Here's a great example of the looming sub-prime implosion

[NewYorkerfromMass]

In fairness, I am not quoting this whole story from dailykos, nor giving away the ending, but this is an incredibly poignant frontline anecdote that should make us all shudder.

The Subprime Disaster in One E-Z Anecdote

by TheWurx
Fri Mar 30, 2007 at 11:49:23 AM PDT

... I work for a subprime mortgage company, and I recently got a stated refinance on my desk. "Stated" is one of the tribes of loans that require minimal or no income documentation. In our case, the borrower shows his employer, and the employer verifies that the employer works there, the hire date and his position, but we receive no income documents and the employer gives us no income information....

...So I got this stated wage earner file. He worked as a warehouse manager for a famous Big Box retailer, and stated that he earned $3,200 a month. His loan would require monthly payments of $840 a month, not including insurance and taxes.

Because of the recent slaughter in the subprime markets, we tightened most of our lending criteria considerably, including no longer accepting stated wage earner applications. The borrower had to resubmit his application as a full doc and had to supply his paystubs and W-2s. It turns out that according to his documents, he earned $600 a month working part time in this company's warehouse. He didn't even earn enough in a month to make his payment, even if he had no other expenses!

A month earlier, we would have closed this loan. We closed thousands of loans just like this. That is why, even without any substantial rate hikes, the subprime market has bottomed out. And it will not come back....

http://www.dailykos.com/story/2007/3/30/142246/479

[soothsayer]

1. wait until nonchattel loans pop up to replace subprime (no payments

for three years, then you start paying, but the loan isn't tied to your house, it's tied to YOU. Can't get out of it thru death or bankruptcy, the debt passes to your heirs. Welcome back indentured servitude and debtors prisons!). Today's kooky conspiracy theories may be tomorrow's realities...

[htuttle]

6. I think I read about Japan having those a few years ago

[JNelson6563]

2. This is going to be bloody

If I were a financial advisor my advice would be "Run for your lives!"

Ugh. :hide:

[SoCalDem]

3. A "money-honey" last month actually said this:

paraphrasing a bit...

"really though, a person making less than $40,000.00 a year should not even consider buying a house that costs more than $400,000.00"..:wtf:

the HOUSE payment on a $400K loan would NEVER be affordable to anyone making that little..

example:

[Dr.Phool]

4. And if they tried to buy that house in Florida today,

Their taxes and insurance could well equal the principal and interest.

[NewYorkerfromMass]

5. Related news: 'Credit Suisse sues subprime lenders'

Credit Suisse has filed lawsuits against at least three US subprime mortgage lenders, marking an escalation of efforts by Wall Street banks to use legal action to purge themselves of bad housing loans....

...The legal action comes as Wall Street seeks to limit damage from the subprime collapse. Banks including Credit Suisse, Bear Stearns and Lehman Brothers helped fuel the boom in subprime lending, providing billions of dollars to lenders as they bought mortgage loans to sell to yield-hungry investors.

In recent months, amid a spike in payment problems, banks have cut off credit and demanded that lenders buy back soured loans. That has helped drive many lenders including ResMae Mortgage Corp and Ownit Mortgage into bankruptcy and pushed others such as New Century Financial to the point where they are unable to issue any new loans. The coming wave of lawsuits is expected to threaten other subprime companies....

The problems in the subprime mortgage market threaten one of Wall Street's most profitable businesses - packaging such mortgages into bonds and selling them to investors. Banks earned nearly $2.6bn in fees for underwriting mortgage-backed securities last year, Thomson Financial says.

http://www.msnbc.msn.com/id/17860982/

[NewYorkerfromMass]

7. NPR story today

Goods web-story with maps and graphs:

http://www.npr.org/templates/story/story.php?storyId=9248739