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skomer

Alt-a Mortgage Defaults Hitting Us

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Much predicted by some on here but I wonder how long it will be before our Media and Banks catch on to this one? 2007 was 'subprime' will 2008 be 'ALT-A' ?

http://www.iht.com/articles/2008/08/03/business/mortgage.php

"The first wave of Americans to default on their home mortgages appears to be cresting, but a second, far larger one is building with alarming speed.

After two years of upward spiraling defaults, the problems with mortgages made to people with weak, or subprime, credit are showing the first, tentative signs of leveling off.

But with the U.S. economy struggling, homeowners with better credit are now falling behind on their payments in growing numbers. The percentage of mortgages in arrears in the category of loans one rung above subprime, so-called alternative-A, or alt-A, mortgages, quadrupled to 12 percent in April from a year earlier. Delinquencies among prime loans, which account for most of the $12 trillion market, doubled to 2.7 percent in that time.

While it is difficult to draw precise parallels among various segments of the mortgage market, the arc of the crisis in subprime loans suggests that the problems in the broader market may not peak for another year or two, analysts said........"

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Homeowners with good credit are falling behind on their payments in growing numbers, even as the problems with mortgages made to people with weak, or subprime, credit are showing their first, tentative signs of leveling off after two years of spiraling defaults.

The percentage of mortgages in arrears in the category of loans one rung above subprime, so-called alternative-A mortgages, quadrupled to 12 percent in April from a year earlier. Delinquencies among prime loans, which account for most of the $12 trillion market, doubled to 2.7 percent in that time...

While it is difficult to draw precise parallels among various segments of the mortgage market, the arc of the crisis in subprime loans suggests that the problems in the broader market may not peak for another year or two, analysts said.

Remember that the scale of Alt-A and Prime dwarf Subprime so they don't need to go as bad to have a major effect (though they may do anyway!)...

www.bigpicture.typepad.com

post-6670-1217933441_thumb.jpg

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0804bizlendweb.jpg

Remember that the scale of Alt-A and Prime dwarf Subprime so they don't need to go as bad to have a major effect (though they may do anyway!)...

www.bigpicture.typepad.com

Bump

Prime dwarf Subprime? Does that go on the CV?

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This is exactly why it seems so ridiculous that anyone could predict house prices rising 25% in the next 2-3 years.. the problem resets won't finish until 2012 so the US government would literally have to just print money and bail out every struggling home owner to correct the market. Even then there is a lot more risk factored in now.. we will have to go back to 3-4 times salary.. that is the only way the markets will ever start buying it again, ie, when it's safe.

IMO of cause :)

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That's an interesting observation, negative equity is the leading contributor in loan default.

So obvious but I never thunk it.

The Boston Fed has done some very interesting research on the matter, and they found that the biggest factor in loan default was negative equity, not unemployment.

So those people who think that we need unemployment to rise before people start defaulting en masse, had better think again.

Think about it. If you bought a house for £100k, and it's now worth £200k, and you lose you job, would you walk away from the mortgage?

http://www.bos.frb.org/economic/wp/wp2007/wp0715.htm

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The Boston Fed has done some very interesting research on the matter, and they found that the biggest factor in loan default was negative equity, not unemployment.

So those people who think that we need unemployment to rise before people start defaulting en masse, had better think again.

Think about it. If you bought a house for £100k, and it's now worth £200k, and you lose you job, would you walk away from the mortgage?

http://www.bos.frb.org/economic/wp/wp2007/wp0715.htm

Difference is that credit law is set up in the states such that you can walk away from the house and the debt and in a year or so your 'free to buy again' without any comeback. The great irony of the US is in the midst of free market capitalism there are such strong safeguards for individuals. They have safeguards for the little people that goverments in this country of every colour are too busy being whiny little syncophants to real ruling class to implement. The would spend 12 months doing a consultation and declare that 'after signficant consultation' (banks, building societies and mortgage insurers only) it was found that nobody in the market wanted the tough laws. Consumers would never be consulted. When they got Ralph Nader we got Mary Whitehouse.

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Mortgage_Rate_Resets.png

This is an interesting little graphic...2009 could be fairly benign in the US - but then?

indeed,the subprime bailouts are smallfry.

the second wave of the tsunami is generally MUCH more devastating,you have the original wave reflecting back into it and it only serves to increase the amplitude of the second.

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I didn't realise it with all the trillions flying around , but the two, Fannie and Freddie ,only have about $80 Billion in core capital.

The 5 Trillion dollars is leveraged lending, even though they aren't government backed the regulators allowed them

to keep on raising the risk by lending more on each dollar than they have in real money. The shares are counted as part

of this core, so when they fell the leverage increased even further and the government has to open funding for them.

Sure this has been explained to me before, but I didn't realise how simple it was, even with Basel II the areas this

involves are untouched I think. They lend money based on the cash, gold, shares, obligations people can't get out of

without providing cover or losing money, and back home owners with them as well as other mortgage lenders.

How they were allowed to become so highly geared and poorly researched is amazing, it's not complicated.

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Mortgage_Rate_Resets.png

This is an interesting little graphic...2009 could be fairly benign in the US - but then?

indeed,the subprime bailouts are smallfry.

the second wave of the tsunami is generally MUCH more devastating,you have the original wave reflecting back into it and it only serves to increase the amplitude of the second.

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So where are we now with the whole ALT-A reset etc & how will this effect us ?

Are we on the brink of the 2011 reset now, and what happens in 2013 onwards when these figures seem to drop down. Start of another boom ?

SSR_TB_graph1.jpg

graph1.jpg

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I didn't realise it with all the trillions flying around , ...//.....

How they were allowed to become so highly geared and poorly researched is amazing, it's not complicated.

PREDATORY LIAR LOANS......

.

:rolleyes::rolleyes:

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The sub-prime mortgage mess has done nothing to house prices in the UK.......what makes you think that the Alt-A tsunami will have any effect here?

The US is clearly in for some pain.

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  • 399 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
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      • up 5%



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