A reset is when an adjustable rate mortgage goes to the next interest rate level, thus increasing the mortgage payment. Adjustable rate mortgage resets through the end of July 2007 were $197 billion (USD). That is less than what is projected for February and March – and just February and March – of 2008. The first six months of next year will see more than the total for 2007 or $521 billion. The number of foreclosures is due to rise dramatically from the already high current levels, putting more homes into a weak housing environment. So why not refinance instead? Here’s why that may be impossible.
KPMG was the auditing company for New Century Mortgage. Were the buy backs of unacceptable or defaulted mortgages so well hidden by New Century Mortgage that one of the most influential auditing companies in the world could not find the discrepancies? The Public Company Accounting Oversight Board is looking into the practice and faulted KPMG LLP for some deficiencies in its audits of public companies, citing three instances in which the firm failed to obtain sufficient competent evidence to support its audit opinions. The name of the public companies was not included in the information, and neither were the deficiencies.
Low interest rates and easy loan approvals fueled the fire for the housing price bubble. Human nature is to compare the cost of rent with a comparable house payment. Sounds good, but on income statements the dollar exchange to break even on rental income is the house payment + 36%. A house with a $1000 monthly payment must rent for $1400 monthly to show a profit. $1400 per month rent is not the same as a $1400 house payment.
As the United States mortgage market spirals out of control intelligent minds consider whether the US economy is headed into a recession or a depression. Studies of the 1929 stock market collapse and the depresssion show that the economy functioned and all appeared normal in that regard. Depression studies show, however, that the economy functioned at such a low level that it was like an 8 cylinder engine running on 4 cylinders.