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Skyrocketing Consumer Debt & Falling Rates
With home mortgages, the primary collateral for the loan balance is the home itself. In the event of a future default, the lender can file a foreclosure notice and take the property back several months later. With automobile loans, the car dealership or current lender servicing the loan can repossess the car.


Homeowners often refinance their non-deductible consumer debt that generally have shorter terms, much higher interest rates, and no tax benefits most often into newer cash-out refinance mortgage loans that reduce their monthly debt obligations. While this can be wise for many property owners, it may be a bit risky for other property owners if they leverage their homes too much.

With credit cards, lenders don’t have any real collateral to protect their financial interests, which is why the interest rates can easily be double-digits about 10%, 20%, or 30% in annual rates and fees, regardless of any national usury laws that were meant to protect borrowers from being charged “unnecessarily and unfairly high rates and fees” as usury laws were originally designed to do when first drafted.

Zero Hedge has reported that 50% of Americans don’t have access to even $400 cash for an emergency situation. Some tenants pay upwards of 50% to 60% of their income on rent. A past 2017 study by Northwestern Mutual noted the following details in regard to the lack of cash and high credit card balances for upwards of 50% of young and older Americans today:

* 50% of Baby Boomers have basically no retirement savings.

* 50% of Americans (excluding mortgage balances) have outstanding debt balances (credit cards, etc.) of more than $25,000. 

* The average American with debt has credit card balances of $37,000, and an annual income of just $30,000. 

* Over 45% of consumers spend up to 50% of their monthly income on debt repayments that are typically near minimum monthly payments.

 

Rising Global Debt 

 

According to a report released by IIF (Institute of International Finance) Global Debt Monitor, debt rose to a whopping $246 trillion in the 1st quarter of 2019. In just the first three months of 2019, global debt increased by a staggering $3 trillion dollar amount. The rate of global debt far outpaced the rate of economic growth in the same first quarter of 2019 as the total debt/GDP (Gross Domestic Product) ratio rose to 320%.

The same IIF Global Debt Monitor report for Q1 2019 noted that the debt by sector as a percentage of GDP as follows:

  
Households: 59.8%

* Non-financial corporates: 91.4%

* Government: 87.2%

* Financial corporates: 80.8%

 


Rate Cuts and Negative Yields

As of 2019, there’s reportedly an estimated $13.64 trillion dollars worldwide that generates negative yields or returns for the investors who hold government or corporate bonds. This same $13.64 trillion dollar number represents approximately 25% of all sovereign or corporate bond debt worldwide. 

 

On July 31, 2019, the Federal Reserve announced that they cut short-term rates 0.25% (a quarter point). Their new target range for its overnight lending rate is now somewhere within the 2% to 2.25% rate range. This is 25 basis points lower than their last Fed meeting decision reached on June 19th. This was the first rate cut since the start of the financial recession (or depression) in almost 11 years ago dating back to December 2008.
 

It’s fairly likely that the Fed will cut rates one or more times in future 2020 meeting dates. If so, short and long-term borrowing costs may move downward and become more affordable for consumers and homeowners. If this happens, then it may be a boost to the housing and financial markets for so long as the economy stabilizes in other sectors as well such as international trade, consumer spending and the retail sector, government deficit spending levels, and other economic factors or trends.

We shall see what happens in the near future in 2020 and beyond.

* The blog article above is a partial excerpt from my previous article entitled Interest Rate and Home Price Swings in the Realty 411 Magazine linked below (pages 87 - 91):
Page 7 of 24
May 11, 2009

75% LTV Trustee's Sale Money

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I now have access to foreclosure purchase money for Trustee's Sale properites (at the Courthouse steps). The terms are as follows:

* 75% of the purchase price ($100,000 to $1,000,000 plus per property).

* No Income, No Asset Verification.
* Decent FICO scores.
* Rates will vary depending upon a variety of factors (12% to 14%+ annualized).
* Borrowers may be an individual, corporation, or an LLC.
* We may be able to get you the check for the Trustee's Sale within a matter of a few d...

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May 6, 2009

Discounted Debt & Distressed Property Loan Options

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I have over 20 years experience now in purchasing or lending on deeply discounted mortgage notes and foreclosed properties in various states. Some of the deals have been individual homes, and others may have been large commercial mortgages secured by multi million dollar properties.

As I keep writing in my Daily Blogs here, many of the largest lenders in America may be technically insolvent right now. As a result, they need cash anyway possible so they are more willing to deeply discount thei...

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May 5, 2009

"Stress Tests" May Show That The Big U.S. Banks Need More Cash

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The recent "Stress Tests" issued by the U.S. government in order to see how solvent or insolvent many of the biggest American banks are these days may have come back with some troubling figures recently. According to various media reports and banking analysts, Citibank, Bank of America, JP Morgan Chase, and Wells Fargo may need a lot more capital to remain in business.

Some banking analysts estimate that Bank of America may need anywhere from $60 to $100 billion to meet the minimum "required cap...

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April 24, 2009

New REO Pool Financing At A Much Lower Rate

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As of last week, we now have much better REO pool financing options for our clients. The terms are as follows:

* Blanket Loans: $ 1 - $ 50 Million.

* Rates near 7%.

* 5 Year Fixed Rates

* Partial Release Clauses built within the loan. You may sell off each property individually at a later date.

* Loan is available Nationwide.

* Residential and Commercial Properties.

* Up to 75% LTV.

Many banks are still selling their existing foreclosure home inventories for literally cen...

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April 8, 2009

Another Great Derivatives Chart

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Please review the upside pyramid chart to better understand the potential severity of the collapsing derivatives market as it relates to the value of all other forms of assets and credit worldwide. This colorful chart clearly and colorfully illustrates how dire indeed the state of the world's financial markets really are now in 2009. CLICK ON CHART TO ENLARGE.

Banks will need to unload their prime assets for literally cents on the dollar in order to raise much needed capital. We have the great c...

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April 7, 2009

The Popping Derivatives Bubble Chart

The Popping Derivatives Bubble Chart which I created.
The Popping Derivatives Bubble Chart which I created.

Please take a look at the corresponding Derivatives "Bubble" chart which I created. It clearly shows that the existing Derivatives debts worldwide (i.e. Mortgage Backed Securities, Collaterized Debt Obligations, Credit Default Swaps, etc.) far exceed ALL prime assets worldwide several times over (stocks, bonds, real estate, etc.). CLICK ON CHART TO SEE IT BETTER.

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April 3, 2009

The Declining Dollar May Cause The World To Replace It As The "Reserve" Currency

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As the meetings of the G-20 leaders concluded this week in London, there were serious discussions on-going about the possiblity of replacing the "almighty" U.S. Dollar with another "reserve" currency worldwide.

In fact, the topics included the possibility of replacing the U.S. Dollar with the Chinese Huan (which normally "floats" in line with the U.S. Dollar anyway). China, obviously, gets much of its capital from exports to the USA. In addition, China and Japan are the two largest purchasers of...

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April 2, 2009

REO Investment Opportunities

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The word "crisis" has two meanings in Chinese. One meaning is "danger", and the other meaning is "opportunity". Obviously, the Credit Crisis continues to worsen every day around the world in spite of the world's economic leaders attempts to improve the situation.

As we anxiously await the outcome of the on-going G-20 Meetings in London, we will soon see what new regulations and solutions may be forthcoming to hopefully help the citizens of the world. We should all know more later today or tomorr...

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March 18, 2009

The Popping Derivatives "Bubble"

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The quadrillion dollar derivatives meltdown continues at an escalating pace around the world. Again, a quadrillion (plus or minus another 125 to 500 Trillion up to as high as 1,500 trillion) is 1,000 trillion dollars. 

If you start with a million dollars, please multiply it times 1,000. Then, please take that number and multiply by another 1,000. Then, please take that new number and multiply by another 1,000 (1,000,000 x 1,000 x 1,000 x 1,000). This new number will then be a quadrillion.

Or cou...

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March 17, 2009

February's Foreclosure Numbers Were 67% Higher Than In January '09

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In Febraury '09, national foreclosure numbers (completed at the final sale - Trustee's Sale or Judicial Sale depending upon the state) were 67% higher than in January (just one month prior). There were over 121,000 homes which were taken back by their respective lenders during February '09 (sadly, the shortest month of the year). 

In addition, the number of "pre-foreclosure" filings (or Notice of Defaults in Trust Deed states like California) were also at new highs (over 207,000). In most cases...

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