February 26, 2007

UK Telegraph headline: US mortgage crisis goes into meltdown


Boy, reading the paper today and seeing words like "meltdown" and "panic" I thought I was reading HP, not the MSM.

Yes, folks, the Great Unwinding is here. And now it's being reported in some quarters outside the US - while most of the US MSM sleeps. Don't wan't to upset those advertisers you know...

US mortgage crisis goes into meltdown

Panic has begun to sweep the sub-prime mortgage sector in the United States after the bankruptcy of 22 lenders over the past two months, setting off mass liquidation of housing loans packaged as securities.

Analysts say the housing bust is pulling America into recession, citing a 14.4pc drop in housing starts

The rapid deterioration could not come at a worse time for British bank HSBC, which has set aside $10.5bn (£5.4bn) to cover bad loans in the US.

The cost of insuring against default on these loans has rocketed in recent weeks, from 50 basis points over Libor to 1,200, raising fears that a credit crunch could spread to the rest of the property market.

Peter Schiff, head of Euro Pacific Capital, said the sector was in an unstoppable meltdown.

"It's a self-perpetuating spiral: as sub-prime companies tighten lending they create even more defaults," he said.

Mr Roubini said: "America faces a 'reverse cycle' where a credit crunch has hit before the slowdown, a rare pattern. Normally, recession comes first, setting off credit troubles in its wake. We have a housing recession, an auto recession, a manufacturing recession, and a real investment recession already present. If all this happening in what the consensus terms as a 'Goldilocks economy', what would happen if the economy slows down?"

26 comments:

hurin said...

"For now, the US Federal Reserve believes the damage can be contained. "I don't think there'll be a large impact on prime mortgages from the sub-prime market," said governor Susan Schmidt Bies."

Cause and effect.
Without access to sub-prime loans a large amount of potential buyers are no longer able to buy a home. Prices will have to come way down. Cause.

Millions of holders of prime mortgages will be upside down. Many will walk away rather than continue to pay a 400.000 loan on a 200.000 house. Effect.

Anonymous said...

Getting ugly!

Tony1790 said...

My sister's house, which has been for sale and empty for over 1 year, just had it's ARM adjust upward and her payment increase by $600 per month. I told her to let the house go back to the bank. Her husband refied the house (many times) and over drew his housing ATM by a whole bunch.

I offered to make a short sale proposal to their lender, my siste is so screwed. And guess what the hubby does......remodeling contractor. They will not only lose the empty house but also their main home as well.

Almost forgot, guess how they've been financing their lifestyle.....yep, refied the new house and when that money ran out.....credit card advances.

I hate to see it happen to her, but that brother in law, he's on brick shy of a full load when it comes to housing and business.

not a gator said...

Anyone know a good, cheap way to get physical euros? I'm going to Germany in May and I don't want to get reamed too badly.

I know the EU is printing money like crazy to keep the exchange rate stable, but we all know about 'unpredictable exogenous events'. Sure, another Muslim bomb in Europe will probably drive the Euro down temporarily ... but market instability over here could drive the Dollar down sharply this Spring as well. I just want spending money for my vacation, is that so bad? My retail bank wanted to charge me, oh, $15-20 for a $300 transaction. Bend over and spread 'em.

Well, fuck 'em! How can I get Euros cheap (1-2% fee)?

christiangustafson said...

So which stage of the collapse are we in now?

http://tinyurl.com/yhtweb

It's getting ugly!

joey said...

How exciting. It has almost no effect on anything. Our economy is fine, stop wishing for bad things everybody

Anonymous said...

Sub-prime is "Dead man walking". The ABX index has plunged, and that where the derivatives are sought for insurance of sub-prime loans. No one's willing to take on the risk (could it be so many crappy loans are coming to light?) Not insurable means no more sub-prime loans. But what most aren't reporting is how prime lenders had to lower their standards to 'compete' with the easy writing standards of the sub-prime market. And they did just that during the boom.

tmaioli said...
This comment has been removed by a blog administrator.
Anonymous said...

To Hurin:

but alas, how will they walk away?

honica jewinski said...

As I've said before, I won't start worrying (celebrating is probably more like it) untill the major subprime WHOLESALERS start going under.

Anonymous said...

Auto recession? WTF? There are two BMW dealers in my city. I went to one of them on Saturday morning. I was told by the receptionist that they are too busy right now and could I make an appointment with someone for this week. Either that or wait about an hour for someone to help me. I went to the Audi place down the road and it was very busy too, but at least there I could talk to someone sans appointment.

I swear you people live in an alternate universe.

borkafatty said...

This is a great read...I suggest it

http://www.atimes.com/atimes/
Global_Economy/IB27Dj02.html

Anonymous said...

Excerpt From WSJ today Page C1

Home Lenders Cut the Flow Of Risky Loans
By Ruth Simon, James R. Hagerty and Michael Corkery

David Radley, a sound engineer, wants to borrow $180,000 to buy a house he rents in Appleton, Wis., but he can't afford a down payment and has a low credit score.

Finding such a loan was a snap until recently. Now mortgage broker John Waite of Full Resource Lending says Mr. Radley needs to pay off old bills and put down at least 5% to qualify. Though Mr. Waite's motto is, "We say 'yes' when the banks say 'no,' " he is saying "later" more frequently these days.

Mr. Radley's plight reflects the turmoil in the business of packaging mortgages into ...

Continues with quotes like

"at the low end it ought to whack 5% out of effective home demand right now," says Thomas Lawler, a housing economist in Vienna, Va.

"We're probably reverting back to guidelines that were in place" four years ago, NovaStar Pres Lance Anderson says. The new guidelines wouldn't have allowed as many as 25% of last year's loans without more documentation or bigger down payments, he adds.

keith said...

Everyone see the plummeting lender stocks (again) today?

Anonymous said...

Auto recession? WTF? There are two BMW dealers in my city. I went to one of them on Saturday morning. I was told by the receptionist that they are too busy right now and could I make an appointment with someone for this week. Either that or wait about an hour for someone to help me. I went to the Audi place down the road and it was very busy too, but at least there I could talk to someone sans appointment.

I swear you people live in an alternate universe.


BMW is not an american car. Wake up and look at Ford or GM and you will see the recession.

anon666 said...
This comment has been removed by a blog administrator.
Anonymous said...

"BMW is not an american car. Wake up and look at Ford or GM and you will see the recession."

Remember when driving a BMW meant you actually had some money? Now it's synonymous with "poser".

Anonymous said...

Hmmm, how come BMW Group reported on Feb 2nd that their January 2007 sales were down from January 2006. And that the Jan 07 figure was the 2nd worst month in 2 years?

The 2nd worst month, in the middle of their huge incentive program? Well at least those 2 dealerships you saw were busy.

Anonymous said...

BMW is not an American car. Wake up and look at Ford or GM and you will see the recession.

No what I will see are two companies which make horrible products nobody wants to buy. That's why GM and Ford and in the shitter, not because of a bad economy. They make awful cars. Nobody wants to own one. Therefore they will not be around much longer.

Maybe 25-30 years ago what Ford and GM did made a difference in the overall economy. Today they are so small relative to the overall economy that it doesn't mean much. Michigan might be affected, but not much else.

DC Beltway said...

I am really beginning to love the UK Telegraph they are doing a great job of reporting what the hell is happening here in the US. Between the coming war with Iran and the housing market at least someone is trying to educate Americans. I am going to buy a subscription! Screw our corrupt American media! At least the Brits are paying attention.

Anonymous said...

Remember when driving a BMW meant you actually had some money? Now it's synonymous with "poser".

Still better than the 1993 Accord you and the rest of the renters here drive.

Anonymous said...

The Financial Times is an expensive subscription. $499 per year in California, I believe.

Can't wait for the Greater Depression!

Shakster said...

christiangustafson said...
So which stage of the collapse are we in now?

http://tinyurl.com/yhtweb

It's getting ugly!
---------------------------------
Lmfao

Anonymous said...

None of these people can admit the truth without causing a panic.

Bernanke wipes his ass the wrong way and the stock market will crash. So they have to be very careful.

Why buy euros? Buy gold and silver.

No auto recession? Hmmm. Why are GM and Ford teetering on the verge of bankruptcy?

Anonymous said...

Still better than the 1993 Accord you and the rest of the renters here drive.


Not me, I roll in a pimped out 82 Yugo!

Gramps said...

Could you refrain from posting macro pictures of melting chocolate?

Makes me hungry.