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Mortgage Crisis Hits Depression-Era Lows
February 27, 2008 09:00 AM
by
findingDulcinea Staff
The sub-prime crisis has put 8.8 million homeowners in over their head. Americans haven’t been in this kind of debt since the Depression.
30-Second Summary
The mortgage crisis is being compared to the worst economic meltdown in American history.
The New York Times reports that “not since the Depression have a larger share of Americans owed more on their homes than they are worth.”
With 8.8 million homeowners in trouble, the Bush administration and Congress are considering government-funded emergency measures, such as a federal mortgage guarantee for troubled borrowers.
CBS News explores a handful of proposals that could be discussed on Capitol Hill this week. They include a plan from Sen. Christopher Dodd, D-Conn., that would create a $20 billion federal corporation to buy mortgages back from struggling homeowners and refinance the loans.
Slate opinion writer Nicholas Bagley explores the complex reasons why the government took so long to intervene, and wonders whether mortgage salvation would be better off in the hands of the state.
He discusses how several states, beginning with Georgia in 2002, acted to curb “predatory” lending, taking action well before the Fed stepped in.
“Some of the biggest players in the secondary mortgage market are national banks, and the states' efforts to curb predatory lending clashed with the banks' fervent desire to keep the market in sub-prime loans rolling,” Bagley writes.
So with the depths of the sub-prime crisis so profound, Time magazine asks, "What's the worst that can happen?"
Unfortunately, according to Merrill Lynch economist Kathy Bostjancic, the mortgage crisis could soon "expand into prime mortgages, home equity loans and credit cards, making it the worst consumer recession since 1980.”
The New York Times reports that “not since the Depression have a larger share of Americans owed more on their homes than they are worth.”
With 8.8 million homeowners in trouble, the Bush administration and Congress are considering government-funded emergency measures, such as a federal mortgage guarantee for troubled borrowers.
CBS News explores a handful of proposals that could be discussed on Capitol Hill this week. They include a plan from Sen. Christopher Dodd, D-Conn., that would create a $20 billion federal corporation to buy mortgages back from struggling homeowners and refinance the loans.
Slate opinion writer Nicholas Bagley explores the complex reasons why the government took so long to intervene, and wonders whether mortgage salvation would be better off in the hands of the state.
He discusses how several states, beginning with Georgia in 2002, acted to curb “predatory” lending, taking action well before the Fed stepped in.
“Some of the biggest players in the secondary mortgage market are national banks, and the states' efforts to curb predatory lending clashed with the banks' fervent desire to keep the market in sub-prime loans rolling,” Bagley writes.
So with the depths of the sub-prime crisis so profound, Time magazine asks, "What's the worst that can happen?"
Unfortunately, according to Merrill Lynch economist Kathy Bostjancic, the mortgage crisis could soon "expand into prime mortgages, home equity loans and credit cards, making it the worst consumer recession since 1980.”
Headline Link: Mortgage crisis leads to Depression-era lows
The New York Times reports that 8.8 million homeowners—10.3 percent of the total—are "underwater," suggesting comparisons to the Great Depression of the 1930s. The dire situation has prompted Congress to consider a federal mortgage guarantee for troubled borrowers.
Source: The New York Times
CBS News explores the variety of congressional proposals currently circulating, which “include easing bankruptcy rules, shielding banks from lawsuits and providing government assistance to homeowners facing foreclosure.”
Source: CBS News
Mortgage crisis could soon spill over
A Time magazine article projects the mortgage crisis will soon spill over into everyday life, causing a historic recession. "It kind of reminds me of the old cartoon of the little Dutch boy with his finger in the dyke, and while he's trying to plug up the sub-prime hole, there are leaks sprouting all around him," said Mark Fitzgibbon, director of equity research at Sandler O'Neill & Partners.
Source: Time
Opinions & Analysis: Feds versus state governments
Nicholas Bagley writes in a Jan. 24 Slate piece that government involvement in the sub-prime crisis may be more complicated than it seems. He explains how Georgia’s state-mandated mortgage reform was thwarted by the Treasury Department's Office of the Comptroller of the Currency, a “somewhat conflicted agency.”
Source: Slate
Related Topics: The politics of the mortgage crisis
While the mortgage crisis affects everyone, it is the Democrats who seem to be tackling the situation head on, at least for now. News program Democracy Now recently dedicated one of its radio shows to discussing Hillary Clinton's and Barack Obama's stances on domestic issues, including the sub-prime mortgage crisis.
Source: Democracy Now!
Some Democrats say the Bush Administration's reaction to the sub-prime crisis is “too little too late,” according to an article in Congressional Quarterly.
Source: Congressional Quarterly
An article in The New Republic says Hillary Clinton’s mortgage plan, to freeze rates on adjustable rate mortgages for five years or until the mortgages become affordable, “might appeal to homeowners with adjustable rate mortgages scheduled for a rate increase. But, as with most offers that look too good to be true, this one comes with many problems.”
Source: The New Republic
But a USA Today blog post suggests that both Democratic nominees promise tons of money to fix national problems, including the mortgage crisis, without providing a reliable source for those funds. According to the post, “Obama has received more criticism, perhaps deservedly so, because his list is somewhat longer.”
Source: USA Today
Both candidates, particularly Clinton, are setting out more specific mortgage crisis plans in light of the upcoming primary in Ohio, a state that “saw 150,000 homes go into foreclosure last year, one of the highest rates in the country,” The Wall Street Journal reports.
Source: The Wall Street Journal
Background links: The sub-prime crisis affects everyone
FindingDulcinea reports on the widening influence of the sub-prime crisis. The credit crisis is dragging “prime” borrowers down, too.
Source: findingDulcinea
The site also provides a Web guide to home buying, including advice on mortgages and links to reliable lenders.
Source: findingDulcinea
© 2009 Dulcinea Media, Inc.
