How can US sub prime losses be so great?

amcluesent

Yep, houses in Detroit for $1.

But the losses are multiplied by the leverage used in the selling and re-selling sub-prime packaged up with AAA debt. The sub-prime losses have created a whip-lash effect, just as the profits up to 2007 were excessive, now so are the losses - maybe £500 billion globally.

LongTermLurker

RayWolfe wrote: »

I've got a lot of sympathy for the OPs question. LTL posted - in explanation - that half the US mortgage holder stop paying their mortgage ... well, I'm sure that many did (are) but half?

Maybe it's a northernism, in the same way as a "load"

I wasn't implying literally 50%!

sabretoothtigger

Wouldnt surprise me, anyone with some figures?

1echidna

Just by way of illustration if ten million Americans defaulted on their mortgages and property prices had dropped so that the institutions holding their mortgages lost an average of $100,000 per property on the foreclosure sales the total loss to these institutions would be $1,000,000,000,000 or one trillion dollars.

sabretoothtigger

I wasn't implying literally 50%!

Not far off a figure I just read -

So just how big a bank would Paulson's baby turn out to be?
Well if it were buying mortgages and asset-backed securities at somewhere between 10 and 50 cents in the dollar - which is not an unreasonable assumption based on the latest markdowns by banks - it would end up owning assets with an origination value of well over $2,000bn (or $2 trillion).
That would make it about the same size as HSBC, on one measure - so something of a monster.

http://www.bbc.co.uk/blogs/thereporters/robertpeston/2008/09/paulsons_monster.html

cheerfulcat

Hi sabretoothtigger,

That doesn't mean that there will be a 50% default rate on US mortgages though ( that would be a huge amount and I read LTL's post as giving an example, not fact ) - it just means that no-one actually knows what these things are worth. The banks have marked the loans down - they haven't written them off.

Trollfever

Reduced To $189K Sold in 06' for $333K Built in 2005

This Florida property can be found here:

http://realestate.shop.ebay.com/items/Residential__W0QQStateProvince12c08b2eZFlorida359130bdQQ_dmptZResidentialQQ_flnZ1QQ_sacatZ12605QQ_ssovZ1QQ_trksidZp3286Q2ec0Q2em282

Just realised that I have driven through Port St. Lucie on the 95

sabretoothtigger

Yep no one knows, hopefully the uk will not be so bad in any case


I like this one -
http://cgi.ebay.com/ws/eBayISAPI.dll?ViewItem&item=110290600442

House with heated pool on the 8th hole of a golf course in Florida, thats someones dream home right there -150k

Trollfever

has a New Roof

The old one probably got blown away.

nightwatchman

Possible this will answer OP question regarding the worth of some repossessed houses in US. http://www.detnews.com/apps/pbcs.dll/article?AID=/20080813/METRO/808130360/&imw=Y


Quoted from the original

So desperate was the bank owner of 8111 Traverse Street to unload the property that it agreed to pay $2,500 in sales commission and another $1,000 bonus for closing the $1 sale; the bank also will pay $500 of the buyer's closing costs. Throw in back taxes and a water bill, and unloading the house will cost the bank about $10,000

However the new buyer will not be much better off.


Quoted from the original

The buyer, a local woman, considers the home to be an investment property and will not live there, Colpaert said, though exactly how soon the buyer can expect to recoup her four-quarter investment is questionable. Replacing the guts of the house will costs tens of thousands of dollars, and the owner will have trouble keeping scrappers from stealing the improvements as quickly as they're installed. Home demolition costs about $5,000, Colpaert said.
Meanwhile, the new owner will owe $3,900 in property taxes in 2009 on her dollar purchase unless she challenges the tax assessment