How about some good news for a change about real estate, mortgages, credit, jobs, consumer confidence, Wall Street stability, the future of civilization as we know it?

Sorry, not gonna get it here.

Evidence is evidence and though some may like to engage in wishful thinking, the evidence is not good at all.

Goldman Sachs is actually forecasting that credit losses around the world caused by the current near panic in financial markets will hit some $1.2 TRILLION!!!!!

The same report predicts that U.S. banks, brokers,hedge funds, etc., stand to lose around $460 BILLION in credit losses.

SCARED CONSUMERS

Very scared, in fact. Consumer confidence has hit a five year low; people are nervous about their jobs, their homes, their credit, their lives.

But one example of why the worry: From January 2007 to January 2008, the price of existing single-family homes dropped some 11 percent.

And then, there’s

Bear Stearns

Yeah, JPMorgan Chase upped its bid increasing the value of Bear Stearns, but the new offer still remains some 88 percent below what the stock was worth only one month ago, according to a Reuters report.

Was all of this mess really caused by subprime mortgages?

Well, yes and mostly no.

Yes, in that the subprimes certaintly pulled the trigger on this now global credit crunch.
No, in that the ammunition was stocked by various lending institutions and brokerage firms, all motivated by nothing but pure greed. They rammed these mortgages down the throats of people who wanted to own homes but really couldn’t afford them, and now they are being vomitted back up.

The subprime mortgages were bundled into investments that no one really understood or understands to this day..including officials at the Federal Reserve.

As some have pointed out, in recent years, this country has developed a sort of shadow banking system, one immune from the post-Depression era restrictions slapped on commercial banking institutions to maintain some form of economic stabilty.

It is this shadow banking system that is what is behind this terrible mess. And, the trouble is, much of it remains in the shadows which is why people are running scared.

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Tags: bear stearns, consumer confidence, credit crisis, federal reserve, jpmorgan chase, subprime, subprime mortgages

Want to know just how bad the mortgage / housing / credit / banking / securities / oil / crisis has become? Okay. When was the last time you heard a high ranking government official actually call for lenders to slash the amount of their loans…NOT the interest, the principal!

That is exactly what Federal Reserve Chairman Ben Bernanke has done–called for a reduction in actual loan amounts in order to try and contain the current economic crisis.

“This situation,” said Bernanke, “calls for a vigorous response.”

Duh!

Let’s see why this might be, shall we?

The Fed Chairman himself is warning that mortgage delinquences and foreclosures are more than likely on the way up, not down.

In 2008, about one and a half million subprime loans with adjustable rates are slated to reset to higher rates.

Banks and other lending institutions continue to take a beating from what began as a mortgage crisis.

The stock market is more depressing than a White House position paper.

Oil and now gas prices are rising to levels not seen since the 1980s–and, adjusted for inflation, are actually higher now than before.

So, no wonder the government–even this one–is really getting worried now. Finally.

Which brings us to Bernanke’s proposal: “Principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foresclosure,” he says.

Talk About Tough Sells

Asking lenders to actually write down principal is a bit like asking a very hungry lion to take a pass on a big chunk of fresh meat.

But, Bernanke may have hit upon at least part of the solution to this growing problem.

And, then, too, there is the animosity factor to consider. People who took out mortgages they could afford may really get angry if those who took out mortgages they couldn’t afford walk away from the table with lowered principal!

Some hard decisions clearly must be made. But, do our politicians in Washington have the guts to make these decisions? D.C.’s record can not offer encouragement on this front, yet, there does seem to be a growing recognition that we are in the middle of a global, largely U.S. caused, economic mess. This calls for emergency measures that would have been unthinkable in this country just a few months ago.

Tags: Ben-Bernanke, federal reserve chairman, Foreclosures, principal, subprime mortgages, The Fed

Once upon a time, having sterling credit meant that banks and other lenders valued your business.

No more.

The subprime mortgage mess is now impacting even those who spent years building up their credit record, because banks are running scared.

A just released Federal Reserve study shows that: “About 55 percent of domestic respondents indicated that they had tightened their lending standards on prime mortgages.”

An Associated Press article says that figure is up from about 40 percent just this past November.

This is, perhaps, the strongest indication yet of just how painful the current credit crunch is likely to be for months to come; maybe years?

And, the mortgage/credit crisis has spilled over into business loans, too, with the Federal Reserve survey finding banks have tightened up their standards for loans to businesses.

This raises the issue of who exactly is going to buy up all those vacant or soon to be vacant houses on the market?

Earlier predictions by some were that those with really good credit will be able to take advantage of a buyer’s market. But, that is only the case if they can get credit themselves. The latest survey would seem to indicate that that is increasingly problematic.

So, now what?

Think anyone really knows??

credit, subprime mortgage, credit crunch, mortgage, Federal Reserve

Tags: Credit, federal reserve, prime mortgages, subprime mortgages

The sky might not be falling, but home prices certainly are and in more parts of the nation than ever before.

From October of 2006, home prices fell a whopping 6.1 percent. Most troubling, the declines happened in 20 of the largest metropolitan areas, and in many of those, the declines were much steeper.

In Miami, Florida, where on a recent trip I could not help but notice how many new condo buildings were under construction or about to open, home prices have fallen 12.4 percent from last year. There a numerous reports that people who had put down payments on some of those new condos are asking for their money back. This could be really bad news for the developers who might not be able to pay off the loans that were needed to get their projects off the drawing boards.

In Los Angeles, prices are down 8.8 percent from last year. Things have gotten so bad, in fact, that many real estate agents are turning to other occupations to make a living; applications for new licenses are, not surprisingly, down.

And, even in New York, home prices are down 4.1 percent from last year. That figure would no doubt have been much higher had it not been for the anomaly of a booming condo market in Manhattan where Europeans ,flush with new found wealth courtesy of the decline in value of the U.S. dollar against the Euro, are driving up prices.

But, prices in the rest of the city are down.

These figures, by the way, come via Standard & Poor’s/Case-Shiller indexes as reported by the New York Times.

Lest there be any doubt that these housing woes are the direct result of the subprime mortgage debacle, consider this: just for the month of October, home prices slid 1.4 percent, and that marks the fastest decline in some seven years!

Want more truly scary stuff? The current decline in housing prices is, according to the Times report which quotes Yale economist Robert J. Shiller, creator of the home prices indexes, “greater than at any time since 1941, when the housing market was faltering at the start of the American entry in World War II.”

The ripple effects of the subprime mortgage mess have already tightened credit markets;contributed to the demise of the all-business class airline, Maxjet;forced the early retirement of a number of bank CEOs; dampened the Christmas spirit at many major retailers; and caused stock markets to rise and fall and rise again at alarming rates.

And now, the bad news: By some expert predictions, home prices may drop as much as 30 percent by the time this mess is resolved, if it is resolved?

Tags: home prices, standard & poor's, stock markets, subprime mortgages