Real Wealth Society

Tuesday, April 01, 2008

The $1.1 Trillion HELOC Problem By Mish

The New York Times is writing Home Equity Loans as Next Round in Credit Crisis.

Americans owe a staggering $1.1 trillion on home equity loans — and banks are increasingly worried they may not get some of that money back.

When borrowers default on their mortgages, lenders foreclose and sell the homes to recoup their money. But when homes sell for less than the value of their mortgages and home equity loans — a situation known as a short sale — lenders with first liens must be compensated fully before holders of second or third liens get a dime.

In places like California, Nevada, Arizona and Florida, where home prices have fallen significantly, second-lien holders can be left with little or nothing once first mortgages are paid.

Consider Randy and Dawn McLain of Phoenix. The couple decided to sell their home after falling behind on their first mortgage from Chase and a home equity line of credit from CitiFinancial last year, after Randy McLain retired because of a back injury. The couple owed $370,000 in total.

After three months, the couple found a buyer willing to pay about $300,000 for their home

CitiFinancial, which was owed $95,500, rejected the offer because it would have paid off the first mortgage in full but would have left it with a mere $1,000, after fees and closing costs, on the credit line.

“If it goes into foreclosure, which it is very likely to do anyway, you wouldn’t get anything,” said J. D. Dougherty, a real estate agent who represented the buyer on the transaction.

Underscoring the difficulties likely to arise from home equity loans, a Democratic proposal in Congress to refinance troubled mortgages and provide them with government backing specifically excludes second liens. Lenders holding a second lien would be required to write off their debts before the first loan could be refinanced. That could leave out a significant number of loans, analysts say.

People with weak, or subprime, credit could be hurt the most. More than a third of all subprime loans made in 2006 had associated second-lien debt, up from 17 percent in 2000, according to Credit Suisse. And many people added second loans after taking out first mortgages, so it is impossible to say for certain how many homeowners have multiple liens on their properties.

“This is turning out to be a real impediment to solving this problem,” said Mark Zandi, chief economist at Economy.com, “at least, solving it quickly.”

The article notes that 5.7 percent of home equity lines of credit were delinquent or in default in December 2007, up from 4.5 percent in 2006, according to Moody’s Economy.com. It's not unreasonable to assume with the the recession picking up steam that 10-15% of those $1 trillion in HELOCs and second mortgages will default. If so, add another $100-$150 billion in writeoffs. That number can easily be low.

more
http://globaleconomicanalysis.blogspot.com/

23 Comments:

  • I know this web page offers quality based content and additional stuff, is
    there any other web page which gives these stuff in quality?
    Also visit my site : biggest pic porn star video vivid

    By Anonymous Anonymous, At 10:42 AM  

  • You should be a part of a contest for one of the greatest sites on
    the net. I most certainly will recommend this website!
    Check out my blog ... http://amazingteenbabes.com/

    By Anonymous Anonymous, At 11:53 AM  

  • Thank you, I've just been searching for info approximately this topic for ages and yours is the best I've discovered
    till now. But, what concerning the bottom line?
    Are you positive in regards to the supply?
    Also see my web site - Free Teen Porn

    By Anonymous Anonymous, At 11:53 AM  

  • Hurrah, that's what I was looking for, what a data! existing here at this webpage, thanks admin of this website.
    Also visit my page click through the following web page

    By Anonymous Anonymous, At 2:45 AM  

  • When I initially commented I clicked the "Notify me when new comments are added"
    checkbox and now each time a comment is added
    I get four e-mails with the same comment. Is there any way you can
    remove me from that service? Appreciate it!
    My web page :: Free Porn

    By Anonymous Anonymous, At 4:20 AM  

  • What's up, this weekend is nice in support of me, for the reason that this time i am reading this enormous informative post here at my house.
    My blog :: dont dvd free have pay porn sign up

    By Anonymous Anonymous, At 4:57 PM  

  • What's up, this weekend is nice in support of me, for the reason that this time i am reading this enormous informative post here at my house.
    My page > dont dvd free have pay porn sign up

    By Anonymous Anonymous, At 4:57 PM  

  • I'm not sure exactly why but this site is loading very slow for me. Is anyone else having this issue or is it a issue on my end? I'll check back later
    and see if the problem still exists.
    Also see my site - Busty Whore Hotter Than Ever

    By Anonymous Anonymous, At 9:38 AM  

  • Great blog right here! Additionally your website loads
    up fast! What web host are you the use of? Can I get your
    associate hyperlink to your host? I want my website loaded up as
    fast as yours lol
    Review my weblog : Free Porn

    By Anonymous Anonymous, At 6:59 AM  

  • Link exchange is nothing else however it is simply placing the other person's weblog link on your page at suitable place and other person will also do same in support of you.
    Here is my homepage :: Orlando contractors

    By Anonymous Anonymous, At 3:18 AM  

  • Somebody necessarily assist to make severely articles I'd state. That is the very first time I frequented your website page and up to now? I amazed with the analysis you made to create this actual publish incredible. Wonderful activity!
    Look into my web-site ... Genital Warts Cure

    By Anonymous Anonymous, At 11:49 PM  

  • Somebody necessarily assist to make severely articles I'd state. That is the very first time I frequented your website page and up to now? I amazed with the analysis you made to create this actual publish incredible. Wonderful activity!
    my site: Genital Warts Cure

    By Anonymous Anonymous, At 11:50 PM  

  • Just want to say your article is as astonishing. The clearness in your
    post is simply spectacular and i could assume you are an expert
    on this subject. Fine with your permission allow me to grab your feed to keep up to date with forthcoming post.

    Thanks a million and please continue the enjoyable work.
    Also see my web site: ikea furniture assembly service

    By Anonymous Anonymous, At 7:38 AM  

  • I don't even know the way I stopped up here, however I believed this put up used to be good. I don't recognise
    who you're however definitely you're going to a well-known blogger when you are not already.

    Cheers!

    Look at my website; Miami weight loss centers

    By Anonymous Anonymous, At 9:08 AM  

  • What's up to every single one, it's actually a good
    for me to pay a quick visit this web site, it
    includes valuable Information.

    Visit my webpage - Diablo

    By Anonymous Anonymous, At 5:20 AM  

  • Hello! I just wish to offer you a big thumbs up for your great information you have here on this post.
    I will be returning to your website for more soon.


    My blog - d'nest Condo

    By Anonymous Anonymous, At 11:47 PM  

  • I comment whenever I like a article on a website or
    I have something to contribute to the conversation.

    It's caused by the sincerness displayed in the article I browsed. And on this post "The $1.1 Trillion HELOC Problem By Mish". I was actually excited enough to drop a thought :-P I do have a few questions for you if you do not mind. Could it be just me or does it look like like some of the remarks look as if they are coming from brain dead individuals? :-P And, if you are writing on other sites, I would like to keep up with everything new you have to post. Could you list every one of your social sites like your Facebook page, twitter feed, or linkedin profile?

    My site :: d'nest Condo

    By Anonymous Anonymous, At 11:47 PM  

  • Marvelous, what a blog it is! This blog presents useful facts to us, keep
    it up.

    Check out my page :: Arabic Books

    By Anonymous Anonymous, At 7:52 PM  

  • Hey there! Would you mind if I share your blog with my facebook group?
    There's a lot of folks that I think would really enjoy your content. Please let me know. Cheers

    my blog :: Arabic Books

    By Anonymous Anonymous, At 7:52 PM  

  • Thank you for sharing your info. I truly appreciate your
    efforts and I will be waiting for your next post thank you once again.


    Here is my page ... http://xxx-fuck.net

    By Anonymous Anonymous, At 4:01 PM  

  • Please let me know if you're looking for a article author for your blog. You have some really great articles and I feel I would be a good asset. If you ever want to take some of the load off, I'd love to
    write some material for your blog in exchange for
    a link back to mine. Please shoot me an e-mail
    if interested. Regards!

    Stop by my homepage :: www.Xxxmoviegalls.com

    By Anonymous Anonymous, At 6:20 PM  

  • Appreciate this post. Let me try it out.

    Here is my blog post massage fuck

    By Anonymous Anonymous, At 11:47 PM  

  • I wanted to thank you for this great read!! I absolutely enjoyed every bit of it.
    I've got you book-marked to look at new stuff you post…

    my web site teeneger porno movie

    By Anonymous Anonymous, At 3:22 AM  

Post a Comment

Subscribe to Post Comments [Atom]



<< Home