CNN — Rate freeze plan for ARMs gains traction. How will this affect the market if this goes thru?

[HereWeGo]

That’s going to happen anyway, bsr. Locking the rates might be the best of many bad alternatives for the current investors. It’s tricky to analyze, though.

If Congress passes the recent bill that gave borrowers the ablity to sue investors, that would have a far more profound impact on the cost and availability of credit than this proposed rate freeze.

[pnilesh]

Quite frankly, I don’t think this will work out well. The whole problem startde due to subprime mess. According to BanK of America, many subprime borrowers defaulted on their home loan even before their loan reset.

Refer to the WSJ paper a few weekends back. Freezing the rates will only help a few borrowers. Since the dollar is depreciating, there is an upward pressure on inflation. The salaries aren’t rising as fast as the gas prices are.

This will suck up $$$ out of our wallets and subprime borrowers will likely be hit hard. To give FBs more $$$, congress is proposing an additional tax cut. But that won’t help either because subprime borrowers have a well known history of default and giving extra $$$ to them is like giving alms to them.

MY guess is that this patch is not the right patch.

What do you think of my analysis?

[pnilesh]

Quite frankly, I don’t think this will work out well. The whole problem startde due to subprime mess. According to BanK of America, many subprime borrowers defaulted on their home loan even before their loan reset.

Refer to the WSJ paper a few weekends back. Freezing the rates will only help a few borrowers. Since the dollar is depreciating, there is an upward pressure on inflation. The salaries aren’t rising as fast as the gas prices are.

This will suck up $$$ out of our wallets and subprime borrowers will likely be hit hard. To give FBs more $$$, congress is proposing an additional tax cut. But that won’t help either because subprime borrowers have a well known history of default and giving extra $$$ to them is like giving alms to them.

MY guess is that this patch is not the right patch.

What do you think of my analysis?

[pnilesh]

Quite frankly, I don’t think this will work out well. The whole problem startde due to subprime mess. According to BanK of America, many subprime borrowers defaulted on their home loan even before their loan reset.

Refer to the WSJ paper a few weekends back. Freezing the rates will only help a few borrowers. Since the dollar is depreciating, there is an upward pressure on inflation. The salaries aren’t rising as fast as the gas prices are.

This will suck up $$$ out of our wallets and subprime borrowers will likely be hit hard. To give FBs more $$$, congress is proposing an additional tax cut. But that won’t help either because subprime borrowers have a well known history of default and giving extra $$$ to them is like giving alms to them.

MY guess is that this patch is not the right patch.

What do you think of my analysis?

[pnilesh]

Quite frankly, I don’t think this will work out well. The whole problem startde due to subprime mess. According to BanK of America, many subprime borrowers defaulted on their home loan even before their loan reset.

Refer to the WSJ paper a few weekends back. Freezing the rates will only help a few borrowers. Since the dollar is depreciating, there is an upward pressure on inflation. The salaries aren’t rising as fast as the gas prices are.

This will suck up $$$ out of our wallets and subprime borrowers will likely be hit hard. To give FBs more $$$, congress is proposing an additional tax cut. But that won’t help either because subprime borrowers have a well known history of default and giving extra $$$ to them is like giving alms to them.

MY guess is that this patch is not the right patch.

What do you think of my analysis?

[pnilesh]

Quite frankly, I don’t think this will work out well. The whole problem startde due to subprime mess. According to BanK of America, many subprime borrowers defaulted on their home loan even before their loan reset.

Refer to the WSJ paper a few weekends back. Freezing the rates will only help a few borrowers. Since the dollar is depreciating, there is an upward pressure on inflation. The salaries aren’t rising as fast as the gas prices are.

This will suck up $$$ out of our wallets and subprime borrowers will likely be hit hard. To give FBs more $$$, congress is proposing an additional tax cut. But that won’t help either because subprime borrowers have a well known history of default and giving extra $$$ to them is like giving alms to them.

MY guess is that this patch is not the right patch.

What do you think of my analysis?

[stansd]

I’m not yet convinced that investors will swallow this pill…if I’m an owner of one of the securitized pools, I’m doing the math of how much more interest I get from keeping people in their homes who would have otherwise defaulted versus how much I lose by giving breaks to people who might have made it anyway…there’s no effective way to segment with such big incentives for the borrowers to game the system.

I can see the people in the riskiest tranches being a little more eager to go along because they are first on the hook for losses, but people further up the credit quality spectrum are going to have big problems…that means the benefits will be reaped by a narrow few, while the losses are likely to be borne by the many.

This aside, though, I don’t think it will make a lot of difference. Subprime foreclosures are a driver, but not the main one-you still have issues in prime, job losses from impending recession, and big affordability issues…this is a political stunt-it may have some positive impact on a small segment of borrowers, but it won’t slow the depreciation appreciably:)

Stan

[stansd]

I’m not yet convinced that investors will swallow this pill…if I’m an owner of one of the securitized pools, I’m doing the math of how much more interest I get from keeping people in their homes who would have otherwise defaulted versus how much I lose by giving breaks to people who might have made it anyway…there’s no effective way to segment with such big incentives for the borrowers to game the system.

I can see the people in the riskiest tranches being a little more eager to go along because they are first on the hook for losses, but people further up the credit quality spectrum are going to have big problems…that means the benefits will be reaped by a narrow few, while the losses are likely to be borne by the many.

This aside, though, I don’t think it will make a lot of difference. Subprime foreclosures are a driver, but not the main one-you still have issues in prime, job losses from impending recession, and big affordability issues…this is a political stunt-it may have some positive impact on a small segment of borrowers, but it won’t slow the depreciation appreciably:)

Stan

[stansd]

I’m not yet convinced that investors will swallow this pill…if I’m an owner of one of the securitized pools, I’m doing the math of how much more interest I get from keeping people in their homes who would have otherwise defaulted versus how much I lose by giving breaks to people who might have made it anyway…there’s no effective way to segment with such big incentives for the borrowers to game the system.

I can see the people in the riskiest tranches being a little more eager to go along because they are first on the hook for losses, but people further up the credit quality spectrum are going to have big problems…that means the benefits will be reaped by a narrow few, while the losses are likely to be borne by the many.

This aside, though, I don’t think it will make a lot of difference. Subprime foreclosures are a driver, but not the main one-you still have issues in prime, job losses from impending recession, and big affordability issues…this is a political stunt-it may have some positive impact on a small segment of borrowers, but it won’t slow the depreciation appreciably:)

Stan

[stansd]

I’m not yet convinced that investors will swallow this pill…if I’m an owner of one of the securitized pools, I’m doing the math of how much more interest I get from keeping people in their homes who would have otherwise defaulted versus how much I lose by giving breaks to people who might have made it anyway…there’s no effective way to segment with such big incentives for the borrowers to game the system.

I can see the people in the riskiest tranches being a little more eager to go along because they are first on the hook for losses, but people further up the credit quality spectrum are going to have big problems…that means the benefits will be reaped by a narrow few, while the losses are likely to be borne by the many.

This aside, though, I don’t think it will make a lot of difference. Subprime foreclosures are a driver, but not the main one-you still have issues in prime, job losses from impending recession, and big affordability issues…this is a political stunt-it may have some positive impact on a small segment of borrowers, but it won’t slow the depreciation appreciably:)

Stan

[stansd]

I’m not yet convinced that investors will swallow this pill…if I’m an owner of one of the securitized pools, I’m doing the math of how much more interest I get from keeping people in their homes who would have otherwise defaulted versus how much I lose by giving breaks to people who might have made it anyway…there’s no effective way to segment with such big incentives for the borrowers to game the system.

I can see the people in the riskiest tranches being a little more eager to go along because they are first on the hook for losses, but people further up the credit quality spectrum are going to have big problems…that means the benefits will be reaped by a narrow few, while the losses are likely to be borne by the many.

This aside, though, I don’t think it will make a lot of difference. Subprime foreclosures are a driver, but not the main one-you still have issues in prime, job losses from impending recession, and big affordability issues…this is a political stunt-it may have some positive impact on a small segment of borrowers, but it won’t slow the depreciation appreciably:)

Stan

[capeman]

This won’t affect much but try to simulate slow decline in the value of the MBS securities carrying these mortgages. In the background their value will crater until the music stops and bond bagholders realize they are still only holding a bag of flaming poo.

[capeman]

This won’t affect much but try to simulate slow decline in the value of the MBS securities carrying these mortgages. In the background their value will crater until the music stops and bond bagholders realize they are still only holding a bag of flaming poo.

[capeman]

This won’t affect much but try to simulate slow decline in the value of the MBS securities carrying these mortgages. In the background their value will crater until the music stops and bond bagholders realize they are still only holding a bag of flaming poo.

[capeman]

This won’t affect much but try to simulate slow decline in the value of the MBS securities carrying these mortgages. In the background their value will crater until the music stops and bond bagholders realize they are still only holding a bag of flaming poo.

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