Housing Bubble Bursting?

[Lloyd Bonafide]

Can Mortgage Plan Save Subprime Borrowers?

http://www.foxbusiness.com/markets/...e-plan-save-subprime-borrowers_388104_17.html

The Bush Administration and a group of mortgage lenders are working together to create a program that would lock in those introductory rates for a longer period of time -- possibly up to seven years -- in the hope that extensions will help homeowners avoid foreclosure.


But skeptics said the plan is too complex and will not provide enough assistance to the people hurt the most.

Two real estate experts based in the hard-hit Southwest said troubled housing markets like those in Phoenix and areas of California are not likely to be helped by such a program because too much damage has already been done.


“There are too many moving parts in these markets for it to work out exactly,”said finance professor Tony Sanders at the W.P. Carey School of Business at Arizona State University, an expert on the issue of subprime financing.

The plan would place restrictions on eligibility, according to experts and the Journal report.

For instance, people would qualify if they can afford their current payments, but not their payments following an interest rate adjustment. Meanwhile, people would not qualify if they won't be affected by an interest rate hike, or, conversely, if they are already struggling with their mortgage payments.

We’re out of options but we have to do this,” Sanders said. “But, this is not going to be a smooth operation.”

Speculation holds that the government will target specific geographical areas, Sanders said.

But helping large geographic areas indiscriminately poses problems, according to Sanders and Averett.

The logistics of this seem mind-boggling, not to mention how the mortgage market and secondary market could be affected.

 

[Randolph Kinney]

Greenspan Put


A description of the perceived attempt of then-chairman of the Federal Reserve Board, Alan Greenspan, of propping up the securities markets by lowering interest rates and thereby helping money flow into the markets.

Investors assumed that they would be able to liquidate their stocks at a set price at or before a future date as if there was a built-in put option. They believed that Greenspan would manipulate monetary policy and continue to maintain market stability. While the former Fed chair's actions did have an effect on the markets, it was not necessarily his objective.

The term was coined in 1998 after the Fed lowered interest rates following the collapse of the investment firm Long-Term Capital Management. The effect of this rate reduction was that investors borrowed funds more cheaply to invest in the securities market, thereby averting a potential downswing in the markets.

On February 1, 2006, Ben Bernanke replaced Alan Greenspan as the Federal Reserve Board chairman.

 

[Couch Potato]

Logic is a poor predictor of crowd behavior.

I absolutely agree.The Mickey Mouse plan to freeze teaser rates will result in a much worse recession boarding on depression.No sane person Will purchase mortgage securities that the terms and return will change due to the whim of some bureaucrat.

So you think there is a shortage of insane people? :new_all_coholic:

The housing downturn will be stretched out for many years exceeding the home value downturn from 1925-1933.

I don't think so. Inflation is rising too fast for the downward spiral in home prices to last long. By the end of 2008 home prices will be back in line due to the rising price of everything else; due to the general devaluation of the dollar.

 

[Randolph Kinney]

Here comes the Greenspan put

Wall St. Sees Silver Lining in Economy

Investors appear to be taking comfort in the notion that the economy is so imperiled that it is forcing the government to mount an aggressive rescue effort.

Investors found reassurance yesterday in talk that the White House was brokering a deal with banks that could diminish a looming tidal wave of home foreclosures. Soothing words from the Federal Reserve earlier this week revived the hope that more interest rate cuts are on the way, drowning nervousness in a din of buying.

“The market now feels comfortable that the Fed has come to appreciate the severity of the situation,” said Robert Barbera, chief economist at the brokerage and advisory firm ITG. “The bad news gives you the blessing of lower interest rates.”

Signs point to a slowdown in the creation of jobs and investments by companies. Consumers are clutching their wallets more tightly. Banks are denying loans to many businesses, unwilling to bet scarce capital in a time of risk and uncertainty. A glut of unsold homes keeps prices falling and the construction industry in distress.

The FED will be trying to get in front of the yield curve by cutting rates very aggressively. That is the message that Wall Street is hearing and reacting to.

On the home crisis front, the government is not through yet. More will be done to prop up homeowners in distress. New mortgage money will be made available to spur home purchases. Fannie Mae and Freddie Mac will be participating after the government changes the rules.

 

[Randolph Kinney]

Divining the future - can the LIBOR rate tell us anything?

So why are US Treasury interest rates so much lower than LIBOR? What does that tell us where the interest rates are headed?

 

[Greg Bell]

"If you are a borrower in the group that gets left behind by this scheme, you have a set of perverse incentives to default in order to get the break. It has moral hazard written all over it"

- Don Brownstein, chief executive of Structured Portfolio Management hedge fund

 

[airphoto]

Knowing how the financial crooks play the game, I'd wager that freezing a rate increase on any form of ARM will result in negative amortization .. they might freeze the payment level, but will add 'interest payable' to the principal of the loan ..

 

[Riick]

[/quote]

Knowing how the financial crooks play the game, I'd wager that freezing a
rate increase on any form of ARM will result in negative amortization ..
they might freeze the payment level, but will add 'interest payable' to the
principal of the loan ..but will add 'interest payable' to the principal of the loan ..

My dear friend, you haff fully not understood the
reasoning uff the ruling class. Truly, zee interest vill be
added, howsoever, ven the time to sell the properties is
coming, and zee underclass homeowner is unable to
realize any advantage in zelling zee home, our propaganda
arm - excusing me, zee newscasters -vill be all over zees
stories, and zee politiboro vill zen bail out the homeowner.
Of course utilizing tax dollars taken from the Bourgeois,
most probably in the form of a tax on the mortgage
interest taken specific for the pooorpoise of pooling undt
spreading the grief of the underclasses…. They who were
so badly abused by the Capitalist pig brokers, who would
now deny them their Bass Boats and Plasma Screens.
.
Signed
.
----------- Boris Badanoff

 

[Greg Bell]

Where's Natasha?If you freeze the terms on ANY loan which is a contract , you might as well have made a deal with Hillary Chavez.No new ARM or teaser loans will be made and the homes Sales and refi's will completely dry up.If you think the market is bad now , wait till their is no loans except a few FHA , VA and conventional 30 year fixed.Don't get me wrong that is probably the way it should have been all along during the last ten years , however , since Trillions are in these goofy floating loans it would take decades to weed them out.This little scheme will cost us plenty as they drag the recession out for another few years so the banks won't fail and the Bolsheviks can seize power at the Democratic convention.Long live Billary..Quick , buy some Beans and ammo..

 

[Randolph Kinney]

The end of holding dubious assets, even prime mortgages

E*Trade firesale seen hurting Wall St portfolios

Goldman Sachs analysts said they were surprised by the size of the discount on the E*Trade portfolio because 73 percent of the assets were backed by prime mortgages, or loans to people with solid credit.

Citigroup investment bank analyst Prashant Bhatia said E*Trade actually received 11 cents on the dollar for its portfolio, if you factor in that the brokerage received $800 million in cash minus 85 million shares it issued.

"The portfolio sale, one of the few observable trades of such assets, has very clear, generally negative, implications for the valuation of like assets on brokers' balance sheets," Credit Suisse analyst Susan Roth Katzke said.

My bold. There is going to be a problem going forward holding similar assets on the balance sheet as marked to model for banks, brokers and mutual funds; there is a market value recorded now for similar securities.

Stand back and watch the fall in value as these securities are valued according to market. Wall Street brokerages, banks and mutual funds are going to be reporting giant write downs on their portfolios containing mortgage backed paper.

What happens to lending according to FICO scores?