August 24, 2008

Jim Cramer predicts every home bought in America with an ARM in 2005, 2006 and 2007 will go into default as the upside-down homedebtors just walk away


"I am predicting 100% defaults on all non-fixed-rate loans from 2005 to 2007. No one in America is using that negative a forecast. Do you ever hear anyone say 100% of those loans from that era are going to default? I am."

- Jim Cramer, predicting that every homedebtor in America who 'bought' a home the past few years with an ARM, with their homes worth nowhere near what they paid for them, will simply and smartly turn in the keys and walk away, August 2008

(meanwhile, the realtors keep their six percent, and the mortgage brokers keep their bonuses and bribes)

31 comments:

Anonymous said...

Consider the source.

Anonymous said...

Fixed-rate loans from 2005 to 2007 are up side down too.
Why won't the default?
Serious question.
Look out below.

bidens little B@tch said...

He is probably right here.Anybody know how many homes that would be?

I imagine in the hundreds of thousands.

Man I have to hide my gun from neighbors. They have already lost 250k and looking for answers.I hope they don't burn their house down and fry me too.I told them to do cash for keys and get a few bucks to pay rent for a few months.

He is so clueless it is scary.Don't know how the banks gave them any money.

MarketClown said...

This is the first time cramer was right, besides his famous tirade. Remember this guy told people bear stears was ok and hold on.

Dan said...

(meanwhile, the realtors keep their six percent, and the mortgage brokers keep their bonuses and bribes)

Damn right, and it makes me sick to my stomach.

Anyone want to hear the story of my neighbor here in Santa Monica?

Yeah, the one where a 24 year old receptionist in a movie studio's office, one earning $22K/yr, switches to a career as a mortgage broker in 2005, and by the end of 2006 she's driving around in a new $70K Mercedes that she paid CASH for? Seriously.

Yeah, that's how f***ing insane this asylum was (is?)

And guess what, dummies? You and I are paying for Heather's Mercedes (indirectly) through our taxes. Nice job, government, thanks for having our backs.

Excuse me, I have to go throw up now.

Lost Cause said...

He has a point. Nobody is going to be able to refinace out of the debt trap.

Anonymous said...

Keith, Olympic is over, it's good time to attack China! Go ahead

Frank@MarketingOpus.com said...

Well at least the nutjob got something right for once.

Anonymous said...

Every house? that's sick!

Anonymous said...

He's also saying all the "pain" is over in 7 months. Not likely, and he's still talking about option arms - he's missed the point that the declines are going to affect those without arms as well, and they'll walk too. In 7 months (really closer to a year, because of the timeline of foreclosures to auction)..People with good credit and good mortgages realize the $300-600k house they bought is now worth $150-$300k.. that is when the SHTF... got gold?

Jack Walsh said...

ok so everyone knows Cramer is a bit of a loon and doesn't always get it right, but at least he's the only guy out there (from inside the mainstream) with the balls to say exactly what he thinks and tell you the things no one else would dare say.

home prices are just halfway to the bottom. if a homedebtor sells their house now and waits about 2 years, they could buy their home back for 30-50% less than it is "worth" today (once prices return to their sane pre-bubble levels)

Anonymous said...

Anyone who predicts 100% of anything will happen is a fool.

Anonymous said...

Please, I beg you. No More Cramer.

Enough useless assholes. No More Cramer.

Move On.

You're Welcome

Daphne64 said...

A case could be made for 80%.

He's ignoring the fact that some parts of the country are not depreciating much, that a significant number of folk with ARMs can continue paying or refinance (perhaps privately - say from elderly parents), blah blah blah. Some of those loans already have been refinanced into fixed rate mortgages.

He's not too concerned about his credibility by predicting 100% default.

Anonymous said...

A stopped clock is correct twice a day.

Yoski said...

100% might be a bit high but realistically we're probably looking at 80-90% of those type of loans eventually going into default.

bickerer said...

100%, That's a lot right???

mickeyc said...

Cramer is actually ALWAYS right about everything.
He says every side of every argument sometimes mere days apart.
He calls bottom about every three weeks and at some point he will nail the bottom.
You can fool most of the people most of the time.

Housing izz F'd said...

NOT SO FAST Cramer!!!

WTF?? Why do you continue to talk out of both sides of your A$$?? One minute you are telling everyone how eff'ed up housing is, and "DONT YOU DARE BUY A HOUSE THIS YEAR OR YOU WILL LOSE MONEY"...Then just a few weeks ago, you told everyone to buy a house in the next 6 months because we are at or near a bottom!!!

With all of these defaults, expected in wave after wave, housing prices will do nothing but plummet for at least the next year!! As Peter Schiff says, it is like a pendulum. It dosent just swing far to the right and then back to the middle~~ it swings back to the left on the way down, just as far as it swung up on the way up!!

Makes sense to me~~ I think they will be GIVING houses away to people with money and good credit in a year or two...seriously.

Anonymous said...

Hey Asswipe--

If Heather paid CASH for her Mercedes, then taxpayers are NOT paying for it!!

Cash is CASH, Moron.

Ross said...

Everyone is so down on Cramer, but I don't understand why. He was the only one to actually take a stand and speak out when it was obvious that the Fed and Bernanke, Poole etc. had it all wrong.

Aside from all that the guy is an entertainer and should be viewed as such. How is he supposed to know what's good for your portfolio when he doesn't know what's in it?

Every time someone calls in to my brokerage and brings up Cramer as their source for investment advice, they are always unhappy. Go figure. Let the guy be the clown he is and stop acting like he is your own personal financial consultant.

And if you watch his rant from last August again, he made the same prediction then about ARM borrowers, just not quite as declarative.

CV said...

Actually anybody who has an ARM that will be adjusting in 08' or 09' will be better off than a fixed rate! that would included most subprime borrowers, it's a blessing to be on an ARM when rates are low and the economy is in a tailspin. Check your margin against your index, in most cases especially FHA loans your rate will go down...The problem isn't ARM's it's a weak economy and lack of job creation. The government is working around the clock feeding us bogus employment numbers and bending reporting rules so most major companies are posting false profits it's corruption at it's finest. 2009 will be an absolute bloodbath as companies post profits while at same time write bad checks, solvency will be a huge issue, you can only play the game to a point. Lot's of CEO's and CFO'S will hitting the hen house so enjoy it while it last.

CV said...

Actually anybody who has an ARM that will be adjusting in 08' or 09' will be better off than a fixed rate! that would included most subprime borrowers, it's a blessing to be on an ARM when rates are low and the economy is in a tailspin. Check your margin against your index, in most cases especially FHA loans your rate will go down...The problem isn't ARM's it's a weak economy and lack of job creation. The government is working around the clock feeding us bogus employment numbers and bending reporting rules so most major companies are posting false profits it's corruption at it's finest. 2009 will be an absolute bloodbath as companies post profits while at same time write bad checks, solvency will be a huge issue, you can only play the game to a point. Lot's of CEO's and CFO'S will hitting the hen house so enjoy it while it last.

Anonymous said...

The Mexican...

He is wrong, it all depends on how much down payment was used to get the loan.

les said...

ARM should adjust with inflation (interest rates usually rise with inflation). Bernanke is keeping rates steady to prevent the ARM payments from exploding. Making the rest of America suffer.

Ohio Loan Officer said...

I know a couple, he's a $60,000 a year fireman. She's a M.D. working as a resident. They are walking away from a $160,000 home they bought last year. 4 clones of their house on the same street are for sale for less than what they owe, two in foreclosure.
These are not people who CAN'T make the payments. It's people who DON'T WANT TO make the payments.

Miss Goldbug said...

Here in the bay area, 76% of mortgages during those years were mostly all subprime loans. Even people with excellent credit had to get subprime loans because their income ratio was out of the 28% income vs loan amount.

Timber.

Miss Goldbug said...

Here in the bay area, 76% of mortgages during those years were mostly all subprime loans. Even people with excellent credit had to get subprime loans because their income ratio was out of the 28% income vs loan amount.

Timber.

k.w. - Southern Ca. said...

It's safe to say that many will have no choice but to throw in the keys - I don't know about 100% - but it will be bad enough for many people.


I was down in Belmont Shore Ca. for the weekend - I was amazed at how many "bank-owned" properties are now popping up. So many of these places are small little shacks sitting on postage-sized lots - I'm amazed anyone would put a downpayment on one in the first place.

Now, the reality is coming to light the so many people are in really deep trouble - regardless of their income - it's a really big mess, and it's just getting started.

Housing should have never become speculative.

Anonymous said...

ok, here's what's missing...

A 100% would apply to those in CA, the northeast corridor, Chicago, FL, etc. All bubble zones.

It's probably closer to let's say 20-30% in places like Omaha and Buffalo where prices have been pretty flat throughgout the decade.

So, all and all, given population distributions, it's probably some 70-80% nationwide of option ARMs bought in the past 5 years.

k.w. - Southern Ca. said...

Again, I'm not sure about actual pecentages (they seem to change daily), but one thing is for sure ... where prices were speculated the highest (here along the coastal cities), prices are sure to fall the steepest.

It's a long scary ride to the bottom for many folks.


Anonymous said...
ok, here's what's missing...

A 100% would apply to those in CA, the northeast corridor, Chicago, FL, etc. All bubble zones.

It's probably closer to let's say 20-30% in places like Omaha and Buffalo where prices have been pretty flat throughgout the decade.

So, all and all, given population distributions, it's probably some 70-80% nationwide of option ARMs bought in the past 5 years.