Tag Archives: economy

Sell mortgage — Bubbling Student Loans

Those of you who have been readers of this blog for a while may recall my June 10, 2011 article about the student loan bubble, which included details about the high unemployment rate among recent college graduates and the debacle of defaulted loans to students at for-profit colleges.  Have things changed in the last 14 months?  Well, yes … they have gotten worse.

As Dan Amoss explained in The Apogee Advisory, “The real fallout from the student loan crisis will hit in mid-2013, four years after the volume of government funded student loans surged.  Like the infamous option ARMs (adjustable-rate mortgages) during the housing bubble, these loans have precisely time fuses: Four years after the loans are made, borrowers must start making payments.”  The U.S. Department of Education, which has a massive $452 billion portfolio of student loan receivables (according to the Federal Reserve), has become the equivalent of a subprime lender.

What do the next five years look like for newly minted college grads?  Those that hold degrees in computer science or some disciplines of engineering can often still write their own tickets.  For liberal arts majors and the like … not so much.  According to the Labor Department, 1.9 million Americans ages 20-24 who are not in school are unemployed.  The economic conditions and idiocy of our politicians has caused most of this pain.  In my opinion, an additional element is that the so-called echo boomers (kids of baby boomers) have often been brought up by their parents to believe that the excess use of credit is okay and that they should follow their career dream, even if it has no clear path to a decent paying job.  Those young adults are now getting a cold slap of reality, and I feel for them.

Of course, Federal Reserve Chairman Ben Bernanke is on the case.  He recently stated “”I don’t think it’s a financial stability issue to the same extent that, say, mortgage debt was in the last crisis because most of it is held not by financial institutions, but by the federal government.”  Did you get that?  Student loan defaults are not a problem because the taxpayers will get hit directly by this crisis instead of indirectly with the bank bailouts.  His quote is another gem following such wonderful past predictions as:

*  “It’s a pretty unlikely possibility. We’ve never had a decline in house prices on a nationwide basis.” (July 2005)
*  “We see no serious broad spillover to banks or thrift institutions from the problems in the subprime market.” (May 2007)
*  “The Federal Reserve is not currently forecasting a recession.” (January 2008, one month after the recession started)

Right now, it is quite difficult to get out of repaying a student loan.  It is not like defaulting on a credit card or mortgage, where your credit score takes a hit for a few years and then you can move on.  Only special circumstances allow one to get out of repaying a student loan.  I predict that Congress will make it easier to get out of student loans within the next year, which will help young adults get started without a heavy financial weight on them but will only make the overall student loan program even worse off.  One other piece of good news for those with student loans is that the Fed seems to want to keep interest rates low for many more years, which will keep loan payments lower for the students and, sometimes, their parents.  However, defaulted student loans are going to be another big hit to the taxpayers.

You all know that the debt crisis is severe nationally, and in most states and municipalities.  Last week, Mish shared an interesting analysis of how the U.S. can meet its spending requirements of $3.2 trillion this year.  Here it is:

* take 100% of the corporate profits of Exxon, Wal-Mart, and all other corporations
* make the tax rate 100% for all individual incomes above $250,000
* confiscate 100% of the financial assets of super-wealthy folks with Bill Gates and Warren Buffett
* take all of the player’s salaries in the NFL, NBA, MLB, and NHL

That would pay for this year.  It would still do nothing to affect our $16 trillion debt level or the $117 trillion in unfunded liabilities.  The White House Office of Management & Budget projects federal spending to be $5.8 trillion per year in another ten years.  How will we pay for any of this?

The housing market continues to stumble along the bottom with little chance of a significant increase in home values except in a few choice locations.  For those of us who are mortgage note buyers or are investors of any sort, these are still dicey times.

Rasmussen Reports found that 14% of Americans expect today’s children to be better off than their parents, only 31% believe the economy will be stronger in a year, and 27% of likely U.S. voters say that the country is heading in the right direction.  The consolation to these ugly figures is that more people are how realizing the severity of the country’s problems.  Regardless of whom wins in November, don’t expect much effort to solve them.

Alan Noblitt is a mortgage note buyer who helps people wanting to sell mortgage notes.  People wanting to sell mortgage notes can contact Seascape directly or view the free information available on the website.

Recognizing Problems- San Diego real estate note buyer

The sunny optimism about the European financial situation has all but disappeared.  For many months, various European bureaucrats and central bankers had climbed the podium to tell their trusting citizens that everything was okay and that the situation was under control by the “experts.”  Of course, the opposite was true.  Manufacturing output in even Germany and France is down, and it seems clear that the Eurozone recession will be long and deep.  Greece is on the verge of default as it plays a game of chicken with Germany, and several of the other PIIGS (Portugal, Italy, Ireland, Greece, and Spain) are not far behind.

The debate is raging in Europe about whether to continue austerity programs or shift to a pro-growth mode.  The general public and the politicians clearly prefer the latter, with the plan being to fix the deficits in the future.  Similar discussions are taking place in the U.S.  I would contend that a refusal to solve the debt problem now is a refusal to solve it at all.  Does anyone really think that future politicians will be more focused on solving the country’s problems than furthering their own re-election chances?  No way, as politicians (at least most of them) are made from the same mold, and few are interested in truly solving longer term financial crises.

USA Today recently noted that the real federal deficit last year was $5 trillion rather than the official $1.3 trillion.  Companies and state and local governments are required by federal law and the private boards that set accounting rules to include retirement benefits in their financial statements.  Congress exempts itself from including that cost.  If the Feds were required to use standard accounting principles plus balance the budget last year without reducing expenses, the typical American household would have paid almost all of its income in taxes.

The headlines over the next year or two will tell us that the European recession is adversely affecting U.S. exports (meaning lost jobs) and causing losses at our banks and U.S. Treasury, who were foolish enough to loan them dollars.  We’ll hear more about shenanigans at Wall Street banks causing additional taxpayer losses, since it is clear that the Dodd-Frank rules to force adult supervision of the banks have been stripped of any teeth.  Poor fiscal management, especially of overly generous pension plans, will force more U.S. cities into bankruptcy.  The city of Vallejo, California was the largest to file bankruptcy, back in 2008.   The Washington Post states that, in California, municipalities like Stockton, Mammoth Lakes, and Montebello are exploring bankruptcy protection and projects that at least 100 municipalities will have to seriously explore it by the end of 2012.

If I had a dollar for every headline that I’ve read saying that the real estate crisis is over, I’d be lounging on the beach on a tropical island instead of writing this blog.  Real estate prices are following more of an “L” than a “U” or “V” curve.  They may be near-bottom in most cities but there is nothing to trigger an upswing.  Too many families are dealing with unemployment or underemployment.  Since one in three mortgages is underwater, a lot of families cannot move up to bigger houses because they are trapped in their current ones.  With the robo-signing scandal over, expect banks to continue ramping up foreclosure activity.  The Fed will likely roll out another quantitative easing program to boost GDP and the stock market, though the positive effects will be even more short-term than the previous two.

Admittedly, things look rather gloomy for our economy right now.  A more educated public could force the politicians to do the right thing if we could in parallel strip the lobbying money out of the system.  It is that money going to politicians and their affiliate groups that has caused so much of our current situation.  A true crisis point will be needed to force the issue and get us started on a REAL road to recovery.  Entrepreneurism and the American spirit can eventually bring back the nation to its former level of prominence, but we must first recognize the true issues and have qualified, independent, non-government individuals and groups find ways to solve them.

Alan Noblitt is a San Diego real estate note buyer that buys real estate notes in all 50 states.  As a San Diego real estate note buyer, he has a California real estate broker’s license and his company has an A+ rating by the Better Business Bureau.