How Are We Paying Off SubPrime Mortgages?
August 20, 2007 11:30am by Barry Ritholtz
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It would be funny if it wasn’t true.
The Onion is closer to the truth than Wall Street.
it’s ironic that satirists have a better handle on financial issues than many investment strategists….see also daily show/colbert report take on credit crunch:
hope these links work:
http://www.comedycentral.com/shows/index.jhtml?playVideo=90630
http://www.comedycentral.com/shows/the_daily_show/videos/larry_wilmore/index.jhtml?playVideo=90948
Seeing a huge rift in joke liquidity, the Fed injected some humor into the system to provide relief and let bankers know that they can borrow jokes at discount rates.
In a call with several prominent bankers including the CEOs of Bear Stearns and Merrill Lynch, Bernanke provided the showstopper – Why are some hedge fund managers going to Yellowstone Park on holiday when you can see more bears in the city?
From FT via dealbreaker.com…they crack me up.
“The Onion is closer to the truth than Wall Street.”
Agreed, this image looks pretty accurante by my account.
Fannie Mae to Skip August Debt Auction
http://www.marketwatch.com/news/story/fannie-mae-skip-august-debt/story.aspx?guid=%7BAB7F6BE0%2D8766%2D4E14%2DB7C1%2DE8E88ED7FB96%7D&dist=hplatest
Still contained….
Ciao
MS
What? You mean that when my interest rate goes up, I’ll have to pay more? Well, I’ll just refinance at a lower rate and use the equity in my home to buy new furniture. There. Problem fixed.
Funny mortgage humor-
http://www.careerbuilder.com/monk-e-mail/Default.aspx?mid=22960571&cbRecursionCnt=2&cbsid=32cab956f07e4458b4e5fcc10fc76ce4-240494547 -J1-5
see the 3 month t bill? down one full point…unbelievable…scary
vix hit 40 today? yikes
mexico canada and the united states meeting today……probably getting the “amero” currency ready lol
Jake…you are correct for bringing up the 3 mo T bill….that is NOT a small happening.
Most likely get swept under the rug with all the other pertinent economic indications of the pending “issues”.
Ciao
MS
The cocaine must be a Larry Kudlow reference.
That’s a great post and probably pretty accurate. But trying to be serious for a moment (I’m no Real Estate/Loan Expert by any means…) I would think the Mortgage Companies/Banks would not want to let these Home-Owners who can’t handle the higher payments when their subprime loans, or ARMS, eventually reset go into default. It would seem to me that they would want to keep these existing interest earning loans on their balance sheets (rather than having to write them off) and would re-negotiate the terms of the loans with the Home-Owners, possibly extending out the time for repayment, or making an additional loan to the HomeOwner so that “payments could be made”. I would think that the Mortgage Companies have some more plays in their playbooks. Not to say that this is necessarily going to help the Home Owners out in the long run, but it would extend the time of the game…
The gains in the Stock Market have been heavily dependent upon the Real Estate Boom, with all asset classes moving together… I don’t know the last time this has happened. Given that the Housing Industry, in general, has been forecast to remain in a rather severe downturn I would think this would be a further incentive for the Mortgage Companies to avoid foreclosure, since the value of these Homes (collateral) has to be (in most areas) taking an appreciable hit. Things will become more interesting if the Stock Market (a source of Home-Owner income and confidence) continues to sell off.
Posted by: John | Aug 20, 2007 1:41:24 PM
Part of the problem is that the mortgage companies no longer hold the loans, those financial/investment companies that do hold them are in no position to loan or service loans.
mexico canada and the united states meeting today……probably getting the “amero” currency ready lol
Posted by: jake | Aug 20, 2007 1:30:23 PM
The elites are planning this in plain view, but damned if anyone will cover it including congress which has Treaty Powers.
The SPP is alive and well. Just a bit more tinkering with the contained problems, and we should be there. We of course will all be completely surprised.
Welcome back to 1987 where we had the same problem, but hey it’s all good because it’s contained. LOL!
Has anybody found any other articles that highlight the plunge in 3 mo T-Bill yield and its historical context.
Thanks.
sheeple-
not much but this one hints at it:
http://www.bloomberg.com/apps/news?pid=20601087&sid=a4zj0H6aDm98&refer=home
Ciao
MS
Countrywide’s gonna borrow at the discount rate, buy 3 mo T-bills, and some analyst on Wall St’s gonna say “they can make it up on volume!! u gotta buy this pig while it’s down!!”. my guess is Cramer.
Has anybody found any other articles that highlight the plunge in 3 mo T-Bill yield and its historical context.
Thanks.
Posted by: Sheeple Investment Co. | Aug 20, 2007 3:43:04 PM
Aug. 20 (Bloomberg) — Yields on U.S. Treasury bills fell the most in two decades on demand for the safest securities amid concern over a widening credit crunch.
Three-month yields dropped the most since the stock market crash of 1987 and more than in the wake of the Sept. 11, 2001, terror attacks in the U.S, as funds shunned assets that may be linked to a weakening mortgage market.
“The market is totally, absolutely, completely in fear mode,” said John Jansen, who sells Treasuries at CastleOak Securities LP in New York. “People are afraid that lots and lots of mortgage paper and mortgage paper derivatives of all sorts is completely opaque and they can’t price it.”
Flight to safety hits Treasury bill yields
By Krishna Guha in Washington and Francesco Guerrera and Saskia Scholtes in New York
Published: August 20 2007 14:52 | Last updated: August 20 2007 22:46
Money market investors staged a dramatic flight to safety on Monday, knocking down yields on short-term US government debt, as top Treasury and Federal Reserve officials made behind-the-scenes efforts to maintain confidence in the credit markets.
SHORT VIEW: T-bills yield plunge has shades of 1987
The yield on the three-month Treasury bill fell 66 basis points to 3.09 per cent after being down 125bp during the day – a greater fall than in the October 1987 crash. The yield on the one-month Treasury bill fell 62bp to 2.33 per cent after being down 175bp.
The frantic scramble to obtain government paper, at almost any price, is a sign of extreme risk aversion and suggested that the Federal Reserve’s cut in the borrowing rate it charges banks from 6.25 per cent to 5.75 per cent – on Friday had yet to stabilise credit markets. This in turn encouraged speculation that the Fed will cut its main monetary tool – the Federal Funds rate.
Separately, people close to the situation said Deutsche Bank had taken advantage of new terms offered by the Fed on Friday by borrowing at the “discount window”. Tony Crescenzi, strategist at Miller Tabak said: ”Either the Fed must again cut the discount rate and make it equal to the 5.25 per cent Fed Funds rate, or it must cut the Fed Funds rate, if liquidity is to increase enough to begin absorbing debt securities currently being shunned by large amounts of investors.”
Analysts said the problems were being driven by shifts in asset allocation by the money market funds, which hold $2,700bn in assets. Funds have been dumping asset-backed commercial paper – which promise cash flows from mortgages and other loans – in response to redemption pressure from investors. At the same time, investors are piling into traditional funds that only buy government debt.
“We had clients asking to be pulled out of money market funds and wanting to get into Treasuries,” said Henley Smith, fixed-income manager at Castleton Partners. “People are buying T-bills because you know exactly what’s in it.”
The resulting upheaval was being felt on both sides of the Atlantic. Data from Dealogic showed companies in Europe failed to refinance more than 80 per cent of asset-backed commercial paper that matured on Monday.
This upheaval has created financing problems at two German banks and if the trend goes on, it could hurt other financial institutions.
Top Treasury and Federal Reserve officials on Monday continued their efforts to restore confidence in the markets. Hank Paulson, US Treasury secretary, and senior Federal Reserve officials have called large institutional investors and banks in the last two days in an attempt to restore confidence.
Hey Barry, can ya put some lipstick on the broken piggy because that way art really will imitate real life? LOL!
And another one bites the dust….
CAPITAL ONE TO CLOSE MORTGAGE UNIT, CUT JOBS
(Reuters) – The U.S. mortgage industry took another battering Monday, as Capital One Financial Corp. announced it will close a lending unit it purchased less than a year ago.
Capital One, best known as a credit card issuer, said it will cut 1,900 jobs and take $860 million in charges as it closes its GreenPoint Mortgage unit, which it acquired last December as part of a $13.2 billion deal for North Fork Bancorp Inc. McLean, Virginia-based Capital One plans to close GreenPoint’s headquarters in Novato, California as well as 31 offices in 19 states, and will cease offering mortgages through brokers.
GreenPoint has specialized in “Alt-A” mortgages, which often go to people who do not qualify for “prime” mortgages or cannot fully document income or assets.
“GreenPoint has run into unforeseen challenges that are beyond its control,” Capital One Chief Executive Richard Fairbank said in a memo to employees.
(Ah, yah, like they can’t find any investors to purchase their mortgage paper)
.