Looks like the US sub-prime mortgage lending crisis is going to explode. Millions of Americans have been sold unsustainable home loans and are about to get a nasty shock that will reverberate around the globe.
Get this:
- financial institutions collectively own $1 trillion (£480.6bn) worth of sub-prime debt.
- One in five US mortgages now falls in the sub-prime category
- There have been 1.7 million foreclosure proceedings in the US in the first eight months of 2007, and up to 2 million families are expected to lose their homes over the next two years, according to estimates by the US Congress’s Joint Economic Committee.
- One in ten homes in Cleveland, Ohio is now vacant, and whole neighbourhoods have been blighted by foreclosed, vandalized and boarded-up homes.
- Sub-prime mortgages carry a much higher risk of default because most offer a fixed-rate loan for two or three years, and then switch to a much higher adjustable rate after that.
- Matgages were sold by unscrupulous and little regulated mortgage brokers, who received handsome commissions for selling expensive and unsuitable products.
- All around the US, aid agencies report a “tidal wave” of foreclosure cases
- “There is a natural level of foreclosures that goes on in an economy in good times and bad… it’s part of the nature of how our economy works“. Robert Steel, US Treasury Under Secretary for Domestic Finance
Like the saying goes, “when America sneezes, the whole world catches cold”. That phrase was coined after Wall Street Crash of 1929 ! Batten down the hatches. We might be in for a bumpy economic ride…
Thanks George.
So yeah... 