Seattle Bubble Forum Archive

"An estimated 58 percent of properties in the foreclosure process are linked to borrowers with subprime loans, and RealtyTrac expects U.S. foreclosures to reach 1.8 million by year's end, Rick Sharga, a spokesman for the company, said in an interview."

What shocks me about this is that 42% of foreclosures are NOT related to subprime loans.

But wait, I thought that only subprime would be the problem? And that Seattle hardly has any subprime borrowers, so we're all, like, safe n' stuff?

I'm sure Seattle is way behind in the foreclosure curve, simply because prices were/are/whatever still going up, so people can refi, get a HELOC, and delay the inevitable just that little bit longer. But we'll get there...

"Foreclosures are soaring amid a glut of properties and as interest rates close to an 11-month high make it more difficult for borrowers to refinance."

This is total crap and just repeating what the NAR wants you to believe. If someone is refinancing from some Alt-A, ARM, neg-am, or whatever on some teaser rate, it doesn't matter if they're refinancing to a 6.25% loan, or a 6.75% loan. Both are unaffordable, because the borrower could not afford the house in the first place using any kind of old-fashioned pay-back-the-fricking-principal mortgage.

In addition, I think it's likely that there are a lot of prime borrowers that will miss a payment, then think "crap, I'd better refinance". Then, that borrow is no longer prime, they're sub-prime. The interest rate will now be 8% from their teaser/ARM 4%. Bingo!

My contention is that you aren't providing any proof that foreclosures on prime mortgages are related to what's happening in subprime land. Don't get me wrong, I haven't seen any proof that they aren't related either. But it's alarmist to take two numbers, compare them and then make a statement that they must be related. For example, maybe historically 80% of foreclosures are prime, because 95% of mortgages were. These are just numbers unless they are put into some sort of historical context.

This is just another example of abusing statistics. Here's an awful analogy. We know oceans altitude is 'sea level', but the average altitude of all fresh water is say (making up a number) 100 feet higher. Therefore, we can conclude that global warming 'contagion' is already spreading to fresh water, having the effect of rising fresh water levels across the world!

To prove that subprime woes are contagion and that they are spreading, you would need to compare the number of prime foreclosures today to the recent historical average.