The Mortgage Crisis: Watch Out For The BIG Wave


It’s NOT over yet! In fact, it may have only just begun?

We have already seen the economic destruction wrought by the so-called sub-prime mortgage crisis, as foreclosures escalated in many parts of the country, contributing greatly to putting the credit market in a tailspin from which it has yet to recover and may not for some time to come.

So this is not exactly the best of times to be confronted by the very real possibility that–as they say in show biz–“you ain’t seen notin’ yet!”

A New York Times article this week begins with a paragraph that should make your skin crawl : “The first wave of Americans to default on their home mortgages appears to be cresting, but a second, far larger one is quickly building.”

That’ll take your eyes off your morning corn flakes for sure.

Even The Good Die (Default?) Young!

The article is talking about homeowners who have good credit ratings and how they are rapidly and in “growing numbers” starting to fall behind.

Says the paper as proof: “The percentage of mortgages in arrears in the category of loans one rung above subprime, so-called alternative-A mortgages, quadrupled to 12 percent in April from a year earlier. Delinquencies among prime loans, which account for most of the $12 trillion market, doubled to 2.7 percent in that time.”

The paper points out that a key reason for more defaults ahead will be that monthly payments are going up fast–while, at the same, time, the value of home prices keep dropping like a lox that slid off a deli counter in Queens.

Says Thomas Attenberry, president of First Pacific Advisors, “Subprime was the tip of the iceberg.”

Up, Up and Away!

Meantime, as they like to say in Dark Knight comics, the nation’s inflation rate has come alive with the energy of a dozen hungry pit bulls munching on a postman’s leg.

Consider this: “Consumer prices jumped at the sharpest rate in more than a quarter centuryduring June and consumers coping with soaring costs received their smallest income gain in a year,” reports Reuters, quoting a newly released government report.

Now what?
Now that is one damn good question, ain’t it? Now what?

The other day, while driving through a well to do Los Angeles neighborhood, I lost count of the number of for sale signs on the front lawns of well taken care of homes. Not all are in foreclosure I am sure, but many no doubt are. And this is a “good” part of town.

My guess is, many of these signs will still be out there weeks and maybe even months from now since people can’t get credit to buy at a time when price bargains are surely to be had.

That housing “rescue” plan passed by Congress last week and signed into law by Bush is not likely to have any impact –if at all?–for many more months because it just takes time to get things of this sort rolling. In the meantime, the defaults and foreclosures keep mounting.

And out there, beyond the horizon remember, is that second, bigger wave silently approaching.

About Author

Charles is currently reporting for KNX Radio in Los Angeles, is the co-author of the book No Time To Think, and can be found commenting about the news on his blog, The Feldman Blog, as well as on The Huffington Post.


  1. And after that they are talking about the credit card debt that has been built up by people paying mortgages. The banks have parcelled up and sold on this debt. What’s going to happen when people stop paying. It’s easy to throw your credit card away.

  2. It reminds me of the tsunami that hit in the Indian Ocean a couple of years ago. It wasn’t so much the height of the wave, but the sheer volume of water sucking just about everything out to see. And it didn’t happen like in the moview with a giant wave crashing ashore in a matter of seconds. It is a bit more slow and a lot more painful to watch.

  3. The government is “trying” to help bail out the housing chrisis, but it won’t work if people can’t get loans. The lending industry is changing to rapidly. I mean, they need to reform, but the average middle class citizen still needs to be able to qualify for a loan.

    We’ll be visiting this topic for a while.

  4. I don’t know what to say…This hard and long crisis has just begun. We all believe that there always be rainbow after the storm. But the question is who will be able to survive and see the rainbow…

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