Sub-Prime is tip of iceberg?

[Xtrema]

pmeBSWI9sF8

[Canmorite]

That guy has some great videos.

[finboy]

great video, though i don't want to wish financial hardship on anyone, i would love to see prices in socal drop, costal house for the win

lkQz9Aw4dNo

[whodiman]

If this is true , it is going to get much worse. Does anybody have any other sources to back up what this guy is saying?

[rc2002]

His sources seem quite credible. The numbers are coming from the US Fed already.

[blownz]

I didn't watch the videos yet, but an interesting thing from someone I know with the Royal Bank... Apparently last spring/summer when prices were at their peak in AB, the banks gave out a record number of HELOC's to people. Many of these people basically 'wasted' the money on things like cars, trips, etc. Now all of these people are in debt to the tune of 80% of the value of their place with sometimes not much to show for it.

The big problem is that now today, many of those houses in Calgary and Edmonton are worth about 20% less than when the bank let borrow all that money. So now there are a bunch of people out there that owe 100% of the value of their house to the bank and often since they don't have much to show for what they blew their HELOC's on they are actually upside down on their house. To make things worse, they are seeing a much larger percentage of people only making the minimum interest payment on those HELOC's so things aren't going to get any better for these people. It won't take much to get some of these people in a lot of trouble.

[Super_Geo]

Originally posted by blownz
I didn't watch the videos yet, but an interesting thing from someone I know with the Royal Bank... Apparently last spring/summer when prices were at their peak in AB, the banks gave out a record number of HELOC's to people. Many of these people basically 'wasted' the money on things like cars, trips, etc. Now all of these people are in debt to the tune of 80% of the value of their place with sometimes not much to show for it.

The big problem is that now today, many of those houses in Calgary and Edmonton are worth about 20% less than when the bank let borrow all that money. So now there are a bunch of people out there that owe 100% of the value of their house to the bank and often since they don't have much to show for what they blew their HELOC's on they are actually upside down on their house. To make things worse, they are seeing a much larger percentage of people only making the minimum interest payment on those HELOC's so things aren't going to get any better for these people. It won't take much to get some of these people in a lot of trouble.

Fuck, hopefully the high price of oil will keep Alberta relatively recession proof... kind of like what the drug trade did for Miami back in the day.

[rc2002]

Originally posted by blownz
I didn't watch the videos yet

Coles notes for the video for anyone who can't watch the video at work or is too lazy to: The video talks about Alt-A mortgages and their striking similarities to the subprime mortgages.

The Alt-A mortgages are already starting to default in the same fashion the subprime ones started, and the average values of the Alt-A mortgage are almost double that of the subprime mortage ($400k versus $200k). The credit scores aren't far off the subprime credit scores, and there's a similar amount of cash out refinancing.

If Alt-A follows the subprime, then homeowners are in a LOT of trouble.

[The Cosworth]

wow smart guy

[Canmorite]

Meanwhile, the Dow is up 260 points :nut:

[ExtraSlow]

Correct me if I'm wrong, but this whole Alt-a and subprime thing could actually be a pretty good deal for a person in Alberta if a few specific condition are met.
- you aren't trying to sell your house, since house prices here have been affected.
- your job and income are secure (continuing high energy prices)

So the economy might slow down, but if your income stays the same, doesn't that just make everything cheaper for you? Espeically good if you are looking to buy vacation property in a year or two.

Maybe I'm just an optimist, btu that's the way I'm seeing it.

[finboy]

Originally posted by richardchan2002


Coles notes for the video for anyone who can't watch the video at work or is too lazy to: The video talks about Alt-A mortgages and their striking similarities to the subprime mortgages.

The Alt-A mortgages are already starting to default in the same fashion the subprime ones started, and the average values of the Alt-A mortgage are almost double that of the subprime mortage ($400k versus $200k). The credit scores aren't far off the subprime credit scores, and there's a similar amount of cash out refinancing.

If Alt-A follows the subprime, then homeowners are in a LOT of trouble.

and there are 50% more alt-a loans


Originally posted by ExtraSlow
Espeically good if you are looking to buy vacation property in a year or two.

Maybe I'm just an optimist, btu that's the way I'm seeing it.

pretty much

everyone should watch the other vid's, i can't believe how easy it was to get a mortgage state side

[max_boost]

At what point will the banks reduce the credit limit on HELOCs? When home prices drop XX%?

[Xtrema]

Originally posted by max_boost
At what point will the banks reduce the credit limit on HELOCs? When home prices drop XX%?

Don't know how this will play out in Canada.

But other than TD and BMO, other major CDN banks do get burnt playing in the credit market.

So I'm sure they are shying away from HELOC for the next little bit.

As long as people keep their jobs, we should be ok.

[canuckcarguy]

I don't really agree with this guy. The big problem in the USA with sub-prime was that the lenders loaned to much higher levels, the interest rates were almost always starting with teaser rates, the credit sucked, and lenders pretty much ignored ability to pay. This guy contradicts himself, claiming that the sub-prime borrowers don't have any cash, but also that the majority of them re-financed and have "their pockets lined with cash". He also claims that Alt-A borrowers tend to be more likely to allow their homes to go into default, because they have the financial means to go and rent a new house. This is historically inaccurate - most people do whatever they can to remain in their homes, and this is especially true with people that have decent credit, which applies to the Alt-A market. The alt-A market has arguably been around for a long time, while the sub-prime market is essentially a failed 10-15 year old experiment.

He puts a lot of stock in the fact that roughly 15% of Alt-A loans are late, but even in a super economy, this number is generally over 10%.

I'm not a starry-eyed optimist, and I think the sub-prime lenders and borrowers were totally irresponsible, but sub-prime does not equal alt-A.

In Canada, the sub-prime market was way less aggressive, so even with some market fluctuation, most borrowers, especially low-credit borrowers, were at lower loan-to-value than their American counterparts, and therefore are inherently less risky.

[Xtrema]

http://www.slate.com/id/2188982/pagenum/all/#page_start

[topfuelman]

Great to see that other car guys/gals are also intelligent enough to see the big picture, beyond what industry pump monkeys and media powers choose to feed the ..okay... fair enough... masses/joe six pack/lay person/average joe/whatever.

If you are thinking about buying real estate or investing in general...
Don't buy anything until you dig a little deeper into the big picture.

In Calgary, as in other bubble urban centers, prices recently rose exponentially (parabolic curve) in a short time, and the flip side of the increasing slope of the parabola is a decreasing slope (price decline). It is not only inevitable, it is necessary.

The loose monetary policies of the US fed and other central banks since the tech bubble has created bubbles in most asset classes on a global and unprecedented level. The US government is now at the center of trying to prop up their banking system and are allowing creative accounting (fraud) to mitigate the perceived depth of their financial woes.

Did you know that the new head of CMHC is ex Goldman Sachs? Hmm... One of the first policy changes he slipped through this fall was to allow CMHC guarantees of investment (not primary properties) at 5% down. Promoting speculation? Condo market prop?

They US (fed) have also just convinced Great Britain to try similar techniques. This will not end well. We've always had conservative lending standards and it has traditionally protected our banking system. This "financial innovation" sourced from Wall Street is dragging us down the same path as the US. and Great Britain.

The big picture...

The US, Great Britain, Ireland, Spain, India, Australia, New Zealand and to a similar extent Canada have been played by the global banking "pigmen" with the blind eye support of their respective governments. These giant Ponzi schemes all have the same end result. Make borrowing easy and watch asset class speculation drive the prices higher and higher. Banks made billions in profits from service fees and loan origination procedures, and then sold off the debt in complex packages to unsuspecting investors/funds and also made a profit in doing so. The theory was that the loan to value ratio was secure as home prices always rise...right?

Wrong.

The average personal debt level has been climbing to unsustainable levels. House prices cannot climb exponentially or outpace wage growth for any sustained period of time. Housing prices must resolve back to a historical mean to maintain affordable debt levels for average households. The only other option is for wages to grow exponentially to match. Think that will happen? Not.
The visible signs of wealth so prevalent everywhere are predominantly the result of opening up the (ficticious) wealth tied up in home equity. HELOC's. Let people tap into their perceived home equity to spend like drunken sailors. What the hell, right... my house is going up in value so it will be alright... The banking system not only promoted these vehicles but encouraged their use. Doesn't matter if you don't make enough money just tap into your homes value and spend. This will not end well as the US banking system is just starting to find out. Our Canadian banks are following closely behind this trend.

Anyways,
I did not dream this stuff up nor do I claim to be an expert. I did however discover an incredible resource "forum" site where people contribute news releases, information, observations, investing ideas etc.
The forum was set-up by a fairly smart individual who posts a daily column laying out the reality of each days newsworthy economic events...not the spin you will see on CNBC, CNN or the like.

http://www.tickerforum.org/cgi-ticker/akcs-www

Spend some time on this site daily and it will offer some insight and perspective that you won't find in your local news. Macroeconomic concepts should play an integral role in your local market decisions. Ignore them at your peril.

[broken_legs]

Originally posted by max_boost
At what point will the banks reduce the credit limit on HELOCs? When home prices drop XX%?


Who cares. HELOCs above 80% loan to value are insured through GMAC or CMHC.

[autosm]

Originally posted by blownz
I didn't watch the videos yet, but an interesting thing from bank let borrow all that money. So now there are a bunch of people out there that owe 100% of the value of their house to the bank and often since they don't have much to show for whsomeone I know with the Royal Bank... Apparently last spring/summer when prices were at their peak in AB, the banks gave out a record number of HELOC's to people. Many of these people basically 'wasted' the money on things like cars, trips, etc. Now all of these people are in debt to the tune of 80% of the value of their place with sometimes not much to show for it.

The big problem is that now today, many of those houses in Calgary and Edmonton are worth about 20% less than when the at they blew their HELOC's on they are actually upside down on their house. To make things worse, they are seeing a much larger percentage of people only making the minimum interest payment on those HELOC's so things aren't going to get any better for these people. It won't take much to get some of these people in a lot of trouble.

Its going to be ugly. This is exactly what happened in Arizona.

It was easyer to walk away than repay 150k when the houses dropped in price.

[Antonito]

Originally posted by topfuelman
sheeple.


I'm sure there might be some reasonable things in your post, but this is where I stopped reading, as historically anything that uses the phrase "sheeple" is not worth reading

[sputnik]

Originally posted by Antonito


I'm sure there might be some reasonable things in your post, but this is where I stopped reading, as historically anything that uses the phrase "sheeple" is not worth reading

:werd:

Most of them eventually go into US conspiracies about 9/11, religion and UFOs.

[TomK]

Originally posted by Antonito


I'm sure there might be some reasonable things in your post, but this is where I stopped reading, as historically anything that uses the phrase "sheeple" is not worth reading


You kept reading...

This site contains posts with much more juvenile content than "sheeple", and everyone here loves it.

[Antonito]

Originally posted by TomK



You kept reading...

This site contains posts with much more juvenile content than "sheeple", and everyone here loves it.

Juvenile comedy is great, overbearing elitism is not.

And I really didn't, and know lots of people who don't. Several of my friends actually put anyone who unironically uses the word on their ignore lists. It's kind of like seeing "hey guys, have I got a deal from you, Nigeria...."

[Canmorite]

Originally posted by topfuelman

http://www.tickerforum.org/cgi-ticker/akcs-www

Spend some time on this site daily and it will offer some insight and perspective that you won't find in your local news. Macroeconomic concepts should play an integral role in your local market decisions. Ignore them at your peril.

+1 for ticker forum. Some brilliant guys over there.

[blownz]

Originally posted by broken_legs


Who cares. HELOCs above 80% loan to value are insured through GMAC or CMHC.

That isn't what he is saying. He is referring to the same thing I did in my post where a year ago the banks were giving guys in Calgary and Edmonton a HELOC worth 80% of the value of their house and now their place might be worth 20% less and now the HELOC is actually close to or maybe over 100% of the current value of the home. The banks have no insurance on that. And I'm not sure if they have a policy on reducing the limits when the home prices drop but I will ask the guy I know at RBC.

[Xtrema]

Originally posted by broken_legs
Who cares. HELOCs above 80% loan to value are insured through GMAC or CMHC.

The problem with insurance is that everyone pays for it. Insurance companies will never lose money. If there are enough defaults, they will raise the rate which eventually be passed on the consumer in some form or other.

The saving grace for Alberta is the strong employment market. If that go south, watch out for defaults.


US Construction vs Sub-Prime vs Unemployment

http://graphics8.nytimes.com/images/2008/04/05/business/20080406_METRICS_SUB_GRAPHI.jpg

[broken_legs]

From the Globe n Mail



'There is no sign of a bottom'
BARRIE McKENNA
00:00 EST Wednesday, Apr 30, 2008

WASHINGTON -- Conditions at the epicentre of the credit crunch are getting worse as Ben Bernanke and the U.S. Federal Reserve Board appear poised to slow their aggressive drive to cut interest rates. Home prices are falling faster in virtually every major U.S. city and foreclosures are on a pace to double over last year, according to two reports released yesterday.

There is also mounting evidence consumers are feeling the squeeze from slumping house values, rising gas prices and lenders increasingly wary of financing their high-spending ways.

This latest grim economic news comes as the Fed, where Mr. Bernanke is chairman, is expected to announce today that it's lowering its benchmark lending rate by a quarter percentage point to 2 per cent, and then may not cut again for a while. The Fed, which winds up a two-day rate-setting meeting in Washington, is leaning toward a pause in its rate cuts as it assesses the impact of its efforts to fix the credit crisis, economists said. The U.S. central bank has already cut its key interest rate by a total of three percentage points since the start of the credit crisis last summer.

The decision comes as the heart of the credit mess - housing - continues to be a major source of trouble for investors, lenders and homeowners. House prices fell 2.6 per cent in February, and are down nearly 15 per cent from their July, 2006, peak across the country, according to the Standard & Poor's/Case-Shiller index of the 20 largest cities.

"There is no sign of a bottom in the numbers," David Blitzer, who heads S&P's index committee, said bluntly.

Prices were down in all but one of the markets surveyed - Charlotte, N.C. And out of the 20 cities in the survey, 17 reported record annual declines. Miami and Las Vegas, which experienced a burst of speculative building during the housing boom, led the way with annual declines of 22.8 and 21.7 per cent, respectively. Prices are also down sharply in California - Los Angeles (off 19.4 per cent), San Diego (19.2 per cent) and San Francisco (17.2 per cent). Particularly worrying, the pace of home price devaluation is picking up. Prices fell 2.6 per cent in February, compared with 2.4 per cent in January.

Prices have now retreated to where they were at the end of 2004, the 20-city index shows. That means that a growing number of homeowners owe more than their properties are worth.

"The deflation trend shows no signs of turning, let alone ebbing," agreed Michael Gregory, senior economist at BMO Nesbitt Burns.

The combination of slumping prices and a wave of mortgages resetting to higher rates is proving toxic for the most indebted homeowners.

The number of U.S. homes heading toward foreclosure more than doubled in the first quarter from a year earlier, as weakening property values and tighter lending left many homeowners powerless to prevent homes from being auctioned to the highest bidder, according to RealtyTrac Inc. of Irvine, Calif.

The foreclosure problems closely track declining home prices. Nevada, Florida and California are experiencing the worst foreclosure rates.

Across the United States, 649,917 homes received at least one foreclosure notice in the first three months of the year, up 112 per cent from 306,722 during the same period last year, RealtyTrac said. Lenders also repossessed 157,000 homes.

RealtyTrac monitors default notices, auction sale notices and bank repossessions. One of every 194 households is now in some stage of foreclosure.

The problem left few parts of the country untouched. Foreclosure filings are up in all but four states.

The deepening housing slump is also showing signs of hitting consumer sentiment, and behaviour.

The U.S. Conference Board reported yesterday that American consumer confidence fell to the lowest level since the start of the March, 2003, invasion of Iraq. The index fell to 62.3 in April from 65.9 in March.

MasterCard chief executive officer Bob Selander told investors on a conference call that it's seeing evidence that more consumers are putting food and gas charges on their credit cards, while fewer are buying luxury items.

Meanwhile, executives of Wal-Mart Stores Inc. pointed the finger at lenders, who they say are increasingly unwilling to extend credit to maxed-out consumers.

"People don't have as much access to credit as they used to," said Wal-Mart USA CEO Eduardo Castro-Wright, speaking at a Lehman Bros. retail conference broadcast over the Internet. "Clearly that is having an impact on how consumers behave."

And without easy access to credit, he said, consumers are finding it has become more difficult to splurge on non-essential or big-ticket items.

[broken_legs]

Originally posted by blownz


That isn't what he is saying. He is referring to the same thing I did in my post where a year ago the banks were giving guys in Calgary and Edmonton a HELOC worth 80% of the value of their house and now their place might be worth 20% less and now the HELOC is actually close to or maybe over 100% of the current value of the home. The banks have no insurance on that. And I'm not sure if they have a policy on reducing the limits when the home prices drop but I will ask the guy I know at RBC.


So what did the guy at RBC say?

[blownz]

I forgot about it. But I will be seeing him later today and will ask.

[01RedDX]

.

[broken_legs]

9GsxGmR6uPk


Thought this was kind of funny (and scary)

[broken_legs]

Good thing I have a decent internet connection, there are lots of interesting videos to watch!

more idiots on fox news:

yoZV5jt9puc&NR

[The Cosworth]

Originally posted by broken_legs
Good thing I have a decent internet connection, there are lots of interesting videos to watch!

more idiots on fox news:

yoZV5jt9puc&NR

haha wow some of those experts are retarded

[Xtrema]

http://www.businesspundit.com/sub-prime/

haha

[Canmorite]

Originally posted by Xtrema
http://www.businesspundit.com/sub-prime/

haha

Seen it, but so awesome :rofl:

[finboy]

kJOJYUJi4n8

[broken_legs]

Yikes

...

[Godfuader]

Originally posted by blownz


That isn't what he is saying. He is referring to the same thing I did in my post where a year ago the banks were giving guys in Calgary and Edmonton a HELOC worth 80% of the value of their house and now their place might be worth 20% less and now the HELOC is actually close to or maybe over 100% of the current value of the home. The banks have no insurance on that. And I'm not sure if they have a policy on reducing the limits when the home prices drop but I will ask the guy I know at RBC.

The banks have absolutely no re-course. When signing documents, its bases on 80% LTV on the newly appraised value. When you sign for a HELOC, you are signing for a dollar amount and not a percentage. The 80% just buys the bank leverage in case of a downfall. When getting approved for a HELOC, the banks look at the worst case scenario, where if the entire HELOC was added onto the current mortgage and termed out...could the client afford that.

[blownz]

I totally forgot about this but that is pretty much exactly what I was told. They never go back and reduce the HELOC.

But I was told that right now because of the fact some people have maxed out their HELOC and their house is worth less or close to what they owe the bank, when these people do default on their payment (and it is apparently happening more lately) the bank jumping on them quicker than they used to.

[broken_legs]

Originally posted by Godfuader


The banks have absolutely no re-course. When signing documents, its bases on 80% LTV on the newly appraised value. When you sign for a HELOC, you are signing for a dollar amount and not a percentage. The 80% just buys the bank leverage in case of a downfall. When getting approved for a HELOC, the banks look at the worst case scenario, where if the entire HELOC was added onto the current mortgage and termed out...could the client afford that.

The 80% is the max LTV until you have to pay CMHC

You can get a HELOC up to 100% of the value if you are willing to pay the insurance.