Housing Lenders Fear Bigger Wave of Loan Defaults

The first wave of Americans to default on their home mortgages appears to be cresting, but a second, far larger one is quickly building.

Homeowners with good credit are falling behind on their payments in growing numbers, even as the problems with mortgages made to people with weak, or subprime, credit are showing their first, tentative signs of leveling off after two years of spiraling defaults.

The percentage of mortgages in arrears in the category of loans one rung above subprime, so-called alternative-A mortgages, quadrupled to 12 percent in April from a year earlier. Delinquencies among prime loans, which account for most of the $12 trillion market, doubled to 2.7 percent in that time.

The mortgage troubles have been exacerbated by an economy that is still struggling. Reports last week showed another drop in home prices, slower-than-expected economic growth and a huge loss at General Motors. On Friday, the Labor Department reported that the unemployment rate in July climbed to a four-year high.

While it is difficult to draw precise parallels among various segments of the mortgage market, the arc of the crisis in subprime loans suggests that the problems in the broader market may not peak for another year or two, analysts said.

Defaults are likely to accelerate because many homeowners’ monthly payments are rising rapidly. The higher bills come as home prices continue to decline and banks tighten their lending standards, making it harder for people to refinance loans or sell their homes. Of particular concern are “alt-A” loans, many of which were made to people with good credit scores without proof of their income or assets.

“Subprime was the tip of the iceberg,” said Thomas H. Atteberry, president of First Pacific Advisors, a investment firm in Los Angeles that trades mortgage securities. “Prime will be far bigger in its impact.” (MORE)

http://www.nytimes.com/2008/08/04/business/04lend.html?em=&adxnnl=1&adxnnlx=1217957113-pFlrUGvr7OAaQuMcyPKCbg

We'll all be living in FEMA trailer parks soon, eating MREs. If we're lucky.

I'll start gathering some wood for the campfire -- and for the pikes upon which we will stick the heads of the oligarchs.

re: "Trading is not automatically stopped until losses exceed something like 1200 points.

That could be tomorrow. I don't see buying going into the weekend, since Sunday now seems to be the day of choice of the Treasury and Fed to make dramatic announcements.

Who the hell knows what the world will look like come Monday morning.

Monday Monday, can't trust that day...

re: "Because the rich will always make sure of it.

“You can always hire half the poor to kill the other half.”

-Boss Tweed, Gangs of New York

Recommended reading:

Drugs, Oil, and War: The United States in Afghanistan, Colombia, and Indochina

by Peter Dale Scott

http://www.amazon.com/Drugs-Oil-War-Afghanistan-Indochina/dp/0742525228

re: I drew them a little sketch about what widespread bank failures and massive unemployment could look like

May I recommend that you show them this:

http://www.youtube.com/watch?v=TMYLjlpP0NY

:)

http://www.youtube.com/watch?v=_rtVGbLeCR8

Behind the Panic: Financial Warfare and the Future of Global Bank Power

by F. William Engdahl

"...in every major US financial panic since at least the Panic of 1835, the titans of Wall Street—most especially until 1929, the House of JP Morgan—have deliberately triggered bank panics behind the scenes in order to consolidate their grip on US banking. The private banks used the panics to control Washington policy including the exact definition of the private ownership of the new Federal Reserve in 1913, and to consolidate their control over industry such as US Steel, Caterpillar, Westinghouse and the like. They are, in short, old hands at such financial warfare to increase their power."

http://www.globalresearch.ca/index.php?context=va&aid=10495

sorry about that

Watch this video from CNBC, with billionaire investor Jim Rogers:

http://www.youtube.com/watch?v=xIsHD7nwTbU

JIM ROGERS: "...this is going to unleash rampant inflation around the world, rampant confusion in the currency markets..."

PAUL KRUGMAN: "If a new rescue plan is not announced this weekend, the world economy may experience its worst slump since the Great Depression."

NOURIEL ROUBINI: "At this point severe damage is done and one cannot rule out a systemic collapse and a global depression. It will take a significant change in leadership of economic policy and very radical, coordinated policy actions among all advanced and emerging market economies to avoid this economic and financial disaster."

SCORPIO69ER: "Pass the bong, please."

Behind the Panic: Financial Warfare and the Future of Global Bank Power

by F. William Engdahl

"...in every major US financial panic since at least the Panic of 1835, the titans of Wall Street—most especially until 1929, the House of JP Morgan—have deliberately triggered bank panics behind the scenes in order to consolidate their grip on US banking. The private banks used the panics to control Washington policy including the exact definition of the private ownership of the new Federal Reserve in 1913, and to consolidate their control over industry such as US Steel, Caterpillar, Westinghouse and the like. They are, in short, old hands at such financial warfare to increase their power."

http://www.globalresearch.ca/index.php?context=va&aid=10495

re: "Rogers is the guy you really want to pay attention to."

Watch this video from CNBC, with billionaire investor Jim Rogers:

http://www.youtube.com/watch?v=xIsHD7nwTbU

JIM ROGERS: "...this is going to unleash rampant inflation around the world, rampant confusion in the currency markets..."

Having created the conditions that produced history's biggest bubble, America's political leaders appear unable to grasp the magnitude of the dangers the country now faces. Mired in their rancorous culture wars and squabbling among themselves, they seem oblivious to the fact that American global leadership is fast ebbing away. A new world is coming into being almost unnoticed, where America is only one of several great powers, facing an uncertain future it can no longer shape.

http://www.guardian.co.uk/commentisfree/2008/sep/28/usforeignpolicy.useconomicgrowth