More Subprime/Alt-A Pain Coming

[davelj]

I spoke to a friend of mine who’s head of securitizations for the mortgage sub of a large wall street investment bank and he told me that all of the non-conforming lenders, including his own, are in the process (this week) of raising rates between 100 and 200 basis points on all of their non-conforming products (which includes Alt-A, obviously). He said he expects more BK filings like Alliance to follow over the next few months. This is being driven by the Moodys/Fitch CDO downgrades, among other things. He said, “This is going to be Bloodbath, Part II.”

Should be interesting…

[JWM in SD]

“This is going to be Bloodbath, Part II.”
Cool, let the carnage begin……

[JWM in SD]

“This is going to be Bloodbath, Part II.”
Cool, let the carnage begin……

[IONEGARM]

Last Friday a lot of rate increases happened already, you see some posts regarding it on BO and the Grapevine

Here is one:
http://forum.brokeroutpost.com/loans/forum/2/142984.htm

But there are many others. The other thing will be Fannie and Freddie requiring people with IO loans to be qualified at the fully indexed, fully amortized rate. That bomb drops July 22nd.

[IONEGARM]

Last Friday a lot of rate increases happened already, you see some posts regarding it on BO and the Grapevine

Here is one:
http://forum.brokeroutpost.com/loans/forum/2/142984.htm

But there are many others. The other thing will be Fannie and Freddie requiring people with IO loans to be qualified at the fully indexed, fully amortized rate. That bomb drops July 22nd.

[davelj]

Yeah, he told me there were some (relatively) small increases last week but that now everyone’s doing an immediate second round of additional increases as the secondary market is demanding it. And the stock market just churns along as if nothing’s wrong… “Move along folks, no problems, nothing to see here.”

[davelj]

Yeah, he told me there were some (relatively) small increases last week but that now everyone’s doing an immediate second round of additional increases as the secondary market is demanding it. And the stock market just churns along as if nothing’s wrong… “Move along folks, no problems, nothing to see here.”

[barnaby33]

A co-worker asked me if there were any way to short this market. I said I didn’t think so, at least for retail investors like him/me. Are there ways for large institutional investors to do this? Are there any funds out there that are short on RMBS CDOs?

Josh

[barnaby33]

A co-worker asked me if there were any way to short this market. I said I didn’t think so, at least for retail investors like him/me. Are there ways for large institutional investors to do this? Are there any funds out there that are short on RMBS CDOs?

Josh

[DaCounselor]

“A co-worker asked me if there were any way to short this market. I said I didn’t think so, at least for retail investors like him/me. Are there ways for large institutional investors to do this? Are there any funds out there that are short on RMBS CDOs?”
______________________________

The answer to your first question is yes, by way of credit default swaps (CDS). This has been going on for some time now and the value of CDS’s for the riskiest CDO tranches has risen dramatically. A tidy profit can be made from selling previously purchased CDS’s, but the real $$ stands to be made after the defaults.

I am unaware of any readily accessible fund that an individual investor can buy into that specifically holds CDS’s on RMBS CDO tranches.

The potential for collusion in this investment area is extremely high. Anyone who finds access to invest in CDS’s is best advised to educate themself on all the angles before plunging in.

[DaCounselor]

“A co-worker asked me if there were any way to short this market. I said I didn’t think so, at least for retail investors like him/me. Are there ways for large institutional investors to do this? Are there any funds out there that are short on RMBS CDOs?”
______________________________

The answer to your first question is yes, by way of credit default swaps (CDS). This has been going on for some time now and the value of CDS’s for the riskiest CDO tranches has risen dramatically. A tidy profit can be made from selling previously purchased CDS’s, but the real $$ stands to be made after the defaults.

I am unaware of any readily accessible fund that an individual investor can buy into that specifically holds CDS’s on RMBS CDO tranches.

The potential for collusion in this investment area is extremely high. Anyone who finds access to invest in CDS’s is best advised to educate themself on all the angles before plunging in.

[davelj]

Well, it appears that those Bear Stearns investors are in for a bad evening – apparently they’ll be getting back exactly $0. Good times. I guess the market will go up tomorrow since now there’s a greater likelihood of a rate decrease from the Fed. It just keeps on going… until it doesn’t.

[davelj]

Well, it appears that those Bear Stearns investors are in for a bad evening – apparently they’ll be getting back exactly $0. Good times. I guess the market will go up tomorrow since now there’s a greater likelihood of a rate decrease from the Fed. It just keeps on going… until it doesn’t.

[no_such_reality]

The indices seem to be disconnected from the broader markets they supposedly represent. Not only does the DOW rise disporportionately on a few, but the broader market will be mostly down and the QQQ and S&P 100 still show increases. I’m convinced the indices have taken a life of their own due to number of “index” funds and chronic investment of 401Ks.

For the indices, and in particular, the DJIA which is hovering at 14,000, it’s like watching the reporting of median home price. It keeps going up, but a smaller and smaller segment of the market is all that is producing.

[no_such_reality]

The indices seem to be disconnected from the broader markets they supposedly represent. Not only does the DOW rise disporportionately on a few, but the broader market will be mostly down and the QQQ and S&P 100 still show increases. I’m convinced the indices have taken a life of their own due to number of “index” funds and chronic investment of 401Ks.

For the indices, and in particular, the DJIA which is hovering at 14,000, it’s like watching the reporting of median home price. It keeps going up, but a smaller and smaller segment of the market is all that is producing.

[Author]

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