The Golden Truth: The Mortgage Market's Ticking Time Bomb

Thursday, August 6, 2009

The Mortgage Market's Ticking Time Bomb

Do NOT believe anything you hear from the financial media, your local news sources, the Government and especially those housing industry pimps, the National Association of Realtors or National Association Home Builders. We are leading up to a crushing wave of housing foreclosures, the effects of which will be devastating to the financial and economic system in this country.

I borrowed the chart posted from www.calculatedblogspot.com. This chart shows the rapidly increasing rate of mortgages that are 90+ days delinquent. I know for a fact from chatting with people in the industry that banks are intentionally underreporting delinquencies. Why? 1) When they report troubled assets, it requires them to post more capital - capital they do not have - so underreporting delinquencies allows banks to maintain the appearance of healthier capital ratios. 2) Banks do not have the manpower to process the rapidly growing number of bad mortgages.

Anectdotally, I know a CPA who has several formerly high net worth clients who lost their jobs and have not made mortgage payments for several months. Many of them have not received a phone call or a letter from their bank/mortgage servicer about their missing payments. In this case, the mortgages are not being reported as delinquent to the regulatory authorities. The point is that this delinquency graph actually understates the actual number of 90+ day delinquent mortgages.

At some point, the mortgage-backed bond trusts will run out of cash to make coupon payments to investors of the trusts and the trust servicers will be required to start putting pressure on the banks to either make the payments or start seizing collateral.

What this is leading up to is a massive wave of foreclosures, the supply of which will further crush housing prices. This is just a basic law of supply and demand. As I have previously stated, I am on the record forecasting another 35-40% of pricing downside in the housing market. I will add to that the price drops will be much bigger - i.e. greater than 40% - in all resort towns and high net worth, 7-figure housing areas.

1 comment:

AnonymousMonday, 10 August, 2009
Thanks for good info.

reverse mortgage pitfalls
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Why Gold?

Gold is the world's oldest currency. You exchange your fiat currency (dollars, euros, yen, yuan) into gold as an insurance policy against catastrophic Central Bank and Government policies which serve to destroy the value of fiat currencies and destroy democracy.

Gold can ONLY be considered an investment to the extent that it remains significantly and historically undervalued in relation to the fiat currencies against which its value is measured. Otherwise it remains the world's oldest currency and is completely free from the counterparty risk associated with currency by Government fiat (i.e. fiat currencies rely on a Government's "full faith and credit.")

Quote Of The Month Courtesy of "Jesse"

Unfortunately for Larry Summers, Ben Bernanke, and their friends at the BIS, they have not yet figured out how to print physical gold, silver, and other essential commodities, and the world is reaching the point where it might simply start ignoring the New York based markets with respect to essential commodities such as basic materials, oil, foodstuffs, and the like, as they become increasingly irrelevant, fraudulent, and Orwellian. And then where will the financial engineers be, except with no more excuses and no place to hide?

Here is the link to his entire commentary, well worth a read:

http://jessescrossroadscafe.blogspot.com/2010/07/gold-daily-chart-shock-and-awe-for.html

Great Quote From Jim Rogers On Govt CPI Reporting

JR: I mean, we have inflation now. If you go to the shop, whether it’s groceries, or education or insurance or health care, prices are going up for everything. The government lies about it in the US. Some countries lie, many countries don’t: Australia, China, India and Norway. Many countries don’t lie about it and acknowledge that we have inflation. Others lie about it, the UK and the US, but if you go shopping you know prices are up.

Q: Are you saying that the American Consumer Price Index (CPI) published by the US Bureau of Labor Statistics is a lie?

JR: In my opinion, yes, of course it is. Have you looked at it? They’ve changed their accounting several times in the past few decades. When housing was 20% to 25% of the CPI and housing was going up, they didn’t count it, saying rents weren’t going up, and then when home prices started going down, they counted it. It’s the same with many things. It’s staggering some of the tortuous reasoning that the BLS has used over the past 25 or 30 years. When the price of gasoline goes up, they say it’s not really going up because it’s better gasoline, better quality, therefore you’re getting more for your money. I mean, it’s endless, the stuff that they say and for some reason people sit there, although more and more people are catching on, and accept what the government says.

source: www.clusterstock.com

Quote of the Week

"The primary function of a Central Bank is to engage in the massive transfer of wealth from the middle class to the wealthy elite. The Federal Reserve was set up to do this with the blessing and support of Congress." - Dave in Denver

If you refuse to believe the above, please read "The Creature From Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin and then explain to me why the Senate voted down the Vitter Amendment and Congress refuses to pass a law requiring a full audit of the Fed, even though the Fed is using taxpayer-backed money to bailout Wall Street and Europe.