well, maybe the "credit crisis is behind us" (as the CFOs of Lehman and Bear declare), but I sure wouldn't want to own the RMBS that are out there in this environment.
Exeter Township firms clients face mortgage default risk
The company files for bankruptcy and tells customers it made no payments on their mortgages in September.
...
As many as 800 clients in Berks, Chester and Lancaster counties are affected by the filing, Case said.
...
"Since we are no longer able to honor our agreement to pay your principal mortgage lender, you will be faced with the immediate prospect of default and a possible mortgage foreclosure unless you are able to make your mortgage payments directly," said the letter with Snyders name on it.
...
Case said the clients had what are called wraparound mortgages, in which people refinancing their mortgages agree to assume more debt than what is outstanding.
The difference is invested, and the proceeds applied back to the mortgage.
...
"He (Snyder) was writing mortgages Wednesday and Thursday (last week) and closed the doors Friday," she said. "Theres people in worse straits than we are."
A former employee of Personal Financial Management who also declined to be identified said the staff of 30 was abruptly let go Friday.
"Sept. 20 (Bloomberg) -- The U.S. commercial paper market unexpectedly shrank for a sixth week, extending the biggest slump in at least seven years and signaling the Federal Reserve's interest rate cuts haven't drawn investors back to short-term debt."
I know this has been discussed ad nauseum on here, but Lacoursiere is the highest number out there on resets. CR, have you seen the chart/numbers Rod Dubitsky and company from Credit Suisse put out earlier this month on subprime resets?
Lacoursiere's peak subprime reset month has ~$100 billion; Credit Suisse is at $20 billion (timing differences also). CS's methodology seems solid -- 1st reset only, captures both both voluntary and involuntary prepayments (although I don't know the specific assumptions), and is estimated on all subprime outstandings.
CS resets total $196 billion in 2008; what is Lacoursiere doing to get to what looks like around $500 billion.
Yikes, yesIamclueless.....you have a servicing company agree to make a payment, you pay on time and whamo!--you are hit with nasty foreclosure notices---yet paid....Geeze...this is just getting worse.
I doubt the naysayers can argue that the foreclosures are the fault of ignorant people signing up for more then they could afford anymore.
What's all this talk I hear about a "housing bubble"? Pshaw! It's under control.
While Rome burns, the MSM is trying to get a peak at the latest, famous-for-nothing starlet's snatch. Did'ja hear? OJ got busted again (as entire tracts of new, but never occupied, homes burn in the background, and waves of Nouveaux Okies head towards points unknown with their possessions). Here's a big story: This morning, Republicans in the Senate are going to force a vote on a resolution condemning MoveOn.org for running an ad they didn't like. That's important. I thought these clowns knew something about business and finance.
And once again, this chart shows resets in early 2008 that are higher than any other street firm or mortgage analyst does. E.g., Mark Zandi of Economy.com presented a chart on estimated monthly resets of all mortgage, including nonsecuritized mortgages, at the Credit Suisse housing conference this week, and his chart shows a peak monthly reset of about $50B in early '08. This BoA reset chart simply appears to be wrong.
Case said the clients had what are called wraparound mortgages, in which people refinancing their mortgages agree to assume more debt than what is outstanding. The difference is invested, and the proceeds applied back to the mortgage.
This is a scary thing, because credit consolidation is a huge industry. If credit consolidators aren't actually paying off the underlying mortgages or loans, then aren't they just ponzi schemes?
Here's PR on this company from its Web site:
"It should also be noted that Personal Financial Management as of 1997 has over $31,000,000 in assets and continues to provide professional personal financial counseling while originating first mortgage loans for individuals. On a direct lending basis, the company provides swing or bridge loans requiring no servicing until the former home is sold and settled. The company also provides secondary financing for individuals needing a mortgage just over the eighty percent PMI limitation to avoid the costs inherent in such transactions."
Are they taking money from one client (to consolidate debts) and lending it out to another (as a "swing bridge loan" or "secondary financing")?
CR - is the chart accurate? Please let me know, in the meantime I will be watching the latest OJ updates and writing my congressman about a flag burning amendment and also asking them to do something about prohibiting gay marriage.
Hey! Greenspan isn't sure we should have the FRB regulate mortgages. What a surprise: Greenspan reiterated he was wary of the Fed taking part in regulating the mortgage market, adding ``I don't know the answer'' of whether it is proper for the current Fed to increase regulation of the market.
But I would say it is fundamentally a job for state attorneys general,'' he added, citing fraud as a particular problem.I think what you need is experts in criminal acts.''
LaLALALALALAALALALA! Next up, Greenspan's plan to abolish the FTC? Cause, you know, if it's not fraud it's not a problem? There's a sucker born every minute, and by God, it's the mortgage industries right to serve 'em, use 'em, abuse 'em, and then let the investors lose?
Man! I'd love to see Sheila Bair and Greenspan duking it out.
I like a man with sound fundamental priorities. You da' man. (Unless you're a woman. In that case, you're the kind of woman I like, and you da' woman).
I think we are just seeing the tip of the tip of the iceberg. "First Reset Defaults" are probably no more common that "First Payment Defaults." Given the time delays involved; reset, 60-90 days to NOD, 30+ days to report forceclosure activity is a rearview mirror trailing indicator. Far more common is the mortgage resets and the family pays for 2-3 months while looking for refis and drawing down savings and maxing out credit cards before even the first late payment. Gee, have we seen any evidence of an increase in revolving credit balances? This may lead to a new credit cruch. Card limits reduced or revoked.The ripple effect in PCE is likely to have a larger and more immediate impact than the housing crisis.
My prepayment penalty of 20k (particularly stiff) expires in June '08.
Combined FICO is above 750, the mortgage is our only debt, and our income is depression proof.
Should we eat the penalty and refi to a higher fixed interest rate now or will the 30yr fixed interest rates not increase that drastically in the next 8 months?
mod - I apologize for accidentally posting this same question in the home prices thread from yesterday. I meant to post it here.
Most of the problems from resets are still ahead of us AND most of the problems related to relatively high (as compared to 3 years ago) interest rates are still ahead of us.
Meanwhile, we have a recession forthcoming (by all accounts) and the Fed's solution is throwing money at the problem. Stagflation, anybody?
somean - you might want to mention the assessed value of the house as well as the outstanding balance. If your assessment goes down and equity falls below 20% there will be add-ons to the mortgage rate, and maybe PMI unless you can pay down the difference.
somean - set up a spreadsheet and run the numbers for various interest rate scenarios. Off the top of my head, $20K strikes me as a rather big penalty, but if long-term fixed rates jumped by 1-2% you could save money if you definately planned to stay put and never refinance. But I have no idea if interest rates will jump. For all we know, in 8 months we could be in the middle of a big recession and long-term rates will have fallen. And since your rate is known for 3-4 more years, why panic now (unless the current rate is onerous)?
At least there's an end in sight to the resets, and after March they'll start to taper off. The lingering effects might last, but not the resets. Phew.
Just guessing, not advice, yadda, yadda. I'd wait for the balance to drop below the conforming loan ceiling. $50k vs. 417k but soon to change. I'd also see if you can get out of the prepay. Ask, that doesn't cost anything. Lenders are sometimes more in need of lower exposure than of fees.
Does the increase in the conforming loan ceiling affect federal programs only? Or do these lenders tend to sell their loans to the fed programs, so an increase in one ceiling begets an increase in the other?
...the Fed's solution is throwing money at the problem. Stagflation, anybody?
You know it baby! We have a war to pay for m'dear...
I really wonder if the inflation will pick up so quickly that nominal housing prices remain the same...that's how it played out in the 70s...
The question is what happens WRT wages...esp. now that inflation in China appears to be picking up...sooner or later 'water finds it's level' and Chinese wage pressures will start to level things off. I wonder if this isn't the Admin's way of killing two birds w/ one stone: the war debt and the China trade imbalance...but then, my therapist often warns me against assuming rationally aware motives on the part of others, and it seems particularly good advice with this Whitehouse.
I think wage pressures in China will begin to unmask inflationary pressures at home, independent of monetary policy - no more Wall-Fart Effect - and then wage pressures at home will be enormous. People will be stripped of their savings through inflation, because they are powerless to stop that, but the laws of affordability can't be repealed, even by 800lb Gorillas, and the traditional income/costs/debt ratios have to come back into balance.
Top White House economic adviser Ben Bernanke said on Friday strong U.S. housing prices reflect a healthy economy and he doubts there will be a national decline in prices.
"House prices have gone up a lot," Bernanke said in an interview on CNBC television. "It seems pretty clear, though, that there are a lot of strong fundamentals underlying that.
"The economy is strong. Jobs have been strong, incomes have been strong, mortgage rates have been very low," the chairman of the White House Council of Economic Advisers said.
The pace of housing prices may slow at some point, Bernanke said, but they are unlikely to drop on a national basis.
"We've never had a decline in housing prices on a nationwide basis," he said, "What I think is more likely is that house prices will slow, maybe stabilize ... I don't think it's going to drive the economy too far from its full-employment path, though."
first to trolll.lllllll.
second it after 30 sec.
well, maybe the "credit crisis is behind us" (as the CFOs of Lehman and Bear declare), but I sure wouldn't want to own the RMBS that are out there in this environment.
Looks like a trillion bucks between now and next Sep.
Let's back the T bills China holds......
Scary stuff: Exeter Township firm’s clients face mortgage default risk
Exeter Township firms clients face mortgage default risk
The company files for bankruptcy and tells customers it made no payments on their mortgages in September.
...
As many as 800 clients in Berks, Chester and Lancaster counties are affected by the filing, Case said.
...
"Since we are no longer able to honor our agreement to pay your principal mortgage lender, you will be faced with the immediate prospect of default and a possible mortgage foreclosure unless you are able to make your mortgage payments directly," said the letter with Snyders name on it.
...
Case said the clients had what are called wraparound mortgages, in which people refinancing their mortgages agree to assume more debt than what is outstanding.
The difference is invested, and the proceeds applied back to the mortgage.
...
"He (Snyder) was writing mortgages Wednesday and Thursday (last week) and closed the doors Friday," she said. "Theres people in worse straits than we are."
A former employee of Personal Financial Management who also declined to be identified said the staff of 30 was abruptly let go Friday.
Oops, I think they might have to go to plan B.
"Sept. 20 (Bloomberg) -- The U.S. commercial paper market unexpectedly shrank for a sixth week, extending the biggest slump in at least seven years and signaling the Federal Reserve's interest rate cuts haven't drawn investors back to short-term debt."
U.S. Commercial Paper Slump Extends to Sixth Week (Update4) - Bloomberg.com
It's a BUYYYYYYYYYY
"what's that"... Prudent said
Everything!!!!!11111111
I know this has been discussed ad nauseum on here, but Lacoursiere is the highest number out there on resets. CR, have you seen the chart/numbers Rod Dubitsky and company from Credit Suisse put out earlier this month on subprime resets?
Lacoursiere's peak subprime reset month has ~$100 billion; Credit Suisse is at $20 billion (timing differences also). CS's methodology seems solid -- 1st reset only, captures both both voluntary and involuntary prepayments (although I don't know the specific assumptions), and is estimated on all subprime outstandings.
CS resets total $196 billion in 2008; what is Lacoursiere doing to get to what looks like around $500 billion.
Yikes, yesIamclueless.....you have a servicing company agree to make a payment, you pay on time and whamo!--you are hit with nasty foreclosure notices---yet paid....Geeze...this is just getting worse.
I doubt the naysayers can argue that the foreclosures are the fault of ignorant people signing up for more then they could afford anymore.
What's all this talk I hear about a "housing bubble"? Pshaw! It's under control.
While Rome burns, the MSM is trying to get a peak at the latest, famous-for-nothing starlet's snatch. Did'ja hear? OJ got busted again (as entire tracts of new, but never occupied, homes burn in the background, and waves of Nouveaux Okies head towards points unknown with their possessions). Here's a big story: This morning, Republicans in the Senate are going to force a vote on a resolution condemning MoveOn.org for running an ad they didn't like. That's important. I thought these clowns knew something about business and finance.
Get ready to start over from the bottom.
We. Are. Screwed.
And once again, this chart shows resets in early 2008 that are higher than any other street firm or mortgage analyst does. E.g., Mark Zandi of Economy.com presented a chart on estimated monthly resets of all mortgage, including nonsecuritized mortgages, at the Credit Suisse housing conference this week, and his chart shows a peak monthly reset of about $50B in early '08. This BoA reset chart simply appears to be wrong.
fwiw, that chart is too old to be particularly useful today, except to show the directional trend.
This is a scary thing, because credit consolidation is a huge industry. If credit consolidators aren't actually paying off the underlying mortgages or loans, then aren't they just ponzi schemes?
Here's PR on this company from its Web site:
"It should also be noted that Personal Financial Management as of 1997 has over $31,000,000 in assets and continues to provide professional personal financial counseling while originating first mortgage loans for individuals. On a direct lending basis, the company provides swing or bridge loans requiring no servicing until the former home is sold and settled. The company also provides secondary financing for individuals needing a mortgage just over the eighty percent PMI limitation to avoid the costs inherent in such transactions."
Are they taking money from one client (to consolidate debts) and lending it out to another (as a "swing bridge loan" or "secondary financing")?
CR - is the chart accurate? Please let me know, in the meantime I will be watching the latest OJ updates and writing my congressman about a flag burning amendment and also asking them to do something about prohibiting gay marriage.
Hey! Greenspan isn't sure we should have the FRB regulate mortgages. What a surprise
:
Greenspan reiterated he was wary of the Fed taking part in regulating the mortgage market, adding ``I don't know the answer'' of whether it is proper for the current Fed to increase regulation of the market.
But I would say it is fundamentally a job for state attorneys general,'' he added, citing fraud as a particular problem.I think what you need is experts in criminal acts.''
LaLALALALALAALALALA! Next up, Greenspan's plan to abolish the FTC? Cause, you know, if it's not fraud it's not a problem? There's a sucker born every minute, and by God, it's the mortgage industries right to serve 'em, use 'em, abuse 'em, and then let the investors lose?
Man! I'd love to see Sheila Bair and Greenspan duking it out.
M-F | Homepage | 09.20.07 - 11:52 am | #
I like a man with sound fundamental priorities. You da' man. (Unless you're a woman. In that case, you're the kind of woman I like, and you da' woman).
If you run for office, you've got my vote.
JL, do you have a link to the new CS reset data?
Thanks.
Hey! Greenspan isn't sure we should have the FRB regulate mortgages.
Shorter Greenspan: "Me! Me! Look at me! I'm talking! See! Blahblahblah! Hey, get that camera back here! I'm going to stand on my head now!"
Shouldn't he be sitting in a rocking chair in St. Pete yelling at kids to get off his lawn?
Isn't the correct answer "Both are Right in their own Universe and Enjoy the Skiing?"
I think we are just seeing the tip of the tip of the iceberg. "First Reset Defaults" are probably no more common that "First Payment Defaults." Given the time delays involved; reset, 60-90 days to NOD, 30+ days to report forceclosure activity is a rearview mirror trailing indicator. Far more common is the mortgage resets and the family pays for 2-3 months while looking for refis and drawing down savings and maxing out credit cards before even the first late payment. Gee, have we seen any evidence of an increase in revolving credit balances? This may lead to a new credit cruch. Card limits reduced or revoked.The ripple effect in PCE is likely to have a larger and more immediate impact than the housing crisis.
Question:
We have 7yr arm that expires in 4 years.
My prepayment penalty of 20k (particularly stiff) expires in June '08.
Combined FICO is above 750, the mortgage is our only debt, and our income is depression proof.
Should we eat the penalty and refi to a higher fixed interest rate now or will the 30yr fixed interest rates not increase that drastically in the next 8 months?
mod - I apologize for accidentally posting this same question in the home prices thread from yesterday. I meant to post it here.
The balance? The basis and margain?
Most of the problems from resets are still ahead of us AND most of the problems related to relatively high (as compared to 3 years ago) interest rates are still ahead of us.
Meanwhile, we have a recession forthcoming (by all accounts) and the Fed's solution is throwing money at the problem. Stagflation, anybody?
BB twice in the quotes says:
GSE debt does not equal FF&C guarantee.
BB must expect GSE's to lose their equities, and the lenders to come hat in hand to the USG/FR. And he's just said, "Take a hike".
But BB also said, "contained" and he waffles apparently very easily.
I'll go with the "no FF&C payoff" argument. Best to y'a, BB.
somean - you might want to mention the assessed value of the house as well as the outstanding balance. If your assessment goes down and equity falls below 20% there will be add-ons to the mortgage rate, and maybe PMI unless you can pay down the difference.
House is valued at 645,000
Mortgage balance is around 450,000.
A 25% price decline would put me to about break even.
I'm mostly just concerned with what the rates are expected to do in the next 8 months, but the PMI is a good point.
somean - set up a spreadsheet and run the numbers for various interest rate scenarios. Off the top of my head, $20K strikes me as a rather big penalty, but if long-term fixed rates jumped by 1-2% you could save money if you definately planned to stay put and never refinance. But I have no idea if interest rates will jump. For all we know, in 8 months we could be in the middle of a big recession and long-term rates will have fallen. And since your rate is known for 3-4 more years, why panic now (unless the current rate is onerous)?
CR -- I just sent you an e-mail.
Actually the current rate is fine, it the prepayment penalty that is truly onerous.
If I recall correctly it's something on the order of 9 months interest as penalty regardless of how much time is left until the penalty expires.
At least there's an end in sight to the resets, and after March they'll start to taper off. The lingering effects might last, but not the resets. Phew.
I mean, the huge resets. There'll still be some, of course.
somean - if the current rate is fine, then I wouldn't panic and pay that big penalty. Disclaimers: TINFA, IANAL, YMMV.
http://www.asitebyanyother.name/images/f/f3/Don%27t_Panic.jpg
Just guessing, not advice, yadda, yadda. I'd wait for the balance to drop below the conforming loan ceiling. $50k vs. 417k but soon to change. I'd also see if you can get out of the prepay. Ask, that doesn't cost anything. Lenders are sometimes more in need of lower exposure than of fees.
condemning MoveOn.org for running an ad they didn't like..
you mean one with a true statement in it? Of course the GOP would find that intolerable.
tick tock tick tock.....
Does the increase in the conforming loan ceiling affect federal programs only? Or do these lenders tend to sell their loans to the fed programs, so an increase in one ceiling begets an increase in the other?
Clytemnestra's Sister sed:
...the Fed's solution is throwing money at the problem. Stagflation, anybody?
You know it baby! We have a war to pay for m'dear...
I really wonder if the inflation will pick up so quickly that nominal housing prices remain the same...that's how it played out in the 70s...
The question is what happens WRT wages...esp. now that inflation in China appears to be picking up...sooner or later 'water finds it's level' and Chinese wage pressures will start to level things off. I wonder if this isn't the Admin's way of killing two birds w/ one stone: the war debt and the China trade imbalance...but then, my therapist often warns me against assuming rationally aware motives on the part of others, and it seems particularly good advice with this Whitehouse.
I think wage pressures in China will begin to unmask inflationary pressures at home, independent of monetary policy - no more Wall-Fart Effect - and then wage pressures at home will be enormous. People will be stripped of their savings through inflation, because they are powerless to stop that, but the laws of affordability can't be repealed, even by 800lb Gorillas, and the traditional income/costs/debt ratios have to come back into balance.
Sure, Ben, uh huh, whatever you say...
From the vaults (Jul 2005):
Top White House economic adviser Ben Bernanke said on Friday strong U.S. housing prices reflect a healthy economy and he doubts there will be a national decline in prices.
"House prices have gone up a lot," Bernanke said in an interview on CNBC television. "It seems pretty clear, though, that there are a lot of strong fundamentals underlying that.
"The economy is strong. Jobs have been strong, incomes have been strong, mortgage rates have been very low," the chairman of the White House Council of Economic Advisers said.
The pace of housing prices may slow at some point, Bernanke said, but they are unlikely to drop on a national basis.
"We've never had a decline in housing prices on a nationwide basis," he said, "What I think is more likely is that house prices will slow, maybe stabilize ... I don't think it's going to drive the economy too far from its full-employment path, though."