Survive and thrive during the coming economic crisis

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[Update 3-11-08]

Mortgage Meltdown Update

So far U.S. banks have written off over $100 billion in bad debts related to the mortgage mess. Problem is - no one knows how far the losses will run! There are reports that the overall cost may surpass one trillion dollars, a sum that would impact our entire national economy.

When congress proposed a bill that contained a number of possible partial solutions, President Bush quickly announced he'd veto it. While everyone agrees something must be done, no one is taking the lead to provide concrete solutions.

Meanwhile the FDIC (the government agency that insures our banks) is hiring new employees in preparation for the coming wave of bank failures). High ranking government officials including Ben Bernanke have admitted that some banks will fail.

The government has announced a huge surge in job losses during the last quarter of 2007. Non-farm employment dropped a whopping 65,000 jobs, more than twice what the experts expected.

Today more than 2% of of the 46 million U.S. mortgages are in foreclosure. And another 6% are more than 30 days past due. 13% of sub prime mortgagers are now in foreclosure and fully 20% are in arrears.

Some leading analysts are predicting that house values may fall another 20-25% during the next few years as millions of Americans abandon their homes after their adjustable mortgage payment increase to levels they can't afford.
 

"Jingle Mail"

There's a new term circulating within the mortgage community. They call it "jingle mail". It's when a home-owner walks away from a property they can no longer afford and mail the keys to the mortgage lender. With 20 million homeowners now holding properties in which they have negative equity (they owe more than the home is worth on the present market), more and more owners will walk away.

As house values fall even further, millions more hard-pressed home owners will be pushed into foreclosure - or jingle mail. It's a vicious cycle with no end in sight.

This mortgage meltdown is having an effect on all forms of credit. Credit across the board is getting harder and harder to obtain. Auto loans are more difficult to find and credit card interest rates are climbing.

Expect runs on banks, particularly the smaller local banks that invested in the 2000-2006 super-hot sub prime mortgage market. You can also expect bank failures (my report includes a list of the largest and most solid U.S. banks). Now is the time to switch to a bigger bank.

You can also expect labor problems to explode. If you plan to take a foreign vacation during the next few years, 2008 may be the year to fly as it may be the last year you'll be able to rely on our air transport system.

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