Alt-A Crisis Looming

05 May 2008 17:33:30

Renli

Everyone from the common man (http://www.youtube.com/watch?
v=pmeBSWI9sF8) to financial news websites (http://mrmortgage.ml-
implode.com/2008/05/05/10am-est-moodys-hits-lehman-due-to-alt-ahere-
comes-the-alt-a-crisis/) can see this coming.

Good luck, you'll need it :/

-

06 May 2008 02:37:27

Greendistantstar

Re: Alt-A Crisis Looming

"Renli" <oliver.richman@gmail.com > wrote in message
news:5774df7b-a065-40a2-8eb2-14f60436c280@q27g2000prf.googlegroups.com...
> Everyone from the common man (http://www.youtube.com/watch?
> v=pmeBSWI9sF8) to financial news websites (http://mrmortgage.ml-
> implode.com/2008/05/05/10am-est-moodys-hits-lehman-due-to-alt-ahere-
> comes-the-alt-a-crisis/) can see this coming.
>
> Good luck, you'll need it :/

Mr Mortgage is full of shit. "Negative equity is the prime cause of mortgage
defaults" ???????

Inability to pay is what causes foreclosures, not some notional value of the
property.

The vast majority of US home loans are non-recourse loans, which is is one of the
major reasons why defaulters mail the keys to the bank, trash the house before
moving etc.

Those with mortgages that are full recourse loans don't do this shit in all but
the most extraordinary circumstances.
--
GDS

"Let's roll!"

05 May 2008 21:04:48

Renli

Re: Alt-A Crisis Looming

On May 6, 10:37 am, "Greendistantstar"
<pde63539removet...@bigpond.net.au > wrote:
>
> Mr Mortgage is full of shit. "Negative equity is the prime cause of mortgage
> defaults" ???????
>
> Inability to pay is what causes foreclosures, not some notional value of the
> property.

That would be true if they were interested in keeping their homes.
They're cashing out, refinancing, remember? Therefore, negative equity
is the prime cause *given that* they are not interested in keeping the
homes. That's why the statistics are important.

> The vast majority of US home loans are non-recourse loans, which is is one of the
> major reasons why defaulters mail the keys to the bank, trash the house before
> moving etc.
>
> Those with mortgages that are full recourse loans don't do this shit in all but
> the most extraordinary circumstances.

You're right. The problem mortgages are only a small portion, as Mr.
says - subprime is 500,000 out of 12.5 million mortgages in california
for instance. Subprime is only 750,000 (and double the $ value).
However, given what subprime HAS done, alt-a seems like it's going to
hit JUST as hard /if not harder/. The fundamentals are the same,
right? if i'm wrong I'd like a specific example why not. As a banker
you're probably the most qualified of anyone to refute what I'm saying
with proper evidence. Remember, when alt-a rolls over it's basically
no recourse, right? "your payments will double and there's nothing you
can do about it".

-

06 May 2008 14:05:08

Greendistantstar

Re: Alt-A Crisis Looming

"Renli" <oliver.richman@gmail.com > wrote in message
news:08458558-5c94-4b99-aace-84242a982274@k1g2000prb.googlegroups.com...
> On May 6, 10:37 am, "Greendistantstar"
> <pde63539removet...@bigpond.net.au> wrote:
>>
>> Mr Mortgage is full of shit. "Negative equity is the prime cause of mortgage
>> defaults" ???????
>>
>> Inability to pay is what causes foreclosures, not some notional value of the
>> property.
>
> That would be true if they were interested in keeping their homes.

The value of the home is only important (in the case of default) if it's a full
recourse loan.

> They're cashing out, refinancing, remember?

Refinancing is one of the ways non-recourse loans turn into full-recourse loans.
A curious system, but that's what they have.

>Therefore, negative equity
> is the prime cause *given that* they are not interested in keeping the
> homes. That's why the statistics are important.

No it's not, Ollie. non-recourse means the bank can only get $ owed from the sale
of the property...they can't sue you for the shortfall.

If they can, it changes the borrower's attitude...they do their best to 'stick it
out' especially if they have 'hurt money' in there ie a sizeable deposit.

This is what happened in the UK in the early 80s....lots of people got stuck with
negative equity. It isn't a huge problem if you have a good cashflow and can
weather the storm.

It's not a crystallised loss unless and until the property is sold, merely a
notional one.

For instance.... that new car you bought today probably dropped 10%+ of it's
value the moment you drove it out of the dealership....that doesn't mean you're
gonna rush out and sell it to crystallize that loss.

>> The vast majority of US home loans are non-recourse loans, which is is one of
>> the
>> major reasons why defaulters mail the keys to the bank, trash the house before
>> moving etc.
>>
>> Those with mortgages that are full recourse loans don't do this shit in all
>> but
>> the most extraordinary circumstances.
>
> You're right. The problem mortgages are only a small portion, as Mr.
> says - subprime is 500,000 out of 12.5 million mortgages in california
> for instance. Subprime is only 750,000 (and double the $ value).
> However, given what subprime HAS done, alt-a seems like it's going to
> hit JUST as hard /if not harder/. The fundamentals are the same,
> right? if i'm wrong I'd like a specific example why not. As a banker
> you're probably the most qualified of anyone to refute what I'm saying
> with proper evidence. Remember, when alt-a rolls over it's basically
> no recourse, right? "your payments will double and there's nothing you
> can do about it".

That's not what recourse is about. Here in Oz, if you default or your home loan,
they will sue you until bankruptcy for any shortfall, if they figure it's worth
it.

The worry about alt-a is a storm in a teacup. There's no evidence that these
loans are any other than the quality of paper they purport to be ie between
sub-prime and prime.

Only in a major economic catstrophe would these mortgages become shaky.

If one believes such a catastrophe is imminent and likely, then it's a worry, but
really, few pundits are seeing that any time soon.
--
GDS

"Let's roll!"

06 May 2008 08:34:30

Renli

Re: Alt-A Crisis Looming

On May 6, 10:05 pm, "Greendistantstar"
<pde63539removet...@bigpond.net.au > wrote:
>
> The value of the home is only important (in the case of default) if it's a full
> recourse loan.
> [snip]
> >Therefore, negative equity
> > is the prime cause *given that* they are not interested in keeping the
> > homes. That's why the statistics are important.
>
> No it's not, Ollie. non-recourse means the bank can only get $ owed from the sale
> of the property...they can't sue you for the shortfall.

Is that why people are walking away from their homes?

> If they can, it changes the borrower's attitude...they do their best to 'stick it
> out' especially if they have 'hurt money' in there ie a sizeable deposit.
>
> This is what happened in the UK in the early 80s....lots of people got stuck with
> negative equity. It isn't a huge problem if you have a good cashflow and can
> weather the storm.

Well, given the credit situation in america right now, and the fact
that they have the kind of mortgage they'd rather walk away from, I'd
say it's a pretty story but not worth much to someone in California
right about now. See, the thing is yeah, you're right, it's just that
what you are saying - as right as it is - does not mesh with what is
actually happening right now in the USA. What is actually happening is
a slow crash which is gouging everything. Just look at shares of
MoneyGram (MGI), for example. Poor MoneyGram.

> It's not a crystallised loss unless and until the property is sold, merely a
> notional one.

Margin calls.

> For instance.... that new car you bought today probably dropped 10%+ of it's
> value the moment you drove it out of the dealership....that doesn't mean you're
> gonna rush out and sell it to crystallize that loss.

Matter of time, Peter..
http://globaleconomicanalysis.blogspot.com/2008/05/pawnshop-society.html
http://bigpicture.typepad.com/comments/2008/05/raiding-the-401.html

> >> Those with mortgages that are full recourse loans don't do this shit in all
> >> but
> >> the most extraordinary circumstances.
>
> > You're right. The problem mortgages are only a small portion, as Mr.
> > says - subprime is 500,000 out of 12.5 million mortgages in california
> > for instance. Subprime is only 750,000 (and double the $ value).
> > However, given what subprime HAS done, alt-a seems like it's going to
> > hit JUST as hard /if not harder/. The fundamentals are the same,
> > right? if i'm wrong I'd like a specific example why not. As a banker
> > you're probably the most qualified of anyone to refute what I'm saying
> > with proper evidence. Remember, when alt-a rolls over it's basically
> > no recourse, right? "your payments will double and there's nothing you
> > can do about it".
>
> That's not what recourse is about. Here in Oz, if you default or your home loan,
> they will sue you until bankruptcy for any shortfall, if they figure it's worth
> it.

They can't do that in the states - or if they can, they're not doing
it. They're having trouble finding the mortgage in the first place,
and also finding out who owns it. Surely you know this. Surely you've
heard of all of those people who are escaping foreclosure because the
banks can't actually prove they hold the mortgage?

> The worry about alt-a is a storm in a teacup. There's no evidence that these
> loans are any other than the quality of paper they purport to be ie between
> sub-prime and prime.

That isn't true. The available from the federal reserve website states
they have a similar quality to subprime loans. Well to be precise,
running the numbers, you see that although they are actually of
slightly higher quality, they are much much higher in total value, and
it turns out that the impact actually will be more severe than the
subprime crisis once this all starts hitting in late 2008/2009....

> Only in a major economic catstrophe would these mortgages become shaky.

Lol

> If one believes such a catastrophe is imminent and likely, then it's a worry, but
> really, few pundits are seeing that any time soon.

Imminent? You mean you still don't realize the USA is in the middle of
a recession *at best*?

-

06 May 2008 08:34:48

travisgod@aol.cominyrface

Re: Alt-A Crisis Looming

> No it's not, Ollie. non-recourse means the bank can only get $ owed from the sale
> of the property...they can't sue you for the shortfall.
>
> If they can, it changes the borrower's attitude...they do their best to 'stick it
> out' especially if they have 'hurt money' in there ie a sizeable deposit.

good luck w/ that, banks.

> This is what happened in the UK in the early 80s....lots of people got stuck with
> negative equity. It isn't a huge problem if you have a good cashflow and can
> weather the storm.

There's no end to this particular storm except by hyperinflation.

People are best served by walking away.

> For instance.... that new car you bought today probably dropped 10%+ of it's
> value the moment you drove it out of the dealership....that doesn't mean you're
> gonna rush out and sell it to crystallize that loss.

Don't compare a house to a car, please. The scale of the notional
losses are orders of magnitude apart.

> That's not what recourse is about. Here in Oz, if you default or your home loan,
> they will sue you until bankruptcy for any shortfall, if they figure it's worth
> it.
>
> The worry about alt-a is a storm in a teacup. There's no evidence that these
> loans are any other than the quality of paper they purport to be ie between
> sub-prime and prime.

LOL...u really don't know, do ya?

> Only in a major economic catstrophe would these mortgages become shaky.

LOL....hahahahahahahaha...gawd, what a fool.

Alt-A paper is of exaggerated quality. These are your no-docs against
high credit scores. Fuck, man, open your eyes. Go take a look at
Mish's blog...he's got one particular WM Alt-A CDO where the fking
60day rate is like 20% already...a 2007 vintage.

> If one believes such a catastrophe is imminent and likely, then it's a worry, but
> really, few pundits are seeing that any time soon.
> --
> GDS

You very clearly do not understand how paper is rated.

Trav

07 May 2008 02:17:07

Greendistantstar

Re: Alt-A Crisis Looming

<travisgod@aol.com > wrote in message
news:3e12f80c-fc93-47d7-8b4d-b0b0575ba8ed@d45g2000hsc.googlegroups.com...
>> No it's not, Ollie. non-recourse means the bank can only get $ owed from the
>> sale
>> of the property...they can't sue you for the shortfall.
>>
>> If they can, it changes the borrower's attitude...they do their best to 'stick
>> it
>> out' especially if they have 'hurt money' in there ie a sizeable deposit.
>
> good luck w/ that, banks.
>
>> This is what happened in the UK in the early 80s....lots of people got stuck
>> with
>> negative equity. It isn't a huge problem if you have a good cashflow and can
>> weather the storm.
>
> There's no end to this particular storm except by hyperinflation.
>
> People are best served by walking away.
>
>> For instance.... that new car you bought today probably dropped 10%+ of it's
>> value the moment you drove it out of the dealership....that doesn't mean
>> you're
>> gonna rush out and sell it to crystallize that loss.
>
> Don't compare a house to a car, please. The scale of the notional
> losses are orders of magnitude apart.

That's right...*notional* losses. You know what that means, don't you?

>> That's not what recourse is about. Here in Oz, if you default or your home
>> loan,
>> they will sue you until bankruptcy for any shortfall, if they figure it's
>> worth
>> it.
>>
>> The worry about alt-a is a storm in a teacup. There's no evidence that these
>> loans are any other than the quality of paper they purport to be ie between
>> sub-prime and prime.
>
> LOL...u really don't know, do ya?

Alt a is the dumb name some dumb US banker gave to this type of paper.

US bankers are, per capita, the dumbest in the world...only slightly smarter than
many of their customers.

>> Only in a major economic catstrophe would these mortgages become shaky.
>
> LOL....hahahahahahahaha...gawd, what a fool.

The onus is on you to prove otherwise.

And we're talking about the extent of YOUR speculation, which is just that,
speculation, not fact.

> Alt-A paper is of exaggerated quality. These are your no-docs against
> high credit scores. Fuck, man, open your eyes. Go take a look at
> Mish's blog...he's got one particular WM Alt-A CDO where the fking
> 60day rate is like 20% already...a 2007 vintage.

So fucking what? The yields on this paper reflects the risk.

>> If one believes such a catastrophe is imminent and likely, then it's a worry,
>> but
>> really, few pundits are seeing that any time soon.
>> --
>> GDS
>
> You very clearly do not understand how paper is rated.

You're trying to tell me how paper is rated? How many billions have you
securitised in your career?

Really Trav, you should know better than to argue this shit with me.
--
GDS

"Let's roll!"

06 May 2008 20:02:31

travisgod@aol.cominyrface

Re: Alt-A Crisis Looming

> That's right...*notional* losses. You know what that means, don't you?

LOL...you're asking ME that question? Seriously, now...

> Alt a is the dumb name some dumb US banker gave to this type of paper.
>
> US bankers are, per capita, the dumbest in the world...only slightly smarter than
> many of their customers.

HAHAHAHAHAHAHAHAHA...this from the guy who denied there even WAS a
property bubble in Australia. Dude, you are completely out of touch.

For being so stupid, our bankers managed to make off with trillions of
the rest of the world's capital for shit sandwich structured debt
instruments.

> The onus is on you to prove otherwise.

Mortgages are ALREADY shaky, mfer, because people cannot afford the
houses, whose values are declining rapidly. The entire goddamned debt
bubble is coming apart.

> So fucking what? The yields on this paper reflects the risk.

HAHAHAHAHAHAHAHAHA..

Oh good lord, I expect shit like this from Hal, not you.

HAHAHAHAHAHA...that's the fucking PUNCH LINE, dumbshit! The yields
DID NOT reflect the risk!

The western "housing boom" was a goddamned PONZI.

> You're trying to tell me how paper is rated? How many billions have you
> securitised in your career?

Apparently, more than you have. I would submit that you are WOEFULLY
underinformed about structured debt instruments.

I mean, if you can't figure out that Alt-A paper is of arguably WORSE
quality than subprime, then you've got a TON of catching up to do.

Even prime paper is imploding, buster...it's all about the freakin
loan types, NOT the credit qual of the fkin borrower.

> Really Trav, you should know better than to argue this shit with me.
> --
> GDS

Buddy, you refused to accept the reality of a property bubble in your
own gd'd back yard, telling me the same canned shit that we heard here
for years..."it's different."

It ain't and it wasn't. You've had, what, a couple of bank failures
already? Pretty serious for lack of any bubble trouble.

When you get your head out, hit me up.

Trav

07 May 2008 03:54:49

Greendistantstar

Re: Alt-A Crisis Looming

<travisgod@aol.com > wrote in message
news:b6701556-59b9-4d45-8651-42c3cce0cb2b@25g2000hsx.googlegroups.com...
>> That's right...*notional* losses. You know what that means, don't you?
>
> LOL...you're asking ME that question? Seriously, now...

Your use of the term suggests you don't.

>> Alt a is the dumb name some dumb US banker gave to this type of paper.
>>
>> US bankers are, per capita, the dumbest in the world...only slightly smarter
>> than
>> many of their customers.
>
> HAHAHAHAHAHAHAHAHA...this from the guy who denied there even WAS a
> property bubble in Australia. Dude, you are completely out of touch.

Nah. The housing market sill works along supply/demand curves.

> For being so stupid, our bankers managed to make off with trillions of
> the rest of the world's capital for shit sandwich structured debt
> instruments.

Then we'd imagine a country with such exquisitely adept bankers would not be in
the shit you purport it to be in.

US bankers (and I've worked with plenty of them) suffer the same malaise of your
good self- they think the rest of the world is just like the US.

They 'export' financial products into ther economies and assume they'll work just
fine. Dumbasses. Is the US housing market in the shit? You bet.

The rest of the world? Not really...and it's hubris to think that just because
YOUR economy might fail, this will mean the rest of the world.

>> The onus is on you to prove otherwise.
>
> Mortgages are ALREADY shaky, mfer, because people cannot afford the
> houses, whose values are declining rapidly. The entire goddamned debt
> bubble is coming apart.

Yes, it sure is...in the US. Blame the dumb US bankers and their dumbass
customers.

>> So fucking what? The yields on this paper reflects the risk.
>
> HAHAHAHAHAHAHAHAHA..
>
> Oh good lord, I expect shit like this from Hal, not you.
>
> HAHAHAHAHAHA...that's the fucking PUNCH LINE, dumbshit! The yields
> DID NOT reflect the risk!

No, you're talking as though your doomsday prediction has already happened.

When the US B+ through AAA debt fails, then make your claim, not before.

> The western "housing boom" was a goddamned PONZI.
>
>> You're trying to tell me how paper is rated? How many billions have you
>> securitised in your career?
>
> Apparently, more than you have. I would submit that you are WOEFULLY
> underinformed about structured debt instruments.

LOFL!!!

> I mean, if you can't figure out that Alt-A paper is of arguably WORSE
> quality than subprime, then you've got a TON of catching up to do.

Show me some stats that prove that debt rated ABOVE sub-prime and less than prime
(the definition of Alt-a) is in worse shape than sub-prime.

> Even prime paper is imploding, buster...it's all about the freakin
> loan types, NOT the credit qual of the fkin borrower.

Such debt is a composite of many factors, and people like me get paid to know
just how to raise, price and package securitised debt.

>> Really Trav, you should know better than to argue this shit with me.
>> --
>> GDS
>
> Buddy, you refused to accept the reality of a property bubble in your
> own gd'd back yard, telling me the same canned shit that we heard here
> for years..."it's different."

The FUNDAMENTALS are different, yes.

> It ain't and it wasn't. You've had, what, a couple of bank failures
> already? Pretty serious for lack of any bubble trouble.

No, we've had no bank failures here. Bear in mind that some of the real
differences between your banking system and ours are different debt structures
(non-recourse vs recourse debt) and your Fed guaranteeing deposits up to $100k.
The impact of bank failures comes right back to your Fed, and THAT is one deep,
fundamental difference.

> When you get your head out, hit me up.

We're still accepting US immigrants, so start making plans now, dude.
--
GDS

"Let's roll!"