Thread: Subprime Market

These lenders did it to themselves and we will pay for it. Same with the countries enormous credit card debit.

Is the Sub-Prime “Garbage” 6% or Rather 50% of the Mortgage Market? And the Worst Housing Recession in Decades...
Nouriel Roubini | Feb 28, 2007
Now even mainstream media and mainstream analysts regularly speak of the sub-prime “meltdown” or “carnage” and refer to these sub-prime mortgages as “garbage” or “trash”. Since most of these sub-prime mortgages were junk that should have never been originated in the first place, now the new spin in financial markets is to minimize the nature of the problem by making two arguments: first, sub-prime loans are only a very small fraction of the housing market, specifically only 6% of it; second, sub-prime problems are a niche problem that is not affecting other parts of the mortgage market. Both arguments are utter spin without any basis. Let us see why.
Where did the Mortgage Bankers Association (MBA) get the “sub-prime is only 6%” figure that it is spinning around in every possible media? Their trick is to consider all homeowners, even the 35% of homeowners who do not have any mortgage and then argue that only 6% of homeowners are sub-prime borrowers. Why is this spin and why is the actual figure for “garbage” mortgages actually closer to 50% of the flow of new mortgages in 2005-2006 rather than the “6%” being spinned around? Several reasons.
http://www.rgemonitor.com/blog/roubini/180573/

Nouriel can be a pretty negative in his comments, but at least we know where he’s coming from and we don’t get the media “spin” we normally see in other e-rags.

Originally Posted by Show-me

These lenders did it to themselves and we will pay for it. Same with the countries enormous credit card debit.

What was that theory in the 60’s…the domino effect. Can the weakness in sub-prime lead to weakness in other lending areas, credit cards which leads to something else?

But your right, we all end up paying for these screw ups, lets just hope we can afford the price tag.

http://www.financialsense.com/editor...2007/0227.html

NEXT LEG DOWN IN HOUSING?
by Richard T. Williams, CFA, CMT
Director, ICAP Equity Research
February 27, 2007

The market amazed us for about 5 or 6 new highs along a progression that we thought would have been almost ideal for a turning point. But it was not to be. Even with the BOJ raising its lending rate to .5% from .25% didn’t have the expected impact on stock prices. The inflation figures came out worse than expected, at least nominally fulfilling Fed-head promises to hike rates if pricing doesn’t slow down and decline. But that was shrugged off as a rounding error! Now we are hearing that our thesis that housing price declines have not yet reached investors ears because of the 90-day delay in reporting home sales. That coupled with commentary from several housing stock mgmt teams points to another down leg in housing very much along the lines predicted in prior notes and comments.

If this is not a dead cat bounce, then I don't know what is. Are people that stupid these days? Especially with the internet and all. This company is about to be investigated and they might be done with the real estate business. Heck, they might be done period.

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"33
lenders have now gone kaput"

"Deep Thought Of The Week
~ Bear Stearns analysts upgraded New Century (NEW) one day before the company announced it was breaching covenants with its warehouse lenders, which was also the same day it came to light that NYSE and state criminal probes had been opened against the company for trading irregularities. Bear Stearns is itself heavily involved in mortgage lending at almost all levels. How credible does all this make Bear Stearns, I wonder? ~"

http://ml-implode.com/


The idiots that are buying New Century(up 30% today) are going to get spanked!

Oldcoin, So 6% is actually 50% of all mortgage loans issued. That seems a bit excessive in the industry. So what should be the correct lending rate?

Either that, or all that sidelined money is going to find its way into a cheap real estate mortgage lending company venture.

Originally Posted by 350zCommTech

The idiots that are buying New Century(up 30% today) are going to get spanked!

Originally Posted by Fivetears

Either that, or all that sidelined money is going to find its way into a cheap real estate mortgage lending company venture.

But when it's all said and done, their stock might eventually be worth less than $1 a share. What was Enron's stock price after the blow-up?

Originally Posted by Fivetears

Oldcoin, So 6% is actually 50% of all mortgage loans issued. That seems a bit excessive in the industry. So what should be the correct lending rate?

Did you read the whole article? Here are his reasons why he thinks it should be closer to 50% of all mortgages:

• Sub-prime are now 13% of the stock of mortgages, not 6%.
• Sub-prime mortgages were at least 20% of mortgage originations in 2005 and 2006.
• The same “monster” lending practices used for subprime mortgages were also used for most “near-prime” and “prime” mortgages.
• Many pseudo “near-prime” mortgages (such as Alt-A) are undistinguishable from sub-prime ones and have now sharply rising default rates
• What is defined as sub-prime is subject to highly cosmetic accounting by banks: the rule that FICO scores of 660 or below are sub-prime is often diluted down to 630 or even 620 to exclude many mortgages from a sub-prime classification.
• Counting all of the categories above, subprime-like mortgages accounted for almost 50% of all originations in 2005 and 2006 not the 6% figure spinned by the industry lobbies.

http://www.rgemonitor.com/blog/roubini/180573/

I did. I get that. Just what should the lending rate be? Prime? 1% over? 1% under? I'm just trying to understand this. I climb in jet fuel tanks for a living.
So is my taking advantage of a fixed 4.75% home mortgage offer, one those sub-prime mortgages talked about? Just curious, and need to understand.

Originally Posted by 350zCommTech

Did you read the whole article? Here are his reasons why he thinks it should be closer to 50% of all mortgages:

• Sub-prime are now 13% of the stock of mortgages, not 6%.
• Sub-prime mortgages were at least 20% of mortgage originations in 2005 and 2006.
• The same “monster” lending practices used for subprime mortgages were also used for most “near-prime” and “prime” mortgages.
• Many pseudo “near-prime” mortgages (such as Alt-A) are undistinguishable from sub-prime ones and have now sharply rising default rates
• What is defined as sub-prime is subject to highly cosmetic accounting by banks: the rule that FICO scores of 660 or below are sub-prime is often diluted down to 630 or even 620 to exclude many mortgages from a sub-prime classification.
• Counting all of the categories above, subprime-like mortgages accounted for almost 50% of all originations in 2005 and 2006 not the 6% figure spinned by the industry lobbies.

http://www.rgemonitor.com/blog/roubini/180573/