Today's Article
A whopping 48
percent of those with
such a mortgage
either are failing to
keep up with their
payments or are in
foreclosure.
percent of those with
such a mortgage
either are failing to
keep up with their
payments or are in
foreclosure.
The American Spark
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Nearly 50% Of Sub-Prime, Adjustable-Rate Mortgages In Trouble
By Cliff Montgomery - Mar. 5th, 2009
An industry survey has revealed that a whopping 48 percent of those with a sub-prime, adjustable-rate
mortgage either are failing to keep up with their payments or are in foreclosure.
That makes 5.4 million Americans who were in serious danger of being homeless by the end of 2008--or said
another way, a record 12 percent of Americans with a mortgage.
The Mortgage Bankers Association said on Thursday that the stunning number of failing mortgages is part of
an ever-increasing trend in the industry. The current record percentage is a mere rise from the 10 percent of
troubled loans from the July-September quarter, which itself was a rise from about 8 percent in 2007.
The sharpest rises in severely troubled loans--that is, mortgages 90 days past due--were in Louisiana, New
York, Texas, Georgia and Mississippi. These rises are due to an increasingly bad recession, and particularly of
nation-wide, massive job losses.
The study further showed the rates for delinquent fixed-rate mortgage payments also rose in the last quarter of
2008--another sign that the Great Recession is particularly rough on would-be homeowners.
But all is not lost. If President Barack Obama has his way, the government may soon create methods to bail
out cash-strapped homeowners just as it bailed out mortgage bankers and the rest of Wall Street a few short
months ago.
Under Obama's housing rescue plan, homeowners who can no longer afford their mortgages may be able to
get those monthly payments decreased in bankruptcy court.
But there is far too much common sense and fair play in this measure for it to be loved by everyone.
"The bankruptcy measure has been the subject of an intense lobbying campaign by the financial services
industry, which has worked hard to kill it," states The Associated Press (AP).
"It has exposed rifts among liberal Democrats who regard it as the only real way to help debt-strapped
homeowners avoid foreclosures," AP continued, "and moderates who want to give voluntary efforts a chance
to work before resorting to the courts."
But the AP analysis gets something wrong.
Those who oppose Obama's measure are not "moderates"--they are rabid economic conservatives, clearly
speaking out of ideology rather than out of any reasonable concern. The rabid conservatives may not yet admit
it, but it was eight previous years of "voluntary efforts" in the financial industry which created the current
economic mess.
Expecting the disease to be the cure, rather than the cause, of an obvious sickness is ideology in everyone's
book...that is, except for rabid economic conservatives, the incompetent financiers whose irrational ways led to
the current economic meltdown and the good publishers at AP.
A quick glance at the mortgage financiers' position reveals its inherent foolishness. It insists that giving
borrowers an "unfettered access to bankruptcy court mortgage modifications would impose steep and
unpredictable costs on its companies," according to AP.
Let's examine this idea. The financial sector essentially is saying that if it is forced to accept new mortgage
terms, whereby it will receive, say, 80% of what is still owed on troubled mortgages, its monetary loss will be too
high to sustain.
So it would rather continue to foreclose on millions of American homes, create scores of failed mortgages and
instead receive 0% of what is still owed them. That's not a good alternative.
True, the financiers would be able to reclaim their properties. But since foreclosures are already putting the
American economy into a massive tailspin, even more foreclosures will only drive an already collapsing
economy ever further into the ground--and thus practically ensure that no one will buy the reclaimed properties,
at least at anywhere near the properties' real value.
This ultimately means that financiers would rather be stuck with worthless mortgages and properties which
they cannot sell, as they struggle to survive in an ever-weakening economy of their own making.
Why? Because if they instead collect most of what is still owed on their troubled mortgage loans and save the
U.S. economy by keeping families in homes, they've getting screwed.
And we wonder why we're in this current mess.
Like what you're reading so far? Then why not order a full year (52 issues) of the The American Spark
e-newsletter for only $15? A major article covering an story not being told in the Corporate Press will be
delivered to your email every Monday morning for a full year, for less than 30 cents an issue. Order Now!
By Cliff Montgomery - Mar. 5th, 2009
An industry survey has revealed that a whopping 48 percent of those with a sub-prime, adjustable-rate
mortgage either are failing to keep up with their payments or are in foreclosure.
That makes 5.4 million Americans who were in serious danger of being homeless by the end of 2008--or said
another way, a record 12 percent of Americans with a mortgage.
The Mortgage Bankers Association said on Thursday that the stunning number of failing mortgages is part of
an ever-increasing trend in the industry. The current record percentage is a mere rise from the 10 percent of
troubled loans from the July-September quarter, which itself was a rise from about 8 percent in 2007.
The sharpest rises in severely troubled loans--that is, mortgages 90 days past due--were in Louisiana, New
York, Texas, Georgia and Mississippi. These rises are due to an increasingly bad recession, and particularly of
nation-wide, massive job losses.
The study further showed the rates for delinquent fixed-rate mortgage payments also rose in the last quarter of
2008--another sign that the Great Recession is particularly rough on would-be homeowners.
But all is not lost. If President Barack Obama has his way, the government may soon create methods to bail
out cash-strapped homeowners just as it bailed out mortgage bankers and the rest of Wall Street a few short
months ago.
Under Obama's housing rescue plan, homeowners who can no longer afford their mortgages may be able to
get those monthly payments decreased in bankruptcy court.
But there is far too much common sense and fair play in this measure for it to be loved by everyone.
"The bankruptcy measure has been the subject of an intense lobbying campaign by the financial services
industry, which has worked hard to kill it," states The Associated Press (AP).
"It has exposed rifts among liberal Democrats who regard it as the only real way to help debt-strapped
homeowners avoid foreclosures," AP continued, "and moderates who want to give voluntary efforts a chance
to work before resorting to the courts."
But the AP analysis gets something wrong.
Those who oppose Obama's measure are not "moderates"--they are rabid economic conservatives, clearly
speaking out of ideology rather than out of any reasonable concern. The rabid conservatives may not yet admit
it, but it was eight previous years of "voluntary efforts" in the financial industry which created the current
economic mess.
Expecting the disease to be the cure, rather than the cause, of an obvious sickness is ideology in everyone's
book...that is, except for rabid economic conservatives, the incompetent financiers whose irrational ways led to
the current economic meltdown and the good publishers at AP.
A quick glance at the mortgage financiers' position reveals its inherent foolishness. It insists that giving
borrowers an "unfettered access to bankruptcy court mortgage modifications would impose steep and
unpredictable costs on its companies," according to AP.
Let's examine this idea. The financial sector essentially is saying that if it is forced to accept new mortgage
terms, whereby it will receive, say, 80% of what is still owed on troubled mortgages, its monetary loss will be too
high to sustain.
So it would rather continue to foreclose on millions of American homes, create scores of failed mortgages and
instead receive 0% of what is still owed them. That's not a good alternative.
True, the financiers would be able to reclaim their properties. But since foreclosures are already putting the
American economy into a massive tailspin, even more foreclosures will only drive an already collapsing
economy ever further into the ground--and thus practically ensure that no one will buy the reclaimed properties,
at least at anywhere near the properties' real value.
This ultimately means that financiers would rather be stuck with worthless mortgages and properties which
they cannot sell, as they struggle to survive in an ever-weakening economy of their own making.
Why? Because if they instead collect most of what is still owed on their troubled mortgage loans and save the
U.S. economy by keeping families in homes, they've getting screwed.
And we wonder why we're in this current mess.
Like what you're reading so far? Then why not order a full year (52 issues) of the The American Spark
e-newsletter for only $15? A major article covering an story not being told in the Corporate Press will be
delivered to your email every Monday morning for a full year, for less than 30 cents an issue. Order Now!
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