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Post by unlawflcombatnt on Feb 28, 2007 20:49:17 GMT -6
John Makin has written an excellent article describing the subprime mortgage industry. The title of the article is Risk and Return in Subprime Mortgages. Makin's article discusses how subprime mortgages are packaged into bonds, how many investors are unaware of the risk, and the underlying belief by large investors that the Fed will bail them out if there's a massive collapse. He also describes how the ABX Subprime Index works, and what changes in the index mean. Makin does seem to understate the % of loans that are subprime, though there is considerable disagreement on this issue. (Economist Nouriel Roubini believes that sub-prime and "near" subprime mortgages make up 50% of the mortgages originated in the last 2 years.)
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Post by beachbumbob on Mar 3, 2007 7:34:22 GMT -6
not only the subprime mortgages but the fact that system was scammed by the real estate, loan orignaters and appraisers with the willing participation of the buying/selling public under total indifference of the FED and all other regulatory agencies.
- properties over appraised so "cash could be taken out" - "piggyback loans" for the downpayment not declared to purposely bypass PMI...and the safeguard that PMI provides upon defaults... - "no-doc" loans where the buyer could make up their own "stated income" and loan officiers who cared about pocketing the fee - realtor's misrepresenting housing market conditions, "real estate always goes up"
the trillions at risk....passed unto pension funds, REIT, mutual funds, hedge funds.
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Post by jeffolie on Mar 3, 2007 11:29:44 GMT -6
2006 lending resulted in subprime mortgages at nearly the same quantity as 2005. The teaser rate periods now resetting are the 2004 and early 2005 mortgages. The meltdown in subprime will continue for at least 2 years. The Alt-A mortgages constituted about 16% of the 2006 mortgages raising RGE's point of view that 40-50% of 2006 mortgages are at high risk - I agree.
IMHO the public's attitude will change from aggressive consumerism to defensive savers. This has not happened yet. A grassroots movement will shift the attitudes due to the mortgage meltdown creating fear.
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