US Senate Moves to Block Bids On Foreclosures
HudAuctionwatch, a Hud foreclosure site, has an interesting bit regarding the future of hud auctions.
According to the article:
U.S. Senator Charles Schumer is seeking to stop HUD foreclosure home sales to investors. He says that the investor “loophole” is causing communities such as Rochester to deteriorate.
Should investors be blocked from HUD bidding, housing prices would likely increase as investors moved to other low priced inventory. This may benefit those with equity build from bi weekly mortgage payments.
BMW dealer issues loan to Low Income Disabled Woman
According to Mortgage News, a BMW dealer falsified the loan documents necessary to give a woman a $100k BMW she couldn’t afford. From the article:
Vivian Snyder has strong credit and is not classified as subprime, but she is one of many consumers who can’t afford the car she leased. Snyder drives a brand new convertible BMW with a MSRP listed at approximately $100,000.
Most consumers can’t afford it, and neither can Vivian. That’s because the monthly lease payment is $1,300. It eats up half her income which is a $2,500 disability check.
Yet, she got it at BMW of Fremont without showing a drivers license, pay stub, or any proof of income.
How did this happen? Apparently, her income was inflated by nearly 150%.
According to consumer advocate Rosemary Shahan with Consumers for Auto Reliability and Safety the practice is common.
Unfortunately for her, she stands to lose her life savings if the car is repossessed. It’s no surprise that this nation has problems with debt consolidation, when one considers instances such as this.
Banks Stop Issuing Credit
The current housing disaster is not fed by the lack of home sales. Rather, it’s due to the lack of funding banks are issuing to potential buyers. Denying such buyers the opportunity to purchase a home is causing prices to plummet, and doing some heavy damage to our economy.
‘Banks are not lending for one of two reasons 1. They are unable (Bank balance sheets are too impaired with non performing loans). 2. They are unwilling (Banks do not see any risks worth taking). ‘
Those in need of a loan should consider building equity by use of a bi weekly mortgage program.
The Candidates Cannot Save the Economy
Sadly, it would appear that none of the leading Presidential candidates offer a clear solution for the housing disaster:
Let us not be fooled. The candidates thus far have nothing substantial to offer us. The problems we face are huge, and the candidates not only seem to have no clue, but no real plan. It is a shame our nation lacks real leaders who will say plainly and forcefully: “This is what we ought to do, this is what we are going to do, and this is how we are going to get it done.” It’s a greater shame that we lack the intellectual and moral fortitude to vote for such a plain-speaking person. We are about to get the government we deserve.
Those facing adjustable rate mortgage disaster may be considering services such as home ownership accelerators in order to escape rising debt. Such action should be carefully reviewed prior to being pursued.
Fitch Makes Rating Cut
The economy continues to slide downward today, with the Primary results showing an economic beating. Fitch has further modified it’s ratings:
“Fitch placed MBIA’s ‘AAA’ Insurer Financial Strength (IFS) on Rating Watch Negative following Fitch’s announcement that it will be updating certain modeling assumptions in its ongoing analysis of the financial guaranty industry.”
With MBIA being cut to rating watch negative, it’s likely that the housing market will continue to suffer. This means it will be harder to get a loan, so those in need may wish to pursue mortgage acceleration.
Feds Open Subprime Mortgage Probe, Warn 14 Companies
Fourteen companies have been given a heads up to start burning documents and covering up their illegal actions from the past with today’s announcement that the Federal government would be expanding its inquiry into 14 companies.
Federal investigators have opened criminal inquiries into 14 companies as part of a wide-ranging investigation of the subprime mortgage crisis, The Wall Street Journal reported on its Web site Tuesday. None of the 14 companies were named in the report
This move will likely make it harder to get a mortgage, as companies act to issue only the safest of mortgage loans. Those looking to buy a new home may need to consider a bi weekly mortgage in order to afford such.
Bank Reserves Plummet
A surprising occasion, given that the US federal reserve was instituted as a means of forcing banks to maintain strict reserves, it would appear that reserves have plummeted this week.
As one can see from the graph above, reserves are in trouble. The St Louis Fed has additional details on this plummet.
Banks failing to succeed in their efforts at debt consolidation will effect consumers, by passing their hurt onto customers.
Several banks recently announced that they would be kicking ATM fees up to $3 in an effort to restrain their debt’s growth.
Mortgage Acceleration Of Disaster
Disaster is ahead for major US banks due to the accelerating mortgage disaster. The common sense forecaster has this tidbit on the spiraling storm:
There are a couple of comparisons in the article that require some additional comments. Namely, more money was lost in the S&L crisis of the late 1980s then is lost so far, both in dollar terms and as a percentage of GDP. Second, there were more bank failures in the 1990s then now.
My response to the first point is that losses of have just begun to increase. The real losses started in early summer and have already topped $100B with no end in sight (this only took 7 months). Most realize that the banks are probably looking at another 2 – 3 years of losses assuming no serious recession. Furthermore, who cares that the losses in the S&L crisis was 3.2% of GDP as opposed to the current 0.7%. The primary difference between the S&L crisis and now is which financial sector is taking the losses. The collapse of the S&Ls almost 20 years ago was the final chapter in the slow death of that financial sector due to the disintermediation of the S&Ls resulting from the growth of money market accounts. Or as money markets gained in popularity people pulled their money from the S&Ls and put it into money market accounts (disintermediation). To counter this loss of revenue the S&Ls became more aggressive mortgage lenders with fewer sources of cheap funds. The crash of the housing market in the 1990s just finished off a financial sector that was already in decline. Basically, the S&Ls did not play that large a part in the consumer and small business portion of the credit cycle.
The accelerating disaster which is approaching the mortgage industry will prove devastating for any bank that has low diversification. Lenders like Countrywide have already witnessed this effect firsthand.
The Foreclosures Keep Coming
Records continue to be set nationwide as more and more Americans find themselves choosing foreclosure, over holding an upside down property.
JSonline is reporting on Milwaukee’s predicament:
After a record year for foreclosures, a stunning 1,000 Milwaukee County properties already have been scheduled for sheriff’s sales in the first nine weeks of 2008, with a record 200 put up for sale in just one day earlier this month, records show.
With home mortgage foreclosures becoming a drag on the national economy, local officials now say they are worried that the high tide of foreclosure sales - more than 2,800 properties were scheduled for sheriff’s sales in 2007, a 60% increase over the previous year - could easily become a tsunami in 2008.
“When I started in 1998, there were fewer than 800 for the entire year, maybe 20 or 30 a week,” said Eileen Carlson, a civilian employee of the Sheriff’s Office who helps supervise the weekly sale of foreclosed property.
Barring a clear method of debt consolidation, it’s likely the stream of foreclosures is going to continue unabated.
Americans hate being upside down in debt, and due to relaxed penalties, many are finding it cheaper to accept foreclosure than to struggle to pay off a home they cannot afford.
Subprime Disaster for Chinese Banks
The British publication, the Guardian, has some dire predictions for China:
They quote from Reuters:
Earnings at Chinese banks will probably be hit this year by the snowballing U.S. subprime mortgage crisis and Beijing’s moves to cool the economy, the president of the country’s sixth-biggest bank said on Monday.
“We have to be very realistic: we are facing many challenges this year which are not only from home but also abroad,” China Merchants Bank Co <600036.SS><3698.HK> President Ma Weihua told Reuters in an interview.
The bank, China’s biggest non-state lender, made some U.S. subprime-related investments in 2004 and sold them two years later for 13.4 percent returns.
But the country’s bigger, state-owned banks could suffer.
Bank of China <3988.HK> may suffer a 2007 loss because of a big write-down on billions of dollars of U.S. subprime-related investments, the South China Morning Post reported on Monday, sending Hong Kong-listed shares in the lender tumbling 6.4 percent.
Investing in one commodity is the worst possible investment, any good investor will recommend diversifying one’s investments so as to avoid keeping all of one’s eggs in one basket.
That so many companies are now hurting from Sub prime gone bad shows a lack of diversification. One method consumers can utilize to enable personal diversification is to make a bi weekly mortgage plan which enables them to put some investment money in their own property.