Economic Impact
If a military family bought a home with a conventional loan (not subprime) as the subprime crisis was building, the military family will be hurt more than their neighbors. The primary reason is that servicemembers will be transferred on a regular basis. When home prices increased it was not a problem. Knowing that you would be transferred somewhere else in three or four years was a given. What happened from 2006 through today was a shock to everyone. However, as home prices drop everyone must wait until the market turns around. Servicemembers cannot wait.
It is interesting to note that some investment banks that lost money – millions or billions – on subprime are now involved with oil, futures trading, index trading, and high oil prices. Are the making up for loses by adding pain for Americans? You decide. On the mortgage issue, nearly 1 in 10 U.S. homeowners faced foreclosure or fell behind in their mortgage payments in the first three months of the year, according to a report released Thursday, a figure that offers a look into the toll caused by the collapse of the housing market.
U.S. foreclosure filings climbed 65 percent and bank seizures more than doubled in April from a year earlier as rates on adjustable mortgages increased and vacated homes added to a glut of unsold homes. Amid the mess mortgage lenders are telling us how many borrowers were helped by their loving, consumer oriented customer care staff. It sounds like banks could not help enough of their borrowers.
What guidelines did banks use to help the few?
If the family budget is already strained or an adjustable rate mortgage increase is just around the corner a realistic view of reality is required. What many people do not realize, and many homeowners find alarming, is that a refinance into an ARM only saved about $100 per month on average. After a reset the home is basically lost. It is tragic. But what about that budget if you decide to work 2 jobs, or supplement your income in another way? Let look at the economy for starters:
George Soros, the hedge fund legend and billionaire philanthropist, said on Wednesday the subprime mortgage crisis is likely to cause global losses of over $1 trillion. The International Monetary Fund (IMF) issued a similar guess, and Soros seems to agree with the assessment. What started out as an experiment in the United States certainly blew up all over the world. The net impact of lowering rates to help the financial sector has weakened the dollar and is already showing at the gas pumps. High diesel fuel costs will soon be passed to the consumer as the mess spreads like a wildfire.