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Good morning, sunshine!
"That yield curve thingy. You've heard of it, maybe."
I honestly doubt if they have.
Snarky and full of common sense. A Tanta classic.
Why would someone write an article so misinformed? What could it be trying to accomplish? Ughhh, stupidity abounds. It is sad how it is now considered a right to take money out of your house, and big bad freddie and fannie are taking away that right.
If you've ever tried to get flood insurance, you may have noticed this phenomenon.
As you state perfectly, we see it everywhere. Florida liability insurance is the same way (in addition to flood).
"The insurance companies are screwing us!"
"No they're not. They're abandoning you."
So there are always two main ingredients of mortgage rates, comparable-duration bond yields and the credit risk premium.
excuse me, but you have you forgotten about the wonderful post you yourself wrote about convexity?
excuse me, but you have you forgotten about the wonderful post you yourself wrote about convexity?
No, I have simply concluded that convexity has been outlawed.
I was trying to keep it simple for stupid by that "comparable duration," which I hereby declare means convexity-adjusted duration.
Convexity is not a main ingredient. It's more like a herb.
Thank You Tanta,
Tomorrow is 1st class for the undergrad Advanced Macroecon class I teach. This posting will be given to the class as their 1st outside reading of the semester.
They're going to hear alot this semester about causes and consequences of the housing debacle.
By semester's end, they will be well acquainted with the wisdom, and snark, to be found at CalculatedRisk.
Thanks much for your many valuable postings.
Convexity is not a main ingredient. It's more like a herb.
I have always thought of it more like the cooking method. You know, you take your main ingredients and then you puree them in the cuisinart before nuking them in the microwave.
I'm not sure why you expect the NYT to get anything right regarding mortgages. Last week, in the same magazine as that "Dr.Doom Roubini" article, they also featured this "mortgage glossary" article which started out by defining subprime mortgages as 'an umbrellla term for cheap mortgages'.
Tomorrow is 1st class for the undergrad Advanced Macroecon class I teach. This posting will be given to the class as their 1st outside reading of the semester.
Kids these days don't know the meaning of pain and suffering. They get to read entertaining blog posts instead of dull dry boring textbooks? That is so totally not fair.
Convexity is not a main ingredient. It's more like a herb.
no, it's a main ingredient. like the peanut butter in "ants on a log," where duration is the celery and credit risk is the raisins.
Hey dby, does this mean I'm going to be famous?
I'm not sure why you expect the NYT to get anything right regarding mortgages.
OMFG, Shnaps, I hadn't seen that.
Yeah, I can see myself trying to explain convexity to someone who thinks subprime means "cheap."
bacon,
Thanks for clearing that up!
like the peanut butter in "ants on a log," where duration is the celery and credit risk is the raisins.
You're doing that just to make me heave, aren't you?
yeah, I missed it last week too. He also makes it seem like Gretchen was the first to report on 'jingle mail'. Barf.
Shnaps, whenever I read a NYT article, the first thought I have is, I wonder if this article is true.
From now on, I pledge to read only "The Huffington Post". (and also Pravda - it is an old habit of mine)
"jumped the shark" is a terrible cliche to pluck from hollywood.
The article does the best it can in the short space it has to explain the recent jump in rates as a change in the policy of FNM rather than a change in the yield curve. Their policy before: there is no risk or if there is we don't need to include it in the price because the government is behind us. Their policy now: there is a risk and we're not going to ignore it anymore because we might not have a job if we keep screwing up.
To maintain fair-and-balanced-ness, please lampoon a WSJ article too?
Having established NYT is full of lies and propaganda, it would be fun to see if the other side is working to compensate.
e.g. Has the GSE meltdown been caused by labor unions?
Another 2 cup of coffee post from Tanta; get back to you guys when I'm awake however interesting timing as 10/30 year moving through resistance thank goodness for I-series bonds and as my Dad use to say "the price is right."
Darth Toll would enjoy hearing your feedback noting your underwater on your TBT position.....
policy before: there is no risk or if there is we don't need to include it in the price because the government is behind us.
Are you familiar with the term "begging the question"?
Besides the fact that I don't buy the idea that the GSEs ever thought that going on government life-support would be so much fun and so profitable for their shareholders that they simply ignored risk, I have also observed in this very post we are reading at the moment that the loans they are buying today do not necessarily have the same risk characteristics as the loans they bought three years ago. For one thing, the housing market and the economy have kinda changed. For another, there were these private investors out there buying the highest-risk loans. You remember them, right? The Implode-O-Meter and the FDIC have been tracking their disappearance. Those private-issue loans were pretty obviously more mispriced than GSE loans of similar vintages. If you do not find that obvious, then you've drunk too much anti-GSE koolaid. Thus the Times piece makes sense to you to the extent it affirms your biases about the GSEs, which was pretty much my point in the post.
You're the best, Tanta! So refreshing on a Monday morning!
NYTimes: "defining subprime mortgages as 'an umbrellla term for cheap mortgages'"
But I thought that the NY legislature just explicitly defined subprime as expensive mortgages (175bps above average, IIRC)..
Wouldn't it be interesting to see a graph showing the % of all mortgages bought by the GSE's over time?
How many times have they been the only game in town?
How many times have they been the only game in town?
Only as many times as we've had RE busts and liquidity crises . . . it's kind of why they have a government charter . . .
CR posted a chart showing relative GSE market share not long ago, but I can't remember the post title. I'll see if I can find it.
You are parsing things too much here. There wasn't much, one way or another, in those sentences you are parsing ...
If the circularity of the reporter's thinking wound any tighter breathing would stop.
Risk-Taking Hits Investors In Leveraged-Loan Market: WSJ Error Page - WSJ.com r=308595
"The average price in the loan market is around 88 cents on the dollar these days, according to Standard & Poor's Leveraged Commentary & Data unit, down from above 100 cents before the credit crisis."
igh-yield issuance is down 47% for the year, falling to $55.2 billion from $103.3 billion a year earlier. The primary marketin which banks sell new junk-bond issuesis running at roughly a 61% deficit from last year, according to Standard & Poors LCD.
The pipeline of high-yield deals coming to market resembles a roll-call of zombie leveraged-buyout debt. The vast majority of the $3.5 billion of bonds attached to last years buyout of Home Depots HD Supply arm, for instance, still is largely sitting with underwriters J.P. Morgan Chase, Merrill Lynch and Lehman Brothers Holdings, according to Standard & Poors LCD. The last time any part of HD Supplys debt was sold was last August.
How Bad Is It?: Leveraged Loans at Slowest Volume Since 2002 - Deal Journal - WSJ
Isn't it a bit much to expect the NYT to understand what it is talking about? I mean, after all........
"convexity"
That sounds so hedge fund like. Oh that's right Freddie and his fat little sister Fanny are hedge funds my mistake.
Tanta, "usury ceiling"? I thought usury went the way of simony and all those other obsolete sins.
My preferred ARM would be indexed to CPI, lining up my interests with the government desire to keep a lid on indexed entitlements.
I cringe every time I hear US Treasuries described as "risk free." US debt to the penny is approaching $10 trillion, and that doesn't include tens of trillions in promises that the government can't afford to pay.
In a culture where defaulting on mortgage and credit card debt is increasingly seen as prudent, we may soon reach a point where defaulting on sovereign debt is seen as equally prudent.
"convexity"
That sounds so hedge fund like.
I think you win some kind of award for the most ignorant comment ever.
Well, I guess it could be more ignorant. You could say "convexity" sounds like a kind of mirror. Therefore Fannie and Freddie are funhouses.
But damn, you were close.
My preferred ARM would be indexed to CPI, lining up my interests with the government desire to keep a lid on indexed entitlements.
Strange you should say that. Many years ago, in response to some silly memo from the CEO looking for ideas from everyone for a cool new mortgage product, I suggested the "COLA ARM." (COLA = Cost of Living Adjustment.)
This was funny because at the time, see, we were all doing "COFI ARMs" (Cost of Funds Index). So the marketing slogan was that COLA was for people who don't drink COFI. The beauty of the thing was that while the rate on a COFI ARM will rise with inflation, effectively making homeownership a losing battle, the COLA ARM would get cheaper in inflationary periods but would bite you in the ass when wages were rising.
For some reason, the CEO didn't pick my idea.
Tanta said: Besides the fact that I don't buy the idea that the GSEs ever thought that going on government life-support would be so much fun and so profitable for their shareholders that they simply ignored risk,"
I guess I don't get where you are coming from Tanta, or frankly what your argument is.
It doesn't appear you extend the same logic to all the people and companies that, as you point out, the implodo-meter has tracked.
So, I assume all those companies and executives in the private sector DID think it would be fun to go out of business and have their stocks go to zero?
Why is it that those in the private sector would ignore risk at their own peril, but those in the "too big to fail" world not? Logic would say it's the opposite.
In a culture where defaulting on mortgage and credit card debt is increasingly seen as prudent, we may soon reach a point where defaulting on sovereign debt is seen as equally prudent.
Prudent? Wait, I thought that was the plan. You mean to say that we actually had plans to pay that off?
COLA was for people who don't drink COFI
I love it!
Convexity is not a main ingredient. It's more like a herb.
I have always thought of it more like the cooking method.
Strictly speaking, only when cooked in a convexion oven.
So, I assume all those companies and executives in the private sector DID think it would be fun to go out of business and have their stocks go to zero?
Well, no, you wouldn't want to assume that either.
So it occurs to me that perhaps you would conclude that no one was just plain old "ignoring" risk. Everyone thought they had it covered and that they wouldn't implode or have their stocks go to zero.
They were, rather clearly, wrong in that estimate. It is important to know where they went wrong and why they went wrong.
But I was responding to the claim that the GSEs' position was "there is no risk or if there is we don't need to include it in the price because the government is behind us." To say that is not to claim that the GSEs weren't as well hedged against credit risk as they thought, because they made a similar mistake that everyone else made. It is to say that they didn't try to hedge that risk at all. And I think that's just absurd.
The GSE's are no different that the private sector.
They are losing money.
They have a mandate to continue to do.
If they wanted to make money they would raise rates to very high levels.
They are afterall, essentially a monopoly.
If rates would skyrocket right now, then home prices would collapse. Houses would be at bottom and could only go up as default risk would go to nearly zero and rates could only go down.
We would be in a healthy housing market where affordability based upon house prices would be at all time highs.
Govt, for the first time, would actually be able to do something to make homes more affordable.
Cash investors would snap up homes and could rent them for lower prices bring housing costs and CPI down.
Why not raise rates significantly?
Because they are protecting current asset holders at the expense of future asset buyers.
It is to say that they didn't try to hedge that risk at all. And I think that's just absurd."
Well then, given that they are a monoply now.
Why not raise rates to 10% on home loans? This would bring lower home prices, bring in investment cash immediately due to healthy spreads, and give the private lenders a chance to compete
They don't because they have been mandated to "save the housing market".
This is translated to "stop price drops".
What is the advantage to the GSE's here?
Do the GSE's want to be 80% of the market?
When housing prices are dropping there should be an immediate and significant shift in lending rates to account for risk.
The only reason this isn't happening is because those running the GSE's are not interested in adequately accounting for risk. They are interested in stopping house price drops. They are only raising rates high enough to attract cash and lose just enough to be able to somehow stay in existance.
If they wanted to make money they would raise rates to very high levels.
They are afterall, essentially a monopoly.
If rates would skyrocket right now, then home prices would collapse. Houses would be at bottom and could only go up as default risk would go to nearly zero and rates could only go down.
So you're suggesting that the GSEs should raise rates to, say, 12%, and keep paying that measely 6.00% to MBS investors, while pocketing the other 6.00%. Bond investors would go with this because . . . I don't know why. I do know that this would totally freeze the mortgage market, which would mean the GSEs using their "monopoly" power to move themselves from losing money to completely out of business, since you'd think that kind of price increase would sort of hurt demand . . .
I don't know if it would make home prices collapse, of course. It might simply bring transactions to zero. Well, except for foreclosures, which the GSEs would have a lot more of if no new loans were being made . . .
You realize, of course, that there's nothing in the GSE charters about using their pricing power to rapidly clear RE markets. There is in fact something in their charters about guaranteeing credit risk for the cheapest possible price, and passing that savings on to consumers in the form of lower interest rates. You may disagree that this is what the charters should say, but it is indeed basically what they do say. The GSEs were not designed to be 800 pound bond market vigilantes.
Why not raise rates to 10% on home loans? This would bring lower home prices, bring in investment cash immediately due to healthy spreads, and give the private lenders a chance to compete
So you mean the GSEs should raise rates to borrowers and also yields to investors? They should use their "monopoly" power to pass more money through to investors? How does that keep them from losing money?
How does it give private lenders a chance to compete?
Tanta: "So it occurs to me that perhaps you would conclude that no one was just plain old "ignoring" risk"
No, I would conclude that the only ones "ignoring" risk were the GSE's! The others couldn't adequately price for it since the GSE's were ready and willing to lose money.
If your competitor is willing to increase market share by continuing to lose money (loss leader) then you have what the private sector calls anti-competitive behavior.
Then, as a private sector lender, your only choice is stop doing business today or tomorrow. Tomorrow gives you more time to unload your shares (Mozillo). So of course everyone chooses tomorrow.
Tomorrow has arrived and the loss-leading GSE's have successfully eliminated the competition.
Time to raise prices.
Why aren't they then?
Because they aren't motivated to corner the market and price accordingly, but to prop up, or at least slow the drop in home prices.
As everyone has said, the biggest threat to the economy is the falling home prices.
The GSE's have been asked to fall on the sword.
They are only raising rates high enough to attract cash and lose just enough to be able to somehow stay in existance.
But that is exactly not what they are doing. Even the Times understands this, although it doesn't understand what they are doing.
The portion of interest rates that is paid to the GSEs in the form of the "credit risk premium" is rising. Because the GSEs' present and projected credit costs are rising.
The rest of it isn't rising at all. MBS investors aren't making any more money off new MBS than they were before. The coupon--the amount passed through to investors after the credit risk premium comes off the top--has not markedly changed. That is what the Times means by pointing out that mortgage rates are going up while bond market yields are not.
Another way to put this: MBS investors are getting the same 5.50-6.00% yield they've been getting for some time. The reason the rate to consumers has risen is because the GSEs are demanding that more of the mortgage interest be paid to them, not to investors, in order to get the same financial result. If your credit losses are increasing and you increase your credit risk premium to compensate, you are quite possibly only breaking even. Remember that new loan volume is very low right now, but the big pools of already-existing loans that are taking credit losses is very big. There ain't no way the GSEs are making so much money charging another .125% in rate on a small pool of new production that it will significantly exceed the losses they are projecting on the much larger pool.
Think of it like these condo projects we keep reading about, that have all these foreclosed units and maintenance problems and thus terrible HOA budget issues. You can't solve this by leaving the small group of remaining owners' assessments the same as they always were, but charging the very small pool of new buyers of units a very slightly larger assessment. The numbers just don't work.
Neither the GSEs nor anyone else can raise rates on the loans that have already closed; that isn't legal in this country. Nor are they sucking up investor capital that would otherwise go somewhere else by paying juiced up yields to investors in mortgages. Probably even the Times would have noticed that if it were happening.
They certainly are paying higher yields to buyers of their corporate debt than they used to. There's a risk premium there, too. And if they continue to be forced to raise capital at these rates, then they will have to either cut back on their mortgage portfolio purchases or raise the effective interest rates on the loans they buy for portfolio. Otherwise they'd have a negative interest margin on the portfolio investments. But if they "priced themselves out of the market," they'd be . . . out of the market. You've been arguing that demand will only go so far: if rates get too high, people won't buy houses unless prices go into freefall. So the GSEs would have to go without buying portfolio loans until that happened; then they'd have to lose money on all the short sales, then they'd be buying new loans at a much smaller balance than they currently do at these higher interest rates, which wouldn't generate enough actual dollars to offset the huge losses on the old high-balance loans that had lower rates.
"Treasuries are backed by the full faith and credit of the U.S. Government, which has financial resources that Joe Blow the homebuyer doesn't have."
Joe Blow is the U.S. Treasury, only he can't directly print the money with which his debts will be repaid. He's got Hank and Ben to do that for him.
No, I would conclude that the only ones "ignoring" risk were the GSE's! The others couldn't adequately price for it since the GSE's were ready and willing to lose money.
If your competitor is willing to increase market share by continuing to lose money (loss leader) then you have what the private sector calls anti-competitive behavior.
Um, you seem to be assuming that the "market" of which the GSEs now have almost the entire "share" has stayed the same size as it has been.
100% of a much smaller pie can be a lot less than half of a much larger pie. Even Bush knows you gotta make the pie higher.
Your argument is getting more and more out of control. If the GSEs have been out there buying up every crazy loan in existence at super-low guarantee fees, how come we keep reading in the paper that nobody can get a refi these days?
Tanta,
As I have noted before.....ask any hijacking expert (before 911) what to do if a plane gets hijacked and you will get absolutely the wrong answer 100% of the time.
Ask any cop what to do (before columbine) about an active shooter in a school and 100% of the time you would have gotten the wrong answer.
What are the right answers now?
--If hijacked, attack the hijackers but you will likely die. Oh well.
--If there is an active shooter then the first cops go in without waiting for SWAT. But cops will be at a very high risk. Oh well.
But, But....I want to know what to do to survive a hijacking, or stop a school shooting without risk to officers?!!
Sorry, game is changed. Live (or die) with it.
I can't and wont argue the details with you Tanta, your answers come from within the industry.
The very existence of the GSE's may be based upon a false premise.
I say the game has changed. Make the GSE's an absolute last option, priced accordingly, or better yet eliminate them and let the free market sort it out.
It will get ugly.
I don't expect those within the industry to believe the game has changed until the plane hits the ground. But it will. Either now or into the white house. Those on the plane may wish to extend it a little longer. Others may feel we should sacrifice those today for the health of those tomorrow.
Let's roll.
Joe Blow is the U.S. Treasury, only he can't directly print the money with which his debts will be repaid. He's got Hank and Ben to do that for him.
Whatever. I had in mind when referring to the resources of the government versus individuals the fact that the government can . . . wait for it . . . levy taxes. Which have a higher priorty claim on people's income than any creditor does.
I know, I know, taxes are so last week. But I think it's a bit odd to pretend that "sovereign" debt just isn't really "sovereign." It is.
Lunatics like the current administration might prefer to default on TSYs rather than raise taxes, but I don't see why that is the only choice.
Tomorrow is 1st class for the undergrad Advanced Macroecon class I teach. This posting will be given to the class as their 1st outside reading of the semester.
Kids these days don't know the meaning of pain and suffering. They get to read entertaining blog posts instead of dull dry boring textbooks? That is so totally not fair.
Yeah, they should get the same crappy mis-information we did. Make them listen or read the papers from the Jackson Hole-in-the-Wall Gang.
Wow, what a time to be taking MacroEcon!
Sometimes the answer is Chaos.
Those in the business of making things orderly won't ever chose, plan, or accept this.
I responded to a riot in Vista. I spent 1 1/2 hours in a parking lot while the city around me rioted.
I had to get in a team, put my name on a card for federal reimbursement, come up with a plan...blah blah blah.
We couldn't just get into a car and go out and deal with whatever we were faced with. You see, this would be disorderly, put officers at risk, and could not be justified if things went wrong.
At least if we followed the handbook, we got paid, and didn't have to justify what bad things happened to others. We did what we were trained to do.
Meanwhile the citizens were left to fend for themselves.
Katrina anyone.
It's against human nature to say...let's not try to manage the unmanageable.
GSE's can't by definition be the solution. As long as they exist and as long as people look to them for the solution, the longer this whole thing takes.
As I have noted before.....ask any hijacking expert (before 911) what to do if a plane gets hijacked and you will get absolutely the wrong answer 100% of the time.
Up to 9/11 it was the correct answer,...9/11 was the first, that's why it was so surprising. Now the only scenario I can see for me losing my life trying to stop a hijacker is if he's stolen the pilot's weapon.
Tanta tart flambee - properly roasted, served to those for whom convexity is confused with perplexity
Unsweetened, to avoid concavities.
I can't and wont argue the details with you Tanta, your answers come from within the industry.
Oh, so now I'm just a shill for the industry? Well, then. Bite me. I don't take that shit from anybody.
My answers don't "come from within the industry," they come from "understanding the subject matter we are discussing" and "thinking through the implications of what we are saying."
If you can't handle having someone challenge your logic in any way except accusing your hostess of bad faith, then . . . you're a being a jerk.
"sdtfs writes:
Wow, what a time to be taking MacroEcon"
Well, I always try to remember that the passion for teaching nearly always exceeds the class average passion for learning; but, it certainly is a great time to be teaching MacroEcon.
Nothing like correctly sequencing quotes from Greenspan with the subsequent financial carnage for a few fun teaching anecdotes.
Up to 9/11 it was the correct answer,...
And up till houses started dropping in value loans were priced correctly?
No, it was always the wrong answer.
The hijackers could count on an orderly response.
If chaos was embraced from the beginning perhaps 911 would never have happened.
Those who say we can't allow the GSE's to fail are EXACTLY opposite.
They MUST be allowed to fail. Yes, this time it will be ugly.
They are the impediment, not the solution.
Like this little Greenspan anecdote, decades before touting ARMs -
'In 1985, Keating hired Alan Greenspan as an economic consultant, in an unsuccessful effort to convince an oversight agency to exempt Lincoln Savings from certain regulations. Greenspan delivered a favorable report, writing that Lincoln Savings was a financially strong institution that presents no foreseeable risk to depositors or the government. (Greenspan produced similar favorable reports on numerous other banks that also failed soon after.)'
Charles Keating - Wikipedia, the free encyclopedia
Tanta tart flambee - which says 'bite me' before devouring the person it is served to.
Tanta,
I like you (from what I read). I was not accusing you of being a Shill and honestly don't mean to offend you.
As you say:
My answers don't "come from within the industry," they come from "understanding the subject matter we are discussing"
This is my point. As my analogies point out those with an understanding of the subject matter dealt wtth the tools they are given and revert to their training and experience.
Just like the cops who surrounded Columbine and allowed the kids to slaughter others did as they were trained. They weren't shills or bad people. (not to imply you allow others to be slaughtered
.
It's just that those in the know, by definition aren't.
If a citizen ran up to the cops that day and said "hey can't you just go in there without a plan and get them?" They would have been thought of as an unknowing, shoot from the hip, loose cannon with no understanding of police work.
Guess what....now our plan for school shootings...is....there is no plan...go in and do what you can...good luck.
Free market....high risk....deal with it. Reality came up with this plan. No cop could or would have.
I think the answer lies outside those who have traditionally had the answers.
Just encouraging others to think outside the box.
If "experts" say that can't work....they may be wrong.
Perhaps an understanding of how things traditionally work is a handicap for seeing how things will or should work going forward.
That's all I was saying.
Certainly wasn't given you shit.
Average Joe - you aren't the same "Average Joe" who's commented here in the past, are you?
Or have you recently taken up huffing?
Fight Club neither identifies the problem nor proposes a solution. It simply proposes "chaos" as the substitute for thought. Similarly, Average Joe is nothing but a troll, and should be treated as such.
Or, AJ, you could always go read Bookstaber's "A Demon Of Our Own Design."
The precise quantification of risk has always been central to man's economic advancement. Disliking that fact, or attempting to avoid it through gratuitously ignorant strawman arguments, won't somehow make it go away.
It's just that those in the know, by definition aren't.
Oh, I see. You aren't insulting me personally, you are insulting everyone who knows more about financial economics than you do. Well, then, don't take "jerk" personally. Anyone who would make the claim you just did is a jerk; you shouldn't take it personally.
You are seriously fooling yourself here. It may be that those "in the know" will not always respond correctly to a novel situation. But it is pretty much a sure bet that those who don't know nuthin' 'bout nuthin' will never respond correctly to any situation that requires knowing something whereof one speaks.
The answer to any particular failure of police tactics that may have occurred at Columbine, for instance, was not to put high-school kids or grieving parents in charge of the police force. Nor does any such failure mean that the local cops were totally stupid and incompetent and we should abolish police because they don't do anything right.
However, you seem dangerously close to making that argument about the GSEs.
Ok.
Well.
Henry Ford probably knew "nothing about nothing" when it came to blacksmiths.
He probably knew more about the future of that industry than the whole of the blacksmiths.
It wasn't the "failure of police tactics" it was the existence and reliance and dependance on them.
The future of home lending won't be dictated by the current home lenders.
Time will prove one of us right.
Nuff huffing for me.
F&F should be trying to squeeze more out of their current position, given that the same NYT's GM is repeating weeks stories about how they are insolvent.
They need money, similar to the way the airlines need money to lose less on their operations. So charge a fee for checking a bag or $5 for the free snack or whatever.
In retrospect F&F didn't charge enough for risk so as long as they have that charter, they should try to claw back some of their losses. Only 1/8% sounds pretty wimpy.
Good blog. You summed it up well on the issue of risk premium(s). The thing is that mtg credit has been taken for granted by the entire country for a long, long time. Now we will get a lesson in risk and it's price adjustments in the mtg market that will be passed along to the nit-wit consumers we call homeowners/homebuyers... It will take a lil' while to sink in though.
you can't make up a negative margin on volume
Dammit!! Why didn't somebody tell me this earlier?
It's one of those "step 2" issues again:
1) Buy loans that can never be repaid
2) ???
3) Profit!