August 29, 2006 at 12:12 PM #33873CAwiremanParticipant
PS How does one get a Weiss report? Web link available?
Apologies if this was already posted somewhere else…August 29, 2006 at 12:30 PM #33875August 29, 2006 at 5:12 PM #33890powaysellerParticipant
yes, you got it.
fdic will cover any bank losses for fdic insured bank. don’t worry .
don’t think usaa will get paid faster than others. look how long it took the gov’t to clean up katrina. gov’t is slow,inefficient, and often very incompetent!August 30, 2006 at 8:56 PM #34047Steve BeeboParticipant
I’m not suggesting that Washington Mutual is going to fail, but they sure are going to have to restate their earnings at some point in the future, because not all of the income they are counting will actually be received:
“At the end of 2003, 1% of Washington Mutual’s (WaMu’s) option ARM (adjustable rate mortgage) loans were in negative amortization (the borrowers were borrowing more money each month, not even paying enough to pay the monthly interest charge in full). At the end of 2005, 47% of WaMu’s option ARM’s were in negative amortization (55% by value of the loans).
WaMu is booking these negative amortization payments as earnings. In prior times, loans where borrowers were making less than the interest payments would be classified as non-performing loans. In January-March, 2005, WaMu booked $25 million in earnings from negative amortization payments. In the same period in 2006, WaMu booked $203 million in earnings from these payments. These borrowers are increasing their mortgage balances as property values have started falling, so the default risk on these loans is extremely high.”August 31, 2006 at 12:07 PM #34109powaysellerParticipant
Thanks for bringing this to our attention again. We’ve discussed this before. One thing I don’t know though is: does the borrower’s loan reach a cap, at which time the principal and unpaid interest is amortized? When does the borrower have to pay this money that is already recorded as income by WaMu, and as a mortgage interest deduction by the borrower?
What happens to the tax write-off when homeowner defaults?
I expect to sell large write-downs from WaMu. Maybe WaMu is the best lender to short, because the market has not yet priced in its high risk lending. After all, earnings are up, and the $203mil in Q1 earnings is hiding that his money will be mostly lost. When that becomes apparent, WaMu will go down the slippery slope of Countrywide.
WaMu has hovered around $45 for years, while the other lenders have been punished. So isn’t WaMu the ideal short play?September 1, 2006 at 12:48 AM #34163RaybyrnesParticipant
USE Credit Union is paying 7% for a 7 Month CD. Limit of $2500 so you might want to open multiple accounts. You could have had a 6% CD if you elected to open an 18 month acccoutn with minimum of $5000. Believe they ahve reduced this to 5.75% at the moment.
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