Almost 2 Million To Lose Homes
Freeze Foreclosures Now, Says LaRouche
Aug. 1, 2007 (EIRNS)An estimated 1.7 million Americans will lose their homes over the next year when adjustable rate mortgages (ARMs) reset, according to an analysis by Moody's Economy.com reported in today's New York Times.
In face of the looming threat, Lyndon LaRouche has called for a freeze on home foreclosures, and emergency government action to guarantee stability of the banking system. LaRouche calls for putting the economy through the equivalent of a Chapter 11 bankruptcy in which personal savings and local banking functions are preserved, while the hedge funds and other speculative ventures take a bath. We don't need the hedge funds, but we need the banks to carry out a recovery, based on job-creating investment in public infrastructure and industry, LaRouche has argued.
The resetting of adjustable rate mortgages will spread the carnage already experienced on the sub-prime market to the better off homebuyers, who purchased houses beyond their means by taking out mortgages with low initial rates that reset to higher rates at a later time. The peak month for the resetting of mortgages will come this October, according to a report by Credit Suisse, when more than $50 billion in mortgages will switch to a new rate for the first time. In total, interest rates on $1 trillion worth of home mortgages, 12% of the nation's total, will reset for the first time this year or next.
Today, another U.S. mortgage lender IndyMac, showed signs of heart failure, posting a 57% drop in second-quarter profits, as bad loans jumped 342%. IndyMac specializes in alt-A loans, a type of mortgage which allows little documentation of income and assets. This follows the death tremors of the twelfth largest U.S. lender, American Home Mortgage, which ended trading on the New York Stock Exchange yesterday following announcement of insolvency.
Meanwhile, the commercial real estate market is about to take a hit from the credit seize-up. Private equity buy-outs of real estate investment trusts are already slowing, as banks have raised the interest rates on such deals, the Wall Street Journal reports.