The Shifting Calculus of Buying a House

AP/ Yahoooo ^ | 10/13/2006 | James R. Hagerty and Anjali Athavaley

[Concentrate]

The report, by Moody's Economy.com Inc., a research firm in West Chester, Pa., also says that the slump won't end quickly. Indeed, according to the report, prices may keep falling until 2008 or even 2009 in some areas. In all, prices are falling or likely to decline soon in about 100 metro areas, the firm says.

So how often is Moody's wrong? If Moody's downgrades a company or an industry, that means it's already toast. Look out below!

[Concentrate]

Yes, but what happens when the loan has been sold and packaged as an MBS(Mortgage backed security)to your pension fund? Or your mutual fund? What happens then? :)

[pfony1]

"What happens then? :)"

Since you asked...

The hedge fund that bought the risky "C" strip of that MBS will probably NOT make the 25% yield its managers hoped for. MBSs are sold to investors in "strips" that offer higher yields for accepting higher risk. This means that defaults will hit the "C" strip first. Since hedge funds have been voracious buyers of "C" strips, some hedge funds may lose some of the principal they have "invested" in such "C" strips. But really, who cares?

Meanwhile, your pension fund, which has been limited by "the prudent man rule" to buying only "A" strips, will receive its interest and principal exactly as scheduled.

I gather you didn't learn about these financial details from the scare-mongering MSM...