US mortgage crisis goes into meltdown

alternative-energy · Post by **alternative-energy** » 03 Dec 2007, 22:59

So have you said "Peak Oil" to a class yet?

Not in so many words but I am a Primary Teacher...
However as a Deputy head I do have a bit more scope and I have planned for whole school renewable energy science weeks and fossil fuel depletion was raised as one of the issues. The kids think it's cool that I cycle to school and that I have my solar PV.
Each class now has their own raised bed area for growing vegetables and The Eco School committee, involving mainly children, meets each six weeks to develop sustainable awareness in the school. We are apple tasting on Wednesday to decide on the varieties we will grow as espaliers around the fence of the vegetable gardens.

Have tried to get the PO message across to teachers in school and during presentations that I have given using the eco guise but I think they see me as a bit of an eccentric and really these issues are all a bit irrelevant to their job anyway. They can't really see that growing skills or sustainable living practices are fundamental to these children's well being in the future.

At the moment I'm finding that quite a lot of what's being taught in school is totally failing our children for their future, I'm finding it all a bit depressing... but that's another story.

Post by **mikepepler** » 04 Dec 2007, 21:24

Oil prices could help beat subprime problem
The core of the issue is simple: oil producers tend to save about half of their windfall gains from higher oil prices. If the oil price stays around $90 a barrel, oil producers will increase their current account surpluses by $200bn-$300bn a year. The question will then be: who is willing and able to run corresponding deficits?

http://www.ft.com/cms/s/0/60e1076a-a1b8 ... fd2ac.html

I give up trying to figure out these complexities....

RenewableCandy · Post by **RenewableCandy** » 04 Dec 2007, 21:27

mikepepler wrote:
Oil prices could help beat subprime problem
The core of the issue is simple: oil producers tend to save about half of their windfall gains from higher oil prices. If the oil price stays around $90 a barrel, oil producers will increase their current account surpluses by $200bn-$300bn a year.
http://www.ft.com/cms/s/0/60e1076a-a1b8 ... fd2ac.html

$300Bn, unfortunately, is peanuts compared to the amount of debt and other assorted loose money sloshing about in the system. Otherwise, the guy would have a good point.

Aurora · Post by **Aurora** » 06 Dec 2007, 06:15

http://news.bbc.co.uk/2/hi/business/7129990.stm

BBC News - 06/12/07

President George W Bush is expected on Thursday to outline a plan to freeze mortgage rates for five years for homeowners hit by the credit crunch.

Reports said the freeze would apply to sub-prime home loans made between 1 January 2005 and July 31 2007 whose monthly payments are due to rise.

The White House said the president will make a statement on Thursday afternoon.

Hundreds of thousands of sub-prime mortgage holders could default and lose homes as credit tightens in the US.

An estimated 1.8 million US homeowners who took out loans with discount teaser rates face pricey loan resets next year alone, the Federal Reserve has said.

Treasury Secretary Henry Paulson and Housing and Urban Development Secretary Alphonso Jackson have a news briefing scheduled for 1845 GMT (1345 EST) on Thursday shortly after the president is due to speak.

Bail out?

Officials fear half a million borrowers risk losing their homes.

Many homeowners that signed up to cheap deals are now seeing rates rise.

Many believe these mortgage rates should be temporarily frozen, to make it easier for those caught out by the credit crunch to meet their mortgage payments and keep their homes.

But others say such measures would bail out homeowners who made imprudent decisions and delay the necessary correction that home prices must undergo in order to resolve the fundamental problem.

See Also: The US sub-prime crisis in graphics

http://news.bbc.co.uk/1/hi/business/7073131.stm

Tracy P · Post by **Tracy P** » 06 Dec 2007, 08:12

I was teaching a year 3/4 class yesterday (ages 8 - 9) and they had a NEWS corner, stuff printed out from what is in the news
they had a picture of the 'kind of car we could be driving in 10 years'
and it wasn't an eco one! It was one of these space age things!

Oh dear

In the staff room I asked the teachers if they had heard about teachers in America not getting paid.... they hadn't!

Oh dear

People only seem to want to hear what they want to hear....

snow hope · Post by **snow hope** » 06 Dec 2007, 08:42

Interesting observations Tracey. The human condition....... most afluent westerners have taken their eye off the ball and have been lulled into a false sense of expectation that everything tomorrow will be as good, if not better than today. So many people are in for such a big shock....

Post by **mikepepler** » 06 Dec 2007, 09:32

While waiting at the station coming back from London last night (Fatih Birol presentation and APPGOPO meeting) I read one of those free papers. The third back of it was full of adverts trying to sell people new houses. All kinds of special offers, from cashback, to part-purchase, to "we'll pay your rent until the house is built if you sign now". They're getting desperate...

Post by **clv101** » 06 Dec 2007, 10:02

The really scary thing is that this afternoon Bush is set to announce a freeze on sub-prime home loans made between 1 January 2005 and July 31 2007 whose monthly payments are due to rise. This sounds like economic madness, the state injecting crazy amounts of money into a fundamentally broken system.

Totally_Baffled · Post by **Totally_Baffled** » 06 Dec 2007, 10:53

clv101 wrote:The really scary thing is that this afternoon Bush is set to announce a freeze on sub-prime home loans made between 1 January 2005 and July 31 2007 whose monthly payments are due to rise. This sounds like economic madness, the state injecting crazy amounts of money into a fundamentally broken system.

How long are they frozen for?

And the next obvious question is , what happens when that "freeze" period ends?

If these people cannot afford the higher rates now , they certainly will not at the end of the "freeze" period?

Unless - in the meantime the fed lowers rates back to 1% and therefore the reset rate is not that much higher than amount these sub prime borrowers are already paying?

But then - it will be hyper inflation...

RenewableCandy · Post by **RenewableCandy** » 06 Dec 2007, 10:55

clv101 wrote:The really scary thing is that this afternoon Bush is set to announce a freeze on sub-prime home loans made between 1 January 2005 and July 31 2007 whose monthly payments are due to rise. This sounds like economic madness, the state injecting crazy amounts of money into a fundamentally broken system.

It sounds a bit like what HMG did in 1992 to try propping the ? up! Kind of trying to stave-off the inevitable.

Post by **mikepepler** » 06 Dec 2007, 11:00

details here, it will be announced in full today:
http://www.guardian.co.uk/business/2007 ... rimecrisis

President Bush will wade into the sub-prime mortgage crisis today with a rescue package freezing interest rates on certain high-risk home loans for up to five years.

After protracted negotiations with America's biggest lenders, the White House is set to announce a package providing relief for a limited number of cash-strapped homeowners who are on the brink of foreclosure.

The freeze will apply to mortgages with short-term "teaser" interest rates which are due to jump to much higher rates between 2008 and 2010.

In a deal negotiated by treasury secretary Henry Paulson there will also be help to speed up refinancing deals for people struggling with repayments.

The move is a rare intervention from an administration which prides itself on its laissez-faire economic approach. It has been cautiously welcomed by community groups, although critics say the crisis has gone far beyond the sub-prime sector.

My emphasis in the above - I think it may be a bit late to be closing the stable door...

Blue Peter · Post by **Blue Peter** » 06 Dec 2007, 11:06

I did see somewhere, that most US defaults at the moment are not due to rate resets, but simple inability to even pay the teaser rate.

The reset problems, if this new move doesn't stop them, are still to hit

Peter.

Adam1 · Post by **Adam1** » 06 Dec 2007, 11:15

I wonder whether we will see a half-percent rate cut today. I wouldn't be surprised if governments do what it takes to keep the debt dragon at bay.

TPTB will always favour inflation over deflation, especially now that some many of us have given up saving now.

Blue Peter · Post by **Blue Peter** » 06 Dec 2007, 11:28

Adam1 wrote:I wonder whether we will see a half-percent rate cut today. I wouldn't be surprised if governments do what it takes to keep the debt dragon at bay.

TPTB will always favour inflation over deflation, especially now that some many of us have given up saving now.

But what can the government/BoE do? Banks' balance sheets are full; the residential mortgage backed secruity (RMBS) market has closed down (and the commercial one too, I think); less sophisticated Asian investors have become sophisticated enough to know that Western housing is not a good place for investment at the moment.

There won't be the volume of money coming in at any rate to maintain the housing bubble, let alone inflate it any more.

(All IMHO, of course),

Peter.

Post by **clv101** » 06 Dec 2007, 11:39

Adam1 wrote:TPTB will always favour inflation over deflation...

As a saver and not a debtor high inflation paying people's mortgages off for them would not impress me.