Mortgage Meltdown - Four Corners

[Judd]

Remember "the Jolley Swagmen" my Grandfather said they were the homeless and out of work who walked the roads looking for handouts and work just to feed themselves during the great depressions. Apparently there was one after the gold rush in the late 1800's and they appeared also in the thirties. Most of them were able to join the army then for the 2nd world war.

This is a very rough general remembrance. Perhaps someone with an accurate knowldge of history can elaborate.

Anyway it looks like it is heading that way in Detroit

Yeah. Remember my mother telling me that my great-grandfather worked on the Great Ocean Road with pick and shovel in the 1930s. It really was "Work for the Dole" back then. If I recall my history books correctly, I understand that TB, also known then as consumption (what a word in today's context!), was also rife in those days. Quite a few died from it.

If you can get hold of it, grab a copy of the book "The Land Boomers" which was written about the mid-1960s. Great read about what happened in Melbourne especially with property speculation in the 1880s during the lead up to, and during, that depression. It is always possible that history may repeat or mirror.

 

[Judd]

Yeah. Remember my mother telling me that my grandfather worked on the Great Ocean Road with pick and shovel in the 1930s. It really was "Work for the Dole" back then. If I recall my history books correctly, I understand that TB, also known then as consumption (what a word in today's context!), was also rife in those days. Quite a few died from it.

If you can get hold of it, grab a copy of the book "The Land Boomers" which was written about the mid-1960s. Great read about what happened in Melbourne especially with property speculation in the 1880s during the lead up to, and during, that depression. It is always possible that history may repeat or mirror.

The 20 minutes have expired. In view of that, for "grandfather" please substitute "great-grandfather." {Done-Mod}

 

[Kathmandu]

Pity that so much heartbreak has to happen.

Where are they though, I havent seen any evidence of whole suburbs boarded up an vandalised like in the 4 corners program.

Dave

 

[Mofra]

Where are they though, I havent seen any evidence of whole suburbs boarded up an vandalised like in the 4 corners program.

Dave

Different market, different products, indirect effects to be felt here rather than direct ARM resets flooding the local market with stock.

Might help to compare vacancy rates & construction activity in the past 3-4 years, in the context of market division of prime to subprime here & in the US for a little balance to the argument.

 

[numbercruncher]

NEW YORK (CNNMoney.com) -- Late summer brought no relief from soaring foreclosures. The number of homes in some stage of default jumped 36 percent month-over-month in August, according to a regular monthly survey.

http://money.cnn.com/2007/09/17/real_estate/August_foreclosures_way_up/index.htm


Pretty much as expected i guess, will get worse month after month, something along the lines of snowballing effect

 

[Happy]

Quote from ABC, Posted Fri Aug 10, 2007 7:49am AEST


HOME LENDING PRACTICES UNDER PARLIAMENTARY SCRUTINY


A federal parliamentary committee will host a public hearing in Canberra today as part of its investigation into home lending practices.
The House of Representatives Economics Committee (HREC) will hear submissions from financial institutions on the growing number of mortgage defaults and foreclosures.

HREC deputy chair Sharon Bird says south-west Sydney is experiencing the highest number of defaults.
Ms Bird says some unscrupulous lenders are able to escape regulations to provide unsustainable loans.

"There's some evidence from the submissions that the non-bank lenders and some of the new types of financial loans that people are getting into are much higher risk, that people are being encouraged to undertake debt that they really can't service," she said.

In another report, which I cannot find, it said that foreclosures jumped up more than 90%

We are definitely not in the worst of it, but looks that it is coming.

 

[Kathmandu]

In another report, which I cannot find, it said that foreclosures jumped up more than 90%
We are definitely not in the worst of it, but looks that it is coming.

Is that a lot?

This article says that "About 12,000 of the 5.5 million loans in Australia were in arrears by at least 90 days in March this year"

http://www.news.com.au/business/story/0,23636,22437730-462,00.html

Isnt that 0.002%

so plus 90% would be 0.0038% of loans 90 days and over

Does'nt sound like much

Dave

 

[Happy]

It is amazing that 12,000 struggling and heartbroken individuals or families are mere 0.002%

 

[numbercruncher]

Thats just drizzle , wait for the rain

Stress levels among Australian mortgage borrowers are on the rise and potentially some 113,000 households, or 1.6 percent of the market, could be forced to sell their homes, according to an industry report released on Tuesday.

Housing affordability has worsened as the pace of house price growth has outstripped increases in disposable income, said the report by Fujitsu Consulting and JP Morgan

About 85.2 percent of Australia's A$850 billion ($708 billion) mortgages are held at variable rate loans, making them vulnerable to rising interest rates.

http://www.smh.com.au/articles/2007/09/18/1189881493611.html

Maybe the RBA will slash rates and give us a nice does of super Inflation as well?

 

[numbercruncher]

It is amazing that 12,000 struggling and heartbroken individuals or families are mere 0.002%

Drop two 0s

 

[Kathmandu]

Drop two 0s

120 sounds a bit light on

Dave

 

[Kathmandu]

You'll have the Numbers somewhere NC, what was the Sepo's % compared to Oz

"Stress levels among Australian mortgage borrowers are on the rise and potentially some 113,000 households, or 1.6 percent of the market, could be forced to sell their homes, according to an industry report released on Tuesday."



It could also be worth bearing in mind that high defaults in the US is because over there you can hand in the keys and walk awy from debt in a lot of instances.

In OZ, we have to "man up" to the debt, so people will hold on if at all possible


Dave

 

[numbercruncher]

Heya Davo,

The percentage of loans in the foreclosure process was 1.40 percent of all loans outstanding at the end of the second quarter, an increase of 12 basis points from the first quarter of 2007 and 41 basis points from one year ago.

http://www.finfacts.com/irelandbusinessnews/publish/article_1011076.shtml


So we have seen the carnage already unleashed in the US at 1.4pc of all loans in foreclosure(The delinquency rate is 5.12 alot higher than ours) - this will probably rise month on month for like 2 years according to spread of Subprime resets(still to see effect of the Interest rate slashing).

So you maybe could imagine or theorise a similar level of carnage here if the forementioned 1.6pc of loans went to forced selling.

Spooked selling seems to spur on more spooked selling if history is anything to go by, time will tell I guess

 

[Kathmandu]

So you maybe could imagine or theorise a similar level of carnage here if the forementioned 1.6pc of loans went to forced selling.

Although I doubt we'll see those numbers because of what I said previously here


It could also be worth bearing in mind that high defaults in the US is because over there you can hand in the keys and walk awy from debt in a lot of instances.

In OZ, we have to "man up" to the debt, so people will hold on if at all possible

Dave

 

[numbercruncher]

Heya Dave,

I believe the rule in the US is something along the lines of if you foreclose/bankrupt the difference between the selling price and amount owed is forgiven but this difference is then classed as taxable income and a debt is incurred with the us treasury.

In Australia you can bankrupt and be a discharged bankrupt ex amount of years later, there is cases of serial bankruptors (word?) in Australia, basically people just taking the piss out of the system.

I see what your saying though that most people would avoid at all costs to save face, but for some i guess a time comes that you have no option.

 

[Kathmandu]

A quick google came up with this gem

http://www.financialsense.com/fsu/editorials/merk/2007/0905.html


Walking away from a mortgage means that you send the lender the keys of your home. The lender will then foreclose on your property, trying to auction it off to the highest bidder. Typically, the lender will not go after the personal assets of the homeowners. Once a homeowner has decided to walk away from a property, a lender will expect him or her to dismantle anything of value, including the kitchen sink and bath tub. Lenders may also foreclose on homeowners that have fallen behind payments, but don’t want to leave their home.


Plenty more articles like that

Dave

 

[numbercruncher]

Ahh well pointed out seems in US they dont pursue your personal assets, I think in Oz they take everything of a certain value threshold ?

 

[Kathmandu]

Ahh well pointed out seems in US they dont pursue your personal assets, I think in Oz they take everything of a certain value threshold ?

I think in OZ you touch your toes while they search for assets.

This is part of the reason that I feel Oz wont take as big a hit.

That combined with the vast majority of loans having at least 20% deposit's and no ARMS (Resetting Mortgages)

Don't get me wrong, there will be pain and lost equity in areas, I just don't feel it will be as bad as some believe.

Dave