Alt A Not such a problem?

[gandalf]

Great clarification, fsd. Sounds exactly right to me. Also sounds like you should be the one writing for the Financial Times…

BTW, I wasn’t aware that Wells was so exposed in the Option ARM segment. I understand they have a problem with HELOCs. What does their balance sheet look like with respect to the Option ARM products? If they originated the products but sold them off to MBS investors, are they still on the hook in terms of their balance sheet? Servicing revenues? Where do they take the hit? What’s their liability?

Up to this point, I hadn’t grouped them into the Wachovia/Wamu set. Looking for comments on why I might be wrong…

Thanks,
Gandalf

[Anonymous]

So the $500 Billion pay option ARMS are toast, but they are not all Alt-A loans. Some were/are subprime and prime.

Very few of them were subprime, but it doesn’t matter. We have $500 Billion in loans and banks will be taking a huge loss on them. They are heavily concentrated in California, and more specifically San Diego. Alt-A will likely be fine if you take the option-arms out of the equation, because most loans currently would reset to a lower rate. However, if interest rates start to jump we’ll see just how accurate people reported their income for Alt-A loans.

There’s also the problem that the historical causes of foreclosure are still happening (death, divorce etc.) Without equity the houses can’t be sold to prevent a foreclosure, so we may have more foreclosures than normal just from the typical reasons.

[Anonymous]

So the $500 Billion pay option ARMS are toast, but they are not all Alt-A loans. Some were/are subprime and prime.

Very few of them were subprime, but it doesn’t matter. We have $500 Billion in loans and banks will be taking a huge loss on them. They are heavily concentrated in California, and more specifically San Diego. Alt-A will likely be fine if you take the option-arms out of the equation, because most loans currently would reset to a lower rate. However, if interest rates start to jump we’ll see just how accurate people reported their income for Alt-A loans.

There’s also the problem that the historical causes of foreclosure are still happening (death, divorce etc.) Without equity the houses can’t be sold to prevent a foreclosure, so we may have more foreclosures than normal just from the typical reasons.

[Anonymous]

So the $500 Billion pay option ARMS are toast, but they are not all Alt-A loans. Some were/are subprime and prime.

Very few of them were subprime, but it doesn’t matter. We have $500 Billion in loans and banks will be taking a huge loss on them. They are heavily concentrated in California, and more specifically San Diego. Alt-A will likely be fine if you take the option-arms out of the equation, because most loans currently would reset to a lower rate. However, if interest rates start to jump we’ll see just how accurate people reported their income for Alt-A loans.

There’s also the problem that the historical causes of foreclosure are still happening (death, divorce etc.) Without equity the houses can’t be sold to prevent a foreclosure, so we may have more foreclosures than normal just from the typical reasons.

[Anonymous]

So the $500 Billion pay option ARMS are toast, but they are not all Alt-A loans. Some were/are subprime and prime.

Very few of them were subprime, but it doesn’t matter. We have $500 Billion in loans and banks will be taking a huge loss on them. They are heavily concentrated in California, and more specifically San Diego. Alt-A will likely be fine if you take the option-arms out of the equation, because most loans currently would reset to a lower rate. However, if interest rates start to jump we’ll see just how accurate people reported their income for Alt-A loans.

There’s also the problem that the historical causes of foreclosure are still happening (death, divorce etc.) Without equity the houses can’t be sold to prevent a foreclosure, so we may have more foreclosures than normal just from the typical reasons.

[Anonymous]

So the $500 Billion pay option ARMS are toast, but they are not all Alt-A loans. Some were/are subprime and prime.

Very few of them were subprime, but it doesn’t matter. We have $500 Billion in loans and banks will be taking a huge loss on them. They are heavily concentrated in California, and more specifically San Diego. Alt-A will likely be fine if you take the option-arms out of the equation, because most loans currently would reset to a lower rate. However, if interest rates start to jump we’ll see just how accurate people reported their income for Alt-A loans.

There’s also the problem that the historical causes of foreclosure are still happening (death, divorce etc.) Without equity the houses can’t be sold to prevent a foreclosure, so we may have more foreclosures than normal just from the typical reasons.

[sdduuuude]

http://www.housingwire.com/2008/08/04/ny-times-picks-up-the-prime-meme-but-misses-the-point/

My perception of the effect of Subprime and Alt-A meltdowns was changed by this article at Housing Wire last week. Basically it points out that the Prime sector, due to its size and expected stability, is the key driver.

Small increases in the prime default rate can translate into much more money lost than large increases in the Alt-A default rate.

Also, because very few subprime and Alt-A loans are being made now, problems in the prime sector will more dramatically affect the future of lending.

The banks know Subprime/Alt-A is going bad, and they have cut those out. Prime is still there. If prime goes bad, it hurts the vast majority of past loans, discourages future loans and may cause rates to really rise.

After reading this article, I’m much less interested in Alt-A, except as an indicator that the prime meltdown is approaching. When prime hits the fan, or even grazes the fan, that is what makes the big mess.

Prime problems, not Alt-A problems will drive the desireable areas like CV into the dirt.

Interestingly enough, when looking for the link above, I found this article on Housing Wire about the FT article posted by the original poster:

http://www.housingwire.com/2008/08/11/lex-gets-it-very-very-wrong-on-alt-a/

[sdduuuude]

http://www.housingwire.com/2008/08/04/ny-times-picks-up-the-prime-meme-but-misses-the-point/

My perception of the effect of Subprime and Alt-A meltdowns was changed by this article at Housing Wire last week. Basically it points out that the Prime sector, due to its size and expected stability, is the key driver.

Small increases in the prime default rate can translate into much more money lost than large increases in the Alt-A default rate.

Also, because very few subprime and Alt-A loans are being made now, problems in the prime sector will more dramatically affect the future of lending.

The banks know Subprime/Alt-A is going bad, and they have cut those out. Prime is still there. If prime goes bad, it hurts the vast majority of past loans, discourages future loans and may cause rates to really rise.

After reading this article, I’m much less interested in Alt-A, except as an indicator that the prime meltdown is approaching. When prime hits the fan, or even grazes the fan, that is what makes the big mess.

Prime problems, not Alt-A problems will drive the desireable areas like CV into the dirt.

Interestingly enough, when looking for the link above, I found this article on Housing Wire about the FT article posted by the original poster:

http://www.housingwire.com/2008/08/11/lex-gets-it-very-very-wrong-on-alt-a/

[sdduuuude]

http://www.housingwire.com/2008/08/04/ny-times-picks-up-the-prime-meme-but-misses-the-point/

My perception of the effect of Subprime and Alt-A meltdowns was changed by this article at Housing Wire last week. Basically it points out that the Prime sector, due to its size and expected stability, is the key driver.

Small increases in the prime default rate can translate into much more money lost than large increases in the Alt-A default rate.

Also, because very few subprime and Alt-A loans are being made now, problems in the prime sector will more dramatically affect the future of lending.

The banks know Subprime/Alt-A is going bad, and they have cut those out. Prime is still there. If prime goes bad, it hurts the vast majority of past loans, discourages future loans and may cause rates to really rise.

After reading this article, I’m much less interested in Alt-A, except as an indicator that the prime meltdown is approaching. When prime hits the fan, or even grazes the fan, that is what makes the big mess.

Prime problems, not Alt-A problems will drive the desireable areas like CV into the dirt.

Interestingly enough, when looking for the link above, I found this article on Housing Wire about the FT article posted by the original poster:

http://www.housingwire.com/2008/08/11/lex-gets-it-very-very-wrong-on-alt-a/

[sdduuuude]

http://www.housingwire.com/2008/08/04/ny-times-picks-up-the-prime-meme-but-misses-the-point/

My perception of the effect of Subprime and Alt-A meltdowns was changed by this article at Housing Wire last week. Basically it points out that the Prime sector, due to its size and expected stability, is the key driver.

Small increases in the prime default rate can translate into much more money lost than large increases in the Alt-A default rate.

Also, because very few subprime and Alt-A loans are being made now, problems in the prime sector will more dramatically affect the future of lending.

The banks know Subprime/Alt-A is going bad, and they have cut those out. Prime is still there. If prime goes bad, it hurts the vast majority of past loans, discourages future loans and may cause rates to really rise.

After reading this article, I’m much less interested in Alt-A, except as an indicator that the prime meltdown is approaching. When prime hits the fan, or even grazes the fan, that is what makes the big mess.

Prime problems, not Alt-A problems will drive the desireable areas like CV into the dirt.

Interestingly enough, when looking for the link above, I found this article on Housing Wire about the FT article posted by the original poster:

http://www.housingwire.com/2008/08/11/lex-gets-it-very-very-wrong-on-alt-a/

[sdduuuude]

http://www.housingwire.com/2008/08/04/ny-times-picks-up-the-prime-meme-but-misses-the-point/

My perception of the effect of Subprime and Alt-A meltdowns was changed by this article at Housing Wire last week. Basically it points out that the Prime sector, due to its size and expected stability, is the key driver.

Small increases in the prime default rate can translate into much more money lost than large increases in the Alt-A default rate.

Also, because very few subprime and Alt-A loans are being made now, problems in the prime sector will more dramatically affect the future of lending.

The banks know Subprime/Alt-A is going bad, and they have cut those out. Prime is still there. If prime goes bad, it hurts the vast majority of past loans, discourages future loans and may cause rates to really rise.

After reading this article, I’m much less interested in Alt-A, except as an indicator that the prime meltdown is approaching. When prime hits the fan, or even grazes the fan, that is what makes the big mess.

Prime problems, not Alt-A problems will drive the desireable areas like CV into the dirt.

Interestingly enough, when looking for the link above, I found this article on Housing Wire about the FT article posted by the original poster:

http://www.housingwire.com/2008/08/11/lex-gets-it-very-very-wrong-on-alt-a/

[kev374]

View this video. Mr. Mortgage lays out the facts with concrete data. Alt-A is a significantly bigger problem than subprime.

[kev374]

View this video. Mr. Mortgage lays out the facts with concrete data. Alt-A is a significantly bigger problem than subprime.

[kev374]

View this video. Mr. Mortgage lays out the facts with concrete data. Alt-A is a significantly bigger problem than subprime.

[kev374]

View this video. Mr. Mortgage lays out the facts with concrete data. Alt-A is a significantly bigger problem than subprime.

[Author]

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