Posted on 09/26/2006 5:17:21 PM PDT by GodGunsGuts
OCTOBER 2, 2006
NEWS & INSIGHTS
Bad Blood Over Bad Loans
Mortgage defaults are rising. Wall Street thinks banks should mop up the mess
Everyone involved in the mortgage business got rich during the housing boom, including Wall Street. The biggest firms bought all the loans they could get their hands on, repackaged them, and sold them for a fee to hedge funds and other investors. Mortgage-backed securities issuance soared from $184.5 billion in 2000 to nearly $1 trillion in 2005, generating more than $1 billion in fees last year.
But now that the real estate tide is ebbing, trash is starting to wash up on shore. Mortgage delinquencies are zooming -- bad news for the banks, Wall Street firms, and investors holding loans.
In some cases, the original lenders are taking the biggest hits...
(Excerpt) Read more at businessweek.com ...
Is your other name Earth Solvent?
ping
Was the first think on my mind too lol! THey are coming out of the wood work tonight! We may see a good ZOT! before the night is out.
Opportunity abounds.
Ping. The sky is falling AGAIN.
Earth Solvent?
LOL. It's amazing.
Or Willie Green?
The real opportunities won't present themselves until real estate falls much further IMO. But you are right, there will be some great buys in a couple of years.
A year and a half ago you could get a 100% Option ARM and pay 1% the first year. Now you would have to do two loans 90-10 or 80-20 to get 100% and your credit score would have to be 720+. Your loan would be 4% fixed or 3% ARM for five years.
My wife and I left a corrupt company where other officers would knowingly submit loans with false info. Way high stated income, personal residence when it wasn't, and so forth and so on.
Some of these borrowers have seen a serious increase in their payment with rising rates, especially those tied to LIBOR index. And some of the associates in that company are upside down with their own homes.
The worst problem is those who MUST sell now for some reason. They borrowed 100%, the market went down, the payment went up and they will have to sell way short to get out.
We are turning some of our clients who have to move, from sellers to buyers.
I am a planner and have a license. We recommend certain hedges to our clients to avoid what folks are going through now. But what I've seen and heard from some clients tells me the loan business is a land mine even in the best of times.
For straight-ahead real estate, I would tend to agree, just now at least.
I'm thinking a bit more in terms of hedging portfolio risk, and taking the opposite side of bad portfolio layoffs.
==I'm thinking a bit more in terms of hedging portfolio risk, and taking the opposite side of bad portfolio layoffs.
I'm not sure I follow you. Would you mind fleshing your comment/strategy out a little more?
Where is Mr. Optimist? He's been awfully quiet as of late.
I still have a lot to learn and these threads and links are part of the process. I was looking at the ocean from the living room and was trying to see signs of a bad market. LOL! Thanx.
Jamie Gorelick. Bad policy, bad loans, bad books, grab bag for the closed circle of the charmed.
He got banned some time ago. Not sure exactly why.
How would it work out though? If the borrower has almost no equity, any drop in prices means the lender takes it in the shorts.
This whole thing could make the RTC debacle look like a lemonade stand by comparison.
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