Here Comes the Next Mortgage Crisis

[n2doc]

Subprime was just the beginning. Wait until California's prime borrowers start handing their keys to the bank.
By Mark Gimein
Posted Tuesday, April 15, 2008, at 8:12 AM ET
California is to mortgage lending what Chicago is to pork bellies. For years, that meant it was a place with soaring house values; today, the foreclosure rate across the state is twice the national average and going up fast. Riverside County, outside Los Angeles, may be the foreclosure capital of the country, with a rate close to six times the national average. And housing prices are in freefall.


California should be the poster child for a mortgage-loan bailout. In few other places have so many taken on such onerous debts with so little equity. Unfortunately, the crisis in California is going to get much worse, and there is no bailout that will solve it. Why? Because if the first stage of the foreclosure crisis was about people who could not afford their mortgages, the next stage will be about people who have every reason not even to try to pay their mortgages.

Over the next several months, we're going to be subjected to a chorus of hand-wringing about the moral turpitude of people who walk away from their mortgages and pronouncements like last month's warning from Treasury Secretary Henry Paulson that people should honor their mortgage obligations. The problem with finger-wagging on what you "should" or "ought" to do is that, when it comes to money, you're usually given the lecture only when it's in your interest to do the opposite. Certainly, that's the case for all the California homeowners who in the next year or two are going to find themselves with the choice of whether, faced with a huge new wave of interest resets and a historic decline in the value of their homes, they will simply walk away.

more:

http://www.slate.com/toolbar.aspx?action=print&id=2188982

[Name removed]

1. Deleted message

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[Trajan]

3. Hate California much ?

Seems kinda peculiar ..... Hmmmmmm ...

So ... Who'd you vote for in 2000 ?

[Name removed]

8. Deleted message

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[MissB]

Welcome to DU!

Enjoy your stay.

[AlCzervik]

4. well lucky for you and us that you aren't a resident of our wonderful state.

[Name removed]

9. Deleted message

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[AlCzervik]

10. not even.

[BeatleBoot]

5. How about Corporate Welfare? What a drain on the economy.

Like Exxon and Mobil receiving $ 25 billion in Taxpayer subsidies.

And doctordog just went on alert.

[Trajan]

2. I 'enjoyed' a foreclosure in Riverside in 1993 ....

Just after Bush I left office ...

In fact: the real estate marketplace suffered from a similar malaise during Reagan II and Bush I ...

Just child's play to what was to come in Bush II though ....

Hand the GOP the reins of government, and suddenly the nation flies off into the barbed wire fence ....

[madrchsod]

6. this has happened before

people will walk away and there`s nothing to stop them...when the house i live in is worth 90 thou and in cali it would be over 500 thou something is wrong

[Name removed]

7. Deleted message

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[Caretha]

11. An old saying in my family

Don't "should" on me & I won't "should" on you

[El Pinko]

12. This is something I've been screaming about for months.

The whores in the Real Estate industry would have you believe that since the subprime rate resets and defaults are mostly past, the bottom in the housing market is just around the corner.

But look at the graphic. The shock of subprime resets is mostly past, but there are still all those Option-ARM and Alt-A resets waiting in the wings over the next several years.




Not only will the housing market continue to be weak (especially in bubble markets like CA and FL), it will get much, much worse, with scores of foreclosures, plummeting prices (possibly to mid 1990s levels) and huge swaths of exurbia left abandoned.

And I'm sorry to say, it was inevitable and any buyer who did a modicum of research should have known that there have been a number of huge speculative booms and busts in real estate, and that house prices, when uncoupled from local median incomes cannot continue to rise, and will eventually fall back to a median that local incomes can support.

[MiniMe]

13. Meanwhile, I'm still getting junk emails from Countrywide Mortgage

Saying how I can get a mortgage through them with a low fixed rate. I think I'll pass.

[Amonester]

14. The repuglican Fed will bail out the lenders.

limited foodstamps for the rest.

it's comin'

[Stinky The Clown]

15. Yanno what iIhate?

I hate coming into a thread with a lot of deleted messages. I feel like a party just ended and I missed all the fun.

Y'ever feel that way, too?