S&P: Delinquencies Surge for HELOCs and Jumbo Prime Loans
Submitted by
CalculatedRisk on Thu, 03/12/2009 - 11:01am (82 comments)
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Stunning but not surprising.
The baby boomers: Delinquent as children, delinquent as adults.
This comment thread has been HALO-IZED by CRbot.
http://realize.org/cr/halokit.php?halourl=http://www.haloscan.com/comments/calculatedrisk/2443269886465822168
home-equity lines of credit and prime-rated jumbo mortgages
One was used to pay another so the parallel performance should be expected
OT FCX 37. Sold too early oh well.
Robert McTeer, Ph.D.
Distinguished Fellow
National Center for Policy Analysis
Former President of the Federal Reserve Bank of Dallas
testimony to the House Finance Committee on
MARK-TO-MARKET ACCOUNTING:
"Thousands of banks, thrifts, insurance companies and credit unions who had absolutely nothing to do with making or securitizing subprime loans are victims"
I'm so glad the government has decided to make me a bank shareholder.
I bet the bondholders have happy to have that $700 billion dollar "placeholder" in the new budget too!
I'd argue that the prime jumbo customers have an outsized influence on all consumer spending in the economy. Rising prime jumbo deliquencies is very bad news.
I guess the S&P didn't see this coming, either! Oh well, better late than never. What about the other ratings agencies?
GRRRRRRR!
In other news, just why is the market up THIS high today?
Someone please explain.
In other news, just why is the market up THIS high today?
have you been watching the House Finance committee circus - they're going to legislate changes to mark to market if the regulators don't -
Not if Ron Paul has a say, he's the ranking member.
Oh I'm sorry RP is on the Banking comity.
FWIW, the market was very oversold, and on a point and figure chart showed a "low pole" on more than one index (depending on your box size) so the rally wasn't that unexpected, and anyone short with big profit would have been smart to "take profit"
Clearly Obama did something to singlehandedly save the economy. I mean, if he's responsible for the market tanking up until Monday, surely he's responsible for the rally.
Can a walkaway work with a HELOC?
Man, glad I'm not short. Game is over for those suckers who were late to that game. Just like the bulls who bought in to the market in early 2007 when it ran for no good reason. Only idiots trade on momentum.
CR,
Was the discrepancy between CoreLogic (?) and Zandi's negative equity estimates due to HELOCs?
The market is up because people are buying into the OPEC meeting, they'll sell off after it closes.
How are unemployed people going to be able to continue to pay their mortgages?
We have 5.3 million existing unemployment claims. What is the average payout of unemployment benefits, $300 per week?
$300 X 5.3m = 1.5 billion/week or 6b/month. Is my math correct? So $1,200 per month/person is just not going to be enough to make the mortgage payments. And how about the 6b a month payouts, aren't states going to run out of money to pay claims? Yes but the federal government will have to pick up the tab, what about that?
I really hate to speak ill of the dead but I took some serious abuse a few years ago for predicting this exact consequence.
Care to explain your prediction?
Nemo
I really hate to speak ill of the dead but I took some serious abuse a few years ago for predicting this exact consequence.
RD,
At least you're not a Cassandra anymore.
Good gourd, Zuzu - who would refi at 150% rather than walk or run?
Nicklaus doesn't have a thing on this Bear Rally. Either these folks know something I don't, or they're absolute suckers. Me thinks it's the latter. In fact, Dope Theory explains it nicely.
Must have something to do with OPM, like the 401K suckers money.
Godman Sucks annoucnbes a $5B FDIC bond deal. I love how all these good banks are clamoring to get the PR newsbite out that they are so healthy and want to repay tarp. This as they are issuing FDIC backed debt as fast as they can. This is also a direect subsidy by taxpayers to the tune of 300-400 bps a year. When is someone going to write the storyu of the FDIC backed debt. This is abhit like the FHLB dumping ground used by the GS advisory council in the runup to the Countrywide. Every FDIC backed bond is a direct attempt by the banks to take more hide out of the taxpyers. This entire program is a disgrace.
RE: Godman Sucks annoucnbes a $5B FDIC bond deal.
Actually, Goldman Sucks is paying the FDIC to insure the bonds... so it's not a complete rip-off to taxpayers. It's similar to muni's buying insurance from MBIA or AMBAC... execpt that the FDIC is still AAA and those companies now all but illrelevent.
I think the rate for FDIC insurance is like .75%. The real question is how that compares to other private bond insurers.
At least you're not a Cassandra anymore.
Cassandra to Pariah is a promotion?
Rob Dawg, at least as a Pariah, you know someone was listening...
When interest rates fall, long dated cash flow assets (like mortgages) are supposed to increase in value. The assets the banks want to mark to myth are performing against all past history. Big red flag.
The Treasury's baseline economic scenario is a joke too. A smokescreen to avoid taking losses and allow more looting.
Enough of the fraud and make believe. I say cram the losses down the bondholder's throats.
the problem is you are rapidly becoming the bondholder via the fdic that is the great irony as the banks rush to offer fdic backed debt. BAC just offered 8B and goldman coming with 5B. The new scam
The bond holders need a buzz cut.
Bondholders ought to take their lumps. Eventually they will.
Eventually.
--bj
Cassandra to Pariah is a promotion?
Probably not. But at least you can say: I TOLD YOU SO!
BTW, that will make the pariah issue more acute.
"We need President Obama to go out there and give people hope, like FDR and Regan did so that they will have confidence to go out an buy a new car or a washing machine"
are these people insane? (rhetorical)
S,
Bondholder isn't so bad. It's being obligated to paying off debt in foreign currency as with some of the FDIC backed bonds that is substantively different
Madoff
Documents released on Tuesday estimated the combined worth reflected on client statements at $64.8bn
a new record! victim's statements should be interesting, it's American court so good chance of excerpts being televised
He copped a plea, so there will be no trial to televise unless a civil action is brought. Which will probably happen.
"He copped a plea, so there will be no trial to televise unless a civil action is brought. Which will probably happen."
No, he didn't.
They charged him, he pled guilty.
No deals.
I'm glad there's not going to be a trial of the millennium televised. That means the Rupert Murdock's of the world will not be reaping the benefits from ad revenues with an OJ style human interest story being broadcast 24/7.
“"We need President Obama to go out there and give people hope, like FDR and Regan did so that they will have confidence to go out an buy a new car or a washing machine"
are these people insane? (rhetorical)
Yes, the are. Buying more crap we all don't need will do the trick and keep the game going.
Out of curiosity, are HELOCs and mortgages generally non-recourse loans?
Wow.... just... wow.
Thank glod I bought some calls.
Still weeping for my Sep SPY 50s though.
Sounds like a perfect recipe for a 250 point rally....
they are only making it worse.....but thanks for the opportunity to load of more shorts.
Ciao
MS
On my block of 28 houses we now have our 3rd foreclosure. One was bought, and now people are in it. The other 2 are empty.
listening to this idiot isaac and mcteer on the House circus on the one hand and seeing cnbc running an interview with the B. Westbook is beyond painful. Brian Westbrook should be taken to the gallows. It is a referendum on CNBC that this guuy could be put on television.
There's always his wife's trial to look forward to.
The longer they put off an OJ style trial, the less valuable the story becomes and people forget. I see millions of potential ad revenue dollars flying out the window every day there is not another OJ style trial.
There is a tremendous amount of cash on the sidelines. We won't respect capital again until people stop jumping into momentum driven rallies. And as anyone who has seen a compulsive gambler, that doesn't happen until the gambler blows his wad.
It's just air dollars on the sidelines. Forbes billionaires lost 1.25 trillion last year.
This is not an "organic" rally.
holy short squeeze/bear rally/start of new bull/sucker rally/age of Aquarius/chance to get more short. take your pick of reason behind it, whatever suits you, but i don't see how % moves this great are a sign of a healthy market. i could be wrong, but huge moves eaither way on a regular basis aren't healthy.
Sears Tower is now the "Willis Tower" because the london insurer is consolidating its offices into it
How's that hedge fundy thingy going Lampert? Maybe you should have just stayed in bed today
that's fairly obvious Gav.
Ciao
MS
What is he smoking?
Geithner Expects ‘Many’ Banks Will Repay Government TARP Funds
By Robert Schmidt
March 12 (Bloomberg) -- U.S. Treasury Secretary Timothy Geithner said he wouldn’t prevent banks from returning government capital and predicted that “many” would.
Still, Geithner urged firms that get money from the Troubled Asset Relief Program to keep it until they can replace it with private capital to “provide lending to the economy.” Restoring the flow of credit will help consumers and businesses struggling in a recession, he said.
The TARP funds are nothing. I'd like to see the banks operate without government guarantees.
TARP funds are nothing. I'd like to see the banks operate without government guarantees.
SP has no credibility...
Wow.. just sold UYG and get some FAZ calls with house money. Wish me luck guys
These geniuses are going to blow their entire wad (we're profitable this quarter, we're going to return TARP, consumers are buying, etc.) and then what are they going to do when alt-a and prime hits? What soothing words will they present then?
dogmeat?
- NY Times
Bank of America Corp <BAC.N> Chief Executive Kenneth Lewis said on Thursday the largest U.S. bank was profitable in January and February and said it should be able to ride out the recession without new help from the nation's taxpayers.
Lewis joined Citigroup Inc's <C.N> Vikram Pandit and JPMorgan Chase & Co's <JPM.N> Jamie Dimon among chief executives to say their banks were in the black this year.
He also said Bank of America will make money for all of 2009, after reporting the bank's first quarterly loss in 17 years for the October-to-December period.
Since we already have zombie banks, why can we not have fictional profits?
beach-
something most people are wholly unaware of. Honestly I stopped counting at about $7t when you factor in repo's starting in late '06.....this is just noise to me nowadays.
The gubmint guarantee amounts to nothing more then a used-car salesman saying "trust me".
Really that's about all it's worth too.
Ciao
MS
Honestly I stopped counting at about $7t when you factor in repo's starting in late '06
Jumping the shark. You can't just add together a succession of one-day loans and think you're getting a meaningful total. Or do you think the Fed doesn't actually settle the repos as they expire?
i told you its ok! now back to 9000! then 10000 then 11000! :-$
You didn't see CNNHN's epic white ford bronco coverage of the plane with malfunctioning landing gear in detroit yesterday?
Anonymous says:Today, 3:59:55 PM EDT
SP has no credibility...
To quote a frazier - I mean phrase: the market can remain irrational longer than you can remain solvent.
"i told you its ok! now back to 9000! then 10000 then 11000!"
If we're going to 11,000 -- might as well keep going. At that point there'd be no stopping the momentum. Seriously. 36,000? Highly achievable. 100,000? Why not. Toilet paper, baby. Be careful what you wish for.
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We are not sub prime anymore--we're all delinquents.
Is it possible that everybody who bought in the past ten years might well go underwater? Scary.
Almost bought the neighboring house in '02; dodged the bullet. It might sell today for what I offered then. But next year?
A set of infinite repo's is not by any stretch of the imagination "settling" at all.
Sure you can have payment settled at each expiration however it's what that money was used for that is most important here. But the rub is that even though it was settled...it was replaced at the same rate.
There is nothing temporary/settled with a system that was used at will to bloat the market upwards.
Ciao
MS
Sure you can have payment settled at each expiration however it's what that money was used for that is most important here. But the rub is that even though it was settled...it was replaced at the same rate.
To take a simplified example: 100 one-day loans of $1 million each is the same as a 100-day loan of $1 million--it hardly changes anything if the borrower comes in every morning to wave the $1 million, or to hand it to the lender just to get it back again.
It is NOT the same as lending $100 million.
Saying the Fed injected $6T through repos in the past two years is simply absurd. Or intentional obfuscation.
to add Yalt...I don't believe they settle them out for one New York minute....DO you?
Looking at the Fed's balance increase it's fairly obvious to me that they don't intend to for a very long time period.
Ciao
MS
EHP,
You say the FDIC is borrowing in other currencies? What percent of the total so far?
I miss Tanta.
As do we all. :'(
I really wonder what kind of assumptions about prime, jubmo mortgages are built into the stress tests. Many have commented (and my own experience agrees), that the high end housing markets are just BEGINNING a downturn.
I don't think we can call any kind of bottom or feel comfortable that banks are adequately capitalized, until the "jumbo" shoe drops.
In Bankrate's weekly rate survey, rates on jumbos and home equity loans have jumped recently. We figured that defaults and delinquencies were responsible for the rise in HE loan rates. With jumbos, it's harder to figure out what moves rates.