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Housing Bubble Bursting?

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CDO to bite subprime snitzel

S&P: 353 CDOs exposed to possible downgrades

SAN FRANCISCO (MarketWatch) -- More than 350 collateralized debt obligations are exposed to possible downgrades of subprime residential mortgage-backed securities, rating agency Standard & Poor's said on Tuesday.

Roughly 13.5% of all U.S. cash-flow and hybrid collateralized debt obligations (CDOs), or 218 deals, are exposed to the downgrades, S&P said. Another 135 synthetic CDOs are exposed, the agency added.

Of the 218 cash flow and hybrid CDOs exposed to S&P's possible downgrades, 168 mainly hold BBB-rated tranches of subprime RMBS, the agency said on Tuesday, while 42 invested in mainly AAA and AA rated parts.

All of the 135 exposed synthetic CDOs invested in mostly BBB-rated RMBS tranches, S&P added, noting that they were set up in either 2006 or 2007.

Synthetic CDOs are built with credit derivatives that are linked to a portfolio of assets, such as mortgage-backed securities. Cash flow CDOs contain asset-backed securities and the payments from these holdings flow to the CDO investors.
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o'but a gander of a wonder about the coming assunder to the lenders with the "down unders" and where their plunders can all be blunder'd on some appraisers' papered numblers chosen by those 'preciate "get it done" grumblers....poor ole ap-ing stumblers....marriage of joint tumblers, as in cell and sell...........well, well.....tale of tails...tell of tales...????
 
S&P's possible downgrades,
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S & P's Economist said probably 90% of the ones under review will be downgraded. He also said the impact is impossible to predict because Hedge funds cannot be examined like bank or Insurance company records.. The tumble could be very large and the Stock Market certainly got the jitters today because of it.

Again the Wall Street Gurus keep saying "No contaigin" The rest of the economy just keeps hopping along...except the furniture makers, builders, sheetrock factories, lumber companies, home improvement stores, appliance dealers and manufacturers.."No contagin?"

It's like looking a big black cloud coming up over the horizon with lightning bolts out of it and you are saying, "Well, it isn't raining now, so I suppose it isn't going to soon."
 
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"It's like looking a big black cloud coming up over the horizon with lightning bolts out of it and you are saying, "Well, it isn't raining now, so I suppose it isn't going to soon."

I'm wearing a gortex suit, and have bought a zodiac.
 
Duh!

Why a rising median price means nothing.
SAN DIEGO – July 11, 2007 – While the subprime U.S. real estate market is in the dirt, high-end U.S. homes are in clover, an analysis of nationwide home sales published Wednesday showed.
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“The low end is getting creamed. The middle is struggling. The high end is running on its own dynamic,” Moody’s Economy.com Chief Economist Mark Zandi told the Times.
Copyright 2007 by United Press International
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It's been obvious for more than a year.
 
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Mortgage Worries Hit Alt-A Market

Fears That Subprime Mortgage Problems Will Spread Hit "Alt-A" Lenders

NEW YORK (AP) -- Shares of some mortgage lenders fell Wednesday as investors worried that problems in the subprime mortgage market could spread more widely in the industry.

"If it gets worse, the next area to see losses and price declines is the alt-A market," said Bose George, an analyst at Keefe, Bruyette & Woods Inc.

Shares of American Home Mortgage Investment Corp. and Impac Mortgage Holdings Inc., which both primarily originate alt-A mortgages, fell sharply in midday trading.

Shares of IndyMac Bancorp Inc., another alt-A lender, fell 65 cents to $28.56 during midday trading.
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Subprime-bond Carnage

ROOF CAVES IN

July 11, 2007 -- Wall Street is bracing for a nearly $2 trillion washout over the collapse of hollow and shaky mortgage bonds, triggering fears of a recession worse than the dot-com bubble bursting.

A stunning first step in that grim outlook came yesterday when two credit rating agencies - Standard & Poor's and Moody's Investors Service - abruptly pulled the plug for the first time on a protective layer of respectable ratings that have cloaked the underlying, deep weaknesses of mortgage securities awash in the economy.

It sent shock waves through the market, triggering worry among investors that a domino effect could spread in the coming weeks throughout the nearly $2 trillion in mortgage securities.

Some economists are alarmed that shaky mortgage paper - which could be exposed to be worth barely 60 percent of current purported values - are parked throughout the investment world in mutual funds, hedge funds, financial institutions and other investment pools around the world.

Analysts say that there could be a wholesale stampede to unload any newly tainted securities, causing a scramble for capital and forcing hedge funds to give back billions to rich investors.

"This is a disaster," said Peter Schiff, CEO of Euro-Pacific Capital, who predicted the mortgage meltdown and slowdown a year ago. "I fear that this is going to be worse than the dot-com bubble. That was just a warm-up. This is the main event."

Meanwhile, the market for the new securities and their recycled derivatives, called collateralized debt obligations, is quickly collapsing, closing the window for underwriters to earn back their money.
But when the credit rating agencies formally downgrade their mortgage securities later this week, it will force many of CDOs in limbo to be reevaluated for realistic prices that could be as much as 40 percent lower than on the books.
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Steve Owen said:
A little more detail on the same subject:

http://www.nytimes.com/2007/07/11/business/11leonhardt.html?th&emc=th

Perhaps the housing bubble burst mainly effects people who don't manage credit well... and construction companies driven by speculation.
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From the article ... "Remember, it’s not as if the wealthy are immune to irrational exuberance. Just think back to the 1990s — or the 1920s. Any asset can end up becoming overvalued. Right now, though, there is a bit more of a rational explanation for home values at the high end of the market."

So this is saying the affordability and fundamentals are supported by the wealthy in those markets. The problem of affordability and lack of fundamentals is in the entry to mid level markets and seems to be the case across the nation.
 
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