| Good news: Michigan's voices heard
California mortgage lender IndyMac cuts 2,403 jobs; computer chip-maker Applied Materials zaps 1,000; Bank of America slashes 650 jobs; Citigroup sheds 4,200, Nokia will close a German factory and eliminate 2,300 jobs. This nation needs to get over its hypersensitivity about who's insulting whom with an ill-chosen phrase, who's doing what in their bedrooms and who believes what about the hereafter. It's time to focus on the here and now of how to compete in a dynamic global economy, how to create companies and more good jobs and how best to educate our children to cope in a world that no longer kowtows to the notion that the United States gets to make all the rules. I'm not smart enough to know whether Michigan's primary win will propel Romney to the presidency of the United States.
Saint Joe and the impending global financial crisis
The Mortgage Bankers Association estimates that 1.35 million homes will enter foreclosure in 2007 and another 1.44 million in 2008, up from 705,000 in 2005. $514 billion in resets; 3.5 million foreclosures. Did I say Three Mile Island? I meant Nagasaki. California is bound to be the state that's hardest hit by the housing slump. Homeowners can expect to see price depreciation that could rival the Great Depression. As Broderick Perkins says, The California Association of Realtors reported the median price of an existing, single-family, detached home in California dropped 9.9 percent in October, compared to the same month a year ago. The decline was the largest year-to-year decline in CAR's history books. . . . "We believe that a downturn is imminent, with sales volumes down 52 percent from the peak (in January 2005) and inventory (11.8 months) up 100 percent since last year.
Defaults moving beyond sub-prime
Thought the mortgage meltdown was just a sub-prime affair? Think again. There's another time bomb waiting to explode, experts say: risky loans made to people with good credit.
So-called pay-option adjustable-rate mortgages, or option ARMs, were the easiest and most profitable home loans for lenders and brokers to make for much of this decade. Last year, they accounted for about 9% of the volume of all mortgages made in the U.S. and were especially popular in California, Florida and Nevada -- states where home prices rose the most during the housing boom and are now falling most sharply.
An option ARM loan gives a borrower the option of paying less than the interest due, causing the loan balance to rise. If it rises too much -- say, by 10% or 15% -- the opportunity to make a low payment vanishes and the required payment skyrockets.
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