How Big Is the Sub-Prime Mortgage Market? A: Not very big at all

[Naturalized-Texan]

Q: How Big Is the Sub-Prime Mortgage Market? (http://article.nationalreview.com/?q=Y2Y5NGVmODQzNTEwOGZmMzExNzRkYzBkMzA4OGI1ZGM=)
A: Not very big at all.

http://www.nationalreview.com/images/chart_bowyer8-8-07.gif

Ben Stein said it well this past Saturday on Fox’s Cavuto on Business: The sub-prime mortgage problem is grossly overstated; the sector is just too small.

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So, all in all, when you work through the details and get down to the number that really matters, only about 0.6 percent of U.S. mortgages are currently in foreclosure. That’s up a hair from roughly 0.5 percent last year. That’s it.

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...the recent increase in sub-prime foreclosures amounts to 0.01 percent of net U.S. household wealth.

[Rhino]

They're absolutely killing my stocks though.

[Naturalized-Texan]

They're absolutely killing my stocks though.
Yep! However, the effect on the stock market is the result of emotion/panic fomented by the DBM, not on logic.

[Rhino]

In other words, business as usual on Wall Street. Sigh!!!

[Kathy30]

I don't believe it. I just don't. For one thing, realtors by the packs have been going around specifically targeting hispanic families most of whom are here illegally to buy homes with no down no doc loans on stated income. Lenders have been almost exclusive in funneling money into these loans to the point of putting qualified borrowers last on the list.

A friend of mine who works for the San Bernardino Assessor's office said last year that they were looking at a 75% foreclosure rate because of loans to illegals. In many cases the original migrant borrowers had abandoned the property to successive migrant familes and could not be located.

Another friend who works for Wells Fargo in the mortgage loan department said that because of investing too heavily into the hispanic market, the entire bank was in real trouble. The bank denied loans to working Americans to offer the "American dream" to undocumented immigrants who are now gone. They have disappeared with new names and new social security numbers. When the homes finally get to be foreclosed, they are destroyed inside and the bank has had to increase the money set aside for rehabing these kinds of residences for which the original mortgage was well over a million dollars. This is Southern California and most properties run a mil and over.

This is being replicated in every major city where there is a large immigrant population. It started the housing collapse in Miami, which was exacerbated and aggravated by overbuilding condos. It is these cities that are the rocks dragging the whole market into collapse.

If you think that's bad. You are being optimistic. What was done to the housing market is now being done to the credit card market.

Nope, looking at that chart doesn't tell me a thing.

[Dowple]

It's a double whammy. Not only were illegals given home mortgages but the jobs they used to leverage those mortgages were often in the construction of new houses. Mobs of mexicans will soon be roaming our streets demanding unemployment benefits, housing vouchers, and food stamps. Too, don't forget how anchor babies will play into this. An anchor baby entitles a household to receive benefits for the anchor baby, as long as the household income falls below a certain level. Many of these mexicans were actually making money hand over fist in construction and were ineligible for welfare based on income. It ought to be interesting to see how many anchor baby "citizens" load up the welfare rolls for their illegal parents and siblings.

[Rhino]

Kathy, did you read the article? They aren't saying that situations like those don't exist. They're saying that the amount of hype over this is far beyond the percentage of the market that such loans constitute. San Bernardino is hardly representative of the market as a whole, but that could be a good point. These foreclosures are sure to vary quite a bit by geographic area and/or demographics, but that really isn't all that unusual. Since most sub-prime lenders are subsidiaries of major lenders, the effect of the market as a whole is far more important than the market in any specific area. There are very few independent lenders in this market. And since homes sold in the subprime market are far less valuable than other homes, the effect on a monetary scale is even less. Plus, over 80% of subprime loans are refinances, meaning that the borrower has already established an acceptable payment history.

And, believe it or not, the stated figures are correct.
Total delinquencies for all loans past due were at 4.95 percent in the fourth quarter of 2006, up 6 percent from the third quarter of 2006 and up 5 percent from the fourth quarter of 2005. Delinquencies for sub-prime loans past due were at 13.33 percent, up 6 percent from the third quarter of 2006 and up 15 percent from the fourth quarter of the previous year. For the fourth quarter of 2006, 90-day delinquencies for all loans were at
0.96 percent, up 2 percent from the third quarter of 2006 but down 6 percent from the fourth quarter a year ago. Subprime loans that were 90 days past due stood at 3.13 percent at the close of 2006, up 6 percent from the third quarter of 2006 and up 6 percent from the end of 2005. During the fourth quarter of 2006, 0.54 percent of all loans entered foreclosure, an increase of 17 percent from the third quarter of 2006 and an increase of 29 percent from the fourth quarter of the previous year. In the subprime loan category, 2.00 percent began foreclosure in the fourth quarter of 2006, an increase of 10 percent over the third quarter of 2006 and 36 percent over the fourth quarter of 2005.http://www.huduser.org/periodicals/ushmc/spring07/USHMC_Q1_07national_data.pdf

No one is saying that there aren't problems with these loans, and they certainly will vary in significance from area to area. But in the grand scheme of things, they are hardly a blip on the radar of the overall market, and the media hype is indeed way overblown.

[ThomasMore]

My IRA manager just recommended that I buy into mortgage stocks -- they haven't hit bottom yet, but the stock market has alreadly largely discounted them for the real estate downturn, which the manager believes will be a short one (@ 1 - 1 1/2 years).

[Rhino]

The way the market is depressed right now, you could buy into just about anything.

[Lazarus]

Some foreign investors bought into these mortgage loans to make a quick buck... Now some of these unqualified home-buyers are (suprise suprise) defaulting on their mortgages and someone lost their shirt... That makes for the kind of shock-news that the MSM lives for...

Risky markets pay big when they pay off - When they go South, you lose your ass... If you're gonna play the game, you better be able to take the loss...

What the banks are concerned about is that this particular market, although small in comparison to the total economy, its usually a popular indicator of the overall economic health... The banks are afraid of a financial panic occurring... Even though its not justified by the actual facts, panic doesn't usually consult the facts...

[Lazarus]

My IRA manager just recommended that I buy into mortgage stocks -- they haven't hit bottom yet, but the stock market has alreadly largely discounted them for the real estate downturn, which the manager believes will be a short one (@ 1 - 1 1/2 years).Might be a good choice if you have a small amount of "risk capital"... If he's right you can make a nice little windfall in a couple of years... But I wouldnt rush to move my whole basket over there...

Stay diversified - Keep some money in stable performers... When lookin at a bond investment, always pay close attention to the Moody's and S&P rating... Never go with a marginal bond...

[Kathy30]

Rhino, I just don't believe it. Sorry, but statistics, trends and everything else can be faked up like everything else. I've seen it. I see what's happening around me. San Bernardino is representative of what's going on around the country in every major immigrant hub. In Detroit a used car costs more than a home. A home that sold at one time for a hefty chunk of change. This is representative of what's going on in every major city that bought into the providing the american dream for the poor, poor poor undocumented. That millstone is dragging the entire industry down.

[Rhino]

Okay. Whatever.

[Naturalized-Texan]

After a down day yesterday, my stocks are soaring again.

[Rhino]

Mine aren't exactly soaring, but a few are rising again. One of my stocks was gaining steadily (albeit slowly) throughout all this, but pretty much everything else was tanking. Of course, they'll all probably jump right back, but it is a disconcerting feeling to see all this.

[Lazarus]

Such is life in the financial markets... That bunch at the NYSE are as flighty as a herd of wildabeasts in lion country... It doesnt take much to send them into a panic, and they will actually trample some of their own in the process... But in the morning they are right back at the watering hole... :rolleyes::D

[Rhino]

After a down day yesterday, my stocks are soaring again.Pssssstttt! What are you holdin, dude? :lol:

[Naturalized-Texan]

Pssssstttt! What are you holdin, dude? :lol:
:biggrin: