Comments on: Barclays: Negative Equity Subprime, Alt-A to Soar http://www.nakedcapitalism.com/2008/04/barclays-negative-equity-subprime-alt.html Sun, 22 Nov 2009 04:39:16 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Anonymous http://www.nakedcapitalism.com/2008/04/barclays-negative-equity-subprime-alt.html#comment-7409 Anonymous Wed, 30 Apr 2008 10:23:00 +0000 http://www.nakedcapitalism.com/2008/04/barclays-negative-equity-subprime-alt-a-to-soar/#comment-7409 You have to love cranky people who vent without thinking - and I suspect some spend a lifetime doing just that, patting themselves on the back the whole time for whole smart they are. Debt and negative equity are not the same concept. Debt is how much you owe, which on a $750,000 with a mortgage of $800,000 would be $800,000. Negative equity is the gap between what you owe and the value of the house - here, -$50,000. The term negative equity is an oxymoron, but it captures a mathematical relationship in an easy to understand way. I didn't invent the term negative equity, but the guy who did is not the idiot on the premises. You have to love cranky people who vent without thinking – and I suspect some spend a lifetime doing just that, patting themselves on the back the whole time for whole smart they are. Debt and negative equity are not the same concept. Debt is how much you owe, which on a $750,000 with a mortgage of $800,000 would be $800,000. Negative equity is the gap between what you owe and the value of the house – here, -$50,000. The term negative equity is an oxymoron, but it captures a mathematical relationship in an easy to understand way. I didn’t invent the term negative equity, but the guy who did is not the idiot on the premises.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/04/barclays-negative-equity-subprime-alt.html#comment-7405 Anonymous Wed, 30 Apr 2008 02:53:00 +0000 http://www.nakedcapitalism.com/2008/04/barclays-negative-equity-subprime-alt-a-to-soar/#comment-7405 $6 trillion? Doesn't that really spell an ongoing disaster? That's far above the $2 trillion estimates that have been floating around the past 9 months. Isn't the fed (and by extension all of us) now finally between a rock and a hard place? Cut rates and inflation continues to eat away at everything slowly, raise rates and watch financial institutions, mortgages, derivatives blow up? This is like being in a disaster movie. $6 trillion? Doesn’t that really spell an ongoing disaster? That’s far above the $2 trillion estimates that have been floating around the past 9 months. Isn’t the fed (and by extension all of us) now finally between a rock and a hard place? Cut rates and inflation continues to eat away at everything slowly, raise rates and watch financial institutions, mortgages, derivatives blow up? This is like being in a disaster movie.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/04/barclays-negative-equity-subprime-alt.html#comment-7404 Anonymous Wed, 30 Apr 2008 02:40:00 +0000 http://www.nakedcapitalism.com/2008/04/barclays-negative-equity-subprime-alt-a-to-soar/#comment-7404 S&P spokesman David M. Blitzer said, "There is no sign of a bottom in numbers [. . .] Prices of single family homes continue to drop across the nation," (CNNMoney.com 4/29/08). And it appears that the drop in home prices is accelerating. At this rate, according to Baker, as much as $6 trillion in home values could be wiped out from the zenith of the housing market from June, 2006, through the end of this year. S&P spokesman David M. Blitzer said, “There is no sign of a bottom in numbers [. . .] Prices of single family homes continue to drop across the nation,” (CNNMoney.com 4/29/08). And it appears that the drop in home prices is accelerating. At this rate, according to Baker, as much as $6 trillion in home values could be wiped out from the zenith of the housing market from June, 2006, through the end of this year.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/04/barclays-negative-equity-subprime-alt.html#comment-7403 Anonymous Wed, 30 Apr 2008 02:32:00 +0000 http://www.nakedcapitalism.com/2008/04/barclays-negative-equity-subprime-alt-a-to-soar/#comment-7403 Negative equity is no doubt a growing problem for subprime and Alt-A loans. There seems to be a consensus on that issue. <br/><br/>So what is the government doing to solve the mortgage crisis?<br/><br/>Putting troubled borrowers into 97% LTV loans that are guaranteed by the government. The problems caused by borrowers with little or no skin in the game seemed to be one of the lessons that everyone learned in the last three years, everyone apparently but the people in Congress. <br/><br/>With the rate at which Case Schiller is declining, these loans will have negative equity 90 days after the ink is dry on the paper - actually given the time lag from a commitment to closing, they may be underwater by the time the first payment is due.<br/><br/>This will be 2009's delinquency story, except this time the write offs will be taken by taxpayers, not banks in the private sector. That may cut into the money available for stimulus checks next spring. Negative equity is no doubt a growing problem for subprime and Alt-A loans. There seems to be a consensus on that issue.

So what is the government doing to solve the mortgage crisis?

Putting troubled borrowers into 97% LTV loans that are guaranteed by the government. The problems caused by borrowers with little or no skin in the game seemed to be one of the lessons that everyone learned in the last three years, everyone apparently but the people in Congress.

With the rate at which Case Schiller is declining, these loans will have negative equity 90 days after the ink is dry on the paper – actually given the time lag from a commitment to closing, they may be underwater by the time the first payment is due.

This will be 2009’s delinquency story, except this time the write offs will be taken by taxpayers, not banks in the private sector. That may cut into the money available for stimulus checks next spring.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/04/barclays-negative-equity-subprime-alt.html#comment-7402 Anonymous Wed, 30 Apr 2008 01:18:00 +0000 http://www.nakedcapitalism.com/2008/04/barclays-negative-equity-subprime-alt-a-to-soar/#comment-7402 If we can have "negative growth" we can have "negative equity" also. They're all bad euphemisms. If we can have “negative growth” we can have “negative equity” also. They’re all bad euphemisms.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/04/barclays-negative-equity-subprime-alt.html#comment-7401 Anonymous Tue, 29 Apr 2008 22:57:00 +0000 http://www.nakedcapitalism.com/2008/04/barclays-negative-equity-subprime-alt-a-to-soar/#comment-7401 Who came up with the term “negative equity” and where can I find them to mock them for creating stupid language? There is debt and there is equity. If I have paid off my house, do I have positive debt? No, I did not think so. Who came up with the term “negative equity” and where can I find them to mock them for creating stupid language? There is debt and there is equity. If I have paid off my house, do I have positive debt? No, I did not think so.

]]> By: Steve http://www.nakedcapitalism.com/2008/04/barclays-negative-equity-subprime-alt.html#comment-7398 Steve Tue, 29 Apr 2008 19:28:00 +0000 http://www.nakedcapitalism.com/2008/04/barclays-negative-equity-subprime-alt-a-to-soar/#comment-7398 The real LTVs are much worse: the article doesn't mention second mortgages. The real LTVs are much worse: the article doesn’t mention second mortgages.

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