Housing nightmare: Your home is crashing in value, you lost your mortgage broker job, you can't refinance, and you've maxed out your home equity loan

So what is the "Ultimate Great Housing Crash Nightmare Scenario"?

You just know there are a millions and millions of people who made really bad decisions these past few years, who are regretting them now. Kent and Mysti from the other day were a good example, but there's many more out there even worse off than that.

So what's the worst it can be?

My take - anyone who's housing screwed can just walk away. Turn in the keys. Go rent. Find a new job. It's just money, it wasn't your house anyway, and there are more important things in life.

And next time, don't listen to anyone on commission. They'll screw you every time.

So the "party all the time" Americans owe $1.1 TRILLION in home equity loans (HELOCs). How much of that do you figure won't be getting paid back?

Boats

Cars

Hookers

Cocaine

Granite Countertops

And one hell of a spending binge these past few years. Free money! Free money! Oh, crap, you mean it has to be paid back? But that's not fair - my home value has plummeted. OK, screw it, you can have the damn house. Here. Take the keys.

thanks ace...

Home-Equity Loans May Be Next Round in Credit Crisis

Little by little, millions of Americans surrendered equity in their homes in recent years. Lulled by good times, they borrowed — sometimes heavily — against the roofs over their heads.

Now the bill is coming due. As the housing market spirals downward, home equity loans, which turn home sweet home into cash sweet cash, are becoming the next flash point in the mortgage crisis.

Americans owe a staggering $1.1 trillion on home equity loans — and banks are increasingly worried they may not get some of that money back.

You've read a lot about the subprime meltdown and billions in writeoffs. But you haven't heard boo about "second mortgages". You will.

Get ready.

This next wave of debt-bombs are set to go off all over America. The wildly-popular "80/20" loans allowed the AAA-rated 80's to get sold off to CDO-land and to Fannie and Freddie to investors who thought the buyer was putting 20% down, and the higher interest no-collateral 20's got sold off too, but to who knows who.

And millions also took out "Seconds" in order to fund their over-spending these past few years. What happens to these loans now that the equity they were based on has disappeared? Man, ya gotta wonder if BofA knows the all the crap they just stepped into.

Here's a few juicy tidbits on Seconds:

The loan bomb
Other troubling arrangements are the 80-20 loans - a combination of a first and second mortgage to cover 100 percent of a home's price. The rate on the first mortgage may or may not be adjustable, but in almost all cases the rate on the second mortgage is set to shoot way up.

Straight Talk on the Mortgage Mess from an Insider
Sub-prime aren’t the only kind of loans imploding. Second mortgages, hybrid intermediate-term ARMS, and the soon-to-be infamous Pay Option ARM are also feeling substantial pressure.

The ’second mortgage implosion’, ‘Pay-Option implosion’ and ‘Hybrid Intermediate-term ARM implosion’ are all happening simultaneously and about to heat up drastically. Second mortgage liens were done by nearly every large bank in the nation and really heated up in 2005, as first mortgage rates started rising and nobody could benefit from refinancing. This was a way to keep the mortgage money flowing.

Second mortgages to 100% of the homes value with no income or asset documentation were among the best sellers at CITI, Wells, WAMU, Chase, National City and Countrywide.

HousingPANIC Stupid Question of the Day

Without cheap, easy, abundant and fresh credit, what will become of the American consumer? What will become of the American economy (70% of which is consumer spending)? What will become of our self-image?

Because you know we don't earn enough to actually PAY for all of this stuff...

FLASH: GM runs out of gas, blames housing crash

I guess the fact that GM makes overpriced gas guzzling crappy cars nobody wants is just a side note.

Seriously, for a company this screwed and mismanaged (a car company that owns subprime loans!), I don't know how they can avoid bankruptcy. And the fact that (as HP predicted) the housing crash helped kill the US automotive industry is mind boggling.

For GM, all that cash-out refi loot is gone, never to return. I'd guess HELOC money bought half the new cars purchased these past few years (anyone know the #?). And how many trucks were purchased by people in the homebuilding profession? Those days are over...

Had enough? Here's more... The yen is undervalued. Toyota is kicking their behind. Their pension situation is a time bomb. Their cars are crap. Their workers make a hundred times someone in China would require. They still own 49% of subprime cancer GMAC. And now desperate homedebtors are flooding the used car market with inventory in an attempt to raise cash.

And yes, I'm short GM via put options at time of writing...

Mortgage 'meltdown' hits auto sales: GM's Lutz - Vice chairman sees entire sector hit by problems in home financing market, truck sales to suffer.

LOUISVILLE, Ky. (Reuters) -- The crisis in the U.S. mortgage market has hurt U.S. auto sales this month, General Motors Corp. Vice Chairman Bob Lutz said Monday.

"The market as a whole has been a little weakish. That has come as a result of the housing market problems and the mortgage industry meltdown," Lutz told Reuters. "A lot of people are finding themselves in a position of reduced affordability and that has had an impact, not just on us, but across the industry."