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DaCounselor
ParticipantThis game of chicken is going to be played over and over again. I expect a growing secondary market for recourse Heloc judgments. I’m curious what the typical cents-on-the-dollar purchase prices will be.
I would not be surprised to also see non-recourse 2nds/Helocs play hardball with borrowers at the outset, but at the end of the day these lenders are going to have to cave. Many are looking at total losses.
DaCounselor
ParticipantThis game of chicken is going to be played over and over again. I expect a growing secondary market for recourse Heloc judgments. I’m curious what the typical cents-on-the-dollar purchase prices will be.
I would not be surprised to also see non-recourse 2nds/Helocs play hardball with borrowers at the outset, but at the end of the day these lenders are going to have to cave. Many are looking at total losses.
DaCounselor
ParticipantThis game of chicken is going to be played over and over again. I expect a growing secondary market for recourse Heloc judgments. I’m curious what the typical cents-on-the-dollar purchase prices will be.
I would not be surprised to also see non-recourse 2nds/Helocs play hardball with borrowers at the outset, but at the end of the day these lenders are going to have to cave. Many are looking at total losses.
DaCounselor
ParticipantRegarding loan resets, I think there is little doubt that we find ourselves in an entirely different scenario than we were in as recently as last summer. USD LIBOR indices have fallen off a cliff and can now be found in a familiar place relative to the FFR. What percentage of impending resets are on loans with extremely (1-3%) teaser rates (and I’m talking straight 3/1 or 5/1 IO ARMS, not neg-ams) is worth discussing but my sources indicate that the majority of such ARMS did not carry the ultra-low teaser rates but instead the prevailing ARM intro rates in the mid to high 5’s. What I am hearing is that the ultra-low rates were found primarily in neg-ams, which is an entirely different animal. That’s what I’m hearing, for whatever that’s worth.
In any event and back to my original point, there is no doubt that many, many borrowers have dodged the proverbial exploding ARM thanks to LIBOR’s plunge. If they were in an 80/20 deal they were probably getting pinched on their second mtg. over the years due to the ongoing rise in the Prime rate but now that has been falling and their first mtg. is going to reset close to or below their intro rate. Instead of a short sale or foreclosure, they stay in the house. At least for now.
I just do not see a “V” in the LIBOR or FFR – I think we are looking at low rates for at least several years. I think LIBOR and the FFR are going lower and staying lower for awhile. There will likely be a day of reckoning for all those in these ARMS, particularly those with fatter margins and the IO variety, but it ain’t this year, that is for certain. And who knows what sort of additional mechanisms will be in place down the road to save the upside-down ARM holder whose rate is increasing or whose IO period is up? Make no mistake about it, the LIBOR cliff-dive is having a very large impact on housing in this area.
DaCounselor
ParticipantRegarding loan resets, I think there is little doubt that we find ourselves in an entirely different scenario than we were in as recently as last summer. USD LIBOR indices have fallen off a cliff and can now be found in a familiar place relative to the FFR. What percentage of impending resets are on loans with extremely (1-3%) teaser rates (and I’m talking straight 3/1 or 5/1 IO ARMS, not neg-ams) is worth discussing but my sources indicate that the majority of such ARMS did not carry the ultra-low teaser rates but instead the prevailing ARM intro rates in the mid to high 5’s. What I am hearing is that the ultra-low rates were found primarily in neg-ams, which is an entirely different animal. That’s what I’m hearing, for whatever that’s worth.
In any event and back to my original point, there is no doubt that many, many borrowers have dodged the proverbial exploding ARM thanks to LIBOR’s plunge. If they were in an 80/20 deal they were probably getting pinched on their second mtg. over the years due to the ongoing rise in the Prime rate but now that has been falling and their first mtg. is going to reset close to or below their intro rate. Instead of a short sale or foreclosure, they stay in the house. At least for now.
I just do not see a “V” in the LIBOR or FFR – I think we are looking at low rates for at least several years. I think LIBOR and the FFR are going lower and staying lower for awhile. There will likely be a day of reckoning for all those in these ARMS, particularly those with fatter margins and the IO variety, but it ain’t this year, that is for certain. And who knows what sort of additional mechanisms will be in place down the road to save the upside-down ARM holder whose rate is increasing or whose IO period is up? Make no mistake about it, the LIBOR cliff-dive is having a very large impact on housing in this area.
DaCounselor
ParticipantRegarding loan resets, I think there is little doubt that we find ourselves in an entirely different scenario than we were in as recently as last summer. USD LIBOR indices have fallen off a cliff and can now be found in a familiar place relative to the FFR. What percentage of impending resets are on loans with extremely (1-3%) teaser rates (and I’m talking straight 3/1 or 5/1 IO ARMS, not neg-ams) is worth discussing but my sources indicate that the majority of such ARMS did not carry the ultra-low teaser rates but instead the prevailing ARM intro rates in the mid to high 5’s. What I am hearing is that the ultra-low rates were found primarily in neg-ams, which is an entirely different animal. That’s what I’m hearing, for whatever that’s worth.
In any event and back to my original point, there is no doubt that many, many borrowers have dodged the proverbial exploding ARM thanks to LIBOR’s plunge. If they were in an 80/20 deal they were probably getting pinched on their second mtg. over the years due to the ongoing rise in the Prime rate but now that has been falling and their first mtg. is going to reset close to or below their intro rate. Instead of a short sale or foreclosure, they stay in the house. At least for now.
I just do not see a “V” in the LIBOR or FFR – I think we are looking at low rates for at least several years. I think LIBOR and the FFR are going lower and staying lower for awhile. There will likely be a day of reckoning for all those in these ARMS, particularly those with fatter margins and the IO variety, but it ain’t this year, that is for certain. And who knows what sort of additional mechanisms will be in place down the road to save the upside-down ARM holder whose rate is increasing or whose IO period is up? Make no mistake about it, the LIBOR cliff-dive is having a very large impact on housing in this area.
DaCounselor
ParticipantRegarding loan resets, I think there is little doubt that we find ourselves in an entirely different scenario than we were in as recently as last summer. USD LIBOR indices have fallen off a cliff and can now be found in a familiar place relative to the FFR. What percentage of impending resets are on loans with extremely (1-3%) teaser rates (and I’m talking straight 3/1 or 5/1 IO ARMS, not neg-ams) is worth discussing but my sources indicate that the majority of such ARMS did not carry the ultra-low teaser rates but instead the prevailing ARM intro rates in the mid to high 5’s. What I am hearing is that the ultra-low rates were found primarily in neg-ams, which is an entirely different animal. That’s what I’m hearing, for whatever that’s worth.
In any event and back to my original point, there is no doubt that many, many borrowers have dodged the proverbial exploding ARM thanks to LIBOR’s plunge. If they were in an 80/20 deal they were probably getting pinched on their second mtg. over the years due to the ongoing rise in the Prime rate but now that has been falling and their first mtg. is going to reset close to or below their intro rate. Instead of a short sale or foreclosure, they stay in the house. At least for now.
I just do not see a “V” in the LIBOR or FFR – I think we are looking at low rates for at least several years. I think LIBOR and the FFR are going lower and staying lower for awhile. There will likely be a day of reckoning for all those in these ARMS, particularly those with fatter margins and the IO variety, but it ain’t this year, that is for certain. And who knows what sort of additional mechanisms will be in place down the road to save the upside-down ARM holder whose rate is increasing or whose IO period is up? Make no mistake about it, the LIBOR cliff-dive is having a very large impact on housing in this area.
DaCounselor
ParticipantRegarding loan resets, I think there is little doubt that we find ourselves in an entirely different scenario than we were in as recently as last summer. USD LIBOR indices have fallen off a cliff and can now be found in a familiar place relative to the FFR. What percentage of impending resets are on loans with extremely (1-3%) teaser rates (and I’m talking straight 3/1 or 5/1 IO ARMS, not neg-ams) is worth discussing but my sources indicate that the majority of such ARMS did not carry the ultra-low teaser rates but instead the prevailing ARM intro rates in the mid to high 5’s. What I am hearing is that the ultra-low rates were found primarily in neg-ams, which is an entirely different animal. That’s what I’m hearing, for whatever that’s worth.
In any event and back to my original point, there is no doubt that many, many borrowers have dodged the proverbial exploding ARM thanks to LIBOR’s plunge. If they were in an 80/20 deal they were probably getting pinched on their second mtg. over the years due to the ongoing rise in the Prime rate but now that has been falling and their first mtg. is going to reset close to or below their intro rate. Instead of a short sale or foreclosure, they stay in the house. At least for now.
I just do not see a “V” in the LIBOR or FFR – I think we are looking at low rates for at least several years. I think LIBOR and the FFR are going lower and staying lower for awhile. There will likely be a day of reckoning for all those in these ARMS, particularly those with fatter margins and the IO variety, but it ain’t this year, that is for certain. And who knows what sort of additional mechanisms will be in place down the road to save the upside-down ARM holder whose rate is increasing or whose IO period is up? Make no mistake about it, the LIBOR cliff-dive is having a very large impact on housing in this area.
DaCounselor
ParticipantCertainly there are problems with both liquidity AND solvency – not just one or the other. In fact, can there be much doubt that we are headed into a cul-de-sac where a liquidity trap awaits?
I may be wrong but I just can’t imagine that the Fed will fail to continue to offer additional hundreds of billions of dollars more in loans – against mostly junk collateral – moving forward. And what will be the total of worldwide offerings when all is said and done? Several trillion, I would guess.
As for the FFR, I just don’t believe the Fed is even thinking of doing a 180 and tightening right now. I think they are going to take it down to 2.0 and maybe lower before they are done easing, and we are looking at a very low FFR for the next several years.
DaCounselor
ParticipantCertainly there are problems with both liquidity AND solvency – not just one or the other. In fact, can there be much doubt that we are headed into a cul-de-sac where a liquidity trap awaits?
I may be wrong but I just can’t imagine that the Fed will fail to continue to offer additional hundreds of billions of dollars more in loans – against mostly junk collateral – moving forward. And what will be the total of worldwide offerings when all is said and done? Several trillion, I would guess.
As for the FFR, I just don’t believe the Fed is even thinking of doing a 180 and tightening right now. I think they are going to take it down to 2.0 and maybe lower before they are done easing, and we are looking at a very low FFR for the next several years.
DaCounselor
ParticipantCertainly there are problems with both liquidity AND solvency – not just one or the other. In fact, can there be much doubt that we are headed into a cul-de-sac where a liquidity trap awaits?
I may be wrong but I just can’t imagine that the Fed will fail to continue to offer additional hundreds of billions of dollars more in loans – against mostly junk collateral – moving forward. And what will be the total of worldwide offerings when all is said and done? Several trillion, I would guess.
As for the FFR, I just don’t believe the Fed is even thinking of doing a 180 and tightening right now. I think they are going to take it down to 2.0 and maybe lower before they are done easing, and we are looking at a very low FFR for the next several years.
DaCounselor
ParticipantCertainly there are problems with both liquidity AND solvency – not just one or the other. In fact, can there be much doubt that we are headed into a cul-de-sac where a liquidity trap awaits?
I may be wrong but I just can’t imagine that the Fed will fail to continue to offer additional hundreds of billions of dollars more in loans – against mostly junk collateral – moving forward. And what will be the total of worldwide offerings when all is said and done? Several trillion, I would guess.
As for the FFR, I just don’t believe the Fed is even thinking of doing a 180 and tightening right now. I think they are going to take it down to 2.0 and maybe lower before they are done easing, and we are looking at a very low FFR for the next several years.
DaCounselor
ParticipantCertainly there are problems with both liquidity AND solvency – not just one or the other. In fact, can there be much doubt that we are headed into a cul-de-sac where a liquidity trap awaits?
I may be wrong but I just can’t imagine that the Fed will fail to continue to offer additional hundreds of billions of dollars more in loans – against mostly junk collateral – moving forward. And what will be the total of worldwide offerings when all is said and done? Several trillion, I would guess.
As for the FFR, I just don’t believe the Fed is even thinking of doing a 180 and tightening right now. I think they are going to take it down to 2.0 and maybe lower before they are done easing, and we are looking at a very low FFR for the next several years.
DaCounselor
ParticipantGood thread SDR. Most of my recent posts and almost the entirety of my discussions with my 2 best lending industry contacts have related to section f. of your original post. I will be merciful and won’t rehash those posts here but simply state that the handling of the piggybacks is going to be an issue of ever-increasing visibility moving forward. The threshold question for those attempting short sales because they can’t service the debt is whether wiping out the 2nd will allow them to stay in the home.
Cavalier – no, the 2nd is not automatically recourse. If it was taken out to purchase the property or to refi a purchase money loan (with no cash out) it is non-recourse. Even if it is recourse, it has not been the custom for lenders to pursue the borrower directly. I suspect this may change moving forward due to the volume and level of losses, but you are talking about a lawsuit that will cost the lenders money and may lead to minimal if any ultimate recovery for a variety of reasons. A pennies-on-the-dollar settlement is far more likely.
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