep paying a monthly payment at a lower amount until you die..LOL!!!

 

[USAtrader]

Take a look at this chart:

http://www.bankrate.com/brm/graphs/...p=&bottomgap=&rightgap=&leftgap=&seriescolor=

You will find that Conventional 30's are essentially where they were one year ago. Not "much lower" as some would suggest.

As it regards Jumbo 30's (which will apply better to those of us in the leading markets), the rate is not lower, but HIGHER, by over half a point.

The spread on these 2 have moved somewhat inversely since the summer meltdown.

 

[clacy]

It makes me freaking sick that there are morons out there that would

a) take a loan like this and make the $536/mo payments and end up owing more than it's worth

and

b) there are companies out there stupid enough to write these types of loans.

 

[EMRGLOBAL]

The deep deep recession will not come until after the election year. The following year odds are the recession is going to be mind-blowing.

What you see in the "HOUSING" market is just a small cough, the fever, chills, loss of weight and liquifying of the organs is coming.

Keep in mind that the FEDS and THE BANKS, along with the GOV have all provided mass liquidity. This in and off is self is very dangerous as the "Money" is not going to "Lending" of production Businesses. It is to shore up "Banks" that are bankrupt or close to.

The Stock Market does not truly affect the Sheeople. Many watch their 401ks, but most can't touch what the earn or loose in their "Investments". So its a mute point for the Majority of the Middle Class.

The Boomers are affected to a point, but many were locked in to Annuities near the top, if they had smart brokers. "SMART BROKERS" is a oxymoron in general.

The KEY FACTOR IS INFLATION AND JOBS.

If we see oil (which we are now) creeping back up near the high 90s, Johnny SIX PACK is in trouble.

The Average JOE will not be able to sustain another summer of super high gas prices, energy prices. They are BROKE AS IT IS. Until they get the "Ck" from uncle sam, but that is spent already.

JOBS JOBS JOBS. The last data was a very bad sign to those of us who can read between the lines.

American's forget about things very fast. American's love to hide in the "Desperate House Wife" shows and pretend they live in Beverly Hills.

the clock is ticking, TICK TOCK TICK TOC......