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| 60 Minutes: A Second Mortgage Disaster On The Horizon? |
| 2008-12-15 |
| (CBS) When it comes to bailouts of American business, Barney Frank and the Congress may be just getting started. Nearly two trillion tax dollars have been shoveled into the hole that Wall Street dug and people wonder where the bottom is. As correspondent Scott Pelley reports, it turns out the abyss is deeper than most people think because there is a second mortgage shock heading for the economy. In the executive suites of Wall Street and Washington, you're beginning to hear alarm about a new wave of mortgages with strange names that are about to become all too familiar. If you thought sub-primes were insanely reckless wait until you hear what's coming. One of the best guides to the danger ahead is Whitney Tilson. He's an investment fund manager who has made such a name for himself recently that investors, who manage about $10 billion, gathered to hear him last week. Tilson saw, a year ago, that sub-prime mortgages were just the start. |
| Posted by:Delphi |
| #8 Frozen Al, Good for you; that is work that needed to be done to address the real problem here, which is the difficulty that people who bought a house TO LIVE IN might face when the bubble market they purchased in bursts. Those people who are finding themselves underwater both need and maybe even deserve a little temporary help staying in their home. Widespread home ownership conveys an overall benefit to society since it inspires a great deal more involvement in the community. Something which assists low-equity homeowners in continuing to own rather than walk away from an "underwater" home would be a good thing, although my personal belief is that the only long-term answer is a HEAVY dose of shame accruing to those who mismanage their personal finances so badly as to invite foreclosure/bankruptcy. I recently read that if there were that many people repossessed and evicted you would be seeing pictures of them on the national news, particularly back before the election. Since I'm NOT seeing these pictures, I'm very strongly tempted to believe that many of these homes that have been repossessed or abandoned were either spec or flip homes owned by people with very little, if any, of their own money in them. YMMV. |
| Posted by: Jolutch Mussolini7800 2008-12-15 17:27 |
| #7 I'm with Jolutch on this one. In fact the 1st version of the Mortgage Crisis was what would happen when these teaser rates expired and people's payments doubled or tripled. The only caviat to the story is: If the price of the home is under water, the borrowers might choose to walk away from it rather than make the higher payments. If people have good credit and have been making their regular payments, the best thing is to refi (with another bank if necessary) for a fixed rate. Wells Fargo has a rapid refi program for just this situation, as does the State of Minnesota. (I know cause I helped develop them) |
| Posted by: Frozen Al 2008-12-15 16:34 |
| #6 This guy is peddling something that's old news. I've known about the Alt-A and Option ARMs for quite some time now. It's not going to be anywhere near the crisis he's claiming it will be because most of the people who received these things can a) still pay their mortgage debt even when they reset, and b) won't be facing a great raise in their mortgage payment simply because the LIBOR rate (to which most of them are tied) won't rise that much. This is more 60 Minutes hyperbole. These people have spun and flat-out lied about so much for so long they should be put out of business in the national interest. Their credibility for me is nil. |
| Posted by: Jolutch Mussolini7800 2008-12-15 15:30 |
| #5 As much as it galls me to say this, I'd just assume see the government step in to reset these mortgages by equalizing the principal to the "value" and set the interest to a market rate. Then let those who can't pay that go into foreclosure. The thing is, as much as I hate to give a free ride to these idiots, I'd hate to see the entire economy go tits up. Of course you are going to have to pick a few of the big financial institutions (preferably ones not over-leveraged in these mortgage backed securities) and give them a boost otherwise the banking system will collapse. Ultimately, we're screwed. I don't think the global economy will be able to handle the strain. There's more bad news to come. Just wait until the Credit Card markets pop. And we have gotten to auto loans. Yikes, more defaults on the way. Of course, the democrats pushing loans to people who couldn't afford them and the Clinton-era removal of the seperation between banks and investment firms is mostly to blame. But let's not overlook simple greed, that basic mortal sin, as being the true culprit. Greed in the financial sector to greed in our daily lives...this insane need to "keep up with the Joneses". It will be our downfall. |
| Posted by: AllahHateMe 2008-12-15 14:11 |
| #4 The mortgages reset on anniversaries. Houses sell in the spring. Try July to September of 2009 and 2010. Should be interesting mid-terms. The solution is for the FHA to re-fi teaser rates mortgages now with full recourse mortgages with the owner giving an equity kicker to the government and with the bank getting 80 or 90 cents on the dollar. |
| Posted by: Nimble Spemble 2008-12-15 12:36 |
| #3 Caught a few minutes of this (came on immediately after the game). Interviewer will have to bush with 80 grit for days to get the taste out. Sounded a bit like this, "The KC Chiefs really are the best team in football right now; they didn't lose in the final seconds they won by giving up their win so that the Chargers continue to have their opportunity to compete for the Super Bowl. And you see, with a loss KC moves forward in their goal of the first draft pick edging past old AFC West rivals Seattle and Oakland. Detroit still leads in the first pick race but since they are in different markets there should be minimal cross effect and there are many talented players coming up." When asked how rookies will be able to even the field against experience veteran players it was answered, "Well its simple really. All players with more than 2 years experience will be required to drink 5 shots of juarez tequila to be eligible to play before each half, and the play action pass will be an illegal procedure penalty." |
| Posted by: swksvolFF 2008-12-15 12:32 |
| #2 That's ok. Obama promised that we wouldn't have to pay our mortgage or gas bills anymore -- it'll all be taken care of. |
| Posted by: CrazyFool 2008-12-15 11:46 |
| #1 Don't expect to see the true price of the credit crash until this time next year. I expect to see 3.5-4 trillion dollars in losses. |
| Posted by: DarthVader 2008-12-15 11:28 |