Word: defaultations
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...Most economists blame the collapse of the credit markets which began the recession on a drop in US housing prices and devaluing of subprime mortgage-backed securities. The Wall St. experts who created these financial instruments failed to predict how quickly low-quality mortgages would default to some extent because the national value of housing had gone up for decades. But, as defaults did rise, the value of these derivatives cascaded and the banks and other institutions which held them were required to take massive losses. At Davos, Russian and Chinese leaders attacked the U.S. for the "failure" of regulators...
...mortgage default rates, especially among subprime mortgage holders, began to climb at an unprecedented rate. Many home loans had been given to people without even a credit check or income verification. The mortgages often carried very low interest rates in their first three years which reset to much higher numbers after that period. Homeowners found their monthly mortgage payments spiking up and, in many cases, they could no longer afford to make these payments as employment fell across the economy...
...past few decades, banks have been piling up risk, making more and more loans based on less and less capital. Years of economic growth, shallow recessions and record-low default rates lulled bankers into thinking that the future would resemble the immediate past, at least as far as risk went. Turns out it didn't. All it was going to take was a worse-than-average recession - and it looks as though we've got one - and many banks, including a number of the biggest ones, were bound to fail. The shockingly poor lending standards - housekeepers being approved for million...
...include both guarantees and direct asset purchases. The latter plan is favored by the FDIC and is often called the "bad bank" approach, because the government would set up an institution to buy up all the loans or bonds that are backed by borrowers who are nearing or in default. Sources say the FDIC has been against the loan guarantee plan, and only signed onto the Citigroup and Bank of America deals reluctantly...
...joblessness situation is that grim, the price of homes is likely to be falling even more sharply than last year and more mortgages are headed under water. Default and foreclose rates are bound to jump higher. Consumer confidence, which is already remarkably bad, will be exacerbated by the number of people out of work and the lack of credit to buy even the most essential items...