The coming financial crisis

[Sgt PSN]

Countrywide about to go under...not good even though they suck

Just out of curiosity, what happens to home owners who mortgage their homes through Countrywide if the company goes under?  Do the people lose their homes?  Do they find a new mortgage company?  Do they get their balance paid off as a result of some sort of bankruptcy law?  They were my mortgage company for the house I owned in NC so seeing their name raised an eyebrow. 

[reese125]

If a mortgage company goes bankrupt, the mortgages they own are sold to another mortgage company. Nothing else changes. The terms, rates and conditions of the mortgage stay the same. The only difference for a homeowner is they will be contacted by, and begin sending their payment to, whichever lender purchased their loan.

[PhillyPhanInDC]

If a mortgage company goes bankrupt, the mortgages they own are sold to another mortgage company. Nothing else changes. The terms, rates and conditions of the mortgage stay the same. The only difference for a homeowner is they will be contacted by, and begin sending their payment to, whichever lender purchased their loan.

This might be a stupid question, but what happens if no one wants to buy some of the risky mortgages?

[MadMarchHare]

They're sold in bundles, safe ones and risky ones mixed together, to "minimize" risk to the buyer.

[Butchers Bill]

If a mortgage company goes bankrupt, the mortgages they own are sold to another mortgage company. Nothing else changes. The terms, rates and conditions of the mortgage stay the same. The only difference for a homeowner is they will be contacted by, and begin sending their payment to, whichever lender purchased their loan.

This might be a stupid question, but what happens if no one wants to buy some of the risky mortgages?

Thats part of the current problem.  Companies like Countrywide can't sell the stuff they have, which means they cannot loan more money, which means consumer credit shrinks, which means people buy less, which means recession.

[Phanatic]

So how does this effect the average bumbling Joe?

[Butchers Bill]

So how does this effect the average bumbling Joe?

Less consumer credit = less spending.

Less spending = less services, goods sold, etc.

Less services, goods sold, etc = layoffs.

Layoffs eventually will = recession.

Recession = more foreclosures, even less consumer credit...

This one has the potential to spiral out of control.  Not trying to be an alarmist, just looking at the facts in front of me.

[Cerevant]

Yes, it would be horrible if people were actually forced to live within their means and buy only what they could afford, instead of driving themselves further into debt to satisfy the media driven materialist lust.

[ice grillin you]

reason number 478 to get a govt job

we just got the biggest cost of living raise this year since 1998

[Susquehanna Birder]

Less consumer credit = less spending.

This always bothered me. Ideally, spending should be done with free cash (disposable income). Building an economy on credit is a disaster waiting to happen.

[Cerevant]

Yet everyone is shocked when it does happen.

[Sgt PSN]

reason number 478 to get a govt job

we just got the biggest cost of living raise this year since 1998

[Seabiscuit36]

Countrywide up 50% today with rumors of BAC buying out Countrywide

[Butchers Bill]

More good news:

US AAA Credit rating under threat for the first time

Merrill Lynch in trouble

[Sgt PSN]

US AAA Credit rating under threat for the first time

At first glance of the link, I thought that I was going to lose my AAA auto coverage.  Duh.


So basically, what this all boils down to is that now that there's a legitimate chance that we elect a black president, all of a sudden the US has poor credit.  Typical.