U.S. Mortgage Debacle

1/3 of American’s have mortgages coming due within two years.  When they do, watch out!  Industry analysts expect delinquencies to soar as over-leveraged homeowners can’t meet their new (higher) interest payments.

This week was a taste of what’s to come:

  • 1 in 40 Americans is now over 90 days delinquent on their mortgage
  • OwnIt.com, a large $8 billion dollar sub-prime mortgage lender closed its doors
  • HSBC, the world’s 3rd largest bank, admitted its earnings would take a material hit because of mortgage defaults
  • H&R Block’s Option One mortgage division announced a $39 million loss because of bad loans and falling prices in the mortgage resale market
  • The cost of credit-default swaps (which are basically insurance for banks against mortgage defaults) has soared 25% to a five year high.

Keep an eye peeled for more of the same in 2007 as U.S. mortgage excesses shake themselves out.

(Sources:  National Post, Bloomberg, LA Times)

U.S. Mortgage Debacle

1/3 of American’s have mortgages coming due within two years.  When they do, watch out!  Industry analysts expect delinquencies to soar as over-leveraged homeowners can’t meet their new (higher) interest payments.

This week was a taste of what’s to come:

  • 1 in 40 Americans is now over 90 days delinquent on their mortgage
  • OwnIt.com, a large $8 billion dollar sub-prime mortgage lender closed its doors
  • HSBC, the world’s 3rd largest bank, admitted its earnings would take a material hit because of mortgage defaults
  • H&R Block’s Option One mortgage division announced a $39 million loss because of bad loans and falling prices in the mortgage resale market
  • The cost of credit-default swaps (which are basically insurance for banks against mortgage defaults) has soared 25% to a five year high.

Keep an eye peeled for more of the same in 2007 as U.S. mortgage excesses shake themselves out.

(Sources:  National Post, Bloomberg, LA Times)

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