Wednesday, July 18, 2007

What’s that smell?

Sub-prime road ahead 'not pretty'

The US sub-prime mortgage debacle has only just begun, experts said yesterday, with defaults on risky home loans likely to soar as temporary "teaser" rates come to an end this year and next. Michael Farrell, chairman of Fidac, a US-based mortgage-backed securities investor, said home loans worth up to $1,000bn (£490bn) could revert to much higher floating rates in the next two years. More than half could be accounted for by loans to risky, sub-prime borrowers, many of whom will default on interest payments when higher rates kick in. Mr Farrell said: "What's remarkable is that this is happening when we have had good job growth. You would expect this level of delinquencies in a full-blown recession."

Posted by tyrellcorporation @ 11:18 AM (671 views)
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2 thoughts on “What’s that smell?

  • bidin'matime says:

    “The problem is a lot of folks have been making a lot of money in this market. From borrowers who saw their neighbours making a fortune in the housing market, to originators who lent to them, to investment banks and rating agencies.”

    To which you could add politicians, who get more taxes and the ‘feel good’ factor and just about every other business, benefiting from all the extra cash sloshing about. “Not pretty” is a massive understatement…

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  • dohousescrashinthewoods says:

    “You would expect this level of delinquencies in a full-blown recession”

    Either someone’s telling porkies about how good these good times are, or, extrapolating from here, if we do go to a recession, it’s going to be a complete and utter bloodbath.

    I suspect it’s both – awful, but short of armageddon because these are not particularly “good” times for most.

    Then again, what do I know?

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