Let's look at the facts first. Short Sale success rate is less than 20%. That means more than 80% eventually goes to foreclosure. Basically more money wasted for already deprived homeowners.
Loan Modifications. The worst of all time. This is not a solution, but it's a poison that will slow kill our economy and keep it ill for a very long long time. let's say you have a 30-yr fixed mortgage payment, and you decide to seek Loan Modifications. It'll cost you $3000 to $6000 for loan officer/attorney fees. Then you'll end up with a 40-yr loan of which first 5 years are interest only payments. Afterwards, you'll end up paying alot higher than current 30-yr fixed mortgage rate. This is a repeat of Option Arm or Alt-A dilemma we're about to face.
Now, Option Arm........a smart ass program that allows homeowners to pay interest only for the first 5 years, then BAMM!!!! YOUR MORTGAGE PAYMENT GOES UP AS MUCH AS 2X!! Sure it worked fine when the housing market was hot. Now? it'll be worse than subprime mortgage crisis. let's take a look at complaint filed by California Attorney General:
"The loan had an initial principal balance of $460,000, a teaser rate of 1% and a margin fo 2.9%
a. $1,479.54 per month for the first year
b. $1,590.51 per month for the second year
c. $1,709.90 per month for the third year
d. $1,838.04 per month for the fourth year
e. $1,975.89 per month for the first nine months of the fifth year
f. $3,747.83 for the remaining twenty-five years."
And let's look at current status of California's Subprime and Option Arm schedule(according to FRB - as of March, 2009)
Subprime loans active: $119 billion
Alt-A loans active: $288 billion
------------------------------------------------------
Total $407 billion
Assuming that an average house in CA is $250,000.....we're looking at approximately 1.6 million households have either Option Arm or Subprime mortgages. if you look at the mortgage payments in the first five years(above, a-e) and compare it to the monthly payments in the remaining 25 years (f), As much as 90% of them will eventually fall into foreclosures.....heard of domino effect? how will our government prevent this? Unless they give Californeans free housing, there is no stop to this calamity. Our govt fucking know this......Right now, they are giving false impression to the people by buying up shitload of mortgage securites(including equities)....but all this will crumble and taxpayers will eat TARP/TALF shit.
Bottomline......There is no solution stopping this catastrophe. The housing mrkt will get worst into 2010 and into 2011. And if our genius govt pursue loan modification as the solution(which I don't think they will), it'll just get worse and worse into 2012, 2013, etc etc.
Dejavu Japan? Japan went thru this in the 70's when its housing boom crumbled and housing prices fell more than 80%. Eventually Japan's interest rate fell to 0(where it is today) and mortgage rates accordingly down near 2%.
Our banks need to see this NOW and make payments more affordable. Borrowing at 0.25% and lending out at 5.25% will not and cannot save them.......ever heard of 'pigs get slaughtered?'. Eventually mortgage rates HAVE to fall, and faster it falls, the faster housing mkt stabilizes.
But there are more negatives.........Japan was able to rise again due to their lending and productivity.....it had Nissan and Toyota. Fuck, we got GM and Chrysler....................................................................................................................................................................................................................
I think we're doomed.
Loan Modifications. The worst of all time. This is not a solution, but it's a poison that will slow kill our economy and keep it ill for a very long long time. let's say you have a 30-yr fixed mortgage payment, and you decide to seek Loan Modifications. It'll cost you $3000 to $6000 for loan officer/attorney fees. Then you'll end up with a 40-yr loan of which first 5 years are interest only payments. Afterwards, you'll end up paying alot higher than current 30-yr fixed mortgage rate. This is a repeat of Option Arm or Alt-A dilemma we're about to face.
Now, Option Arm........a smart ass program that allows homeowners to pay interest only for the first 5 years, then BAMM!!!! YOUR MORTGAGE PAYMENT GOES UP AS MUCH AS 2X!! Sure it worked fine when the housing market was hot. Now? it'll be worse than subprime mortgage crisis. let's take a look at complaint filed by California Attorney General:
"The loan had an initial principal balance of $460,000, a teaser rate of 1% and a margin fo 2.9%
a. $1,479.54 per month for the first year
b. $1,590.51 per month for the second year
c. $1,709.90 per month for the third year
d. $1,838.04 per month for the fourth year
e. $1,975.89 per month for the first nine months of the fifth year
f. $3,747.83 for the remaining twenty-five years."
And let's look at current status of California's Subprime and Option Arm schedule(according to FRB - as of March, 2009)
Subprime loans active: $119 billion
Alt-A loans active: $288 billion
------------------------------------------------------
Total $407 billion
Assuming that an average house in CA is $250,000.....we're looking at approximately 1.6 million households have either Option Arm or Subprime mortgages. if you look at the mortgage payments in the first five years(above, a-e) and compare it to the monthly payments in the remaining 25 years (f), As much as 90% of them will eventually fall into foreclosures.....heard of domino effect? how will our government prevent this? Unless they give Californeans free housing, there is no stop to this calamity. Our govt fucking know this......Right now, they are giving false impression to the people by buying up shitload of mortgage securites(including equities)....but all this will crumble and taxpayers will eat TARP/TALF shit.
Bottomline......There is no solution stopping this catastrophe. The housing mrkt will get worst into 2010 and into 2011. And if our genius govt pursue loan modification as the solution(which I don't think they will), it'll just get worse and worse into 2012, 2013, etc etc.
Dejavu Japan? Japan went thru this in the 70's when its housing boom crumbled and housing prices fell more than 80%. Eventually Japan's interest rate fell to 0(where it is today) and mortgage rates accordingly down near 2%.
Our banks need to see this NOW and make payments more affordable. Borrowing at 0.25% and lending out at 5.25% will not and cannot save them.......ever heard of 'pigs get slaughtered?'. Eventually mortgage rates HAVE to fall, and faster it falls, the faster housing mkt stabilizes.
But there are more negatives.........Japan was able to rise again due to their lending and productivity.....it had Nissan and Toyota. Fuck, we got GM and Chrysler....................................................................................................................................................................................................................
I think we're doomed.