Free Republic
Browse · Search
News/Activism
Topics · Post Article

To: Pete; AdamSelene235; Grampa Dave; Nick Danger; RJayneJ
"Agencies can default, and the type of inflation the Fed needs to get going to make all housing credit good, will certainly bring back an inverted yield curve, causing the prices of mortgage securities to plunge."

Most people don't even know what that means, so I'll help out.

What Wall Street calls mortgage securities is what you call your home mortgage. Wall Street trades home mortgages like you trade stocks online.

Well, if the trading prices for those securities plunges, then someone is going to pay less for your home mortgage than what the bank gave to you to buy your house. A $150,000 home loan might be sold for $140,000.

Now, what America needs is a simple law that says that home owners get an email notification if their own home loan note is being offered for sale at less than face value.

Wouldn't it be cool if you could purchase your own mortgage back at a discount! The bank gave you $150k to buy your house. Then some banker who owned your $150k mortgage note got scared and sold it back to you at a firesale price (say, $100 grand). Talk about dropping your monthly payments!

But such a law would have another effect: it would add new buyers into the mortgage market. The potential for a large-scale shock to the system would forever be mitigated by the sheer numbers of new mortgage buyers on the secondary market.

You'd get access to reducing what you owed. The mortgage market would gain yet another safety net. Home values would be further shielded, too.

13 posted on 08/21/2003 7:49:15 PM PDT by Southack (Media bias means that Castro won't be punished for Cuban war crimes against Black Angolans in Africa)
[ Post Reply | Private Reply | To 3 | View Replies ]


To: Southack
The bank gave you $150k to buy your house. Then some banker who owned your $150k mortgage note got scared and sold it back to you at a firesale price

What does that $150k note say? "Joe Blow will pay you $1k a month for the next 28 years" (the house owner is 2 years into his mortgage)? Isn't that note worth a lot more than $150k to someone that wants to buy it? How would you determine what its value is worth?

Bear with me as thinking about this makes my head hurt. Perhaps I should write a computer program if I knew all the variables involved.
20 posted on 08/21/2003 8:24:17 PM PDT by lelio
[ Post Reply | Private Reply | To 13 | View Replies ]

Free Republic
Browse · Search
News/Activism
Topics · Post Article


FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson