Straight Talk on the Mortgage Mess from an Insider
December 8th, 2007This is a good one. Highly recommended.
Via: Market Watch:
The ‘Pay-Option ARM implosion’ will carry on for a couple of years. In my opinion, this implosion will dwarf the ’sub-prime implosion’ because it cuts across all borrower types and all home values. Some of the most affluent areas in California contain the most Option ARMs due to the ability to buy a $1 million home with payments of a few thousand dollars per month. Wamu, Countrywide, Wachovia, IndyMac, Downey and Bear Stearns were/are among the largest Option ARM lenders. Option ARMs are literally worthless with no bids found for many months for these assets. These assets are almost guaranteed to blow up. 75% of Option ARM borrowers make the minimum monthly payment. Eighty percent-plus are stated income/asset. Average combined loan-to-value are at or above 90%. The majority done in the past few years have second mortgages behind them.
Research Credit: PD
This author is saying there is going to need to be a lot more government bailing out of these bad loans. But think about it for a minute. The Federal Government is 8+ trillion dollars in debt, and many state governments are in the red, in addition to all the other mountains of debt (including individual consumer credit-card debt). I can see how this mortgage thing could just make all the debt weighing down the US economy go {kerplooey!}
i know this probably isn’t the place to ask this, but i’m not sure how else to find out. in the “about” section you reference hard to find books you have read to educate yourself. i like to visit this site, but usually feel like i’m in over my head and don’t have a good grasp on a lot of the topics. could you provide a list of background material to read to be brought up to speed. anything to help understand all the current market and economy stories would be especially helpful. thank you.
Let’s see… There’s essentially an endless amount of material on this area of inquiry. I’ll try to provide a manageable list that connects a lot of the financial dots— which, of course, extend back as far as you wish to look.
The Creature from Jekyll Island: A Second Look at the Federal Reserve by G. Edward Griffin
A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation by Richard Bookstaber
Wealth and Democracy: A Political History of the American Rich
When Corporations Rule the World by David C Korten
Traders, Guns & Money: Knowns and unknowns in the dazzling world of derivatives by Satyajit Das