Subprime Mortgage Bond Sales Plunge As Loan Delinquencies Soar

[Willy Weasel]

http://www.bloomberg.com/apps/news?pid=206...&refer=home

[REP013]

Tuffers, there was an interesting article in the evening standard on Friday regarding this and CDO's.

I can't find it on the web and don't have a scanner to upload but the title was "All geared up for an economic disaster".

It was using similarities between the gearing on the LMX spiral that virtually wiped out the Lloyds of London in 1989 - 1990 to the gearing in place for the CDO's.

I am not going to type it out or even parts of it (it really needs to be read in its entirety to get the full picture) but it was scary stuff even to someone like me who only has a very small understanding of such things.

The crux was that no-one knows if this is a potential time bomb or not as they have not yet tested it, however, if it is a time bomb it's going to make 1989 -1990 seem like a breeze.

It may well be "just a storm in a tea cup".

If someone can find the article on the net and post I'm sure it will be of interest.

Author was: Anthony Hilton.

[OnlyMe]

This one?

http://news.tradingcharts.com/forex/0/8/91310680.html

Evening Standard, London, Anthony Hilton column

Mar 30, 2007 (Evening Standard - McClatchy-Tribune Information Services via COMTEX) -- This column commented a few weeks ago on the similarities between the London Market Excess (LMX) spiral that virtually bankrupted Lloyd's of London in 1988-90 and the financial behaviour underpinning the credit derivative markets today.

Now Lombard Street Research has published a brilliant, if chilling, paper entitled The ABC of 21st Century Risk, which -- better than any other analysis I have seen -- seeks to explain and put numbers on what is going on.

The conclusions are not for the faint-hearted as we shall see in a moment but, specifically to the LMX point, the paper shows how a given tranche of $1 billion (£509 million) of debt can be used as the basis for $10 billion of derivative contracts.

If the original company that issued the bonds went into default and recovery was 30 cents in the dollar, investors holding the bonds would have lost $700 million if credit insurance did not exist. However, with credit insurance in the above example, the losses would be $7 billion on the same default, or 10 times as much.

Of course, just as at Lloyd's, the people on the other side of the deal in theory pick up a $7 billion windfall -- as long as the counterparties can cover their losses and are willing to stump up the money.

[Willy Weasel]

As Graham Taylor would say, "Do I not like that"

[REP013]

OnlyMe Posted Today, 05:01 PM

This one?

http://news.tradingcharts.com/forex/0/8/91310680.html

Yes, you are a star .... very scary stuff (in my limited opinion).

[OnlyMe]

Yes, you are a star .... very scary stuff (in my limited opinion).

No probs.

Next shoe is dropping..........

http://www.bloomberg.com/apps/news?pid=206...&refer=home

M&T Shares Fall After Bank Reports Weak Bids on Alt-A Mortgages

.....

Alt-A mortgages, short for Alternative A, fall shy of the credit criteria of Fannie Mae and Freddie Mac, the two largest sources of mortgage money in the U.S. They often involve loans made with less proof of borrowers' income or assets, purchases of homes by investors or interest-only loans and ``option'' adjustable-rate mortgages, whose payments can fail to cover the interest owed.

[thedebtisreal]

Yes, you are a star .... very scary stuff (in my limited opinion).

If you really want to get scared, think on this.....

The derivatives market on which all this funny money is based is worth $450 TRILLION. Yes, that's right. Trillion. That is nine times GLOBAL GDP.

[REP013]

thedebtisreal Posted Today, 05:18 PM

If you really want to get scared, think on this.....

The derivatives market on which all this funny money is based is worth $450 TRILLION. Yes, that's right. Trillion. That is nine times GLOBAL GDP.

Er, yes, mmmmm thanks!

Liked this quote from "Only Me's" post, sounds like something people selling houses in America, Spain and Ireland are currently saying

M&T said it plans to keep $883 million of Alt-A home loans instead of selling them because management believes the bids don't reflect their true value.