15 replies to this topic

[NAV]

That many subprime mortagages are issued with interest rates in excess of 10% !!!!.

I had no clue. 10% ? Thats a recipe for disaster.

Spoke to former manager/broker for Countrywide, the biggest in this space. Broker said people were nuts taking these loans, had basically no credit and CW basically promoted this attitude. Broker was amazed how uninformed these customers were. 10% meant nothing to them. It could have been 15 or 20 and people would not have known the difference. Rather than the usual 6 or so folks with "normal credit" would get, etc.
The people getting into these loans were absolutely clueless. CLUELESS.

Almost all are above 8%. No need to wait for ARMS to reset here. These people will default, and continue to default for many many more months. Broker said the tip of the iceberg has been barely scratched.

Standards were so relaxed, it is unbelievable. CW will be laying off many more.

Good luck for those who feel this will not get bigger and affect the markets even more. ALT A and prime are going to be affected much more than anticipated. More on that later.

Subprime is largely uncontained.

Umm why do you say these people were clueless? Lets see.. they put ZERO money down, get high interest rate loans, and wait for house prices to appreciate.

Then house prices don't, so they decide to default. They can't pay it off? Bankrupsy. What are they gonna do, toss them in jail? These people had nothing to lose.

Now lets take a look at banks.. they lent these people the money. BUT the banks took that debt and packaged it and sold it to hedge funds.

Now lets look at hedgefunds.. they got their money from RICH people.. who got their $ from selling realestate in the first place.

So everything works out.

Hmmm....Sounds familiar....

In the end, i always wonder who the ultimate sucker is in this game !

Is it the amigo crossing the border, buying a house in california on daily wages ? - who doesn't care anyway. There's a few months of free rent and high living at worst, before the inevitable bancruptcy

Or is it the banker who lent him the money ? - who doesn't care anyway, after collecting his commisions and passing the loan to Fannie/Freddie

Or is it the Fannie/Freddie, who are suckers ? - who don't care anyway, after they package the the loans into MBS and sell it to wall street instituitons

Or are the wall street instituitons the ultimate suckers ? - Nope. They just sell that crap to the baby boomer retirees, pension funds......

Now the baby boomers sell their inflated real estate holdings to amigos in California and move to Portland, Arizona...... Now who's the ultimate sucker ?

http://www.traders-t...?...c=73487&hl=

Edited by NAV, 03 August 2007 - 06:43 AM.

[calmcookie]

Many adults do not UNDERSTAND how interest rates work. I know that's hard to believe, but it's true ... they have no clue. They also sign mortgage papers that they don't understand. And I'm not blaming anyone or criticizing ... just pointing out a fact. MANY adults are far more ignorant than we assume (just try working in social services or the hospital system). People literally do not KNOW any better. C.C.

[skyymaster]

That many subprime mortagages are issued with interest rates in excess of 10% !!!!.

I had no clue. 10% ? Thats a recipe for disaster.

Spoke to former manager/broker for Countrywide, the biggest in this space. Broker said people were nuts taking these loans, had basically no credit and CW basically promoted this attitude. Broker was amazed how uninformed these customers were. 10% meant nothing to them. It could have been 15 or 20 and people would not have known the difference. Rather than the usual 6 or so folks with "normal credit" would get, etc.
The people getting into these loans were absolutely clueless. CLUELESS.

Almost all are above 8%. No need to wait for ARMS to reset here. These people will default, and continue to default for many many more months. Broker said the tip of the iceberg has been barely scratched.

Standards were so relaxed, it is unbelievable. CW will be laying off many more.

Good luck for those who feel this will not get bigger and affect the markets even more. ALT A and prime are going to be affected much more than anticipated. More on that later.

Subprime is largely uncontained.

Umm why do you say these people were clueless? Lets see.. they put ZERO money down, get high interest rate loans, and wait for house prices to appreciate.

Then house prices don't, so they decide to default. They can't pay it off? Bankrupsy. What are they gonna do, toss them in jail? These people had nothing to lose.

Now lets take a look at banks.. they lent these people the money. BUT the banks took that debt and packaged it and sold it to hedge funds.

Now lets look at hedgefunds.. they got their money from RICH people.. who got their $ from selling realestate in the first place.

So everything works out.

Hmmm....Sounds familiar....

In the end, i always wonder who the ultimate sucker is in this game !

Is it the amigo crossing the border, buying a house in california on daily wages ? - who doesn't care anyway. There's a few months of free rent and high living at worst, before the inevitable bancruptcy

Or is it the banker who lent him the money ? - who doesn't care anyway, after collecting his commisions and passing the loan to Fannie/Freddie

Or is it the Fannie/Freddie, who are suckers ? - who don't care anyway, after they package the the loans into MBS and sell it to wall street instituitons

Or are the wall street instituitons the ultimate suckers ? - Nope. They just sell that crap to the baby boomer retirees, pension funds......

Now the baby boomers sell their inflated real estate holdings to amigos in California and move to Portland, Arizona...... Now who's the ultimate sucker ?

http://www.traders-t...?...c=73487&hl=

Ahh! It is that age old question that no one can figure out. Did the chicken or the egg come first?

[nimblebear]

Many adults do not UNDERSTAND how interest rates work. I know that's hard to believe, but it's true ... they have no clue. They also sign mortgage papers that they don't understand.

And I'm not blaming anyone or criticizing ... just pointing out a fact. MANY adults are far more ignorant than we assume (just try working in social services or the hospital system). People literally do not KNOW any better.

C.C.

My point exactly. Market did today what I expected last night. Where are the bottom callers ?

[cafeflorida]

Many adults do not UNDERSTAND how interest rates work. I know that's hard to believe, but it's true ... they have no clue. They also sign mortgage papers that they don't understand.

And I'm not blaming anyone or criticizing ... just pointing out a fact. MANY adults are far more ignorant than we assume (just try working in social services or the hospital system). People literally do not KNOW any better.

C.C.

My point exactly. Market did today what I expected last night. Where are the bottom callers ?

A large wad of these sub primes are scheduled to reset
over the next 1 1/2 years or so.

An important chart that speaks volumes about where
a bottom might possibly lie in this real estate horror show.

[OEXCHAOS]

Yanno, I always worry about a confident call by a lot of folks. Let me play D.A. here for a mo. I'm confident that a lot of inappropriate mortgages were sold to people who didn't understand them. I know that many of these "variable rates" were really nasty teaser rates that folks didn't understand. OK, fine. But... What if a lot of these loans are also in the hands of folks who could afford that rate and could afford to pay their debts in a timely fashion for 3 years. Let's say that their credit scores go up from the high 5's to the high 6's over that time. Also, let's assume that someone at the fed realizes that we might be in more trouble than they thought. The long bond suggests that. What if the Fed starts cutting again or what if the long bond runs up higher than anyone thought because big money is worried about a massive recession? Suddenly, there are some low 30 year rates for some of these folks to roll into. And, maybe, just maybe, those who can't, reset only a tad higher. And, as for a 10% rate? Well, if it's fixed and one can make the payment, then one can make the payment. Most wouldn't take it if they didn't think they could make it. I'd say it's less than assured that these folks are all going to walk on those loans. In fact, I'll bet that most don't and quite possibly many convert them into much more affordable loans. Assuming the Fed doesn't dawdle too long. I'm not saying that we don't have a problem here that's not over. It is going to get worse. BUT, there are a lot of things are GOING to happen if and as it gets worse and those things have bullish implications. Think like an economist. Cripes, I said that LAST summer as we were making the June or July lows! Mark