Posted on 10/29/2007 10:00:06 AM PDT by zek157
Rising mortgage payments and tighter lending standards for refinancing amid the subprime credit crisis have dried up once-easy access to home equity loans for many middle-income borrowers -- so desperate borrowers are using credit cards to cover basics while trying to keep up with home payments.
Now we know why Congress has made it damn near impossible to declare bankruptcy now.
“Now pull off that same trick after you and your wife get sick and can’t work like we did.”
That is one of life’s curveballs that could get anyone. The only difference between families is how many days/weeks/months/years it would take to get in trouble from having only one check coming in.
We use a card for everything, but don’t buy spurious BS whenever we want. Cards are tools. You don’t play with chainsaws and you don’t make excessive purchases with your card.
While your entire post rang true and sounds compelling, the key to me was the phrase, “”We’re deep into uncharted territory...”
Many people think this is a normal housing down turn. Like this is a normal housing cycle. There is nothing normal about thethe fake cash, loose money and enormous leveraging that inflated that massive bubble. The fallout will be equally unusual.
It is going to take much longer than previous cycles. People who bought at peak house prices will see more depreciation than previous cycles. We are already seeing unprecedented change in the rate of foreclosures. The same is true of the rate of massive losses being admitted to by those holding toxic loans when the music stopped.
Everything about this crisis has been “deep into uncharted territory. Who knows, maybe the bail out will be as well.
I don’t expect this to be as bad as the collapse of the tech bubble in 2000, since homes are illiquid, but the 70% GDP supported by consumer debt spending is going to be impacted heavily, even if the Fed drops interest rates back to 1%. For several years into the future at least, the consumer spending party is over, and the economy is going to feel it.
Lots of people here will disagree, I’m sure. Lots here still believe this is just a typical correction in housing. As is so often the case, many people won’t believe or accept the unprecedented nature of this crisis until it has run its course and they see in hindsight the collapse in house prices, the long duration houses do not appreciate, and the impact that has on the economy.
Most people won’t believe the stock market can fall again. This time it’s different, right?
Not that any of this matters. All you can do is save your money, don’t take big risks and hope for the best.
I just wonder what bubble is replacing housing?
I agree with some (prolly most) of ex-T’s complaints... so I’m just pulling his leg. But thanks for the tip on how NOT to do it! ;-)
On the other hand, I agree with Ron* that whatever problems we Americans face, we’re bigger than the problems, and will get past them, with the help of God. So I’m not quite as pessimistic, and definitely not suicidal!
* that’s Ron(ald) Reagan, not Ron Paul! heheh
They never owned a house, the bank owed it. Someone should tell them they are making a bigger mistake.
Oil.
I hope...
I wonder that same thing. Tulips, maybe?
“said the 31-year-old, a compliance officer at a small bank on Chicago’s blue-collar South Side”
That bank sshould fire her immediatly!
Interesting idea.
I wonder what a “compliance officer” does?
Forgot to add, if you were on board in 2003, then major kudos to you for exceptional foresight! I didn’t have my radar up and wasn’t aware of the cause of the housing bubble.
I knew the massive, quick increase in house prices were not justified by meager increase in salaries, let alone inflation adjusted. I knew that house prices had to bump up some due to historically low interest rates. I knew that interest only, ARMS and jumbos were prevalent here in the San Francisco bay area, but had NO IDEA how prevalent they were elsewhere.
I was completely ignorant until 2006 about no-doc and NINJA loans, or about CDOs and derivatives.
I still didn’t buy a home because they struck me as massively overpriced. Now I see desperate sellers in Sacramento asking 40% below what they paid for their houses purchased at the peak of the bubble, and the houses STILL are not selling, so they still have to fall in price. House builders around Sacramento are offering more than 20% off new houses, and yet they are not selling. About the only folks who haven’t slashed the prices of their homes are the banks’s REOs, but they will as inventories skyrocket.
Kudos to you for seeing the mess in 2003. I didn’t notice until late 2004 when prices were so absurd, I knew it was due to tech-bubble like funny money and “greater fool” behavior.
I sat on the sidelines, and I’ll be happy to buy a home in 2009 when the blood is really flowing in the streets. I am not happy about the pain this is causing ignorant buyers or the hit ignorant mom and pop shareholders will take because their banks were greedy pigs. But if there is going to be pain anyway, it is nice to have cash and to be poised to take advantage of it.
Carolyn
A compliance officer monitors the bank’s activities to ensure it complies with the numerous regulations set forth by the government (truth in lending, fair lending, etc.).
Some people are saying commodities. Oil is one. Food stuffs like wheat. Metals like a aluminum and copper. With China and India gobbling up so many natural resources, it is hard to argue against commodities. It could bubble.
Take a peek at my PR page: http://www.freerepublic.com/~extexan/
Apologies from people that don’t mean it are useless.
Thank yous from people that do mean it are priceless :)
Holy crap, 1600+ a month with one job...
I complain about 900 a month and I make close to 3600 a month...
Another potential long-term problem they will have is that, if they declare bankruptcy, she may not be able to work in the banking/financial services industry again in the future.
Years ago Chuck Harder was talking about those who were going to lose their homes because of non-payment, for whatever the cause.
I remember two suggestions:
1) If things are so bad it looks like you’re going to lose the house (as in this couple’s case), don’t make any more payments - save those precious bucks to start over. It will take the lender at least 90 days to get you out.
2) (This I found a most interesting CYA). On the last day, just before you leave, take pictures of every room as well as the outside. Have that day’s newspaper showing in each pic to date the picture-taking (at least you know it wasn’t taken earlier than that date). This would be a godsend if the place was trashed after you vacated and the lender claimed you left it that way.
The house we live in is paid for. I have another house I rent that I’ve been paying on for 15 years on a 33 year mortgage. I can get a car loan when I want it. I drive a 99,paid for and my wife drives a 2004 with a three year loan. I put my 21 year old daughter through Catholic school and school to be an ultrasound tech. She is now gainfully employed. All without a credit card. My older brother charges his cards to the max then complains about the monthly bills. He has squeezed all the equity out of his home. I live as simply as I can. I have enough junk piled around me. The simple things are truly the best.
The only way buying time in this fashion will make your position better than when you started is if, during that time, you win the lotto.
Otherwise it is a serious mistake.
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