Mortgage Malaise Continues

Although it is reported that the powers that be, namely the sitting Republicans, and would be Democrats, are close to reaching an agreement on the mortgage fiasco, the malaise continues.

Significant events are taking place both sides of the Atlantic. Bradford and Bingley, the UK's eighth largest bank has been nationalized, seemingly because there is no viable alternative. They were one of the biggest operators in the 'buy to let' mortgage market, and like the larger HBOS seem to have got their fingers burned.

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As the turmoil continues, many ordinary people are angry over what is going on, and find it astonishing that Bush in the US, and Brown in the UK, have allowed such situations to develop on their respective watches. It is almost as if they believe that Bill and Ben could have done better than Bush and Brown, to prevent Bradford and Bingley, and Fannie and Freddie going bust!

The main trouble with this unprecedented mortgage mess is that those who were largely responsible are not admitting it, and are being entrusted with sorting it out. This applies to both politicians and bankers and it seems to be a case of everybody loses except those who created the problems. People are in danger of losing their houses, and many more are so debt ridden, that in the present climate it will be difficult to recover. Meanwhile lenders and financiers have stashed their bonuses in safe havens and politicians retain high office.

The whole system is crying out for a breath of fresh air. With the presidential election imminent in the US, and the UK going to the polls in 2010, it may not be that long before someone appears with a new broom!


Mortgage Morality - Political Mortality

Is it reasonable or foolish for the United States Government to be considering buying up sub prime mortgages to the tune of $700 billion? There is more than one factor affecting such decisions. For a start there is Bush, McCain, and Obama. The one thing they all have in common is votes. Bush might be less concerned than the other two in this respect as his term is nearly finished, but there is enough that has already happened on his watch, without another crisis.

It makes you wonder who is really running the USA and possibly the world. At times such as this, when the administration is about to change, anything untoward is sure to be magnified. When the intended sub prime mortgage buy up was announced, financial markets steadied, but as the implications are studied it is not so clear that such a measure will be sanctioned. There have already been viable alternatives suggested, and the financial markets like nothing less than uncertainty. Therefore, shares have started to fall again and the only people sure to buck the trend seem to be financial speculators, although their wings, on short term selling, have been temporarily clipped.

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Initially there was a bounce in the markets followed by a run on the dollar, and what might happen next is anybody's guess. Of course the problems are not peculiar to the United States, although it is convenient for some to believe that's where it all started. It is a changing world in which Asia in general, and China and India in particular, are emerging as big players.

You can bet that mortgage markets and house price inflation do not dominate the growing Asian economies of China and India. That may come eventually but they now have a good model on what to avoid. China and India are the manufacturing nations that the likes of the USA and Britain once were. That was before most of their wealth was tied up in house price inflation, financial services, and dare I say it, greed.

If you manufacture and export cars, or computers, or oil and gas, there are tangible goods that are relatively easy to account for. But if your business is in swapping financial issues, that nobody really understands, in the interests of bigger and bigger bonuses, where do you go when the wheel of fortune stops? Banks used to be safe houses where you could save your money with impunity from any risk. Now they seem to have become little more than casinos, where the house bosses are the only ones guaranteed not to lose.

So will the US Government cough up taxpayer's dollars or not. At the moment it's still a case of wait and see, will they or won't they? What seems for sure is that where there is no regulation there is unprecedented greed, that benefits a few at the expense of the many. Many people are now asking the question, what sort of a society is that?


Bush Seeks Authority For Massive Mortgage Bail Out

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A report from the Christian Science Monitor suggests that the Bush Administration is ready for its next big spend. Seemingly they are set to inject around $700 billion of tax payers money to buy up bad loans. The debates regarding this latest venture are heating up, at a time when a change of government is imminent. Whether Senator McCain or Senator Obama agree with this course of action will be revealed, but for the time being they might not have much say in the matter.

Please read the full report here:

The mortgage buck stops where? |

"Like a subprime mortgage, Congress may soon put taxpayers on a risky hook for mortgages gone bad. The Bush administration wants authority to spend up to $700 billion, or about the cost of the Iraq war, to buy up troubled loans. A federal rescue effort may stem a financial market meltdown. But it shouldn't be done without a reckoning.

Americans need to hear a full-throated debate by lawmakers about the range of players in this mortgage maelstrom who either lied, took on too much debt, or failed to check creditworthiness as these loans were issued and then sold up the financial food chain to the point where it has become nearly impossible to determine their value"


Mortgage Market On The Move

It has been reported that Laurence Fink, the chief executive officer of Blackrock Inc, the biggest US public money manager, believes that the US governments asset relief plan, will result in more mortgages becoming available to stimulate the housing market.

It was interesting to hear Henry Paulson, speaking on television, mention something to the effect that government action would help while the correction continued. That would seem to suggest a realistic approach and indicate an understanding that the market had in fact been overheated.

According to the S & P/Case-Shiller home Price Index US house values have dropped 18.8 per cent since their July 2006 peak.

Fink believes that a recovery is on the way and has already begun. He said, "Coupled with lower house prices and now a lower mortgage rate, affordability for housing has changed dramatically over the last 18 months."

It has certainly been an astonishing week with Wall Street dominating the news. Lehman Brothers filed for bankruptcy, and Merrill Lynch was sold to Bank of America. The American International Group, which is the biggest US insurer, was saved when the US government pledged $85 billion, to help with their debts.

It's been a real roller coaster, with dramatic and sometimes frightening headlines, that affect just about everybody in one-way or another. Japan got the jitters, but not perhaps quite as much as in Moscow where dealings were suspended due to wild swings in share values. In London, the major British Bank HBOS was in trouble, but was rescued when a merger with Lloyds was announced, presumably with the blessing of the British Prime Minister. By Friday share prices had almost recovered to the levels at which they started the week, but phew, that was the week that was!

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George Bush emerged from the White House to suggest that it was essential to sort out finances first, to deal with the problem, and look into the question of blame later.


Mortgage Woes

Could the unthinkable really happen? Could Britain's biggest mortgage lender really go bust? Well, on the 17th September 2008 it nearly happened, but in the event it didn't, thanks to some hasty reappraisal by the Government about competition rules. Of course they wouldn't have allowed it to happen anyway, but to ordinary people with a mortgage and depositors with a few quid put aside, it was and is, a worrying time.

It was not just HBOS Britain's biggest mortgage lender that was in trouble. The problem is that high flying bankers, have been lending money they haven't got, to people who couldn't afford to borrow it, on the back of a housing bubble that was sure to burst. But of course the government couldn't afford to let the bubble burst because they had staved off a recession by turning a blind eye to an unsustainable boom, almost encouraging people to live beyond their means, as they borrowed and spent against inflated house prices.

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Even now there seems to be a reluctance to state the obvious, and that is that the housing market had seriously overheated, both in the UK and on the other side of the Atlantic. Why can't, at least the British Government, realize that the enormous rise in house prices was unsustainable, and that a return to an appropriate level is in everybody's interest.

If you were a newly qualified nurse or similar professional person you might expect to be paid around £20,000 per annum. If the average house price was £160,000, then it's difficult to see how you could ever afford one, at 8-x salary. Remember that it's not very long ago that the average was £60,000, and just about affordable for many prospective first time buyers.

Since that time there has been an unregulated unaccountable rise (bubble) that very nearly led to the ruination of all concerned. Even now politicians seem reluctant to allow house prices to reach a proper market level, and talk in terms of stimulating the housing market, kick starting the housing market, or whatever. Surely it would be better to allow prices to regularize with normal market forces.

Tinkering with markets is not something that the British government should be involved with, but proper regulation, that's a different matter. Grotesque bonuses have been on offer to banking executives as the property bubble was allowed to expand, and taken out of the government's inflation indices. The best that could happen is that house prices find an acceptable level that is affordable without people mortgaging the rest of their lives!

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Mortgage Bushfire - Lehman Brothers Crash

World financial markets are in turmoil as the giant US investment bank Lehman Brothers, goes bankrupt. Respected pundit Alan Greenspan declares it the sort of event that only happens once in half a century, or even a century, and the worst financial crisis he has known. Ominously he went on to suggest that it's not finished yet!

World implications of this momentous collapse can be seen from Stock exchanges plummeting all over the world. The drop in London has been around 5%, with 4% in Germany, and around 5% in France. The major British bank Halifax Bank of Scotland lost about a third of its value with its shares trading at around £2.00 as against £10.00 not that long ago.

It was sad, to see some of Lehman's employees leaving carrying their possessions in boxes. Even worse when you realize that they own around 30% of Lehman's equity, which they stand to lose as well as their jobs.

Of course all this trouble is related to the sub-prime mortgage market, which really involved lending people more money than they could afford to repay. Banks climbed on the bandwagon seemingly disregarding that markets can turn, and a global free for all ensued.

There will be many who will not have that much sympathy with bankers perceived as being greedy instead of prudent. As with many issues it is those at the bottom who are likely to suffer more than those at the top. However, the current situation is something like a bushfire, unpredictable and don't know where it's going next. Not quite uncontrollable, but getting there!

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Prime Minister Brown and B of E Governor King May Disagree on Mortgage Issue

It has been rumoured that Mervyn King, the governor of the Bank of England, could resign if Gordon Brown goes ahead with a state-backed controversial mortgage scheme.

With the British Prime minister in trouble, even with some members of his own party, the likelihood of King resigning could be another hammer blow. Much seems to hinge on a report, produced by Sir James Crosby, commissioned by the government, and now being studied by Chancellor Darling.

It seems that Mervyn King has let it be known privately, that he considers risk and reward to be part of the mortgage market, and that underwriting mortgages is not something that the Bank of England should get involved with.

Please Click Here to review the complete article in the Sunday Herald.

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US Government To Bail Out Fannie Mae and Freddie Mac

It has been reported that the US Government is about to bail out Fannie Mae and Freddie Mac, the giants of the American mortgage industry.

This is a highly controversial use of taxpayer's money, but the collapse of the sub prime mortgage market has cost them billions of dollars. Between them these two colossuses are behind about half of all US mortgages, and have considerable impact on the US economy as a whole.

In the UK it seems that similar moves are afoot. Apparently the British Government have commissioned the Crosby report that could lead to billions of pounds of tax payers money being made available to mortgage lenders. It is not clear how this will operate, as the report is a recent undertaking. However, there are suggestions that the British Chancellor is now studying the report, so some form of decision may be imminent.

The British Government have already moved to support their own ailing mortgage market, but on nothing like the scale now being considered both sides of the Atlantic. Of course the UK authorities have already bailed out the troubled Northern Rock mortgage bank to the tune of a reported £40 billion. These are difficult times and there are still uncertain and contentious issues to deal with. Those countries, whose economies are not so reliant on what happens in housing markets, seem better able to weather the current storms.

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