From today’s Financial Times: “the failure of a small Californian mortgage lender yesterday increased nervousness in the credit derivatives market about the large number of US “subprime” mortgages extended this year… its failure is the latest in a series of ominous developments in the market for subprime mortgages.”
Of condos and homes built by the area’s largest builders—Shoma, Caribe, Century, Lennar, Centex, Horton Homes—what is the percentage of sales based on subprime mortgages? What is the historical foreclosure rate on these mortgages compared to foreclosures in the last three months?
We would like to know because it occurs to us, that the 13 members of the Miami Dade county commission and Miami City Commissioners who facilitate turning the region into a chop shop for condo and production home builders—lead by Natacha Seijas for the county—might take reality into account.
So far, mortgage lenders have been hanging on doggedly with frozen smiles. But you can see the vultures circling.
Little people can’t pawn their debt the way big banks can. If the pain starts spreading to bigger financial institutions—hang onto your hats.
4 comments:
So, what else is new? This is what happens during a boom. The bottom-feeders in the sub prime mortgage business take advantage of the little guy on the street who feels left out by the market. They convince these people that they can stretch to buy their piece of the pie. They don't explain to them what they're getting into and only care about the sale. Well, it's too bad people can be so careless and ignore rule #1 of borrowing money: if you can't read the fine print, make sure you hire a mortgage broker/lender you trust.
So, those of us in the mortgage business who do a lot of explaining don't feel sorry for the people out there who hire brokers who tell them what they want to hear.
Well OK, there are plenty of views that can all be justified with one argument or another, but the blame I would start with is at the opposite end of the spectrum from the idiot who buys more home than he can possibly afford, tied to one of those genius contraption mortgages that only make shareholders of the lending company rich.
I'd start with Alan Greenspan who allowed successive bubbles in the US economy: first in stocks and second in the housing market, when the Federal Reserve drastically lowered rates to cushion the blow back from the internet hysteria.
Consumers are careless in part, because Greenspan preached sobriety and did the opposite: elevating expectations of financial returns that allowed, over time, consumers to borrow for more, and at far riskier costs, than ever before in American history.
We've been calling this period the golden age of home ownership. Well, we will see won't we?
A ton of smart money has left the production home builders in the past six months.
Meanwhile, for the consumer, what a surprise to discover one's mortgage is much higher than the value of one's home.
Some people will tough it out, but lots won't. And so a small mortgage company going belly up in California will likely be followed by larger failures up the food chain. It will be interesting to see how far up the food chain, the process of unwinding the housing bubble goes.
The question is why elected officials roll over like beaten dogs for every zoning and permitting decision when the consequences are so clear.
The footprint of bad zoning decisions is etched in the ground forever, leaving us with the results, while the last in line for expected profits are wiped off the map.
These are not views that one reads, ever, in the Miami Herald.
It looks like gimleteye has gone off the deep end. Hellooooo.....knock, knock, we live in America, the land of capitalism. Go ahead and blame the system, its elected officials, developers... everyone except those who vote for those elected officials and those who chose to stay home and not give a damn. And of course, there's the poor consumer who's at the mercy of the advertisers and bad salesmen.
Everyone plays a part in this soup, my dear Watson, so snap out of it!
Never heard of sub-prime until I read this article. Very sad for people living hand to mouth. The insurance raises can push them over the edge. What about interest only loans? What is happening to those people?
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