Hey wait a minute....some of us lost equity on RELO's and moved to higher cost areas so we lost our DP.
I agree there needs to be good faith provided.
So I suggest that there be a history of mort payments calculated on DTI ratio for old home loans. If FTHB then a DP is required. If anything other than Full Doc in other words, SI costs, SA costs, no W2 costs, plus DP.
Fdoc, seasoned HO, VI, VA, great DTI then you qualify for more.
And please fore the love of God stop relying on the damn FICO....some people learned their lessons with credit gotten and spent in college.
And now pay cash when is penelized because "we" dont carry enough documented credit avail.
What the world needs now: A really great chart showing the top 10 middlemen made fattest by their fees -- and how many fees they collected by loan type 10 years ago vs. fees collected by loan type today.
How does one collect information on fees collected?
Leisa, I see your point, except that what did these bondholders think they were buying? Freddie Gold?
What I'm not buying is the argument that a bunch of institutional investors--widely known as a naive bunch with no skills when it comes to reading a prospectus--just closed their eyes and bought senior tranches based on that pretty AAA, and had no idea whatsoever what the collateral backing those bonds was. You buy a pig in a poke and then have the gall to be outraged?
It's the dissonance in the outrage that's getting on my nerves. The meme o' the day is how stupid and greedy and unwary those dumb subprime homebuyers were. Everyone else who drank the Kool Aid gets a pass.
How does one collect information on fees collected?
One reads the analyst reports on the investment banks.
HAHAHAHAHAHA! Just kiddin'!
One would have to slog through all those IB's financial statements and the prospecti for all those security issues and total it all up.
This would take, obviously, a reporter from the Big Paid Media, since it's time-consuming and expensive. It will, therefore, never happen. But it's a great idea.
The cynicism pills must have kicked in extra early today, Tanta. You better go take a long slow drink of Kool Aid and get back to Planet Wall Street, where all is well and the markets only ever go up.
Oh well, thanks Tanta -- yes there's no way in hell the press would do that kind of slogging.
Hail Mary/fat chance thought #2 - could congress compel firms to total it all up and provide fee data? (you'd think some proud soul -- perhaps annual-report compiler -- would have done it anyhoo).
Gyan Sinha, mortgage strategist at Bear Stearns, said: The problem arose when the interest rate cycle began to turn and the fixed costs of the lending business rose. The lenders then started a kind of hail Mary underwriting, hoping that the volumes would keep them afloat when the economics of the business were no longer there.
Alo, I'm pretty sure the data is there somewhere. Seriously. These IBs are publicly traded. Can we believe that no one is paying attention to what part of their income is securitization underwriting fees? On what planet does that make sense? I'd hazard a guess that a Bloomberg reporter could lay hands on Mr. Data here.
But at this point I'm actually less interested in how much they're making off the thing--interesting as that is--than this question of who wrote the rules. I have, actually, in my own fairly recent lifetime, been paid actual income by an actual investment bank to help them write their credit guidelines. I have, actually, had the threat of not getting a paycheck held over my head until I agreed to put Stupid Shit in those guidelines. I have, actually, sat in the meetings and used phrases like "Stupid Shit." At no time was I ever the only one doing that. There weren't as many of us as there were of them, but there were a fair number of us.
They were warned. They did it anyway. Now they are trying to push the blame off onto the originators of the loans, as if those originators could make up underwriting guidelines on behalf of an investment bank.
That'd be bullshit if the underwriting fee total was $15.
The lenders then started a kind of hail Mary underwriting, hoping that the volumes would keep them afloat when the economics of the business were no longer there.
That makes perfect sense, until you step off the spaceship and return to that planet on which IBs are, in actual real fact, in every known sense of the term, "lenders."
They're getting away with "lender = originator." As if originators were using quarters fished out from between the sofa cushions to fund their warehouses.
Tanta, you disbelieve that people were buying bonds based upon the rating. Me, I just don't CARE. All that fine print is there for a reason. It's not like the people rating bonds are noticeably more "independent" and free from influnence than property assessors.
The systemic removal of checks and ballances has been at the root of this bubble's continuance. People have relied on aggregation to manage risk based upon historic* default rates. They have then used their mathematical modeling to justify less actual underwriting, in the name of efficiency. The idea that you could virtually eliminate underwriting and the default rate would stay the same flies in the face of human nature.
It all sounds rather like: "I am SHOCKED to discover that there is fraud going on in this establishment."
"Your quarter of a point, sir"
"Thank You."
I'm a portfolio manager and let me tell you that in the last few years if I did not jump on an extra 10 bps I was seen as a freak... and lost all credibility! Investors have been so thirsty for yield it's quite dispiriting.
I can't tell me how often I've been told by my peers and clients that I've got to be more optimistic.
In the last couple of decades people have been brainwashed into thiking that optimism implies everything turning out fine while, in my book, it means having the psychological fortitude to overcome hardship.
Oh, I hear you, D. You wanna know how many times I've been told that hand-wringing preservation-of-capital-obsessed blue-haired fear-mongering pointy-headed Risk Managers like me never make anybody any money? Why, if I had a quarter for each time I could fund some warehouses.
I am actually fairly optimistic about our ability to assess and project and manage risk. We--speaking broadly here as a culture--are not just smarter than a box of rocks, we have impressive technology, databases, tools of all kinds. If we actually pay attention to what our analyses are telling us, there's no reason, I think, we cannot be optimistic about the results.
But somehow "optimism" became "ignoring the data." Then we get long pointless threads where people want to talk about the weather in Havana, as if the only choices were chutzpah or Castro. In such overheated oversimplified rhetoric, nobody's going to question whether that extra 10 bps was worth the risk.
Pulitzer again, Tanta. Pulitzer. You heard it here first.
Why doesn't some doctoral program student/department take this issue on? Don't you think it would make a fascinating dissertation? If I were getting my Ph.D. in Economics right now, I'd be looking into this...
Or what about a grant funded research study? There's money to study ticks on cows, I'd think someone could find $$ to study the effects of all this on the housing market/general market economy, etc. etc. If you ask me, this is history in the making - the direction this has all gone in the past 20 yrs., and where it will take the free market in the future. The impact on the housing market from here in. All these questions that have been tossed around.
Yeah, it may take time - a couple years of research maybe - but it sure would be a fascinating read. In fact, you'd be the perfect person to do it, too. Ever thought about that?
`So why fish for the risky loans? Why prey on a certain demo?
The riskier mortgages generally command higher broker commissions. Tullis said one subprime mortgage, which typically costs 2 to 3 percentage points more than a standard loan because it goes to borrowers with bad or limited credit, pays him the same as five mortgages for borrowers with good credit.
What I think people are really missing is the MACRO, the real issue.
Everyone (even myself sometimes) forgets that we can not, repeat can not, compare in anyway this current market to any past market. Bubble or no bubble. Because the simple fact is in previous housing down turns there were NEVER loose lending standars nor this smorgesbord of loan types. Rememeber when there were fixed 30 fixed 15 5, 10, 15 yr ARM and FHA and VA. And even VA was the only no money down loan.
Now we opened the Pandoras box to anyone and everyone that walked into a model home and financed them. All demographics, they were told look will get you in the house, in 2 yrs sell because when you move in you have instant equity. Then you can put hard cash down on another house. Use this 2/28 SISA as a stepping stone.
I need a PhD in Econ like I need a hole in my head. I cheerfully yield the floor to my intellectual betters. I'm just here to bug the shit out of them until they ask me to get out of their way.
Actually, you can bet a decent chunk of change that such research exists. You just won't read about it on Bloomberg. Too tedious, can't be summarized in a sentence, no catchy phrases like "Hail Mary." Ask the three people who actually read the Greenspan-Kennedy paper before expressing an opinion about MEW.
Tullis said one subprime mortgage. . . pays him the same
Funny how that works. Mortgage loans pay brokers. What do investors do? Just pick up abandoned mortgage loans on the street?
Great, the bondholders and investment banks deserve their pain, too, which they're getting. It would still be dumb to make them legally liable for mortgage fraud, though.
And Tanta, the reason the focus has been on the stupidity of the subprime buyers is because that's where the talk of the bailout has been. I don't think anybody's talking about bailing out the holders of subprime paper.
And Tanta, the reason the focus has been on the stupidity of the subprime buyers is because that's where the talk of the bailout has been. I don't think anybody's talking about bailing out the holders of subprime paper.
But that's the problem. How do you bail out the one without bailing out the other? If I were a subprime bondholder, and I saw the state of Ohio--just as an example--about to take a problem loan out of my pool (which is a payoff of principal to me, as well as removal of a delinquent loan) by refinancing a subprime borrower into a new loan, how would I be left holding the bag?
But what if Ohio offered to take the problem loan at an x% discount?
Seems to me there's going to be some value of x which would require the bondholder(s) make a very careful yes/no calculation.
Now if I have understood your Ubernerd securitisation posts correctly, it may well be impossible to balance the win/loss to get agreement between the various tranche-holders for anything less than 100% payout. Does anyone have an overriding call here?
Tanta, I'm talking about the massive loss that holders of subprime paper already took when it dove in value in February. I have heard nary a peep about bailing them out for those losses, which to me is entirely approporiate. They should take those losses.
It's still stupid to make bondholders and investment banks liable for mortgage fraud. That's just a giveaway by Dems to their trial lawyer contituency.
Outsider suggested: "...I'd think someone could find $$ to study the effects of all this on the housing market/general market economy, etc. etc. If you ask me, this is history in the making - the direction this has all gone in the past 20 yrs., and where it will take the free market in the future. The impact on the housing market from here in. All these questions that have been tossed around..."
I've already done it, and I wasn't the first.Nothing new under the sun, and it's not different this time.
I'm pretty sure Roubini will have a few monster research papers out before all of this is said and done. Watch what comes out of his graduate students and collaborators at NYU.
Lance, to go back to your comment way back in the thread, why should there be different rules for homeowners and FTHBs? Does owning a house in Podunk automatically entitle you to buy a house in Manhattan?
I've thought about the right mix of policies to bring about a stable, healthy market that is fraud-resistant and also encourages homeownership. Anybody have any other ideas?
1. Bring back the 20% DP in full. This would shut down a large pa
2. Create a tax-advantaged way to save for that Down Payment, similar to a 401(k) or 529 Plan.
3. Eliminate the mortgage interest deduction altogether. (That means HELOCs too. The taxpayer does not need to be subsidizing boats and plasma screen TVs).
But that's the problem. How do you bail out the one without bailing out the other? Bankrupcy protection. Bankrupcy IS the helping hand that we should think of giving those who have become irreperably insolvent. That is what it is for. I see nothing wrong with branding the stupid and profligate with a scarlet "B" on their credit reports. I see nothing wrong with punishing those dumb enough to lend them money with loss of principal.
Are you guys suggesting that BK lets them keep the house?
I'm seeing loans where the housing payment is 40-50% of GMI. You can discharge all the unsecured debt these folks have and then some, and you still have a house payment they can't carry.
Not that I don't think the BK Deform Bill shouldn't crawl back under the rock it crawled out from, mind you. But insofar as people are talking "bailout," they can't mean BK. Right?
Tanta, I'm talking about the massive loss that holders of subprime paper already took when it dove in value in February. I have heard nary a peep about bailing them out for those losses, which to me is entirely approporiate. They should take those losses.
What actual losses, by the way, did any bondholder take in February? Were there actually a bunch of real impairments to these things that I missed?
A bunch of them did get downgraded, which they surely needed. That forced some holders to bail out, because they need the higher rating. Certainly a bunch of CDO managers got some problems with asset allocation on those BBB tranches.
But who took actual write-downs? That hasn't even started yet.
Honestly, I'm having a hard time distinguishing your argument from "bust the users and let the dealers go."
Glen said: "...I've thought about the right mix of policies to bring about a stable, healthy market that is fraud-resistant and also encourages homeownership. Anybody have any other ideas?
Bring back the 20% DP in full...
Eliminate the mortgage interest deduction altogether. (That means HELOCs too. The taxpayer does not need to be subsidizing boats and plasma screen TVs)..."
As to No. 1, absolutely not, it shuts-out too many first-time homebuyers. Lower down-payments are okay, but the buyers must be properly vetted for sufficient steady income and willingness to stay current. As an example, the first couple of homes I owned were bought with low down-payments, but I never had a late payment, foreclosure or any other trouble along those lines. Young people of modest means and lesser credit grow into people of more-substantial means and better credit, as the age and their careers develop.
As to No. 2, it's virtually impossible politically, and maybe financially impossible, too. It would be like removing the tax-free status of municipal bonds, it would cause massive turmoil. Also, to my knowledge the main use of HELOCs is home-improvement, not consumer goods.
Tanta advocates a return to common-sense mortgage qualification, and I think that works just fine. No need for Draconian standards, IMO.
ozajh, I'm actually working on a new UberPost on that very issue, part III of the MBS thing.
Short version? If the "take out" refinance doesn't pay the MBS in full, including any ppy penalty they're legally due, then it's hard to see why the MBS servicer wouldn't just modify in at least some cases.
Too many modifications, and the lower tranches are threatened with downgrade because of decreasing credit support (OC or excess spread or both). Too few modifications, and the prepayments hose some IO strip good and righteous.
The only thing I can predict with certainty, right now, is that there will be no "conspiracy." There are too many competing interests for a conspiracy to hold together.
Lama and I agree. Trying to allow them to stay in houses that they can't afford is unsupportable. I'm just not convinced that having them as permanant debtors who have lost the house and STILL owe the mortgage company 100K is realy a public good. Unfortunately, the real problem isn't the 2003 bankrupcy law. The REAL problem is that so many of these people are insolvent because they used liar loans to commit fraud for housing. It's my limited understanding that debts gotten through fraud are not dischargable through bankrupcy. And fraud of this type is PERVASIVE. I predict that there will soon be a little cottage industry of law firms providing proof of fraud for creditors. It's one thing to provide a level of forgiveness to the unlucky and stupid. How much forgiveness do we wish to provide for the lying and dishonest?
I predict that there will soon be a little cottage industry of law firms providing proof of fraud for creditors.
That could backfire if what those law firms find are too many of those cases where the borrower signed an application with no income numbers on it, and then the income was added later by the broker.
The broker might not want to have to declare BK either, so someone might have an interest in finding the ones where it was obvious to the funding lender that the "signed app" in the file doesn't match the one submitted by the borrower.
Once you know, you know, you know. I am not so sure that every creditor is all enthusiastic about having all the facts established by an officer of the court.
Sebastian, what about #2 to mitigate those concerns? Are first time homebuyers not shut out right now in most metropolitan areas of the US?
I'm not attached to the 20% number. Maybe the correct number is 10% or 15%. It certainly isn't 0% or 3%. Saying we'll leave it to common sense is what got us here in the first place. I'm sure that any mortgage broker will tell you that they use "common sense" in their underwriting. We can see what that has wrought.
The Mortgage interest deduction is horribly regressive. If it went away, prices would adjust lower. People would get over it. See Lowenstein's article from the NY Times. Google: "Tax Break: Who Needs the Mortgage-Interest Deduction?"
Jim,
I am trying to figure out a way to earn some money in the inevitable forensic audit work that will result from the lawsuits. Any ideas anyone?
BTW, I admit that I no longer remember the changes in bankruptcy. I do remember that they were a lot more strict in discharging debt. Banks lobbied for the change so they could entice more consumers into more debt without banks assuming the risk of defaults.
Glen,
Exactly. First time homebuyers are not shut out from buying. They are shut out from keeping. Once the ARM resets, the honeymoon is over...sometimes literally.
Glen said: "Sebastian, what about #2 to mitigate those concerns? Are first time homebuyers not shut out right now in most metropolitan areas of the US?..."
Frankly, I don't know that they are. Certainly subprime borrowers are being shut-out (which is as it should be), but the legitimate first-time homebuyers are getting painted with the same brush as the fraudulent/criminally ignorant/victims-of-disreputable-lenders homebuyers.
A tax-advantaged savings program is okay with me. If someone is conscientious enough to set aside some money, IMO they'll be responsible about making their mortgage payments on time, too, whether they have a big downpayment or not.
Jim: "Unfortunately, the real problem isn't the 2003 bankrupcy law. The REAL problem is that so many of these people are insolvent because they used liar loans to commit fraud for housing."
Don't discount the fact that lenders will lend you 40% of your monthly income, without using any types of dishonest income reporting, which in my books is pretty near impossible to pay back unless you don't need to eat, drive, and never need a medical care provider. It's not just liar loans that cause these troubles. It's that lenders somehow think you really don't need to spend as much on non-housing expenditures as you think you do. Eating is way overrated.
Eliminating the mortgage interest tax deduction - why do I keep hearing that it 'isn't possible' and will 'cause too much turmoil' or 'house prices will collapse'? Can I have some facts to back that up please?
I'd suggest people take a look at MIRAS (Mortgage Interest Relief at Source) in the UK. It was phased out over a period of a few years in the late 1990s, and was gone by April 2000. I think you might find housing prices boomed without it anyway, and the world didn't collapse when it was withdrawn.
So, a real world concrete example of a very similar economy to the US, with a free market in houses, removing a mortgage interest relief programme over a few years and there was no catastrophe, in fact things still boomed. Anyone care to trump it unsubstantiated opinions or anecdote?
Those who which to read the Inland Revenue info on MIRAS can find it here
Outsider, i didn't mean to imply that liar loans were the cause of the real estate bubble. They were one of many factors. When I said that they were the problem, I meant that they are they are the problem with letting FBs pass through bankrupcy into solvency.
How do we determine who has committed fraud? If we assume, as seems likely, that large numbers of FBs committed fraud for housing in the last few years, how do we punish them without creating a debtor class who have no chance of ever becomming solvent?
You know, the business of leverage can be infectious: If the BSD's can use it then why not the 'little guy?' It used to said that borrowing 10 million bucks was easier (if you were the 'right' person) than borrowing 10 thousand; easier to blow that 10 million and not go to jail too.
Wasn't it one of the Seagram's heirs who said, turning $100 into $105 takes work, turning $100 million into $105 million is inevitable?
Perhaps credit is trumping productivity these days. Need a higher stock price? Why bother improving the business, just repurchase more shares.
Eventually the lesson is learned: Visit AppOrama - Maximize your Credit Card Applications -- read the 'executive summary' and some of the posts -- don't know about you but I felt the chill of a different world approaching fast.
Now I think I need to go make myself a cup of tea.
In the last couple of decades people have been brainwashed into thiking that optimism implies everything turning out fine while, in my book, it means having the psychological fortitude to overcome hardship.
Amen and Hallelujah!! Tell the Bulls around here about that for us okay...
BTW if I had one thing to add it would be that hardship is a certainty, your success is optional - if you don't effectively & rigorously plan for the hardship your failure is certain.
Everyone on every part of the transaction knew exactly what stated/stated meant. It was a straight out bet on appreciation. As long as your market was gaining in double digits every participant in the transaction made money, and in the absense of a victim it is difficult to cry a lot of tears here.
It is pretty ironic that when the shakeout came the immediate victims were not the borrowers who were tricked/lied their way into loans (both narratives are active) or the investors who greedily/stupidly (again both stories running) bought the securities but instead the people who were at no particular risk in any given transaction, the sub-prime lenders. Bulletproof on any individual loan and yet as an industry shockingly exposed to perception changes on appreciation.
People are trying to sell this narrative in broader terms than maybe is justified. To me it just shows that activities that make perfect sense at one point on a curve can turn ruinous at the bend points.
The first chapter of your Real Estate Agent exam textbook explains that housing is cyclical. The bubble and the sub-prime meltdown are the simple result of applying linear thinking to a cyclical market. Like just about everything in life obvious in retrospect.
t is pretty ironic that when the shakeout came the immediate victims were not the borrowers who were tricked/lied their way into loans (both narratives are active) or the investors who greedily/stupidly (again both stories running) bought the securities but instead the people who were at no particular risk in any given transaction, the sub-prime lenders. Bulletproof on any individual loan and yet as an industry shockingly exposed to perception changes on appreciation.
It may be ironic but it should have been anticipated... the only asset buffer most of these brokers & sub-prime lenders had was their fee based revenue stream... once that went away (or fell below cost to operate) it was only a matter of time before they too evaporated like morning mist in a hot dry summer.
I'm in the same position as an agent in the mfg'ing supply chain... no real assets but my wits & current backlog. It is also mist but at least I understand this & 'plan' accordingly... thank God there is Ramen.
My guess is 20 years ago s/p lenders did the same, knew how to get real small real fast & didn't need blogs to tell them when & how to do it... they all got drunk on Booya.
It will be good biz again someday once the survivors are all sufficiently 'sadder but wiser'.
Draconian to a Libertarian is one word more than nothing said at all. Most of us would prefer that operational regs be slightly more comprehensive than the null set...
once that went away (or fell below cost to operate) it was only a matter of time before they too evaporated like morning mist in a hot dry summer. ...along with their warranties and ability to repurchase the loans. Guarantees are only as good as the solvency of the persom who makes them.
The Mortgage interest deduction is horribly regressive. If it went away, prices would adjust lower. People would get over it. See Lowenstein's article from the NY Times.
That and Clinton's RE Capital Gains Exemption Law... enacted in the mid-90s.
Treat all income classes the same, all personal expenditure classes the same... and that would do a lot to eliminate all this 'monkey business'.
Why doesn't some doctoral program student/department take this issue on? Don't you think it would make a fascinating dissertation? If I were getting my Ph.D. in Economics right now, I'd be looking into this...
It will be but in 20-30 years... it will take that much time for the facts to be determined, recorded & analyzed.
PhD theses require a very careful rigor & process. Current problems & issues like this are too messy & open-ended for that kind of thing... you want your dissertation project to be more closed-ended or you'll still be chasing your PhD as you retire.
HOWEVER their full tenured advisers could be taking these kinds of issues on... directing their PhD candidates & post-doc minions to do the actual heavy lifting (i.e. research) for 'cheap'. Even UGRA's can be useful (if directed & properly coached).
I mean these folks have no life, right?
That is really how the thing is supposed to work... trouble is it requires funding & much of the funding is now private (from the very sources that would complain if the sausage machine were really exposed).
So it will likely never happen until 'statutes of limitation' have expired & it all becomes 'history'.
I consider myself a small "l" libertarian, and and think that the role of government in the markets should be the minimal amount to keep the markets honest, and not one bit more. I've said it before here, but regulations need not be elaborate, just smartly written and consistently enforced.
I don't see how requiring a significant DP is Draconian or interventionist. It actually lets the market mechanism work effectively, and may act as a deterrent to speculation. Likely, it would shift the demand curve leftwards at equilibrium for second, third, and vacation homes, while doing little to the demand curve for primary residences.
Borrowers would have some skin in the game that isn't of the "instant equity" variety of the past few years. Policies of the past 2 decades (along with other external factors) have lead to an epic malinvestment in a non-productive asset class.
as usual great stuff here thank you again tanta. good idea by outsider , a history on this stuff would (will ) make for super reading if only to inform people what was (is) really going on :its the underwriting and their rules or lack of. i tip my hat to all here sharp sharp.
I think that it was Tanta who wrote awhile ago about the importance of having some flexibility in underwriting. No matter where you draw the line, there will always be some pretty good fruit JUST on the other side of it. I think that this has to be ballanced by limiting not just the degree of varience accepted, but the amount. If you say that no more than 3 percent (or some other number) of loans can be a variance, you may be safe.
careful not to lump bond analysts and strategists with originators with whom they are thrice removed. if a small mom and pop originator is taking liberties with its guidelines (ie stated doc), then sells the loan it claims is legit to a wall st bank w/ a conduit shelf (banking side of the firm), it would be virtually impossible for a research person behind a "chinese wall" to know this until the delinquency data hits the monthly performance reports, months later.
There is a simple way to combat fraud:
Return the 20% DP.
100% LTV (or in their new name 95% LTV and seller cash-back) are an open door to fraud.
Tanta, these loans were a fee generation machine--the proverbial golden goose. Th bondholders are the ones left with the rotten egg, though.
Hey wait a minute....some of us lost equity on RELO's and moved to higher cost areas so we lost our DP.
I agree there needs to be good faith provided.
So I suggest that there be a history of mort payments calculated on DTI ratio for old home loans. If FTHB then a DP is required. If anything other than Full Doc in other words, SI costs, SA costs, no W2 costs, plus DP.
Fdoc, seasoned HO, VI, VA, great DTI then you qualify for more.
And please fore the love of God stop relying on the damn FICO....some people learned their lessons with credit gotten and spent in college.
And now pay cash when is penelized because "we" dont carry enough documented credit avail.
What the world needs now: A really great chart showing the top 10 middlemen made fattest by their fees -- and how many fees they collected by loan type 10 years ago vs. fees collected by loan type today.
How does one collect information on fees collected?
Leisa, I see your point, except that what did these bondholders think they were buying? Freddie Gold?
What I'm not buying is the argument that a bunch of institutional investors--widely known as a naive bunch with no skills when it comes to reading a prospectus--just closed their eyes and bought senior tranches based on that pretty AAA, and had no idea whatsoever what the collateral backing those bonds was. You buy a pig in a poke and then have the gall to be outraged?
It's the dissonance in the outrage that's getting on my nerves. The meme o' the day is how stupid and greedy and unwary those dumb subprime homebuyers were. Everyone else who drank the Kool Aid gets a pass.
I don't think so.
How does one collect information on fees collected?
One reads the analyst reports on the investment banks.
HAHAHAHAHAHA! Just kiddin'!
One would have to slog through all those IB's financial statements and the prospecti for all those security issues and total it all up.
This would take, obviously, a reporter from the Big Paid Media, since it's time-consuming and expensive. It will, therefore, never happen. But it's a great idea.
The cynicism pills must have kicked in extra early today, Tanta. You better go take a long slow drink of Kool Aid and get back to Planet Wall Street, where all is well and the markets only ever go up.
Oh well, thanks Tanta -- yes there's no way in hell the press would do that kind of slogging.
Hail Mary/fat chance thought #2 - could congress compel firms to total it all up and provide fee data? (you'd think some proud soul -- perhaps annual-report compiler -- would have done it anyhoo).
Clip Syndicate
Hail Mary underwriting:
Bloomberg seems to have changed the meaning of the phrase?
FT.com / In depth - Subprime woes benefit some loan buyers
Gyan Sinha, mortgage strategist at Bear Stearns, said: The problem arose when the interest rate cycle began to turn and the fixed costs of the lending business rose. The lenders then started a kind of hail Mary underwriting, hoping that the volumes would keep them afloat when the economics of the business were no longer there.
Alo, I'm pretty sure the data is there somewhere. Seriously. These IBs are publicly traded. Can we believe that no one is paying attention to what part of their income is securitization underwriting fees? On what planet does that make sense? I'd hazard a guess that a Bloomberg reporter could lay hands on Mr. Data here.
But at this point I'm actually less interested in how much they're making off the thing--interesting as that is--than this question of who wrote the rules. I have, actually, in my own fairly recent lifetime, been paid actual income by an actual investment bank to help them write their credit guidelines. I have, actually, had the threat of not getting a paycheck held over my head until I agreed to put Stupid Shit in those guidelines. I have, actually, sat in the meetings and used phrases like "Stupid Shit." At no time was I ever the only one doing that. There weren't as many of us as there were of them, but there were a fair number of us.
They were warned. They did it anyway. Now they are trying to push the blame off onto the originators of the loans, as if those originators could make up underwriting guidelines on behalf of an investment bank.
That'd be bullshit if the underwriting fee total was $15.
The lenders then started a kind of hail Mary underwriting, hoping that the volumes would keep them afloat when the economics of the business were no longer there.
That makes perfect sense, until you step off the spaceship and return to that planet on which IBs are, in actual real fact, in every known sense of the term, "lenders."
They're getting away with "lender = originator." As if originators were using quarters fished out from between the sofa cushions to fund their warehouses.
Tanta, you disbelieve that people were buying bonds based upon the rating. Me, I just don't CARE. All that fine print is there for a reason. It's not like the people rating bonds are noticeably more "independent" and free from influnence than property assessors.
The systemic removal of checks and ballances has been at the root of this bubble's continuance. People have relied on aggregation to manage risk based upon historic* default rates. They have then used their mathematical modeling to justify less actual underwriting, in the name of efficiency. The idea that you could virtually eliminate underwriting and the default rate would stay the same flies in the face of human nature.
It all sounds rather like: "I am SHOCKED to discover that there is fraud going on in this establishment."
"Your quarter of a point, sir"
"Thank You."
*sometimes a very short history here.
I'm a portfolio manager and let me tell you that in the last few years if I did not jump on an extra 10 bps I was seen as a freak... and lost all credibility! Investors have been so thirsty for yield it's quite dispiriting.
I can't tell me how often I've been told by my peers and clients that I've got to be more optimistic.
In the last couple of decades people have been brainwashed into thiking that optimism implies everything turning out fine while, in my book, it means having the psychological fortitude to overcome hardship.
Oh, I do believe they were buying bonds just based on the rating. That and the sandwiches served at the dog and pony show.
I just have no intention of feeling sorry for them.
Oh, I hear you, D. You wanna know how many times I've been told that hand-wringing preservation-of-capital-obsessed blue-haired fear-mongering pointy-headed Risk Managers like me never make anybody any money? Why, if I had a quarter for each time I could fund some warehouses.
I am actually fairly optimistic about our ability to assess and project and manage risk. We--speaking broadly here as a culture--are not just smarter than a box of rocks, we have impressive technology, databases, tools of all kinds. If we actually pay attention to what our analyses are telling us, there's no reason, I think, we cannot be optimistic about the results.
But somehow "optimism" became "ignoring the data." Then we get long pointless threads where people want to talk about the weather in Havana, as if the only choices were chutzpah or Castro. In such overheated oversimplified rhetoric, nobody's going to question whether that extra 10 bps was worth the risk.
You are in rare form today!
(And it is nice to see the term 'git-go' used without being gentrified to 'get-go'!)
Alo,
here is a link to the top originators as well as subprime orginators:
404 Page Not Found Error
Also,
If you have some quid to spend..
MortgageStats
Pulitzer again, Tanta. Pulitzer. You heard it here first.
Why doesn't some doctoral program student/department take this issue on? Don't you think it would make a fascinating dissertation? If I were getting my Ph.D. in Economics right now, I'd be looking into this...
Or what about a grant funded research study? There's money to study ticks on cows, I'd think someone could find $$ to study the effects of all this on the housing market/general market economy, etc. etc. If you ask me, this is history in the making - the direction this has all gone in the past 20 yrs., and where it will take the free market in the future. The impact on the housing market from here in. All these questions that have been tossed around.
Yeah, it may take time - a couple years of research maybe - but it sure would be a fascinating read. In fact, you'd be the perfect person to do it, too. Ever thought about that?
`So why fish for the risky loans? Why prey on a certain demo?
The riskier mortgages generally command higher broker commissions. Tullis said one subprime mortgage, which typically costs 2 to 3 percentage points more than a standard loan because it goes to borrowers with bad or limited credit, pays him the same as five mortgages for borrowers with good credit.
Tanta and Outsider,
What I think people are really missing is the MACRO, the real issue.
Everyone (even myself sometimes) forgets that we can not, repeat can not, compare in anyway this current market to any past market. Bubble or no bubble. Because the simple fact is in previous housing down turns there were NEVER loose lending standars nor this smorgesbord of loan types. Rememeber when there were fixed 30 fixed 15 5, 10, 15 yr ARM and FHA and VA. And even VA was the only no money down loan.
Now we opened the Pandoras box to anyone and everyone that walked into a model home and financed them. All demographics, they were told look will get you in the house, in 2 yrs sell because when you move in you have instant equity. Then you can put hard cash down on another house. Use this 2/28 SISA as a stepping stone.
Ever thought about that?
I need a PhD in Econ like I need a hole in my head. I cheerfully yield the floor to my intellectual betters. I'm just here to bug the shit out of them until they ask me to get out of their way.
Actually, you can bet a decent chunk of change that such research exists. You just won't read about it on Bloomberg. Too tedious, can't be summarized in a sentence, no catchy phrases like "Hail Mary." Ask the three people who actually read the Greenspan-Kennedy paper before expressing an opinion about MEW.
Tullis said one subprime mortgage. . . pays him the same
Funny how that works. Mortgage loans pay brokers. What do investors do? Just pick up abandoned mortgage loans on the street?
Claude Raines in Casablaca;
Captain Renault: I'm shocked, shocked to find that gambling is going on in here! ...
and is then handed his winnings.
http://bp1.blogger.com/_SfxDExxUukY/Ri4tXeWgiOI/AAAAAAAAADE/BJ4tiZsZJGw/s1600-h/noaaweatherfeb2007.JPG
Good charts showing Feb weather by state!
hat tip to David
Great, the bondholders and investment banks deserve their pain, too, which they're getting. It would still be dumb to make them legally liable for mortgage fraud, though.
And Tanta, the reason the focus has been on the stupidity of the subprime buyers is because that's where the talk of the bailout has been. I don't think anybody's talking about bailing out the holders of subprime paper.
And Tanta, the reason the focus has been on the stupidity of the subprime buyers is because that's where the talk of the bailout has been. I don't think anybody's talking about bailing out the holders of subprime paper.
But that's the problem. How do you bail out the one without bailing out the other? If I were a subprime bondholder, and I saw the state of Ohio--just as an example--about to take a problem loan out of my pool (which is a payoff of principal to me, as well as removal of a delinquent loan) by refinancing a subprime borrower into a new loan, how would I be left holding the bag?
Tanta,
But what if Ohio offered to take the problem loan at an x% discount?
Seems to me there's going to be some value of x which would require the bondholder(s) make a very careful yes/no calculation.
Now if I have understood your Ubernerd securitisation posts correctly, it may well be impossible to balance the win/loss to get agreement between the various tranche-holders for anything less than 100% payout. Does anyone have an overriding call here?
Tanta, I'm talking about the massive loss that holders of subprime paper already took when it dove in value in February. I have heard nary a peep about bailing them out for those losses, which to me is entirely approporiate. They should take those losses.
It's still stupid to make bondholders and investment banks liable for mortgage fraud. That's just a giveaway by Dems to their trial lawyer contituency.
Outsider suggested: "...I'd think someone could find $$ to study the effects of all this on the housing market/general market economy, etc. etc. If you ask me, this is history in the making - the direction this has all gone in the past 20 yrs., and where it will take the free market in the future. The impact on the housing market from here in. All these questions that have been tossed around..."
I've already done it, and I wasn't the first.
Nothing new under the sun, and it's not different this time.
Sebastia
Tanta,
How do you bail out one without bailing out the other?
Return bankruptcy laws to the pre-2003 guidelines. Or maybe I'm missing something?
I'm pretty sure Roubini will have a few monster research papers out before all of this is said and done. Watch what comes out of his graduate students and collaborators at NYU.
Lance, to go back to your comment way back in the thread, why should there be different rules for homeowners and FTHBs? Does owning a house in Podunk automatically entitle you to buy a house in Manhattan?
I've thought about the right mix of policies to bring about a stable, healthy market that is fraud-resistant and also encourages homeownership. Anybody have any other ideas?
1. Bring back the 20% DP in full. This would shut down a large pa
2. Create a tax-advantaged way to save for that Down Payment, similar to a 401(k) or 529 Plan.
3. Eliminate the mortgage interest deduction altogether. (That means HELOCs too. The taxpayer does not need to be subsidizing boats and plasma screen TVs).
But that's the problem. How do you bail out the one without bailing out the other? Bankrupcy protection. Bankrupcy IS the helping hand that we should think of giving those who have become irreperably insolvent. That is what it is for. I see nothing wrong with branding the stupid and profligate with a scarlet "B" on their credit reports. I see nothing wrong with punishing those dumb enough to lend them money with loss of principal.
JINX! Lama is too fast.
... and Senator Schumer and the Banking Committe want us taxpayers to pay for a bailout? Who's the bigger crook?
Are you guys suggesting that BK lets them keep the house?
I'm seeing loans where the housing payment is 40-50% of GMI. You can discharge all the unsecured debt these folks have and then some, and you still have a house payment they can't carry.
Not that I don't think the BK Deform Bill shouldn't crawl back under the rock it crawled out from, mind you. But insofar as people are talking "bailout," they can't mean BK. Right?
Tanta, I'm talking about the massive loss that holders of subprime paper already took when it dove in value in February. I have heard nary a peep about bailing them out for those losses, which to me is entirely approporiate. They should take those losses.
What actual losses, by the way, did any bondholder take in February? Were there actually a bunch of real impairments to these things that I missed?
A bunch of them did get downgraded, which they surely needed. That forced some holders to bail out, because they need the higher rating. Certainly a bunch of CDO managers got some problems with asset allocation on those BBB tranches.
But who took actual write-downs? That hasn't even started yet.
Honestly, I'm having a hard time distinguishing your argument from "bust the users and let the dealers go."
Glen said: "...I've thought about the right mix of policies to bring about a stable, healthy market that is fraud-resistant and also encourages homeownership. Anybody have any other ideas?
As to No. 1, absolutely not, it shuts-out too many first-time homebuyers. Lower down-payments are okay, but the buyers must be properly vetted for sufficient steady income and willingness to stay current. As an example, the first couple of homes I owned were bought with low down-payments, but I never had a late payment, foreclosure or any other trouble along those lines. Young people of modest means and lesser credit grow into people of more-substantial means and better credit, as the age and their careers develop.
As to No. 2, it's virtually impossible politically, and maybe financially impossible, too. It would be like removing the tax-free status of municipal bonds, it would cause massive turmoil. Also, to my knowledge the main use of HELOCs is home-improvement, not consumer goods.
Tanta advocates a return to common-sense mortgage qualification, and I think that works just fine. No need for Draconian standards, IMO.
Sebastia
Sorry, "as to No. 3", not "as to No. 2".
S.
Tanta,
I suggest they lose the house and the debt. Bankruptcy is not a panecea, but will give the opportunity of a new start (after some pain).
ozajh, I'm actually working on a new UberPost on that very issue, part III of the MBS thing.
Short version? If the "take out" refinance doesn't pay the MBS in full, including any ppy penalty they're legally due, then it's hard to see why the MBS servicer wouldn't just modify in at least some cases.
Too many modifications, and the lower tranches are threatened with downgrade because of decreasing credit support (OC or excess spread or both). Too few modifications, and the prepayments hose some IO strip good and righteous.
The only thing I can predict with certainty, right now, is that there will be no "conspiracy." There are too many competing interests for a conspiracy to hold together.
Lama and I agree. Trying to allow them to stay in houses that they can't afford is unsupportable. I'm just not convinced that having them as permanant debtors who have lost the house and STILL owe the mortgage company 100K is realy a public good. Unfortunately, the real problem isn't the 2003 bankrupcy law. The REAL problem is that so many of these people are insolvent because they used liar loans to commit fraud for housing. It's my limited understanding that debts gotten through fraud are not dischargable through bankrupcy. And fraud of this type is PERVASIVE. I predict that there will soon be a little cottage industry of law firms providing proof of fraud for creditors. It's one thing to provide a level of forgiveness to the unlucky and stupid. How much forgiveness do we wish to provide for the lying and dishonest?
I predict that there will soon be a little cottage industry of law firms providing proof of fraud for creditors.
That could backfire if what those law firms find are too many of those cases where the borrower signed an application with no income numbers on it, and then the income was added later by the broker.
The broker might not want to have to declare BK either, so someone might have an interest in finding the ones where it was obvious to the funding lender that the "signed app" in the file doesn't match the one submitted by the borrower.
Once you know, you know, you know. I am not so sure that every creditor is all enthusiastic about having all the facts established by an officer of the court.
Sebastian, what about #2 to mitigate those concerns? Are first time homebuyers not shut out right now in most metropolitan areas of the US?
I'm not attached to the 20% number. Maybe the correct number is 10% or 15%. It certainly isn't 0% or 3%. Saying we'll leave it to common sense is what got us here in the first place. I'm sure that any mortgage broker will tell you that they use "common sense" in their underwriting. We can see what that has wrought.
The Mortgage interest deduction is horribly regressive. If it went away, prices would adjust lower. People would get over it. See Lowenstein's article from the NY Times. Google: "Tax Break: Who Needs the Mortgage-Interest Deduction?"
Jim,
I am trying to figure out a way to earn some money in the inevitable forensic audit work that will result from the lawsuits. Any ideas anyone?
BTW, I admit that I no longer remember the changes in bankruptcy. I do remember that they were a lot more strict in discharging debt. Banks lobbied for the change so they could entice more consumers into more debt without banks assuming the risk of defaults.
Glen,
Exactly. First time homebuyers are not shut out from buying. They are shut out from keeping. Once the ARM resets, the honeymoon is over...sometimes literally.
I vote for more income.
Here is an appraiser who is trying to expose the fraud:
Bakersfield Bubble: Appraiser: local fraud is rampant
Glen said: "Sebastian, what about #2 to mitigate those concerns? Are first time homebuyers not shut out right now in most metropolitan areas of the US?..."
Frankly, I don't know that they are. Certainly subprime borrowers are being shut-out (which is as it should be), but the legitimate first-time homebuyers are getting painted with the same brush as the fraudulent/criminally ignorant/victims-of-disreputable-lenders homebuyers.
A tax-advantaged savings program is okay with me. If someone is conscientious enough to set aside some money, IMO they'll be responsible about making their mortgage payments on time, too, whether they have a big downpayment or not.
Sebastia
Jim: "Unfortunately, the real problem isn't the 2003 bankrupcy law. The REAL problem is that so many of these people are insolvent because they used liar loans to commit fraud for housing."
Don't discount the fact that lenders will lend you 40% of your monthly income, without using any types of dishonest income reporting, which in my books is pretty near impossible to pay back unless you don't need to eat, drive, and never need a medical care provider. It's not just liar loans that cause these troubles. It's that lenders somehow think you really don't need to spend as much on non-housing expenditures as you think you do. Eating is way overrated.
Eliminating the mortgage interest tax deduction - why do I keep hearing that it 'isn't possible' and will 'cause too much turmoil' or 'house prices will collapse'? Can I have some facts to back that up please?
I'd suggest people take a look at MIRAS (Mortgage Interest Relief at Source) in the UK. It was phased out over a period of a few years in the late 1990s, and was gone by April 2000. I think you might find housing prices boomed without it anyway, and the world didn't collapse when it was withdrawn.
So, a real world concrete example of a very similar economy to the US, with a free market in houses, removing a mortgage interest relief programme over a few years and there was no catastrophe, in fact things still boomed. Anyone care to trump it unsubstantiated opinions or anecdote?
Those who which to read the Inland Revenue info on MIRAS can find it here
HM Revenue & Customs: Error page could not be found
Outsider, i didn't mean to imply that liar loans were the cause of the real estate bubble. They were one of many factors. When I said that they were the problem, I meant that they are they are the problem with letting FBs pass through bankrupcy into solvency.
How do we determine who has committed fraud? If we assume, as seems likely, that large numbers of FBs committed fraud for housing in the last few years, how do we punish them without creating a debtor class who have no chance of ever becomming solvent?
You know, the business of leverage can be infectious: If the BSD's can use it then why not the 'little guy?' It used to said that borrowing 10 million bucks was easier (if you were the 'right' person) than borrowing 10 thousand; easier to blow that 10 million and not go to jail too.
Wasn't it one of the Seagram's heirs who said, turning $100 into $105 takes work, turning $100 million into $105 million is inevitable?
Perhaps credit is trumping productivity these days. Need a higher stock price? Why bother improving the business, just repurchase more shares.
Eventually the lesson is learned: Visit AppOrama - Maximize your Credit Card Applications -- read the 'executive summary' and some of the posts -- don't know about you but I felt the chill of a different world approaching fast.
Now I think I need to go make myself a cup of tea.
In the last couple of decades people have been brainwashed into thiking that optimism implies everything turning out fine while, in my book, it means having the psychological fortitude to overcome hardship.
Amen and Hallelujah!! Tell the Bulls around here about that for us okay...
BTW if I had one thing to add it would be that hardship is a certainty, your success is optional - if you don't effectively & rigorously plan for the hardship your failure is certain.
Thank you Tanta
Everyone on every part of the transaction knew exactly what stated/stated meant. It was a straight out bet on appreciation. As long as your market was gaining in double digits every participant in the transaction made money, and in the absense of a victim it is difficult to cry a lot of tears here.
It is pretty ironic that when the shakeout came the immediate victims were not the borrowers who were tricked/lied their way into loans (both narratives are active) or the investors who greedily/stupidly (again both stories running) bought the securities but instead the people who were at no particular risk in any given transaction, the sub-prime lenders. Bulletproof on any individual loan and yet as an industry shockingly exposed to perception changes on appreciation.
People are trying to sell this narrative in broader terms than maybe is justified. To me it just shows that activities that make perfect sense at one point on a curve can turn ruinous at the bend points.
The first chapter of your Real Estate Agent exam textbook explains that housing is cyclical. The bubble and the sub-prime meltdown are the simple result of applying linear thinking to a cyclical market. Like just about everything in life obvious in retrospect.
t is pretty ironic that when the shakeout came the immediate victims were not the borrowers who were tricked/lied their way into loans (both narratives are active) or the investors who greedily/stupidly (again both stories running) bought the securities but instead the people who were at no particular risk in any given transaction, the sub-prime lenders. Bulletproof on any individual loan and yet as an industry shockingly exposed to perception changes on appreciation.
It may be ironic but it should have been anticipated... the only asset buffer most of these brokers & sub-prime lenders had was their fee based revenue stream... once that went away (or fell below cost to operate) it was only a matter of time before they too evaporated like morning mist in a hot dry summer.
I'm in the same position as an agent in the mfg'ing supply chain... no real assets but my wits & current backlog. It is also mist but at least I understand this & 'plan' accordingly... thank God there is Ramen.
My guess is 20 years ago s/p lenders did the same, knew how to get real small real fast & didn't need blogs to tell them when & how to do it... they all got drunk on Booya.
It will be good biz again someday once the survivors are all sufficiently 'sadder but wiser'.
No need for Draconian standards, IMO.
Define 'Draconian'.
Draconian to a Libertarian is one word more than nothing said at all. Most of us would prefer that operational regs be slightly more comprehensive than the null set...
once that went away (or fell below cost to operate) it was only a matter of time before they too evaporated like morning mist in a hot dry summer.
...along with their warranties and ability to repurchase the loans. Guarantees are only as good as the solvency of the persom who makes them.
Like just about everything in life obvious in retrospect.
Actually, it was obvious the entire time but it could be easily forgotten for the right price.
The Mortgage interest deduction is horribly regressive. If it went away, prices would adjust lower. People would get over it. See Lowenstein's article from the NY Times.
That and Clinton's RE Capital Gains Exemption Law... enacted in the mid-90s.
Treat all income classes the same, all personal expenditure classes the same... and that would do a lot to eliminate all this 'monkey business'.
Why doesn't some doctoral program student/department take this issue on? Don't you think it would make a fascinating dissertation? If I were getting my Ph.D. in Economics right now, I'd be looking into this...
It will be but in 20-30 years... it will take that much time for the facts to be determined, recorded & analyzed.
PhD theses require a very careful rigor & process. Current problems & issues like this are too messy & open-ended for that kind of thing... you want your dissertation project to be more closed-ended or you'll still be chasing your PhD as you retire.
HOWEVER their full tenured advisers could be taking these kinds of issues on... directing their PhD candidates & post-doc minions to do the actual heavy lifting (i.e. research) for 'cheap'. Even UGRA's can be useful (if directed & properly coached).
I mean these folks have no life, right?
That is really how the thing is supposed to work... trouble is it requires funding & much of the funding is now private (from the very sources that would complain if the sausage machine were really exposed).
So it will likely never happen until 'statutes of limitation' have expired & it all becomes 'history'.
dryfly,
I consider myself a small "l" libertarian, and and think that the role of government in the markets should be the minimal amount to keep the markets honest, and not one bit more. I've said it before here, but regulations need not be elaborate, just smartly written and consistently enforced.
I don't see how requiring a significant DP is Draconian or interventionist. It actually lets the market mechanism work effectively, and may act as a deterrent to speculation. Likely, it would shift the demand curve leftwards at equilibrium for second, third, and vacation homes, while doing little to the demand curve for primary residences.
Borrowers would have some skin in the game that isn't of the "instant equity" variety of the past few years. Policies of the past 2 decades (along with other external factors) have lead to an epic malinvestment in a non-productive asset class.
dryfly, look here for what I believe is the fundamental source of all of this monkey business- zero reserve requirements. http://www.newyorkfed.org/research/epr/02v08n1/0205benn/0205benn.html#chart2
I've said it before here, but regulations need not be elaborate, just smartly written and consistently enforced.
Agreed. Some one posted earlier about their 'apology' for the twenty page paper, they didn't have time to write the two page version.
Applies to regs except replace 20 & 2 with 20,000 and 2,000.
as usual great stuff here thank you again tanta. good idea by outsider , a history on this stuff would (will ) make for super reading if only to inform people what was (is) really going on :its the underwriting and their rules or lack of. i tip my hat to all here sharp sharp.
I think that it was Tanta who wrote awhile ago about the importance of having some flexibility in underwriting. No matter where you draw the line, there will always be some pretty good fruit JUST on the other side of it. I think that this has to be ballanced by limiting not just the degree of varience accepted, but the amount. If you say that no more than 3 percent (or some other number) of loans can be a variance, you may be safe.
What kind of liability do the bond writers have on the risk?
Could it result in BS and GS having a massive liability for improper documentation?
careful not to lump bond analysts and strategists with originators with whom they are thrice removed. if a small mom and pop originator is taking liberties with its guidelines (ie stated doc), then sells the loan it claims is legit to a wall st bank w/ a conduit shelf (banking side of the firm), it would be virtually impossible for a research person behind a "chinese wall" to know this until the delinquency data hits the monthly performance reports, months later.