Sub-prime fallout: shanty towns outside LA, and watch the red ink flow

This is amazing, shocking – I find it hard to believe that the voiceover is telling what’s really happening, but there it is: a sort of shanty town outside Los Angeles composed of people whose sub-prime mortgages went bang.

And now there’s the pair of illustrations that I came across showing how American banks’ mortgages went bang. (These look terrible in Firefox and Camino on the Mac; fine in Safari. No idea how they are on Windows – anyone care to tell me? OK, fixed.)

The source is And Still I Persist which has used its own technology, called Boomerang, to disentangle this colossally complex topic. The first graph shows (by bank) the value of mortgages, by bank, where there were payments outstanding by 90 days or more. The number of “late” loans is vertical; the asset size of the bank horizontal; its total loan portfolio is the area of the circle at any point. (It’s bad to be vertical, small and near the x-origin.)

And secondly, total charged-off loans – that is, number of loans that have been written off as “non-performing” (vertical axis), total assets (shouldn’t that be claimed assets?) of the bank on the horizontal, and the area of the circles showing the bank’s total loan portfolio. (Being vertical and not far along the axis and having a small circle is bad.)

So – the question we now have is, why did it all go pear-shaped in 2007? What in particular happened?

9 Comments

  1. Aren’t these charts both the same?

  2. Charles

    Wednesday 19 March 2008 at 6:11 pm

    @bill: no. The first one shows those which have mortgages which have outstanding payments 90 or more days overdue. The second shows banks which have junked mortgages (and the value of those mortgages) – that is, they’ve decided that the mortgages are worthless.

    On the second, Washington Mutual clearly has all sorts of fun ahead: lots of written-off mortgages, relatively small value, though its home loan book is pretty big.

  3. Strange, the vertical axis has the same data on both: Total 90+ day late Home Loans ($) whereas you expect different data on the second.

  4. Charles

    Thursday 20 March 2008 at 3:24 pm

    @bill – I’m not seeing that. For me the second graph reads “Total charged-off home loans ($)”. Do the graphs look different when you play them? Which browser are you using?

  5. Both charts play the same; I isolated Washington Mutual after your first response to make sure I wasn’t going mad.
    Using IE6.0.2800.

  6. I’m amazed you’re amazed. What did you think happens when people lose their home?

    The National Coalition for the Homeless says two trends are largely responsible for the rise in homelessness over the past 20-25 years: a growing shortage of affordable rental housing and a simultaneous increase in poverty.

    I don’t know what part the subprime loans play in homelessness now. But looking at the scarce options facing people in low-paid jobs, it’s worth guessing that taking out an unaffordable loan for a house may not have been stupidity or self-delusion but a rationale, if temporary, way out of an impossible situation.

    Barbara Ehrenreich tells the housing story in Nickel and Dimed, her undercover look at low wage USA. She realises early on that unless she wants to live in her car, she needs at least two jobs.

    She couldn’t find figures on how many employed people live in vans and cars. But she quotes stats (10 years old now) suggesting that nearly one-fifth of all homeless people (in 29 cities across the US) are employed in full-time or part-time jobs.

  7. Charles

    Thursday 20 March 2008 at 10:18 pm

    @bill: that’s weird. Anyone else seeing this? The code seems OK.
    @PJ: good point, of course. To everyone else: PJ runs the very good Youth Money blog – http://www.youthmoney.co.uk/

    It sounds, from the BBC piece, like they were offered loans they couldn’t possibly cover, or which blew up when medical bills intruded. This is how the US pays for its lack of universal health care, I guess.

    Multiple jobs? Scary. But then, how many British families with homes have two working parents? Starts in the US…

  8. I’m afraid I see the same as Bill. Two identical graphics in IE7. In Firefox I see two plain blue rectangles, empty of content.

    Kind plug for my youthmoney blog, Charles. Thank you. I’ve written a post for your readers – about computers & the poverty premium in the UK. http://www.youthmoney.co.uk

    Best
    PJ