US situation re mortgages and household debt

[Pure]

Some interesting graphs of burgeoning household debt, etc. over the last decades.

http://www.huffingtonpost.com/hale-stewart/the-illusion-of-the-bush-_b_83197.html

household debt is over 125% of disposable income, on average. anyone experiencing this?

see the Federal Reserve figures at
Household debt service payments and financial obligations as a percentage of disposable personal income; seasonally adjusted

http://www.federalreserve.gov/releases/housedebt/default.htm

debts service payments as an increasing % of personal income.

[Graphs in Susan McIntosh's power point presentation, US Household balance sheet analysis, 2005 are interesting:

www.oecd.org/dataoecd/18/4/35518636.ppt ]


loans on home equity--many of them 'subprime'-- are part of the problem, and it will apparently get worse as home prices 'adjust' downward by a least 5%.

author reports that at least 400 billion must be written off; banks have apparently already written of 100 billion in bad debts from subprime mortagage and the derivative instruments composed of large bundles of them.

the 'r' word is perhaps becoming applicable.

 

[JAMESBJOHNSON]

My debt is a small fraction of my net worth and income. I have a car payment.

 

[Liar]

I owe nothing.

Except as a taxpayer, since the guv'ment has racked up a national debt the size of a small planet.

And for the record, I voted for the other guys.

 

[Weird Harold]

household debt is over 125% of disposable income, on average. anyone experiencing this?

see the Federal Reserve figures at
Household debt service payments and financial obligations as a percentage of disposable personal income; seasonally adjusted

Since the majority of "household debt" would probably be either a house payment or car payment, I don't really see how "disposable income" can be used. Mortgage payments don't come out of "disposible income" and I wouldn't really put car payments in in the disposable income section of the budget either.

Disposable income is generally shrinking as inflation increases the "necessary expense" share of gross income, but while that changes the ratio of "disposable income" to "consumer debt" it doesn't necessarily mean that the "consumer debt" has increased.

If American consumers are having problems meeting their credit obligations, then the Educational System has failed them yet again and should put a bit more emphasis on mathematics, critical thinking and money management.

Have little sympathy for people who are in financial trouble because they took on more voluntary debt than they could afford.

 

[JAMESBJOHNSON]

HAROLD

Our local school board buys high interest credit-card debt. Why in hell would they educate their fools about credit card debt?

 

[Selena_Kitt]

We don't own a credit card. Mostly because we had to declare bankruptcy after my husband's abscessed tooth turned into flesh eating bacteria a few years ago... an ironic three days before our insurance kicked in. $60,000 in medical debt later...

Nor do we have a mortgage - although we did, up until the house didn't sell after we moved (hubby's work) and it's now in the process of foreclosure. (We're in Michigan - worst housing market in the US and essentially in a one-state recession).

So yes, I guess you could say I'm experiencing it... although we're sort of out of the rat race now... back to zero.

 

[rgraham666]

We don't own a credit card. Mostly because we had to declare bankruptcy after my husband's abscessed tooth turned into flesh eating bacteria a few years ago... an ironic three days before our insurance kicked in. $60,000 in medical debt later...

Nor do we have a mortgage - although we did, up until the house didn't sell after we moved (hubby's work) and it's now in the process of foreclosure. (We're in Michigan - worst housing market in the US and essentially in a one-state recession).

So yes, I guess you could say I'm experiencing it... although we're sort of out of the rat race now... back to zero.

Been there, done that.

No where to go but up. *HUGS*

 

[Selena_Kitt]

Been there, done that.

No where to go but up. *HUGS*

No other way to look at it!

Thanks.

 

[Huckleman2000]

People who haven't gotten sucked under yet have little appreciation for how the banking business works nowadays. If I see another "consumers are stupid and deserve it" type of post, I'll probably either go on a profane rant and offend everyone, or else just stop reading these things entirely.

A poster in another thread was talking about getting credit cards at ~14%. But make a payment, any payment, a day late and watch what happens:
Late fee: $35
Revised APR: 20-30%

Multiply that by the number of credit cards you own. Pretty stiff penalty if you have any unexpected bills or your payroll schedule doesn't align with your bills.

Once you start to go down, they smell blood. They cut your credit limit to less than your balance, and start to charge for 'over limit'. Fees start mounting. Less and less of the payments go towards principal. As Pure's links demonstrated, the Financial industry is the only one that has had historically high profits in the timeframe, and Fees have been the fastest growing profit center.

Yes, your conservative prudent tightasses will crow about how wise they are, and how stupid everyone else has been, and how they all deserve what's coming to them. Until something unexpected happens to them, too...

[eta] It's a pretty morally sick country where getting sick means you have a good chance of going bankrupt and losing your home.

 

[SeaCat]

I know several people who are in trouble right now. Luckily I'm not one of them.

Here in the Trailer Park where I live there are currently three places up for sale because of Foreclosure.

Why are these people in trouble? For each one the story is different.

Why am I not in trouble? To be honest I don't know. Yes I save my money, and yes I don't buy a lot of toys. Then again in the past two years I have had two major infections, one which almost cost me my foot. I think the only thing which has saved me was I took a cut in pay so I would get Health Insurance.

The only other thing that has saved me was when I bought my place. I was willin to buy an older, beat up Mobile Home at well below market value because it needed work.

Cat

 

[Xelebes]

People who haven't gotten sucked under yet have little appreciation for how the banking business works nowadays. If I see another "consumers are stupid and deserve it" type of post, I'll probably either go on a profane rant and offend everyone, or else just stop reading these things entirely.

That's called reading the fine print before signing the contract. If you can't be bothered to read it then the consumer is at fault.

Ask these questions:

Was the consumer incapacitated or intoxicated when signing?
Was the consumer made aware of all the terms by having all the terms available to be read before signing?

There are losses on the bank's part when it comes to receiving late payments because the bank isn't lending it's own money, it is lending what has been loaned from the central bank (Federal Reserve in the US' case.)

The only thing which can lead to big trouble on the banks' part is the giving of the loans to people full knowing that they will not be able to pay them once they have to pay anything on the principal. This isn't illegal - however, it once was. That's the key here.

 

[Boxlicker101]

Some interesting graphs of burgeoning household debt, etc. over the last decades.

http://www.huffingtonpost.com/hale-stewart/the-illusion-of-the-bush-_b_83197.html

household debt is over 125% of disposable income, on average. anyone experiencing this?

see the Federal Reserve figures at
Household debt service payments and financial obligations as a percentage of disposable personal income; seasonally adjusted

http://www.federalreserve.gov/releases/housedebt/default.htm

debts service payments as an increasing % of personal income.

[Graphs in Susan McIntosh's power point presentation, US Household balance sheet analysis, 2005 are interesting:

www.oecd.org/dataoecd/18/4/35518636.ppt ]


loans on home equity--many of them 'subprime'-- are part of the problem, and it will apparently get worse as home prices 'adjust' downward by a least 5%.

author reports that at least 400 billion must be written off; banks have apparently already written of 100 billion in bad debts from subprime mortagage and the derivative instruments composed of large bundles of them.

the 'r' word is perhaps becoming applicable.

Like WH, I have to wonder what you mean by "disposable income". I would define it as the difference between revenues and obligatory payments. The latter would include motgage payments or rent, car payments, and similar NP's. I realize you also have to eat, but you have some control over what you spend for that.

 

[trysail]

People who haven't gotten sucked under yet have little appreciation for how the banking business works nowadays. If I see another "consumers are stupid and deserve it" type of post, I'll probably either go on a profane rant and offend everyone, or else just stop reading these things entirely.

Ever heard of a little known concept called personal responsibility? You know- something along the lines of "taking responsibility for your actions" or "self reliance." Mother Nature really does abhor morons.

Then, of course, there's that quaint, old-fashioned concept of not buying stuff that you can't afford.

 

[JAMESBJOHNSON]

XELEBES

The banks arent keeping the loans. Banks sell their loans to brokers, who bundle various kinds of consumer debt, and sell the bundles to state and local government.

Our local school board has about 500 MILLION invested in this scheme.

So people need to work to make their payments on time. Working against full employment is illegal immigration and outsourcing.

 

[Pure]

try Ever heard of a little known concept called personal responsibility? You know- something along the lines of "taking responsibility for your actions" or "self reliance."

one credit card co. who has my card keeps phoning me with special offers. in effect, if my card has $1100 at 18%, they offer me $1500 at a 'special rate,' say 8%, and they are happy to deposit the $400, in effect, hand me the cash. very tempting. HOWEVER, the special rate disappears after X months (reverts to the 18%), AND if you're one day late, it disappears before that.

so factors like pressuring, misrepresentation, and failure to disclose come into play. "fine print" is tricky on the phone. sometimes there might be a phrase the saleperson inserts, once, such as "when you pay promptly this is the rate."

so there are a) laws about the extremes, and supposedly b) business ethics about the less extremes.

"personal responsibility" should not be a code phrase for 'everyone is fair game,' e.g. in selling them worthless mining stocks, cars that were in a wreck and got repainted, etc.

as far as 'responsibility' goes. i'd ask this: WHAT does a company gain from making a credit card loan--see my first example-- that goes bad?

obviously, with 'bad mortgages' the lender gains your house! i understand that, although he probably loses a percentage if the mortgage exceeds 2/3 (i believe that's the guideline).

 

[JAMESBJOHNSON]

PURE

In the old days banks were stuck with the loans they made, and credit was always tight for the bottom-feeders with poor track records.

But now banks dont keep the loans they make. Banks cant care less about your credit history. And they dont care about your race or anything that once mattered. A crackhead can get a loan as quick as a Presbyterian deacon.

Instead they get fees for making loans and selling them to brokers. If you default its not the bank's problem. The school or hospital or town that bought your note has the problem.

 

[cantdog]

It's a pretty morally sick country where getting sick means you have a good chance of going bankrupt and losing your home.

In much of the world, health care is a human right. You can make it one here, if you care to.

 

[Pure]

cant!!... but isn't that.... communism!

 

[Weird Harold]

"personal responsibility" should not be a code phrase for 'everyone is fair game,' e.g. in selling them worthless mining stocks, cars that were in a wreck and got repainted, etc.

No, "personal responsibility" shouldn't be a code phrase for 'everyone is fair game' -- it should be a code phrase for "don't be a patsy for con-men."

The banks and con-men already consider everyone fair game, but the obvious "fine print" gotcha's aren't generally a problem for people who are "personally responsible" -- people who have enough character to feed those pre-approved credit offers to the shredder and who know how much they can use the cards they do have.

It isn't that hard to avoid the scams and keep the minimum payments within your budget.

Lost income and/or unexpected expenses (like medical problems, "acts of God" not covered in the indurance policy's fine print, legal troubles, etc) can't be avoided and can put even the most personally responsible person into bankruptcy, but the current problems in the financial industry aren't the result of "acts of God," they're caused by an abundance of uneducated consumers feeding a bunch of unethical lenders.

I'm sure that natural disasters and the concurrent losses to consumers and insurance companies probably did provide a bit of additional pressure on the money market, but they weren't the cause of the problems.

 

[JAMESBJOHNSON]

Regardless of the system that regulates medical care, demand for medical care is insatiable while the supply of medical care resources is finte.

 

[Pure]

if, asalleged, there is infinite demand,

it proves the need for rational allocation of resources (based on actuarily sound principles). not relying on either the 'good will' of Kaiser, or its alleged desire to compete through offering superior product (market mechanism),

 

[JAMESBJOHNSON]

PURE

The elites never get in line for medical services. You'll never see these people waiting at the E/R.

Regardless of what the government promises, the elites get the Cadillac and the peons get the Yugo. This is how it is in every society.

Therefore, I'm not exactly orgasmic about the idea of paying the government a ton of taxes so I can get two aspirin and my name on a waiting list when I'm sick.

 

[Pure]

note to weird h

[WH] No, "personal responsibility" shouldn't be a code phrase for 'everyone is fair game' -- it should be a code phrase for "don't be a patsy for con-men."

The banks and con-men already consider everyone fair game, but the obvious "fine print" gotcha's aren't generally a problem for people who are "personally responsible" -- people who have enough character to feed those pre-approved credit offers to the shredder and who know how much they can use the cards they do have.

OK, but Harold. Consider the bundling of subprime mortagages, and offering the bundles--secondary instruments-- as investiments to various entities, e.g. union retirement funds, and so on. do you really think the "character" of the persons who made these decisions is the issue.?

Presumably professionals in investment 'bought' the banks' story that if you bundle a bunch of bad risks together, you have a good risk!

 

[JAMESBJOHNSON]

PURE

Bundling is the solution to affirmative action in loans. You salt the good loans with the bad loans, and everyone gets a bite of shit sandwich instead of a flatter of shit sandwiches from the squalid neighborhoods.

 

[Pure]

salting the good with the bad.

somehow i don't think that's how the bundles were described!

further i gather it wasn't 'salting' : i.e the bundles had mainly or substantially subprime constituents.

i any case, is the buyer to be faulted?