“What does that bovine scat mean?”
Uh, the principal and interest payments from the homeowners go to treasury.
99% of the loans are “performing” -— that is, the people pay.
So what do I "own"?
So then you are saying you support the nationalization of the banking industry (or at least the home mortgage part) and the last big step into socialism/communism?
They will stop paying once they realize they are upside down on their mortgages and just walk away.
If 99% of these assets were peforming, there wouldn’t be a crisis.
If 99% of these assets were peforming, there wouldn’t be a crisis.
You need to do some research. This is what the taxpayer will get, in just one of WaMu’s pools. Note the numbers well.
* The total pool size is $513,969,100.
* $476,069,000 was rated AAA.
* 92.6% of this cesspool was rated AAA.
* Yet 15% of the whole pool is in foreclosure or REO after a mere 8 months!
Mish takes us on a magical mystery tour of a recent (mid-2007) WaMu mortgage pool in this post. It is certainly enlightening. He finds an interesting anomaly: there are more loans showing up as foreclosures than can be explained by pre-foreclosure delinquencies. He suggests that this might mean a significant number of people are simply walking away.
We think this is likely. Further, we take his analysis a step farther, and combine REOs with the foreclosure number. From Dec 2007 to Jan 2008, then, there is an increase in these two piles of 6.11% (relative to the total mortgage pool). Dec 2007 had only 3.79% of loans 90-day delinquent, meaning 2.32% of the loans in the pool, in one month, came from out of nowhere or earlier stages of delinquency (probably walk-aways).
In one month.
Other interesting factoids in this pool include:
* That it is post-subprime-collapse (mid-2007), even though all the talking heads have been saying the problems are mostly localized to late-2006 vintages of mortgages from before the break down of the secondary market.
* That it’s not subprime.
* That the average credit score is about 705. Mish alludes that something might be wrong with FICO; we’d suggest something was wrong with debt burdens, and something is wrong with the direction people’s incomes are going.
* That 15% of this pool is already in or past foreclosure (REO), yet as Mish points out, 92.6% of the pool was rated AAA.
* It seems you can see people move through the levels of delinquency in waves. In the January snapshot, 90 and 60-day delinquencies are down, but 30-days are up. It is as if a burst of loan re-working has been going on, but is struggling against an increasing incoming pipeline of bad loans.
This is what non-subprime looks like. And WaMu has tens of billions of the same stuff (or worse).
http://bankimplode.com/blog/2008/09/24/washington-mutual/
http://globaleconomicanalysis.blogspot.com/2008/02/evidence-of-walking-away-in-wamu.html
Oh and by the way, you do know that what the bill proposes to buy is just the security and not the underlying asset, right ?
If that is true then there would be a private market for the securities. If the holders of the securities are willing to sell them to the government, and in doing so take on a number of onerous provisions (SEC audits, limits on executive pay, etc.) wouldn't they be just as willing to sell them to some private party for the same amount of money? Of course they would.
So why aren't the holders of the securities selling them, and why aren't private buyers buying them? (After all the cheerleaders for the bailout swear the Treasury is going to make a giant profit.) Because the securities are worthless, thats why!!!!