Mortgage defaults spread as even 'safe' borrowers falter

[Newsjock]

Source: Sacramento Bee

The mortgage default crisis has an ominous new face. It's your neighbor with a traditional fixed-rate loan.

No longer is the real estate bust simply the result of exotic, subprime loans that doubled payments and blew up in homeowners' faces. As the Sacramento economy buckles, even the safest mortgages have become part of a new wave of loan defaults, experts say.

With capital-area job losses reaching 45,000 in the past year and unemployment at 11.1 percent, lenders, bankruptcy attorneys and debt counselors all say they're seeing rising delinquencies among prime borrowers with fixed-rate loans and good credit. Many of those slipping into trouble are state workers, the mainstay of Sacramento's economy.

... There are 3.3 million of them in California – 56 percent of all mortgages. But nearly 4 percent were delinquent in the first quarter, according to the Mortgage Bankers Association. That number was less than 1 percent two years ago, when the default crisis was dominated by subprime loans.

... Forecasters at Stockton's University of the Pacific predict unemployment in the capital region will peak late next year at 12.3 percent – and remain in double digits through 2011. If so, problems with prime loans are likely to linger in a region having a hard time catching a break.

Read more: http://www.sacbee.com/topstories/story/2017811.html

[SpiralHawk]

1. "This is all Obama's fault. Smirk." - xCommander AWOL Bush (R)

[kirby]

10. OMG - Morph of Bush and Dukakis! n/t

[sarcasmo]

12. Was that a mad magazine cover?

[high density]

2. Well if people don't have jobs, they can't pay for their freaking houses

Duh?

[kirby]

11. It's CA, just pay with IOU! n/t

[PassingFair]

3. Time warp.

Welcome to Michigan....two years ago.

The cancer is spreading.

We can't be a society that supports
.5 percent of the population in un-
believable luxury leaving the remaining
serfs selling cellphones to each other.

Thank gawd Obama stepped in and floated
the auto industry. I say that WITHOUT
a trace of sarcasm.

We were SUNK.

[dixiegrrrrl]

4. This, and failing commercial loans also, was predicted a year ago

by Deninnger, who clearly saw what apparently the government could not see...
rapidly increasing unemployment means no money for home or business loans.
And it will get much worse. Ca. is always the bellweatehr of any trend.

I do so much recommend the Market Ticker site, for a peek into the future, and how to prepare for it.
http://market-ticker.denninger.net/archives/P1.html

[destes]

6. Denninger makes a lot of claims to understand a lot of things...

...and he may well have a good handle on the situation. But he pinned the problems of today on events of 2000 and "the last 2 years" while omitting the years in between where we all know there was either out and out corruption or criminal negligence from our federal regulators, I'd say he's pushing an agenda. It's probably innocuous enough. He just wants wealthy supporters to invest in him and the wealthy are still, for the most part, people who don't want to hear about how 2001-2008 were years where congressional/executive leadership and oversight failed their obligations.

But these are dangerous times. There is no good to come from obfuscation. Almost everyone will be forced to take a hard, honest and clear-eyed look at themselves, their lifestyles and their chances of survival. No exceptions. There is no good to come from obfuscation.

[Grinchie]

8. As far as CRE is concerned, much here in the Bay Area has been empty

For the last 2 years. I'm talking 40 to 100,000 square foot heavy industril, with private railroad spurs, acres of paved over land, fenced and developed for anything an industrialist would desire. It is also less than a few miles from the port of Oakland, and a population that could supply labor in a heartbeat.

Empty, Idle, and growing bumper crops of Russian Knapweed, the most horrible invasive type of thistle on earth.

Add to that, many malls have lost their anchors, and the decline is increasing.

I have never seen anything like this in my lifetime, and it started happened 3 or four years ago, but as long as their was a housing bubble, nobody gave a damn.

Thanks Greenspan! Thanks Bush!

This will be a great way to depress wages so the Corporations can move back in and exploit the American Worker again.

[bertman]

5. "Safe borrowers". Apparently that is nearly an oxymoron these days. In N.C., homeowners

who are fully employed, who have sterling credit records, and who normally would be highly sought-after borrowers are having one hell of a time even getting a loan.

The process has become fraught with appraisals, re-appraisals, underwriting, and re-underwriting to the point where very few equity loans and new home mortgages are being made.

This is killing the possibility of recovery of the home bulding and remodeling industry and the associated businesses that supply them and their subcontractors.

I sure hope this is about to swing in the other direction because if it does not a LOT MORE businesses are going under.

[Grinchie]

7. The Third Wave cometh.

Here in the Bay Area at the moment, I live in a nice neighborhood with fine schools, and infrastructure.

In the last week, 5 REO's appeared and people are starting to have more and more yard sales. The traffic is next to non existant, and you can actually hear the birds again.

We are in for a pretty wild ride this fall, as a nation.

[DCBob]

9. This is not good news.

It is hard to imagine a happy ending to this mess.

[caseymoz]

13. I happen to believe what Robert T. Reich says: no recovery in sight.

Consumers are hurting bad. They are not recovering. They don't have jobs, they can't borrow, even borrow against their homes since home-values are so far down, many of them owe more on their homes then those homes are worth. Unemployment is still rising, and consumers do not feel secure. I've heard some say that jobs would be a "lagging indicator" in the recovery. Say what?

But there will be no recovery until there are jobs and money at the consumer level. They could bail out the banks, hoping that it will "trickle down" but it isn't, unless the consumers have money, forget about a recovery.

They better start on some Keynesian "percolate up" economics.

[eilen]

15. I think this time he is right

I did not agree with an earlier WSJ editorial he wrote regarding jobs outlook, I felt it was unnecessarily optimistic and well, elitist. But this last opinion he has written regarding recovery is true. We will not see recovery, we will see transformation.

Unfortunately, there will be a lot of people scarred by this. I think we will find a better balance in the end. This is not a recession, it is a correction. Those that over-reached are getting burned as well as the innocent who relied on them.

My considered opinion and instinct is to continue to hunker down.

Right now my family is in pretty good shape but still, this week we have decided to get rid of the house phone line and the pay tv channels, and the dvr. I doubt we will totally cancel the cable as it is relatively cheap entertainment. We are also looking at the gym membership.-- thinking of stopping it-- we might renew in the winter, we haven't decided yet. My dh is looking for a pick up truck (he can do deliveries or plowing on the side if unemployment goes too long after the summer).

[hunter]

14. I talked Friday with a guy who is walking away from his home.

He owes more than the home is worth, his business income keeps shrinking, and he no longer think things are going to get any better. He's no longer a "pull yourself up by the bootstraps" Republican either.

He and his wife have rented an apartment they can afford on just his wife's salary, having decided her income is much more stable than his.

It's sad because they've lived there a long time and expected to stay there, but they borrowed money for major home improvements a few years ago, and now they are losing the house. I guess I'll be watching their landscaping die as I drive by, I don't think his neighbors will take care of it.

On my street people have been pretty good about not letting foreclosed properties get too run down, but you'd think the lenders would care, or pay someone to care; perhaps the real estate agents who are listing the houses. But quite a few empty houses don't even have signs up. They just seem to be sitting there in some kind of limbo.

If I was young and single, wild and free, I'd be thinking about moving into one of these homes. I'll bet one of the neighbors would set me up with a water hose and a power cord if I kept the front yard neat...

Our city is overflowing with empty houses and commercial properties the banks won't sell, and now this couple is going to move into an apartment thereby forcing rents up for people who are even less secure than they are.

The U.S. economy is broken.

[cap]

16. well, what did you expect when you furlough state workers?

When you furlough people who used to be able to count on a steady paycheck to pay their bills, what did you really think would happen to their mortgages? Way to go, Arnold!

Yes, let's hear it for the Republican legislatures who want to cut the government even more... net result: even more mortgages of state workers in the toilet!

Trickle Upon Economics At Work.

[lunatica]

18. duplicate

[lunatica]

19. University of California employees are facing furloughs

Which will take effect in September. We're still waiting for the other shoe to fall, and they've basically told us it will.

But it seems their plan to furlough is fair. It's based on a sliding salary scale so those who make more money, traditionally the highest positions in Administration and the faculty, are being cut more than the staff, especially the lowest paid staff from the clericals down. Everyone is taking a hit from the top to the bottom, but thousands of jobs are being saved on all the campuses (nine campuses, or maybe 10 with UC Merced) because of this plan. They claim and I believe them from past actions that it'll be in effect for 12 months and will revert back to normal automatically. Of course they may have to revisit the problem again. I suspect this won't be over in a mere year, and it could be things would be even worse.

Having said that there are departments that have already been cut way back as far as laying people off. When that happens they also lose the position entirely which is bad in the long run. Some have had to lay off 20% of their staff. But for the majority it mean we keep our jobs at least and maybe hunkering down can become a life habit again.

[cap]

20. Furloughs still hit the mortgages

no matter how fair or unfair they are.

[lunatica]

17. My question is, who pays the property taxes on these empty houses?

Do the banks who now own the houses pay property taxes on them? Or does the city, county and state just eat it, thereby compounding the problem?