Now It's the Prime Borrowers Who Are In Deep Trouble From The Recession.
These are the ostrich people who thought if they ignored it, it would just go away. Still buying the big LCD TVs, still going on nice vacations, still pretending it's all going to be okay. Well, it isn't.
Now that it's been a while and the jobs aren't coming back, those people are now getting hit with the reality stick - and because they carry the bulk of credit debt, the banks are going to be in even worse shape than they already are:
The long recession and rising joblessness are taking an increasing toll on the nation's most credit-worthy borrowers, who are now falling behind on their mortgage and credit-card payments at a faster pace than people with poor financial histories.
The mortgage-delinquency rate among so-called subprime borrowers reached 25% in the first quarter but appears to be leveling off, rising only slightly in the second quarter. The pace of delinquencies for prime borrowers is accelerating. Since prime loans account for 80% of U.S. bank exposure to mortgages and credit cards, these losses could ultimately exceed those from weaker borrowers.
"The subprime pain is in the rearview mirror," says Sanjiv Das, head of Citigroup Inc.'s mortgage business, which is seeing delinquencies rise among prime borrowers, who make up three-quarters of its mortgage portfolio.
In many cases, these "prime" customers, whose high credit scores afforded them the best interest rates on mortgages and credit cards, lost their jobs over the past few months and only now are running out of temporary fixes that have been keeping them afloat.
The trend signals more bad news for U.S. banks. Rising delinquencies on prime mortgages helped drive the total mortgage-delinquency rate to a record 9.24% in the second quarter, according to the Mortgage Bankers Association. The data reflect loans at least one payment past-due.
[...] About 40% of the strapped consumers seeking help from the OnTrack Financial Education & Counseling center in Asheville, N.C., are prime borrowers, up from 15% last year, says Tom Luzon, director of counseling services at the United Way agency. Many of these clients already scaled back their lifestyles after losing their jobs or seeing their salaries slashed. Some are small-business owners whose companies foundered as a result of the recession.
"They have made adjustments and made adjustments, but then you get to a point where you can't adjust anymore," says Mr. Luzon, who is a former banker.
"People who are middle-class wage earners initially may have severance pay and think they have plenty of time to find a job, but then they start using credit cards to support living expenses," he says.
The job numbers are always a lagging indicator of recovery.
There will be better news on the jobs front. It will not recover all of the jobs. For the people out of a job and not getting one the recession will live on.
"I know that there are people who do not love their fellow
man, and I hate people like that! " ~ Tom Lehrer (1928 - )
"The latest figures are consistent with an economy pulling out of the deepest downturn since the Great Depression."
Only lost 216,000 jobs in August. Things are looking up!
Until you look at Household Survey Data from the US Dept. of Labor Bureau of Labor Statistics:
"In August, the number of unemployed persons increased by 466,000 to 14.9 million"
http://www.bls.gov/news.release/empsit.nr0.htm
I guess now that it has hit more of the people who have money maybe we will actually see something happen...not for the rest of us of course, that's not how it works, the powers that be will fix things for the people with money and we will continue to get screwed.
But maybe I'm being too bleak.
... things don't get fixed until it affects some rich suburbanite wife of someone who is well connected. Nothing greases the wheels of action like the scorn of a rich stay at home mum with nothing else to do.
I don't think you're being cynical at all. It is true that the wealthier members of this society have to suffer before Congress will do anything. The rest of us are just not important enough for them to take action.
You know, I know several people in this position, and they're not "ostriches," as you say. They are people who either own (or owned) their own businesses or tried to responsibly cut their expenditures and debt back before they lost their jobs--in several cases, cutting their debt almost completely--and it still isn't enough.
They haven't done anything wrong. They own a home (often modest), maybe a business, maybe have car payments (Saturns, not Hummers), maybe not. Most are in their 50s--too close to retirement to start over, really--and they're facing losing everything they've worked for, including any pension or retirement savings.
I object to your tone of schadenfreude, Susie, as though people somehow deserve to go bankrupt because they've always worked for a living. Isn't that the same shit the Republicans threw at the public during the subprime mess they created? Your point is taken: things are bad and are likely to become worse. There's no room for "I told you so" in that, though. These people already know it's bad.
Ask them when you see them at the food pantry--if there's anything there.
... is usually easier than having to provide a coherent analysis.
You're putting your own spin on things, because I'm not happy anyone is going through this - and I'm not talking about the people who lived within their means, anyway.
I'm talking about the people who just "had" to have those granite countertops and the in-ground pool when they were living on a fault line.
And I just wish they'd paid more attention before it got to this point.
A former award-winning journalist and lifelong class warrior, keeping a jaundiced eye on the Washington elite.
"In many cases, these "prime" customers, whose high credit scores afforded them the best interest rates on mortgages and credit cards, lost their jobs over the past few months and only now are running out of temporary fixes that have been keeping them afloat."
"Many of these clients already scaled back their lifestyles after losing their jobs or seeing their salaries slashed. Some are small-business owners whose companies foundered as a result of the recession."
The "spin" I put on this was the article you referenced.
Nothing wrong with the people who wanted things. What is wrong that they had to have those things NOW - not when they could pay cash for them.
Personally - not bragging - but I have not paid interest to anyone since about 1980 except my mortgage (<2% employee rate). I have bought 3 cars, a 1980 I still own, a 1992 which I gave away and a 2007 I also still own. All paid cash. I buy everything else on credit cards, pay the balance every month and get rebates of 2% on most of my purchases. Me and my dog, we love each other (waiting for same-sex marriage between different species) are living fairly well.
If you need funds to pay for essentials, you have a revenue problem
If you need funds to pay for frivolity, you have a spending problem
Raising children is punishing on your income.
And it is the reason I am not debt free.
I think many Americans fall into my category.
While I am glad for you that you have done well for yourself, I might add that although I am facing a $8000 credit card and a $95K home loan (original mortgage never a 2nd)...
Because of ME supplying my son of most of his needs in his 20s, he has a balance sheet like yours.
Why did I do that? Funnel so much into "setting him up"???
Because I predicted, and I was right, that he is the best investment I had going. He gives me happiness like I never thought I would know. He is a fine person.
And he would help me if I were in trouble I know because he told me so.
with a few people like that. They are pretty responsible, generally work two jobs and their hours have been cut back on both jobs. They bought when the market was high and so their house payments are a tad high (not crazy high). They are good people, like most of us, they really didn't envision it getting this bad.
Your entry is fair and kindly worded. But you forgot there are many other people who don't own their own business, who shopped at those small businesses and who ALSO tried to responsibly cut their expenditures and debt back before they lost their jobs. And it isn't enough because INFLATION is setting in. Food prices and fuel prices are up. And if that isn't enough, all those other small and large businesses are sitting on their price mark ups to stay alive. The customers can't buy because the prices are too high for their meager loose change. It's a no win situation.
Are you aware that it was a hidden policy to jettison all workers over 55 to reduce their last 10 years of income and thereby reduce their social security qualification? It's true. So everyone over 55 has gone through this.
We are all fighting to hold on to that which we can no longer replace. And no politician sees us. They're all focused on the young and the aged.
It's true we should no longer continue to divide our numbers but should hang tough in order to receive SOME sort of helpful benefit from the government cash pool, WHICH by the way, WE supply. We give it all and we get nothing. The rich give nothing and get it all when their businesses are in trouble. (Banksters I speak of) but there is never a qualifer of "who will pay for this?" when it's THEIR bailout.
As for me? No matter how bad it gets I can still sleep at night because I NEVER VOTED FOR A REPUBLILCAN.... EVER. I have no responsibility in causing this mess.
C & L goes off on an fantasy cruise. This is one of them. Ignore it.
The United States aspires to democracy, but no true democracy is attainable when the process is determined by economic power.
Fortunately it is a rare occurrence.
Not with this writer.
The article linked doesn't support the "still buying fancy TVs and vacations" judgment, it specifically states people cut back time and again, but have run out of options and are putting *living expenses* on credit cards, not big discretionary purchases.
George W Bush's death panel.
http://www.eandppub.com/2009/09/ap-photo-of-a...
Now that it's been a while and the jobs aren't coming back, those people are now getting hit with the reality stick -
_______________________________________________________________
http://www.youtube.com/watch?v=A61i0Xscj-k&fe...
Diabolus est Deus Inversus
"The long recession and rising joblessness are taking an increasing toll on the nation's most credit-worthy borrowers, who are now falling behind on their mortgage and credit-card payments at a faster pace than people with poor financial histories." I take an issue with this statement and one ought to blame those irresponsible people.
I have been unemployed for two years now. (By choice after my company was sold out and NO, am not getting unemployment benefits) When I was a single mother, making next to nothing, I always saved “rent money” for up to six months just in case but there again I come from nothing.
My husband had a rude reality check when we decided to be a family AND I am still being accused of being “cheap” because I do not spend what we do not have after twenty-some years. Please, People need to PLAN for raining days.
I support my president 100% and Healthcare Reform period!
Most people don't live like Mormons, with a year's worth of food in the basement. (Although it's not a bad idea!)
A former award-winning journalist and lifelong class warrior, keeping a jaundiced eye on the Washington elite.
Many end up in hock by having so many monthly payments on the go that missing one or two paychecks can drain all their saving.
Think of how many bills you have paid with automatic withdrawals every month. You never see those after a while.
Add to that the overt purchases like gas, food, beer and you get an idea of how much you need to earn just to break even.
Oh Oh. This could cause trouble.
Looks like I'll have to cut off the wife's beer this month.
Another shoe drops. It's going to be a long cold winter. I think of it as the icing on the cake of capitalism.
I have always wondered:
There are all these workers who pay taxes;
100 workers make $50,000 each, pay $10,000 in taxes. You cut taxes by 10%, you lose $100,000 taxes collected.
You hire 2 new workers who pay a total of $20,000 in taxes
Net loss in taxes $80,000.
You make up the difference by increasing the national debt.
Is that how it worked Old Ronnie?
If you need funds to pay for essentials, you have a revenue problem
If you need funds to pay for frivolity, you have a spending problem
a virus spreads by hijacking the host, and debilitating it in parasitic fashion. while the host grows weaker and eventually either recovers or dies the virus reproduces by feeding off the host and eventually spreads to another host usually by the mobility of the unkilled host. the odd thing is, the higher the death rate of the virus the less chance it has in the end of spreading, it eventually kills all of the available hosts in an area as it's killing efficiency outstrips it's communicability.
the banks have declared war on middle america, their hosts. soon there won't be any more middle americans left unbankrupt or unforclosed left to prey upon. what then?
Maybe a world of bliss without banks?
Its going to be bad for millions more in 2010 and 2011.
IMF: Mortgage Reset Chart
I'm sick of all the attention given to home foreclosures. Tragic, yes, but not any less dire than those of us who can't make rent anymore. Homeowners in foreclosure are sad victims and those of us threatened with eviction are just slackers?
I'm 54, have no credit debt, am unemployed and saved for a rainy day. My nestegg is running dry and I'm running out of options. I guess I can start running up credit card debt that I'll never be able to pay off like everyone else.
Just once I'd like to see some politician or economic guru address how this economic situation is effecting the rest of us. Homelessness is homelessness whether you're losing a house or apartment.
They talk about in several different lines, homelessness, lack of affordable homes etc.
The reason why they make such an issue of home foreclosures is that's emblematic of the so called "American Dream," part of which is owning one's own home and property. It's also a visceral punch to the complascent Pleasant Valley Sunday Bunch and Mr. Plastic Fantastic Lovers that it can happen to them too.
http://lemurking.files.wordpress.com/2008/05/...
http://www.youtube.com/watch?v=zHC9NANKluU
Diabolus est Deus Inversus
Here Here. The whole nation is NOT homeowners.
Some sort of attention should be paid to renters too.
And not all renters are slackers. They just don't have a lifestyle that gives rise to the time to commit to home maintenance.
Home Ownership is an ordeal as well as a joy.
Renting is an ordeal with busy body landlords who always think they're superior to the renters and with creepy or otherwise unlivable neighbors.
Both lifestyles have their pros and cons. Nothing in this world is free.
It has been 70 years since the last economic depression.
People forget there were 2 recessions during the last depression.
The first recession was the worst. It happened on the down side of the 10 year cycle.
This time it is happening on the up side of the 10 year cycle. The next recession may be worse than this one.
... and I'm not by any means channeling Saint Ronnie Raygun when I say that, but as a self-employed computer tech that has not recovered from the popping of the .com bubble many years ago (when I was always either building new rigs or upgrading/servicing existing ones), there's only one thing I gotta say to these prime borrowers: between my thumb and index finger is the worlds smallest violin and it's playing "My Dirty Liberal 98% Terrorist Murika Hatin' Socialist Heart Bleeds Purple Piss For You" ...
And the next time one of them shows up in my drive way again pulling the toaster oven with the HP logo smeared all over it out of the Hummer/SUV they're driving (both of which they put on plastic) and asks me, "Since cash is kinda tight now, willya fix it for foodstamps?!?", things are gonna get really ugly in my drive way in very short order.
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