Adam Jewell - Search & Affiliate Marketing

As if the “sub-prime” meltdown hasn’t already caused enough damage in the housing market and the economy, there is another wave that is going to hit. This wave will be larger than the sub-prime meltdown. It should have been reported by the mainstream media years ago but just now seems to be percolating up to the surface. The chart below from Credit Suisse shows the tidal wave of junk loans set to reset in the next few years.

Tsunami of Upcoming Mortgage Resets Through 2012

The first round of mortgage troubles consisted of loans made to people who has less than perfect credit. Thee people often had incomes, took out adjustable rate loans that made payments affordable with teaser rates. The next batch of loans was often given to people with good to excellent credit. These were known as Alt-A and option ARM loans. These were the “investors” who “bought” multiple homes, often had no experience in real estate and no business investing in it.

Alt-A loans are loans that were given to people who never had to show or prove their income or ability to pay for the loan. These were also known as liar loans.

Option ARMs are home loans where the consumer gets a rate on the loan that starts out low and can also choose how much they want to pay on the loan each month. Over time, the balance of the loan goes up even though a person is making payments on the loan. This is known as negative amortization.

CBS News 60 minutes program finally did a story on this situation. The video is below:

There are so many people at fault for this whole mess. The banks and mortgage brokers should have verified that people would have a good chance of paying back the loans they made by verifying income. Just because someone has great credit doesn’t mean they have the means to pay back a loan. The people interviewed for this story obviously took no responsibility for anything they bought or signed. These home owners don’t even seem to care or seem to feel that they should take responsibility for their actions. They deserve to lose their homes and the US Treasury, the American tax payer should let the majority of these people who “invested” lose their homes and go into foreclosure. The banking regulators never should have let this situation get out of control in the first place. If people can’t read contracts, can’t take responsibility for contracts they sign and somehow think they deserve to live in a home that costs half a million dollars when they make $50,000 a year, then they deserve to lose.

On the version that aired on TV, there was an acupuncturist interviewed for the story. She bought at least 5 properties, didn’t read any of the docs when buying or financing her “investment” properties and doesn’t really seem to be too concerned about it. Poor woman has or will have to sell them all at a loss. Whatever the US govt decides to do about this to prevent a total meltdown, they need to let irresponsible behavior like this get punished and these “investors” pay for their mistakes, negligence and the fraud in which many participated.

Reported by MarketWatch - Citi says credit card losses may rise through 2009

Unless you’ve been locked in a cave for the last year or two, you are probably aware of the financial crisis. Home loans were handed out like lollipops on Halloween. Unsuspecting prospective home owners were given what they thought were “treats” that turned out to be tricks. THese were loans on unaffordable homes that will lead them into foreclosure and are leading to an unwinding of highly leveraged worldwide financial markets.

For years, the US has lived on credit and imaginary “wealth”. Much of this imaginary weath was tied to home values. In a market where home prices could only go up, you could buy a house with no money down and take out an Option ARM (Adjustable Rate Mortgage) and have the option to make a payment so small tht the balance of the loan would actually go up each month. There were many other creative financing options made avaialble to promote home “ownership” as well. Once you “bought” a home and the value went up, you could refinance and take money out of the housing ATM or simply take out a home equity loan. The Sub-prime debacle is already in full swing and there is more to come as shown in this article on the the tidal wave of mortgage resets coming our way.

When consumers are desparate, when their homes are worth less than the outstanding balance on their home loans, when they can no longer tap home equity loans, when they are experiencing stagnant wages or losing their jobs, where are they going to turn? Why credit cards of course. It is the American way!

It is nice of Citi to at least acknowledge that their credit card losses “may” rise though 2009. Shouldn’t that say WILL rise through 2009 (and probably dramatically)? Lookout below! We’ve got billions more in exotic mortgage resets coming in the next few years, probably billions in unsecured credit card losses by the likes of Citi and other banks ready to hit as people pay their mortgages (and everything else) with their credit cards.

If it wasn’t such a bad situation, it would be comical to see how this financial crisis is being handled, the PR used to spin major losses and how the tax payers are being fleeced to try to fix this whole problem.