They are poor and black and have so many other problems. boo hoo. I've grown up in a low income family and yet I'm not an idiot.

These people are myopic, and have absolutely no foresight for savings. All they see is the big fat cash-out check they get right now. They no one but themselves to blame. I don't care how smooth of a talker that mortgage broker is. When you are told how much your monthly payment will be, you should still be able to do the simple subtraction to figure out if you can afford it or not.

God, everyone should be forced to take an intensive 1 week class of corporate finance to find out what Present Value and Future Value mean to them.

This seems like just the further demolition of the middle class. Outsourcing and NAFTA have taken all of the money out of America, so now we have someone in India doing customer service for our AT&T questions (for $0.08/hr). At the expense of the fact that we now have a country full of rich corporation owner$ and trade workers. No need for middle management. Where this fits into the "Mortgage Mayhem" situation is, if there is no more money to make moving up a ladder, why not pirate it from the person next door. People will find a way to make more than there neighbors, even if it takes eliminating their neighbors. As I say this I shed a single tear and hope that somebody will eliminate the WAL*MART Corporation by whatever means possible, and restore the need for smaller businesses, but then again, I always have been a "dreamer."

Wow ! Now that's saying something .

The foreclosure rates are actually misleading. Normally they would be higher but since there are so many people who would normally have defaulted, the banks are cutting deals with the homeowners for them to put their houses up for sale without the banks calling in the mortgage. Too many foreclosures would affect a bank's credit rating making money more expensive to borrow. On the homeowners side, if you sell your house you don't default on your mortgage, which means your credit is not affected and you can get another mortgage somewhere down the line when your situation improves. If the sale price doesn't cover the mortgage, the banks are willing to forgive the difference if it isn't too great. A win-win situation for both sides. Hence you need to look at mortgage delinquency rates as mortgage default rates are misleading.

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"Of course you can discharge mortgage debt to bankruptcy! That's what foreclosures are. "

foreclosure is not bankruptcy. foreclosure is not the discharge of a debt.

bankruptcy = debt disappears (in a sense)

foreclosure = the collateral supporting your loan is repossessed, sold, and the proceeds used to pay back your debt. if your debt is greater than the foreclosure sale proceeds, the lender can still go after you privately for the rest.

two totally different things.

Of course you can discharge mortgage debt to bankruptcy! That's what foreclosures are. When homes go into foreclosure, the bank takes the property back and makes as much as it can by selling it to someone else. The person who goes into foreclosure doesn't keep paying the mortgage. That's why they declare bankruptcy in the first place. Even though I'm not in law school, my dad's a bankruptcy attorney/trustee.

And I do think it's suspicious the Bush signed off on all these bankruptcy changes last fall. Seems he knew what was coming.

"a law student should know that one generally cannot discharge mortgage debt through bankruptcy."

Of course you can discharge mortgage debt to bankruptcy! That's what foreclosures are. When homes go into foreclosure, the bank takes the property back and makes as much as it can by selling it to someone else. The person who goes into foreclosure doesn't keep paying the mortgage. That's why they declare bankruptcy in the first place. Even though I'm not in law school, my dad's a bankruptcy attorney/trustee.

And I do think it's suspicious the Bush signed off on all these bankruptcy changes last fall. Seems he knew what was coming.

"a law student should know that one generally cannot discharge mortgage debt through bankruptcy."

Of course you can discharge mortgage debt to bankruptcy! That's what foreclosures are. When homes go into foreclosure, the bank takes the property back and makes as much as it can by selling it to someone else. The person who goes into foreclosure doesn't keep paying the mortgage. That's why they declare bankruptcy in the first place. Even though I'm not in law school, my dad's a bankruptcy attorney/trustee.

And I do think it's suspicious the Bush signed off on all these bankruptcy changes last fall. Seems he knew what was coming.

dhex - latest I've heard is that 13% of subprime loans are delinquent (not up to date on payments)- this is different from default which I believe is you haven't paid in 90 days. However there is no reason to believe that delinquent mortgages won't go into default. The subprime market makes up about 20% of the overall mortgage market so this is a very serious situation.

It isn't just poor people and minorities. There are many million dollar homes up on foreclosure auctions as people with 6 digit incomes over-extended and are now paying for it. Not only are alt-a mortgages being affected but so are automobile loans - if you are not going to pay your mortgage, you certainly aren't going to pay your car loan.

The mortgage meltdown ties the hands of Fed as they can't raise rates to fight inflation as that will cause the housing market to slump even more. DOes anyone remember the stagflation of the 70's? We could see that reappear.

The basis of America is the economics of fuck over whoever you can while its still legal

That is so true.

Old definition:

A loan shark is a scumbag who charges the poor obscenely high rates of interest.

New definition:

A loan shark is a scumbag who charges the poor obscenely low rates of interest.

(Disclosure: I'm a law student at Brooklyn Law School).

Firstly, to Koko, "predatory" is a term that has to do with the interest rates the banks charge, not with the individuals who take the loans.

there is no uniform definition of predatory. various states define it in various ways. the federal regulators define it in yet other ways. HOEPA defines it in terms of points and fees, and interest rates.

Secondly, to Lexiphane, it's interesting to note how, when bankruptcy laws changed (making it harder for people to discharge debts when debts are overwhelming) predatory lending INCREASED. Who do you think lobbied Congress to make sure that it was harder for people to file for bankruptcy relief?

a law student should know that one generally cannot discharge mortgage debt through bankruptcy.

(Disclosure: I'm a law student at Brooklyn Law School).

Firstly, to Koko, "predatory" is a term that has to do with the interest rates the banks charge, not with the individuals who take the loans.

there is no uniform definition of predatory. various states define it in various ways. the federal regulators define it in yet other ways. HOEPA defines it in terms of points and fees, and interest rates.

Secondly, to Lexiphane, it's interesting to note how, when bankruptcy laws changed (making it harder for people to discharge debts when debts are overwhelming) predatory lending INCREASED. Who do you think lobbied Congress to make sure that it was harder for people to file for bankruptcy relief?

a law student should know that one generally cannot discharge mortgage debt through bankruptcy.

Old definition:

A loan shark is a scumbag who charges the poor obscenely high rates of interest.

New definition:

A loan shark is a scumbag who charges the poor obscenely low rates of interest.

from a post on www.marginalrevolution.com

Predatory Lending, or poorly educated lendees

The basis of America is the economics of fuck over whoever you can while its still legal, remember that next time you see great deal.

It's interesting that a decade ago, the biggest knock against lending institutions was that they were accused of redlining, i.e., refusing to issue loans to people in minority communities. Now they are accused of being too willing to originate loans in these same neighborhoods. I'm agnostic on who's more to blame, borrowers or lenders, but I think it's fascinating that a perceived economic ill did such a dramatic 180 in such a short period.

At first I thought this was an interesting take, but after further thought it's just reductionist and not an apt observation.

You're assuming that the two states of being in this are either:

a) you are unable to borrow money

or

b) you are able to borrow money with terrible terms

Someone pointed out the legal meaning of "predatory lending" (disclosure: I'm not a Brooklyn Law School student) but that doesn't erase the predatory nature of some of these lending practices. Some of these balloon/ARM mortgages are complicated and - to someone who these banks/lenders know can't possibly meet the terms - usurious. Maybe not from a strictly legal standpoint, but certainly from an ethical one.

Back to those two states above: offering shitty terms to someone previously denied any terms whatsoever is in some cases not such a great thing. And in this case, I'd bet most of those people falling victim to ballooning payments would prefer to turn back the clock and still be renting.

lol@the supporters of predatory lending.

only on gothamist.

lol@the supporters of predatory lending.

only on gothamist.

The reason there's no defaults in Manhattan because this map is for single family homes only. Very few of those in Manhattan.

In fact, tons of people in Manhattan (and elsewhere) have used subprime and alt-a mortgages for Mortgage Equity Withdrawal.

No one is safe from this. It's time to start adjusting.