Housing Bubble Bursting?

[23Degrees]

Wouldn't that be nice if someone with a 520 fico ended up with a fixed rate lower than mine?

Bumped into this colorful blog that takes a similar sentiment on this among other undesirable effects that would result from such a policy.

http://housingpanic.blogspot.com/2007/10/flash-now-even-FDIC-is-run-by-ignorant.html

Nice to read that somewhere someone thinks this is one bad idea. And from the mouth of the FDIC chair no less. Not sure what would be worse, this or a bailout using tax dollars. Important vocabulary word to learn for the next few years if these are the types of ideas coming from those in charge - FUBAR.

 

[moh malekpour]

Bumped into this colorful blog that takes a similar sentiment on this among other undesirable effects that would result from such a policy.

http://housingpanic.blogspot.com/2007/10/flash-now-even-FDIC-is-run-by-ignorant.html

Nice to read that somewhere someone thinks this is one bad idea. And from the mouth of the FDIC chair no less. Not sure what would be worse, this or a bailout using tax dollars. Important vocabulary word to learn for the next few years if these are the types of ideas coming from those in charge - FUBAR.

How in the world are they going to convert those adjustable subprime loans to fix rate loans when those loans are held by CDOs which are owned by European institutions or Chinese government?

Those lenders who made those subprime loans, if they are still in existance, are now only servicing those loans and cannot simply convert them to fix rate loan on their own before satisfy those bond holders and pay off the outstanding loans including pre payment penalties on them first.

 

[Tim The Enchanter]

How in the world are they going to convert those adjustable subprime loans to fix rate loans when those loans are held by CDOs which are owned by European institutions or Chinese government?

Or ground into CDO sausage, as someone commented over there.
Don't spend my tax money on anything so stupid. :new_2gunsfiring_v1:

 

[Austin]

http://hosted.ap.org/dynamic/stories/E/EU_EURO_VS_DOLLAR?SITE=VADAR&SECTION=BUSINESS

[FONT=verdana,arial,helvetica,sans-serif]EU to Discuss Economic Slowdown in US
By AOIFE WHITE
AP Business Writer
[/FONT][FONT=verdana,arial,helvetica,sans-serif] BRUSSELS, Belgium (AP) -- European Union finance ministers open two days of talks Monday to discuss the United States' slowing economy, feeble dollar and massive current account deficit as major problems for the EU and the rest of the world.
Europe is starting to feel the bite as the dollar plummets, making French wine, Italian fashion and German cars expensive purchases for the EU's main export market in the United States.
Last week, the employers federation BusinessEurope said that, by crossing 1.40 against the dollar, the euro exchange rate had reached a "pain threshold" for European companies. It also complained the euro was appreciating too fast against the Chinese yuan and Japanese yen.
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[moh malekpour]

http://hosted.ap.org/dynamic/stories/E/EU_EURO_VS_DOLLAR?SITE=VADAR&SECTION=BUSINESS

[FONT=verdana,arial,helvetica,sans-serif]EU to Discuss Economic Slowdown in US
By AOIFE WHITE
AP Business Writer
[/FONT][FONT=verdana,arial,helvetica,sans-serif] BRUSSELS, Belgium (AP) -- European Union finance ministers open two days of talks Monday to discuss the United States' slowing economy, feeble dollar and massive current account deficit as major problems for the EU and the rest of the world.
Europe is starting to feel the bite as the dollar plummets, making French wine, Italian fashion and German cars expensive purchases for the EU's main export market in the United States.
Last week, the employers federation BusinessEurope said that, by crossing 1.40 against the dollar, the euro exchange rate had reached a "pain threshold" for European companies. It also complained the euro was appreciating too fast against the Chinese yuan and Japanese yen.
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That is what US factories and workers were saying many years about the Chinese unfair export competetion with US workers and industries.
French can buy California wines much cheaper than French wine but I don't know what kinds of car US can export to europ to compete with their domestic cars

 

[Randolph Kinney]

Place your bets - if you are a saver or investor, where?

Interesting reading. The true fallout of the subprime loan debacle will be the changes in bankruptcy laws, regulation of mortgage brokers and changes in federal loan programs.

Bankruptcy today will not allow a subprime HO to keep his home. Changes in the bankruptcy law are necessary such that a court solution known as a "cram down" can be ordered where the lender or investor is told what the new principle and interest rates are on the loan and the HO keeps the house. The idea is fairness in that all creditors to a bankruptcy should be giving up something to make the borrower's plight "livable" or equal to his means of living. In other words, the lenders of credit are going to be held responsible for the plight of the borrower. It is their fault that the borrower is over extended.

Mortgage brokers are not going to have that easy credit mentality that they once had. They are going to be held responsible for determining the creditworthiness of the borrower and also the truthfulness in the supporting documentation along with loan programs that are excluded.

Lastly, we are going to see the federal government step in with new loan programs and new caps on loan limits for the various agency loans or insurance guarantees. This is probably the most important of all changes. It provides the liquidity and solvency of the mortgage industry.

Until these changes can be effective (set up, brought into existence and implemented), more people are going to lose their homes as mortgage rate resets occur and prices of homes continue to fall.

In the meantime, the FED has to act to stem the affect of the housing market and loan losses are having on the economy and global investments. The exchange for that FED intervention will be a lower dollar along with higher inflation and both have their pluses and minuses. A consequence of investor losses in products that contain mortgages will be a drying up of capital that was provided by investors to the mortgage lending industry. We see that now. As a result, a transfer of the source of funds will occur where once again, U.S. bank deposits will be the source of new loans that are government backed.

This is good news for banks. It means their cost of funds, as provided by the FED, will be declining. Their new loans will be guaranteed by the government making the risk factor very low and profitable. Banks that did not go after the subprime, ALT-A and other exotic loan products will be the winners in this down cycle. Borrowers will also benefit too. After a period of time following a bankruptcy, those borrowers can enter the home buying market once again.

This whole economic exercise is one where the consumer is tapped out, over his head, swamped with debt. This process is how to relieve a portion of that debt and to re-liquefy the consumer without deflationary affects such as falling home prices. The penalty is to savers and investors with lower interest rates and potential losses on investments. But that just ignites the cycle all over again for higher yield. Wall Street will find a way to satisfy that demand as it has done so in the past.

The shift for investors and savers will be to the foreign markets that are growing faster than the U.S. and to domestic companies that benefit from a cheap dollar by exports.

 

[moh malekpour]

Banks that did not go after the subprime, ALT-A and other exotic loan products will be the winners in this down cycle.

Can you name one?

 

[Randolph Kinney]

Can you name one?

Wells Fargo.

 

[Terrel L. Shields]

Can you name one?

Regional banker ARVEST - owned by the Walton Family - Capital Mortgage is their wholesale lender.

 

[moh malekpour]

Wells Fargo.

Randoph,
I don’t think there is any bank that was not involved in subprime or ALA loans in the past few years. Wells Fargo might not being #1 but was not totally out of it either. Even GSE jumped on the wagon and bought subprime or ALTA loans .

Here is an article about WF that said they no longer doing ALA. So, they were doing AltA but no longer are doing. isn’t it what Indymac and CW are saying now. They all saying that they are not doing them anymore but it doesn’t mean that they didn’t do it in the past

Wells Fargo, the second-largest U.S. mortgage lender, said it is no longer issuing "Alt-A" home loans through brokers, while Wachovia has stopped entirely. Wachovia also said one lending unit has temporarily halted its Alt-A production

http://www.usatoday.com/money/economy/housing/2007-08-03-mortgage-lending_N.htm