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Go Back   Armchair General and HistoryNet >> The Best Forums in History > Happening Now > Politics Central

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Politics Central An archive of discussions of a political nature that took place here.

 
 
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  #1  
Old 09 Sep 09, 15:46
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Millions More Foreclosures Coming

Quote:
- Only 12 percent of U.S. homeowners eligible for loan modifications under the Obama administration's housing rescue plan have had their mortgages reworked, and millions more foreclosures are coming, the Treasury Department said on Wednesday. A Treasury report showed 360,165 people had their monthly payments reduced through August, up from 235,247 through July, but a senior Treasury official conceded much more must be done to soften the impact of a severe and prolonged housing crisis.
Treasury has begun releasing monthly reporton the loan modification program, called the Home Affordable Modification Program or HAMP.
http://www.msnbc.msn.com/id/32756481...s-real_estate/

I cannot see how this will boost the so-called "economic recovery".
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  #2  
Old 10 Sep 09, 10:58
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The next wave of foreclosures doesn't come here.

It comes when commercial notes are coming due. Commercial notes are for a much shorter term than residential mortgages, usually with a maximum term of 15 years. That means that the payments are more steep. It also means that they're more volatile since the obligation is amortized over a much shorter term.

I regularly talk with a commercial lender, as our law firm works with them often. As just one example, in downtown Columbus, there is a beautiful, approximately 10 year old commercial office building, all Class-A space. The problem is that with the economy in the toilet, this particular piece of property is so far underwater that its owners just said "the hell with it", threw their hands up in the air, and the thing was placed in receivership. It will sell for a fraction of the $11 million that's owed to the bank.

I am in the midst of a transaction whereby some clients of mine are buying a 30,000 SF commercial building out of receivership. It's less than three years old. It cost $19 million to build. The bank that has the first mortgage has a judgment for $7.5 million. This property will sell for about $5 million, meaning my clients are getting a great deal, but the bank and the other creditors are going to take a huge hit.

This is where the next wave of foreclosures is coming. It's going to make the residential foreclosure crisis look small in terms of the dollars involved, but because people won't lose their homes over it, it won't get the attention.

As for the loan modifications you mention, the problem is that is that it is a VOLUNTARY program for the lenders, and my experience is that most refuse to participate. That's why the numbers are so low.
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  #3  
Old 10 Sep 09, 11:37
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I had also heard that those home owners who HAD done the "restructure" bit were right back in default, to the tune of 80% of them.

I could not find any other figures in support or contrary to that single "mention". It IS highly possible that the "players" in this particular attempt to relieve the default pressure on lenders is deliberately "playing the RE-default rate" down. It is, after all, a grasping at straws measure, IMHO.

GG
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  #4  
Old 10 Sep 09, 11:40
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Eric: I HAD read certain "warnings" that what you allude to was on the horizon, usually in "business news" sources.

I'm just waiting for the other shoe to drop. ..... and to ascertain what effect it will put on the "market".

"That CAN'T be good!"

GG
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  #5  
Old 10 Sep 09, 11:53
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Quote:
Originally Posted by Grognard Gunny View Post
Eric: I HAD read certain "warnings" that what you allude to was on the horizon, usually in "business news" sources.

I'm just waiting for the other shoe to drop. ..... and to ascertain what effect it will put on the "market".

"That CAN'T be good!"

GG
Gunny,

It surely can't be good. When that other shoes drops, it's going to be ugly. Really ugly. The commercial office building in downtown Columbus I mentioned is about 125,000 SF, and it's really first-rate space with a view of the Scioto River. It has some great tenants, including a very large law firm and the State of Ohio, so cash flow is not the issue.

Rather, the issue is that the dropping in real property value means that this property is so upside down that it cannot be refinanced without the owners bringing substantial money to the closing table--and I mean several million dollars when I say substantial money--that they made a business decision to simply walk away from it.

And it will only be the first of many.....

Banks are going to take a beating. The real estate market, the banking crisis, and the recession, cannot truly bottom out until this ugly phase is over.

Eric
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  #6  
Old 10 Sep 09, 12:01
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Precisely what I expected the situation to look like when the excrement hit the rotating blade cooling device. (Heh heh!)

GG
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  #7  
Old 10 Sep 09, 13:05
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If I read you correctly, Eric, the next wave will be particularly hard on small businesses. If that is so, and given that Obama is ulikely to bail them out, the economic fabric of America will take another very hard hit, perhaps the hardest of all.
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  #8  
Old 15 Sep 09, 01:16
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Actually the next wave will be both...

We are currently in the "lull" after most subprime loans have croaked. The peak of the "Liar Loans" and adjustable loans hasn't even started. I can't find the graph now (it's often on seekingalpha.com) , but it always pops up on business sites. It shows a large "wave" starting in mid 2010 and going through 2012! And given the fact that unemployment rates are worse now, and worsening; there's no reason to think that these loans won't default at a higher rate than subprimes. Heck prime loans are now defaulting at an alarming and increasing rate.

Then as was pointed out; commercial real estate is starting to go bad. Their loans are often for five years. Many will be unable to find a bank to refi them.

The economy is still a house of cards. Think about it. The main exporting countries: Germany, China, Japan are in the tank. Their year on year exports are down more than 20%. The world's big consumer, us; is bad and getting worse. What exactly is going to improve things? The Fed, MS, and GS are managing to prop up the stock market. But how long will that work? Corporate earnings are tanking, consumer spending is way down, a good chunk of US home and commercial real estate owners are underwater. At the bottom of bad bear markets P/E ratios usually hit 7% or so. Right now they're 17%! It's lunacy. This is going to end badly, very badly. Excuse me; I'm going back to eBay and buy more silver.

Thank goodness you caught me on a day when I'm feeling optimistic about things.
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Old 15 Sep 09, 07:00
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Old 15 Sep 09, 13:06
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Quote:
Originally Posted by Grognard Gunny View Post
Precisely what I expected the situation to look like when the excrement hit the rotating blade cooling device. (Heh heh!)

GG
In the Army, we refer to that as "the alimentary end product impacting the rotating airfoil."

Just a little inter-service information sharing...
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