Worse than subprime?

[metalman]

Re: Worse than subprime?

The ongoing flood of mortgage resets, people walking away from their homes, foreclosures, etc. is the main thing that makes me wonder whether serious inflation is on the horizon.

Don't we still have a huge amount of debt deflation ahead?

but deflating debt against the currency is the foolproof way.

[aaron]

Re: Worse than subprime?

The ongoing flood of mortgage resets, people walking away from their homes, foreclosures, etc. is the main thing that makes me wonder whether serious inflation is on the horizon.

Don't we still have a huge amount of debt deflation ahead?

I do not know even know what debt deflation is anymore. I can only see what is on the ground and use simple logic. Only a small percentage of higher income professionals have lost their jobs. The remainder have a lot more money to spend on average since they can tap into their "foreclosure equity". Perhaps home equity was a big part of spending until 2006, although I have my doubts in relation to prime borrowers. But, I can see "foreclosed equity" being a strong driver of spending for this group going forward. Heck, they may even be smart enough to buy some gold!

[metalman]

Re: Worse than subprime?

I do not know even know what debt deflation is anymore. I can only see what is on the ground and use simple logic. Only a small percentage of higher income professionals have lost their jobs. The remainder have a lot more money to spend on average since they can tap into their "foreclosure equity". Perhaps home equity was a big part of spending until 2006, although I have my doubts in relation to prime borrowers. But, I can see "foreclosed equity" being a strong driver of spending for this group going forward. Heck, they may even be smart enough to buy some gold!

what is debt deflation?

J: What is you definition of debt deflation?

K: Okay. A debt deflation is where you have an unsustainable level of debt in an economy, so a level that has already caused a crisis and therefore the types of affects we’re seeing with a credit crunch start to occur. And those are regarded as threefold. First of all people try to reduce their debt. Secondly, banks that were allowing a large rate of creation of new money are no longer willing to allow the creation to occur, certainly not at the same rate. And thirdly the banks are tempted to in turn reduce available funds for re-lending that in particular drops drastically. So rather than going to an airport and having to fight your way past half a dozen booths that are trying to give you a new credit card, suddenly credit cards scarce and you’ll find your credit card limits being reduced rather than expanded.

[aps1087]

Re: Worse than subprime?

Walking away wouldn't necessarily be so bad if it weren't for the fact that the taxpayer has to pick up the tab for losses. When you sit in your home mortgage free, do you really think that is free? Someone is paying for it, and it won't be the banks.

[cjppjc]

Re: Worse than subprime?

Servicers require information before approving a short sale. That information often includes:

Bank Statements
Pay Stubs
Tax Returns
Hardship Letter

Under Karim's posted scenario a short sale would in most cases NOT be approved due to lack of hardship. The lender/servicer would expect payments to continue or other assets tapped to make up the shortfall.

With all due respect to you and the information you have provided. The bank in the end will okay the short sale. If you have money they say will ask you to put some skin in the game. In the end they hold NO CARDS.

[flintlock]

Re: Worse than subprime?

I have no problem with people in places like California walking away, where you put $300k down and still are upside down. :eek: The bank gets its collateral back, and the whole market was so manipulated, I don't think people should have to lose everything because they were duped into thinking our economy was based on reality. But living there for 2 years without paying? That's a different story.

I know a buddy who made it almost 20 months without a payment before he got kicked out of his house. And that was three years ago! He was trying to work a short sale but couldn't make it happen.

[swgprop]

Re: Worse than subprime?

With all due respect to you and the information you have provided. The bank in the end will okay the short sale. If you have money they say will ask you to put some skin in the game. In the end they hold NO CARDS.

I agree, in most cases they have only one hammer, they can take the house, no bargaining position beyond that. Doesn't mean they will always take the logical path however. If logic dictated business practices we wouldn't be in this mess.