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Hurry up and get these things into the pension plans before they blow up!!!!
D.R. Horton to Report Net Loss After Orders Plunge (Update6) - Bloomberg.com
is that not the ugliest piece of box housing you've ever seen....
i think it was a d-f design student who only new how to glue different size boxes together that approved that...
"are designed to estimate recoveries on a forward-looking basis while taking into account the time value of money."
http://www.weblinks247.com/indexes/idx24_usd_en_2.gif
This keeps going the value of money is going to be zero.
"fixed rate closed-end second liens"
Question - I understand the fixed-rate and second lien part, but what is closed-end? Does this basically mean the securities in the fund do not change (like a closed-end stock fund)?
The alt-a story and your explnation about the OC and why it is not enough are extremely important.
this is the first real proof I have seen that alt-a is in trouble.
btw, at least pre-payment ensure some of the principal back ? right ?
Called Bluff, yes that is ugly. And not only DR Horton is putting up those fugly boxes. In Colorado, they've been putting up even uglier big boxes on small lots for the past few years. A sea of rooftops. I dread what those 'neighborhoods' will look like in 10 years.
OT: yen is up about 1% today.
The great unwind ?
The dollar fell out of bed this morning. I still expect the panic in the housing market by October at the latest. But I have to be honest, this thing looks like it is going to be worse than I care to imagine.
I understand the fixed-rate and second lien part, but what is closed-end?
That just means it isn't a HELOC or line of credit in which future advances of principal can be made after the loan closing. In a closed-end loan, what you borrower at closing is the maximum you can borrow.
btw, at least pre-payment ensure some of the principal back ? right ?
Yes, it does. Since these things are "sequential pay," it means that the senior classes have gotten a substantial amount of principal back. Given the excess/OC problem, though, it doesn't look likely that the B tranches will ever see prepayments.
The sh*t has hit the fan:
S&P May Cut $12 Billion of Subprime Mortgage Bonds (Update6) - Bloomberg.com
You will notice also that both of these pools are fixed rate closed-end second liens. These borrowers did not get caught in a nasty rate adjustment, nor did they max out a credit line in order to pay bills.
Unless their first lien suffered a nasty rate adjustment and they just decided to stop paying on the second.
is that not the ugliest piece of box housing you've ever seen....
I especially like the turret windows overlooking the front entry... easy to shoot at bill collectors & repo men as they walk up the front drive.
Harkons back to the days of Renaissance Italy when your home really WAS your castle.
All this comes too late for many investors. They are stuck with a declining asset that is no longer liquid. Bear Sterns and Merrill Lynch already tried running for the door only to find that they are in "Hotel California" where you can check out any time you like, but you can never leave.
Does this basically mean the securities in the fund do not change (like a closed-end stock fund)?
Closed-End funds have turnover in their portfolio. What distinguishes them from Open-End funds is they have a fixed number of shares. They are traded among investors while Open-End funds are bought from and sold to the fund company. Closed-End funds are mutual funds that trade like stocks.
Alt-A isn't performing anywhere near as well as its boosters claimed it would, for one thing. - Tanta
Tanta, I read the part about the OC & the CE... is the root of the Alt-A problem just plain that the houses are too expensive for these borrowers? I mean my understanding of Alt-A is that they are mostly 'prime' borrowers with mortgages larger than they could qualify for under prime underwriting, so they 'jumbo'... and while they are big they are decidedly NOT too big to fail. Yes/No?
Or is it really more subtle & nuanced than that?
TIA
i put this in the comments yesterday; scooped Tanta agains with no haatip!!!!
dryfly, of course everybody's problem is that the houses are too expensive.
The Alt-A problem is that it was supposed that having a 720 FICO meant you could also have 100% financing, stated income, non-owner-occupied high-rise condos plus some whacky ARM structure all built into the same loan. The "A" part (the borrower's credit rating) was supposed to compensate for all the "Alt" part.
We are learning that cash flow is cash flow, has always been cash flow, and the reason these folks had nice FICOs was that heretofore we didn't let them borrow too much. Once we let them borrow too much, their FICOs actually went down!
Is that not amazing?
If this keeps up, people may realize that one cannot actually buy a house safely for more than about 2.5 x gross annual income no matter how much one slices and dices the loan! What a shock! What's next - down payments?
With a negative savings rate, I think not.
We'd be in much better shape if there was a large number of prospective buyers out there with large down payments just waiting for reasonable house prices.
Unfortunately, even those folks are already in...and the down payment is first in line for a loss.
This is why an undershoot on home prices is likely.
We are learning that cash flow is cash flow, has always been cash flow, and the reason these folks had nice FICOs was that heretofore we didn't let them borrow too much. Once we let them borrow too much, their FICOs actually went down
Is that not amazing?
one of best comments, couldn't say any better
Tanta,
I looked into the deliquency rates at absnet and I found the SASCO 2006-S1 but the numbers seem off. The cummulative loss rate is 3.70% but the rate for greater than 60 days is only 2.64%. If I add the 3.70% it adds up to 6.34 or if I add the 60 day it is 3.77% and with the 30 day it is only 5.53%. Am I adding incorrectly or is absnet not as current as other sources since the last update absnet has for this pool is 6/25/07?
I couldn't find the 2006-ARS1 there but the 2006-BC4 has a cummulative delinquiency total of 13.86% with 4.13% in foreclosure. Ouch.
A faithful ubernerd,
graphrix
Feel free to email me more info too.