Would someone explain that to me? I don't get it.
Subprime loans are usually low (or no) downpayment loans to bums. Once a loan balance exceeds the value of a home, the bum figures, "Why bother?" And then the bum waves goodbye to the house and basically says to the bank, "Enjoy your new house." Because he's a bum.
As values fall, more and more bums take their cue.
Tough to refinance a $ 500 000 house with a $ 450 000 mortgage when the price of the home drops to $ 400 000 in value. Value of the home is smaller than the loan amount. The $ 450 000 mortgage note held by the lender could not be bundled and sold to a re mortgage company because they cannot come up with a discount price for the mortgage. If the lender cannot sell off his mortgage notes, he cannot go to the bank to borrow more money to lend to new home buyers. The cash flow starts to freeze up, making the money available to new homebuyers, carbuyers and business to borrow. Economy starts to gum up.
I think he means to say:
So far, the feds have refused to line up more suckers to keep the Ponzi scheme going.
Would someone explain that to me? I don’t get it.
He’s holding lawmakers hostage to his crisis. Basically he’s saying, “I may have made the mess, but folks are going to blame you guys if you don’t fix it.” And he’s right.
As long as [house] values keep falling, the subprime situation will get worse.”
Would someone explain that to me? I don’t get it.
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Very simple ,, if you bought a house at the limits of your paying ability on an ARM with anything less than 20% down and that ARM is set to reset higher in 0-24 months from now you are now “upside down” on the house as the valuations have dropped and you cannot refinance the full amount,,, since you cannot write a check for the difference in value you are unable to refinance... the rates go up 2%,3%,4% or more on the reset , your monthly payment jumps lets say 40% and you start missing payments and living off your credit cards until you file bankruptcy..