possibly noteworthy wrote:

A month from now, $50 billion worth of adjustable rate mortgages will "reset" from the low interest rates at which they originated in October 2005 to much higher rates that will be due for the next 28 years. Hundreds of thousands of people are about to be hit with 30 to 40 percent increases in their monthly payments. Since house prices are falling and October's resets are just the first of many, a long wave of foreclosures seems inevitable.

A fifth of all subprime mortgages made in California since 2005 are headed for foreclosure.

Also, from this week's Economist:

Not surprisingly, Wall Street's seers are chalking down their projections for construction and house prices. Economists at JPMorgan, for instance, now expect the pace of new-home building to fall by a further 30%, while they expect average house prices to tumble between 7.5% and 15% by the end of 2008. Jan Hatzius, an economist at Goldman Sachs, thinks that house prices could drop by between 15% and 30% over the next few years.

Also, from Bloomberg via Marc Andreessen:

Suppose regulators decide to play hardball on how the financial community marks to market, imposing rules that outlaw the existing freewheeling approach to how over-the-counter derivatives are assayed.

Moreover, suppose those new decrees come just as much of the underlying collateral is so tarnished as to be almost worthless compared with its initial valuation.

The ensuing carnage in the balance sheets of every financial-services company in the world would dwarf the damage wrought in the securities industry by the subprime crisis so far.

RESCUE them?

Please, if they can't afford the house, they shouldn't buy!!! And if they haven't figured out that getting to a fixed mortgage isn't important, let them lose their houses.

Why should more of my tax monies go to stupid lenders and dumb buyers?

dc0de wrote:

RESCUE them?

Please, if they can't afford the house, they shouldn't buy!!!

The "rescue" is not so much about the people who bought what they couldn't afford. They are a minority, although a substantial minority in some regional markets.

The problem is that the coming wave of foreclosures will depress the market value of all homes, including those of people who got fixed-rate mortgages and are making their payments on time.

Why should more of my tax monies go to stupid lenders and dumb buyers?

Agreed, but it's going to be a challenge to punish unwise speculators without creating a market panic. It's going to be a challenge regardless.

noteworthy wrote:
dc0de wrote:

RESCUE them?

Please, if they can't afford the house, they shouldn't buy!!!

The "rescue" is not so much about the people who bought what they couldn't afford. They are a minority, although a substantial minority in some regional markets.

The problem is that the coming wave of foreclosures will depress the market value of all homes, including those of people who got fixed-rate mortgages and are making their payments on time.

Which is a natural process, we've been expecting the market to "turn" downward for several years, look at the Bankruptcies of Homebanc, IndyMac, and other big name players in the sub-prime market.

"Rescuing" these companies, and the consumers is like putting out a forest fire. It's a natural force of economy, and it needs to run it's course.