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Sunday, February 25, 2007

Giving Credit Cards To Illegals

The average individual has the sneaking suspicion that somehow he or she is going to end up paying for that credit card given to an illegal, because the illegal can just skip. The average individual is right. Why would a bank do something like that?

FDIC Stats
Quarterly profitability percentages by asset concentrations - fourth quarter (loans):
2005: 91.2
2006: 89.8
2005: 91.5
2006: 88.6
2005: 89.1
2006: 85.5
2005: 85.6
2006: 84.0
Credit Cards:
2005: 81.8
2006: 96.2
It's amazing what the inability to refi out of credit card debt can do to increase profitability on that credit card debt, especially when you slam those 30% default rates on for a late payment of a utility bill, etc. Think about what I am trying to tell you here. I realize that a lot of people don't want to read the writing on the wall, but incomes have not kept pace with inflation over five years. Last year they started rising, but the accumulated damage has not been made up in comparison to inflation. The consumer made up the deficit by using home equity loans, so having a home became having the ability to borrow. It's all coming to an end now.

CR posted about a Denver article, and these are the telling quotes:
Hector Garcia figured he was doing everything right.
Garcia took out a 30-year, fixed-rate mortgage at 6.5 percent interest, bought a three-bedroom home for $207,000, and began fixing it up.
Bank-owned properties now represent more than 80 percent of all homes on the market there, putting even seemingly stable homeowners like Garcia up against a financial wall.

"I just can't take it anymore," he says of his street's overgrown yards, abandoned houses, and declining property values. "I put so much into this house and this community, but I don't have no equity."
He's trying to sell:
Garcia's house two years ago "would have gone for $210,000, maybe more," says David Cabrera, the real-estate agent whom Garcia hired last fall to sell the home, now priced at $195,500. "But nobody's buying now with all the foreclosures."
...Garcia (...) has yet to receive an offer. "I feel bad," he says. "Everyone thinks they want to get a house to get money for the family. But I need to have a life, too."
He's not in trouble on paying the loan - it's just that it's not worth it to him, because the more he pays down the more the house drops in value, and he can't save otherwise because he's using all his spare cash to pay the mortgage. The neighborhood is unlikely to get better and provide a safe environment for his family. The entire housing bubble was created by the idea that paying a high percentage of your income for a home would create a financial cushion for your future.

This is how the little guys get hurt. His income is probably around $50,000, and even though he's reaching the point where his principal paydown rate is rising, on that income he really can't save AND pay an amortized mortgage of around $207,000 originally. There is a reason for the old ratios - violating them causes insecurity and financial instability. His PITI to Gross Monthly Income ratio is about at 35-36%, when it should be no higher than 30%. So he's locked into working 50-60 hours a week, not getting ahead in any way, and feeling extremely financially insecure - and he is. He's been in the house for 4-1/2 years, and by now by all usual economic rules his payments in comparison to his earned income should have have dropped enough to provide him some margin even if the house value didn't increase - but that hasn't happened either.

Not that's he's an illegal, but the same dynamic holds. When people such as these cannot prosper, in the end the nation cannot prosper. Jeremiah:
Like cages full of birds,
their houses are full of deceit;
they have become rich and powerful

28 and have grown fat and sleek.
Their evil deeds have no limit;
they do not plead the case of the fatherless to win it,
they do not defend the rights of the poor.


No new paradigmer thou.

Please post this on CR where everyone can see it. Your analysis needs wider coverage, much wider coverage.
Preach it, sister - the bubble cycle is about to get biblical.

I am astonished how many middle class people here in New York regard their homes as cash-flow generators. They truly believe that they should be able to extract 10-20 K from their home per annum. Like it's a freaking bond.
The one thing the above stats tell me is that we are indeed moving to the end of this credit cycle.
Hey, MOM, thought I'd come over here and waste your bandwidth for a change instead of CR's.

I used to do a lot in the 90s with affordable housing and bond programs, and I loved recent immigrant loans. Still do, actually--like you, I just don't like the fact that the deck is too stacked against those folks. But do you want to talk about "pride of ownership"? Have you ever seen anything like a neighborhood populated by Garcias? It's a beautiful thing. My colleagues used to snicker over those Virgins in the Bathtub, you know, because the classy suburban homes of their pale siding and cedar shake roofs had nothing so outre as religious icons in the front yard. Those were, in fact, the HOA Nazis who passed rules prohibiting the parking of pickup trucks in driveways--anyone whose vehicle implies "working for a living" has to park it in the garage, with the doors down, so that everyone else's sacred property values don't get messed with. And when the local economy tanks, those HOA Nazis walk away, while the Garcias take the third job and rent out the bedrooms to the cousins, in order to get through the tough times, while never ever once failing to mow the lawn, exhausted though they are by their paid labor. God love them, because the banks don't: having used them, the banks will now throw them away.

Tanta, who is too lazy to have a blogger account
Yes, they are the quintessential "good bets" of prudent home lending, and of course, we have now created a situation where these people are being beat to s__t. If this is a "virtuous cycle", I'm Britney Spears.

"Historically" based expectations that go back, oh, I'd say a few thousand years somehow beat those that go back two years.... I could deal with ten years, but two?

Oh, I know that all good salesmen have the ability to sell themselves first, but what lunatic ever decided to take the sales pitch as if it were written on stone tablets? We have transcended all bounds of realism and we are going to get smacked in the kisser. Reality is a vengeful deity.
Not that's he's an illegal,

I vented on this over at CR's this morning. Not only is he probably NOT illegal... he's probably NOT even a recent immigrant.

I lived in a town with about 25% Mexican-Americans and I would guess the media generation count would be about '2'... With the majority of folks having been here two generations and those who classify as 'recent' or 'illegal' equal in number to those who have been here four generations or so.

It drove my friends (who couldn't even speak Spanish) crazy to be classified as 'wet back'.

But you are right - the Garcia's need as good a deal as the Schmidt's
Chief No-Nag, my better half, is one of those short brown first-gen. He got here in his twenties, went to college, eventually became a research biologist and became a naturalized citizen. He's a very good-tempered man, but you should hear him roar in rage when someone calls him in Spanish to sell him something. He claims it's discrimination, and that it's against the law.

I think that politicians don't understand immigrants or Hispanics very well at all. They are sometimes acutely insulting.

(The reason I threw that line in there was because I just knew that someone would assume the guy was an illegal immigrant because of his name.)

I have to agree. I don't know where the politicos are doing their research, but it's not amongst the Mexican immigrants, second, third generation types I know. My uncle is a PhD in Education, ran a school district and is fluent in five or six Spanish dialects. He is a staunch Republican. Ditto my friends of mixed Mexican-Gringo descent. Not one of them speak a lick of Spanish. It is offensive to assume they do.

As for the loans pressing upon the poor people doing their part, isn't this always the way? Eventually financial stress works its way up the socio-economic ladder, but it starts at the bottom.

I think there is a general heartlessness about banking these days. There are no one-on-one relationships--even for people putting significant amounts of money into a bank. So when things go bad, the bankers feel no personal remorse for their actions and consequences.
He's not in trouble on paying the loan - it's just that it's not worth it to him, because the more he pays down the more the house drops in value, and he can't save otherwise because he's using all his spare cash to pay the mortgage. The neighborhood is unlikely to get better and provide a safe environment for his family.

This is called "going upside down", aka Mortgage Death Spiral.
It ain't over till the fat lady sings.

What's that sound...

In Asian equity moves, Shanghai's Composite Index shed nearly 9 percent amid profit-taking sparked by concerns that additional macro-tightening policies could be introduced following the annual session of the China's National People's Congress, which gets underway March 5.

I would say that's about it.

God help us all. There definitely are not enough life boats for everybody.
God help us all. There definitely are not enough life boats for everybody.

At which point, Zero-Sum Game Rules go into effect: With only so much to go around, the only way to get more for ME is to take it away from YOU. Just like raid-and-pillage tribal societies throughout history -- my family and inner-circle clique WILL survive! All the rest of you HAVE to die!

There's this blog called "Housing Panic" that seems to be accumulating a following of foaming-at-the-mouth Total-Global-Economic-Collapse-It's-All-Over-But-The-Screaming survivalists of a type I have not seen since the Late Seventies/Early Eighties. I am waiting for them to start posting the Survivalist "When Push Comes To Shove, The Most Plentiful Food Source *Will* Be Human Flesh! PREPARE TO DO WHAT MUST BE DONE TO *SURVIVE*!" rants.

The Headless Unicorn Guy
I am not a nationalist but I really cannot understand why illegals are allowed to get credit cards. Giving a credit to illegal immigrants, we spoil economic situation in our country. More than that they buy houses, cars, and other things to root here.
If they work, if they pay taxes and don't litter, let them live here as they like. Is a credit card a regalia for a US resident???
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