Just when they thought it might be safe to go back in the housing market… [Hat tip Freedom's Phoenix]
WASHINGTON (Reuters) – The federal government and states are girding themselves for the next foreclosure crisis in the country’s housing downturn: payment option adjustable rate mortgages that are beginning to reset.
"Payment option ARMs are about to explode," Iowa Attorney General Tom Miller said after a Thursday meeting with members of President Barack Obama’s administration to discuss ways to combat mortgage scams.
"That’s the next round of potential foreclosures in our country," he said.
Option-ARMs are now considered among the riskiest offered during the recent housing boom and have left many borrowers owing more than their homes are worth. These "underwater" mortgages have been a driving force behind rising defaults and mounting foreclosures.
In Arizona, 128,000 of those mortgages will reset over the the next year and many have started to adjust this month, the state’s attorney general, Terry Goddard, told Reuters after the meeting.
"It’s the other shoe," he said. "I can’t say it’s waiting to drop. It’s dropping now."
I wonder how the administration is planning to bailout this one- with the bomb squad?
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Don’t worry. The Federal Government is simply forbidding banks to foreclose. It’s happening everywhere, although apparently YOU don’t know about it. People don’t pay the mortgage, the banks don’t foreclose, and there you are. Why do you think “inventory” is being reduced?
Wake up.
I think it’s a little misleading, because many of those 128k option arms have probably already walked away as they realized their inevitable doom. I know at least one of our friends that short sold out of their option arm before it had even reset earlier this year. Not really a whole lot of modifying you can do to keep these guys in their homes except to allow them to continue to pay the teaser rate indefinitely. Still no sense in hanging around for the borrower; makes much more sense to unload that bad debt and take advantage of plummeting rents.
With all the talk of smoke-filled rooms and mob-like negotiations with big business, as J said above, I wouldn’t be surprised if one of the strings attached to all of the bailout money that was handed out is that these institutions had to hold back on their foreclosures. My brother-in-law had a NOT filed against his house in January and the bank finally repossessed the house this month, about a year turn around. They were the only bidder at the auction at 100k–original sale price, 265k. Nice deal.
I’m inclined to agree with jryskmpr, there’s a disconnect for sure. Being a licensed realtor in CA and NV, it’s the same scenario in both places. Long Beach, CA, inventory is just not there. Agents are jumping ship and getting traditional jobs.
Here in Vegas, they’re stressing out due to the same thing, squeeky tight inventory.
My off-the-wall guess is, banks will bundle these warehoused foreclosures into more Wall Street investment vehicles so they can be sold cheap to the Chinese. Scary.
I really think we’ve been duped.
Worse than being duped by our government is that the average American is absolutely clueless, can’t connect the dots long enough to get a clue, and basically just doesn’t care.
Here in Las Vegas, as a new licensee, it just broils my blood to see how stupid the new breed of homebuyer is. Half of them are from CA and they pay cash. I got the license in an effort to hedge my bets. If they want to buy, I’ll sell. What else is there to do at this point?
Agent-
I’m afraid clueless buyers have been a phenomenon for years.
I remember doing a post back in 2006 about a KB Home neighborhood in Gilbert, AZ. The neighborhood was nearly built out, but there weren’t a lot of people living there. I warned that it was not likely to hold it’s value.
I got an email from a guy who said, “I know you said that you didn’t think it was a good idea to buy in here, but not only did the builder knock 10% off of the price, they threw in a bunch of incentives as well.” Four months later the base price in there dropped another 30%.
I talk to more people now who ask me if now isn’t a hot time to buy because of how much prices have fallen. They always seem to look surprised when I say, “Yes, but where do you think prices are likely to go from here. What will stop prices from sliding now.”
While I don’t think that a primary residence should be an “investment” per se- it should principally be a place to live- anyone who isn’t confident that there job will last for the next few years and confident they aren’t moving should really ask themselves what happens if prices fall from here. Too many people don’t.
Sure, when buyers are this naive they shouldn’t be taken advantage of, but it is awfully difficult to help people who will not bother to help themselves.
Yes Igor, it’s scary
It’s not really that scary. If the Chinese want to sell here (their bourgeois garbage) they have to buy here (our financial “products”). What’s the problem. It’s the same deal the Federal Government has enforced since the second world war. Really, since the first world war.
It’s simply power. Rome did it too. And we do it here too. Look at the pension plans and other entities required or coerced into buying muni bonds and Treasuries.
No, we’ll wreck this baby by the Federal Government simply withdrawing from the society. They haven’t done it yet. And you can tell, because the underemployment rate among those who have a BA or higher is only 10% (high school dropouts–30% or higher–but those guys don’t count unless they riot).
As I said before, it’s Mellon’s “liquidate liquidate liquidate.” It’s taking time, but hey, it takes time to liquidate an elephant.
But the infallible way to chart its progress is to keep tabs on the underemployment rate among the BA+ crowd. They’re the ONLY people who matter. We’ll know they’ve been thrown under the bus when the underemployment rate among those creatures reaches 40%.
Okay, Twist and jryskmpr….. I understand that to really chart this elephant’s progress is to keep tabs on the underemployment among the BA+ crowd. Never thought of that.
What site publishes separated statistics like that?
Based on Mellon’s liquidate, liquidate, liquidate, “enterprising people” will pick up the wrecks from less competitent people – but, the way I’m seeing it in LV, these so-called “enterprising people” are buying up wrecked properties at still-inflated prices and I expect them to be double-duped by next year or the year after when values drop more.
To me, that is not an enterprising person, nor is it an investor. It’s a Johnny-come-lately.
This elephant is dying a slow death with intervals of hope then the rug being pulled out.
Why is this elephant not just croaking?
Okay, Twist and jryskmpr….. I understand that to really chart this elephant’s progress is to keep tabs on the underemployment among the BA+ crowd. Never thought of that.
YOU’RE NOT SUPPOSED TO THINK OF THAT. YOU’RE SUPPOSED TO WATCH OZZIE AND HARRIET.
What site publishes separated statistics like that?
JUST LOOK AT THE DEPARTMENT OF LABOR WEBSITE EVERY MONTH WHEN THEY RELEASE THE UNEMPLOYMENT FIGURES. THEY BREAK IT DOWN INTO EDUCATIONAL LEVEL.
DOUBLE THE FIGURE THEY PROVIDE. SOME PEOPLE DOUBLE AND ADD 3 POINTS. BUT ANYWAY, AT LEAST DOUBLE. THAT’S THE UNDEREMPLOYMENT RATE. I THINK YOU CAN ALSO GO TO http://WWW.SHADOWSTATS.COM.
ANYWAY, THAT’S WHY EVERYONE YAWNS WHEN YOU SAY “RECESSION.” AMONG THE POOR? THEY’RE GARBAGE–THEY DON’T MATTER. THE ONLY THING SUBURBIA DOESN’T LIKE NOW IS THAT ITS STOCK PORTFOLIO IS STILL 20% DOWN. TINY TIM IS WORKING ON THAT.
Based on Mellon’s liquidate, liquidate, liquidate, “enterprising people” will pick up the wrecks from less competitent people – but, the way I’m seeing it in LV, these so-called “enterprising people” are buying up wrecked properties at still-inflated prices and I expect them to be double-duped by next year or the year after when values drop more.
To me, that is not an enterprising person, nor is it an investor. It’s a Johnny-come-lately.
NO, THAT’S NOT WHAT ‘LIQUIDATE LIQUIDATE LIQUIDATE’ STANDS FOR. ‘ENTERPRISING’ PEOPLE HARDLY MATTER IN AN OLIGOPOLY, WHICH IS WHAT WE HAVE IN THE U.S. YOU’D BE SURPRISED HOW FAR THE POWERS THAT BE WILL RETREAT INTO THEIR SHELLS. THEY WILL SEE HOW MUCH OF AMERICA IS PURE JUNK–THEN THEY’LL MOVE.
IF WE DON’T HAVE A REVOLUTION BY THEN!! REMEMBER, THIS TIME THEY’RE PUSHING THE ENVELOPE. THERE WAS NO POLITICAL CHANGE TO SPEAK OF, EVEN AT THE DEPTHS OF THE DEPRESSION.
SO NOW THEY’LL PUSH IT A BIT FARTHER. HOW LONG BEFORE SUBURBIA EXPLODES: 20% AMONG THE BA+ CROWD? 30%? LET’S PUSH PUSH PUSH. WHICH MEANS: LET’S LOOT LOOT LOOT, BECAUSE THAT’S WHAT THE FEDERAL GOVERNMENT IS DOING NOW. LOOTING EVERTHING IN THE SOCIETY WHICH IT CAN GET ITS HANDS ON. IT ALL GOES STRAIGHT TO THE RICH. GOERING DIDN’T PLUNDER ART WORKS AS WELL AS THE FEDERAL GOVERNMENT IS NOW PLUNDERING THE UNITED STATES.
REMEMBER THE SCENARIO: AS LONG AS SUBURBIA WAS A-BUILDING, IT WAS ENGINE OF GROWTH, OF PROFIT. SO THE FEDERAL GOVERNMENT WAS HAPPY TO ALLY WITH IT: POWER GOES TO POWER.
BUT NOW LOOK AT OUR FAT, FARTING SUBURBAN ELEPHANT. ALL THOSE TICKYTACKY HOUSES? ALL THAT INFRASTRUCTURE? THERE’S NO PROFIT IN MAINTAINING IT.
SO YOU GUT IT.
HAVE A NICE DAY.
This elephant is dying a slow death with intervals of hope then the rug being pulled out.
Why is this elephant not just croaking?