‘The IndyMac / Pay Option ARM Effect’ in Full Force

Posted on July 14th, 2008 in Daily Mortgage/Housing News - The Real Story, Mr Mortgage's Personal Opinions/Research

12pm EST.

Spill over to other banks is why the IMB seizure was likely covered up for so long. We heard two weeks prior it was a seizure and not a voluntary closing of their mortgage unit. Look at what’s happening today to other community bank’s stock prices with heavy Pay Option ARMexposure. This looks like an entire string of banks will fail simultaneously.

After a huge gap up, the stocks are all near day and all-time lows. Pay Option ARMs are more toxic than subprime for sure. The street finally ‘gets it’ this time. -Best Mortgage

             Current Price          Prev Close           Day High                52-week high

DSL         $1.52                   $1.69                   $2.06                      $65.67

FED         $3.40                   $4.91                    $5.32                     $59.10

WM         $3.45                    $4.95                    $5.22                     $42.93

WB          $10.30                  $11.54                 $12.08                    $53.10

BKUNA    $0.63                    $0.77                   $0.70                      $19.95

Other Related Mr Mortgage Stories

Mr Mortgage on Fannie/Freddie Massively Underestimated Risks

The Pay Option Implosion – Subprime’s Big Brother

Look Out! Here Comes the ALT-A Implosion!

Mr Mortgage on Mortgage Modifications – You May Qualify!

Mr Mortgage: Mortgage Modifications Part 2 – Being Forward Thinking

5 Responses to “‘The IndyMac / Pay Option ARM Effect’ in Full Force”

  1. SKF’s reflect the turn.. were as low as $163.70 this morning.. now $186.07 up $11.61..

    WM off over 30% today.. Wow.

  2. Pay Option ARMs are more toxic than subprime for sure. The street finally ‘gets it’ this time……….well said.

    The top brass in our govt/in the media still refer to this as the subprime mess – but pay option arms which will be the new wave of failures, were done for Alt A and A clientele. If ever there was a “sell the payment”
    product this was it/way too many people jumped on the wrong product.

    We have a long way to go….years before this comes to a stop. Meanwhile, the Fed tighened rules on lending and here are the real effects:

    low to no pre-pays penalties = higher rates to the consumer

    must verify income = legitimate self empld stated borrowers (a huge part of our economy) who have cash flow, yet legally take advantage of IRS write-offs will have to rely on high interest private sources who charge pts/rates cloes to that of a loan shark = higher rates to the consumer

    prohibit lenders from making a loan without considering a borrower’s ability to repay a home loan from sources other than the home’s value. The borrower need not have to prove that the lender engaged in a “pattern or practice” for this to be deemed a violation = banks will make less loans for fear of fed intervention (not altogether bad for them to have some fear) = brwrs who may have legitimately qualified in the past will now not be able to qualify/or if they do qualify, they can say they were misled = a lose/lose brwr/bank.

    Corrections have to be made, but credit flow is already horrendous and alot of the current/proposed solutions sound like they’re being created by inexperienced, non-market participants——if a doctor made a medical mistake, would you ask an accountant to weigh in on the solution ?

  3. Hey …..out of all this lender which one do you think have the most Option ARM in their portfolio? I used to be a loan officer and the only thing I heard from my WAMU rep is Option ARM.

  4. “Our banking system is solid.” George W. Bush

  5. Hey Mr. Mortgage !
    It’s a miracle !
    The crisis is finished !

    +35 % on the banking sector in 4 days ! Mr. Mortgage, it’s time to mortgage your house to buy some Fannie Mae and Freddie Mac shares. 🙂

    Nice little orchestrated vicious short squeeze. That the banks will be able to dump all their crap to unsuspecting investors. +35% in 4 days. At +50% they are all damn good shorts. But beware, maybe the SEC, will outlaw shorting short and simple.

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