Mortgage Implosion Round 2: The ‘Pay Option ARM Implosion’
Posted on July 17th, 2008 in Daily Mortgage/Housing News - The Real Story, Mr Mortgage's Personal Opinions/Research
Video Version: Mr Mortgage on the ‘Pay Option ARM Implosion‘
This is an updated version of several stories I have written over the past year and a half on this topic. Since all of the banks who originated, held or sold/securitized the most Pay Option ARMs seem to be the most distressed, and IndyMac was recently taken over by the Feds, I thought it was time to update the research and get ahead of this story.
I truly believe that the ‘Pay Option Implosion’ is round 2 of the mortgage and housing implosion and the fight is slated for many more rounds.
THE PAY OPTION IMPLOSION
The ‘Pay Option ARM Implosion’ is upon us. These toxic loans have taken down nearly every company who has ever touched them beginning with American Home Loans last year.
Pay Option ARMs are a sub-set of the Alt-A universe, which is about 50% larger in count and dollar amount than the subprime universe. In the past several months, we have seen subprime defaults plateau and subsequently decline slightly, while Alt-A defaults have climbed sharply, led by Pay Option ARMs. However, I do expect subprime defaults to pick up down the road because a) subprime resets are in a valley right now and b) subprime defaults after Hope-Now style non-profit modifications are surging.
There are about 230k Pay Options in California and 450k nationally out of a total of 2.5M private label Alt-A loans nationally. Roughly 55% of all Pay Option ARMs are in California; however, the true number of Option ARMs is likely much larger and being under-reported due to poor identification processes at the county recorders’ offices. Accurate reporting has never been achieved directly from all of the lenders.
The loan amounts are much larger than subprime meaning ‘the Alt-A Implosion’ could be over a $1.5 trillion problem when factoring in Agency paper. Some estimates put Pay Option exposure as high as $750 billion nationally, but most think it is closer to $500 billion.
Also keep in mind that a large percentage of ‘prime’ loans under old vintage (easy) guidelines, although not formally classified as Alt-A, are indeed structured closer to Alt-A than Prime, and will will perform as such in the future. The ratings agencies just have not got that far yet. For example, until only recently, Pay Option ARMs were considered Prime. See the accelerated reset schedule below.
The largest Pay Option lenders in the nation are a ‘who’s who’ of troubled lenders such as Wamu, Wachovia, Countrywide, IndyMac, Downey Savings, First Federal, Bank United, American Home Loans and even Bear Stearns, Deutsche Bank and Lehman to some degree. However, the latter three served mostly in the ‘investor’ or ‘conduit’ capacity during the bubble years, and their exposure is currently limited to the whole loans and MBS’s they were unable to dump when that market seized in early Q2 2007 for this loan type.
I do believe that it is very likely, however, that they could still be liable for far greater damages caused to bond holders and mortgage insurers when these loans go really bad in the future. Many are turning to litigation for defaults caused by outright fraud, white-lie fraud and lender negligence.
Many banks made a conscious decision to keep these loans due to their much higher yields for ‘Prime’ borrowers than the typical 30-yr fixed loan or other ARMs. This proved to be a fatal error. A kid in a high-school investment club could have figured this one out last year, but the smartest analyst in the room, the banks and the OTS couldn’t.
BANKS’ PHANTOM EARNINGS USING PAY OPTION ARMS
All banks holding these should have significant earnings restatements in the future due to an accepted accounting practice allowing Capitalized Interest on Negative Amortization, or CINA. CINA, sometimes referred to as ‘deferred interest income,’ is booked as revenue and based upon the highest possible monthly payment. This is despite the fact that 80% of borrowers pay the minimum monthly amount allowed on the loan program while the differential (negative amortization) is never actually collected.
Even in the case of foreclosure, the actual revenue will likely never be realized. Banks are not recovering enough in foreclosure to even cover the first mortgage balance, let alone the negative amortization booked as income. Regardless, it may never be realized due to housing prices crashing 30% on the median over the last 12 months in California, the most popular state for these loans.
This is because most home owners cannot sell or refinance due to being under water, and homes are not selling in foreclosure. Last month, banks took back 96.8% of all homes that went to auction in California. Please see my June Foreclosure Report for more detail.
One thing is for sure, however. Pay Option ARMs were absolutely the most toxic loan program ever created, even worse than subprime 2/28’s and 3/27’s. -Best, Mr Mortgage
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Other Related Mr Mortgage Stories
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
Mr Mortgage: June CA Foreclosure Report
July 17th, 2008 7:04 pm
Nicely done Mr. Mortgage!!!
July 17th, 2008 8:39 pm
Are ‘write downs’ due to loans that were made to people going bad?
Lenders writing off 5 billion? Is this 5 billion worth of loans that went belly up? or are they adjusting due to what the assumed value is of the current market? It is tough to understand…you are very good at clarifying these things, any attempt at this one is great.
If I get a loan from a Lender and they give me 1 million for a home and I keep paying, they do not need to write down because my house is now worth 500k if I am making payments?
Even if the house is foreclosed on, they are going to get a percent of the value (they should also get the balance from the debtor, but that appears to be a seperate story all together). So why are these large firms ‘writing down’?
That would be 20 thousand homes worth 250 thousand each, and that is if you ‘wrote off’ the entire amount?
these numbers just seem ridiculous?
July 17th, 2008 9:10 pm
Mark, it would probably be a tremendous amount of work to put it together but it would be so awesome to see a “heat map” of subprimes, Pay Option ARMs, Alt-As, As, etc.
By state if you cover the whole nation, by county if you cover only California, by zip code in California would be really cool. I certainly understand the greater the granularity, the more work to put it together.
Cheers,
Susan
July 17th, 2008 9:34 pm
From what I have heard, Wamu was the king at booking this phantom income as revenue!! It will be very interesting to see what happens with both them and Wachovia. Meanwhile, Wells Fargo reports dubious earnings, and the market rallies!! — People are just so guillable!
July 18th, 2008 2:48 am
You have a good point Carl. People are morons because they listen to the propaganda by bubble television. You just had to listen to the jerks on Bloomberg today. “People are having a lot of fun.” At the close of the market, Merrill Lynch revealed what was really going on. It’s evident that the “good results” in question must be taken with cynisn. Warren Buffett likes to invest in a companies managed by a bunch of godamn liars. The only real piece of data came frome Merrill Lynch. The rest is just pure bullshit, junk food fead to the morons, included the bullshit emanating from Warren Buffett and JP Morgan.
July 18th, 2008 12:08 pm
I am a bit confused. You state that the pay option ARM mortgages could be a $1.5 trillion problem but there are only 450K of these that exist. Are you saying that the average size of these loans is 3.3 M. I find that very hard to believe. subprime is about 1.3 Trillion and you are saying that the Alt-A market is 50% larger, which brings you to about 2 T. so 75% of this alt-a market is a problem. Also very hard to believe. numbers here don’t seem to add up.
July 18th, 2008 3:34 pm
Susan,
The NY Fed has a map that I believe will do exactly what you are talking about. You can find it at http://www.newyorkfed.org/mortgagemaps
July 18th, 2008 3:45 pm
i agree that was confusing…amended.
There are about 230k Pay Options in CA and 450k nationally out of a total of 2.5 million private label Alt-a loans nationally. 55% of all Pay Option ARMs are in CA. However, the true number of Option ARMs is likely much larger due to poor identification processes at the county recorders offices when the data companies look for ARM riders for specific ARM types. Accurate reporting has never been acheived directly from all of the lenders.
The loan amounts are much larger than subprime meaning ‘the Alt-A Implosion’ could be over a $1.5 trillion problem when factoring in Agency paper. Some estimates put Pay Option exposure as high as $750 billion nationally, but most think it is closer to $500 billion.
Also keep in mind that a large percentage of ‘prime’ loans under old vintage (easy) guidelines, although not formally classified as ‘Alt-A’, are indeed structured closer to Alt-A than ‘Prime’ and will will perform as that in the future. The ratings agencies just have not got that far yet. For example until only recently Pay Option ARMs were considered ‘Prime’. See accelerated reset schedule below.
The loan amounts are much larger than subprime meaning ‘the Alt-A Implosion’ could be over a $1.5 trillion problem when factoring in Agency paper. Also keep in mind that a large percentage of ‘prime’ loans under old vintage (easy) guidelines, although not formally classified as ‘Alt-A’, are indeed structured closer to Alt-A than ‘Prime’ and will will perform as that in the future. The ratings agencies just have not got that far yet. See accelerated reset schedule below.
July 18th, 2008 3:56 pm
Mr. Mortgage -
Agreed, neg am loans finally did in IndyMac, but Sen. Schumer gave them the final shove over the cliff.
Interesting bit on E-Trade & it’s bank; nice to know what the dirty little secret was that slammed them so badly.
[Disclosure: E-Trade account holder; not in use ($0 balances.]
Question:
1. What states allowed neg-am motgages?
2. Were these neg-am’s securitized, and if so, to whom?
Thanks in advance for the input…
July 18th, 2008 6:44 pm
It’s Friday afternoon…. do we know where our FDIC is going to show up today?
July 18th, 2008 7:22 pm
It won’t matter - I’m simply blown away by the coverage of the ‘market rally led by the financials’ - not ONE story about the massive short covering (from bloomberg, cnn, wsj, etc)… their stories are about ‘better than expected earnings from the financial sector’..
WTF?
SKF down a zillion in three days after a bank collapse and the govt rescuing Fannie and Freddie… I think I’m seriously going insane..
(and please.. OE..do me a favor and spare me a zionist conspiracy post.. I think none of us are in the mood to hear anything else about “THE PUZZLE”..)
July 18th, 2008 9:00 pm
Kis,
they showed up, and said they are raising insurance rates on the banks - does that tell us anything….? perhaps they lost a panty load with IndyMac? of course. Oh but wait, Miss Sheila also let us know that the fdic is solvent (goodie - for now)
and michael, thanks I tried with the zionists posts but I guess I am not smart enough around here to be taken seriously….fine…what-eve
cheers, all
July 18th, 2008 9:17 pm
I’m curious what the total number of alt-A’s that have been securitized, and what amount held by banks etc. Admin., are you suggesting we may see 750bil in write downs on the $1.5 trillion in alt A. Would a quick count of the amount of alt A and subprime paper held by the top 10 banks give us some insight into what has been held onto, and what has been sold off in the secondary market?
July 19th, 2008 9:57 am
David, thanks for the tip!
When I fly over any county or zip code though it just says that information is unavailable. Is that what you see?
July 19th, 2008 9:45 pm
The FDIC can go to hell as the FED as the whole damn shitbag american financial system. You don’t know how you lucky you are in this country. The foreigners will again save your asses. What’s left in the coffers of FDIC ? 32 billion to insure maybe 500 billion or more of losses ? The trick is monetize without saying it, like the rats at the FED are doing but indirectly. That way you can inflate to death and supposedly the stupid investors and the stupid american workers, won’t notice that they being eaten alive and screwed right and left. Hey the game plan is working. I don’t see riots. The fools don’t even understand. There are still plenty of imbeciles still buying US treasuries, buying GSE’s this afertnoon. This afternoon ! True it’s central bankers, as usual.
July 20th, 2008 2:10 am
Nice pay. It must be because of his superb performance. You screw the US taxpayers of a couple of hundrend billions in losses and you get 20$ million for one fu-in ! year of work ! Wow ! Weee ! It’s not as good the mobster Mozilom, but it ain’t. Step right ahead suckers, it’s time to pay for the good of the big Dick.
Good work USA. Sometimes I have the impression of Banana Republic.
“Dick Syron, Freddie Mac chairman and CEO took home nearly $20 million last year and can take home another $20 million this year reports the Associated Press. This for the man that has guided Freddie Mac’s stock to it’s lowest point since 1991 and presided over a $3 billion net loss for the company in 2007.”
July 20th, 2008 6:40 am
There are no agency Option Arms. What are you talking about? As pointed out before, your numbers don’t add up.
July 20th, 2008 10:28 am
Mrs Mortgage - I never said that. I was referring to Alt-A.
July 20th, 2008 11:15 am
I totally understand the stats and what you are saying about pay option arms; however, I have made a decent amount of them in my career, mostly all with World Savings/Wachovia because I liked the true bi-weekly feature and their index. I always went into detail and showed in writing what the customer signed in their disclosures about negative AM. A lot of these loans were made to people who needed low payments because either for a loss of income (wife just had child, not going back to work for 3 years, high college tuition costs) or because they planned to sell their home in the near future). All of my loans were done in NJ, where property values have not been as hit as hard. Making statements like “One thing is for sure, Pay Option ARMs were the absolute most toxic loan program ever created,” is very strong. It goes without saying that not all of these loans are equal; however, I know I have helped a lot of customers with this loan. These loans were not for everyone and that was part of the problem and I have spoken to a lot of people over the years who didn’t even know what they got into so people sold these loans very irresponsibly. This statement is coming from someone who never wrote a subprime loan over 85% LTV…I would estimate the average FICO scores for COSI/CODI’s were in the 685 range and with a LTV around 72%. Please answer me this: How can this loan be toxic and a 2/28 subprime loan with credit scores of 550 at a LTV of 90% be better? Let’s not forget that my option arm loan customer had had zero mortgage lates and the subprime customer has been 2X30 or 1X60 in the last 2 years? All of this means nothing now because the loan is gone and probably forever but use of toxic is not as accurate as you think!
July 20th, 2008 3:45 pm
Pete, God bless you, man! You were probably the 1 good loan officer out of 100 in those days, and you are the type I would hire =).
Admin is 100% correct about the option arm being the most toxic, because it was the most abused at all levels (borrowers, LO’s, banks, Wall Street). From 2001 to 2004, many companies (Ditech, Quicken Loans, etc.) sold the “1% 30 year loan”. They hired a bunch of ex-car salesmen to peddle these loans (and 1% is an extremely easy sell), and either implied or outright told their clients that the loan was fixed for 30 years at a 1%.
My company used the same lead sources as Quicken/Ditech in those days, and my employees would spend about an hour a day convincing clients that 1% is not the real interest rate… you are just saw the lighter side of that product.
One last note… I give props to World/Wachovia, because only for a very brief time after the Wach acquisition did they ever offer the BS 1%… usually their min. payment factor was 2.1% or so.
July 20th, 2008 4:01 pm
Pete, a small fraction of all pay options were given to people who could bene. For example, I have a rental resort prop that in the summer does not cash flow that well. I have significant equity and don’t want to sell the place. I use the pay option as a tool for cash flow purposes.
I am a rare case. Absolutely rare.
One could argue the people you ‘helped’ with this loan program should not have used a loan program at all, rather sold and rented etc.
Also, the conbination of a few bad market events could ruin even the best of borrowers. For example a inflationary induced spike in the underlying index values and a crash in real estate values, which I believe will continue everywhere.
When it comes to values, remember that the major metro areas are the last hit. The further you go out the worst it is but now we are seeing the creep in.
If values drop another 25% statewide in NJ, which is absolutely possible and rate keep rising, then this bail out loan program may just delayed the inevitable and put them in a far worse place when the end finally does come.
Again, maybe 5% of all Pay Options were used by people like me, the rest were given out because they were easy to sell and borrowers needed or wanted that low payment.
Your arguements are noted, however. One thing is for sure, both our arguments will be tested shortly. Lets come back to this occasionally over the next year.
Mark
July 20th, 2008 8:07 pm
I have to agree with Pete that labeling the product “the most toxic” may not be accurrate. It is as much hype and spin as the ads for the product and the media coverage of the housing bubble and its collapse. Its trendy now to use words like “toxic”, but that ends up shifting the blame to the product and not the usage of it.
Even a 30 year fixed rate mortgage can be “toxic” to someone at 50-60% DTI with minimal reserves and shaky job prospects. FHA, Fannie Mae and others gave “prime” loans with excellent rates under these conditions and they can be as dangerous as an ARM if there is the slightest road bump to someone living paycheck to paycheck.
As the admin stated, selling a home and renting may be a better option for even some of the situations that Pete mentioned. Sure it means 1 less loan in teh pipeline (and a 2-4% YSP one at that) but sometimes the responsible thing to do is to explain why someone should not buy or refinance. The option ARM is a great product when used properly for a very, very specfic niche. It works for vacation properties, the self employed or anytime there is seasonal or variable income and a financially savvy owner.
I myself did only a handful Option ARMs in almost 6 years. Not because I couldn’t sell more (anyone can sell a 1% payment rate with a little spin and pressure) but because it did not fit the needs and goals of my clients. I saw many co-workers proud to make 8-15k on the backs of people that were retiring and selling in a few years, starting a new family and pressed for cash or struggling to buy their first home. They made a quick buck, but with 0 referrals, bad press and no ability to sell beyond payment they could not make it in the business and are back to what they were doing 3 years ago.
July 20th, 2008 8:21 pm
Like I said before. I’m looking at this from a re investment standpoint. Doing that for the last ten years. Now, I find myself unable to continue b/c of the moral issue.
I can’t sell something I don’t believe in. I don’t believe residential re is a good investment for anyone right now and that includes owner occupants.
The ques is. when will this turn around? When will re prices hit bottom and stabilize? I predict sooner than later unless we go into a depression.
There’s alot of talk about depression. (I just thought, that’s also a mental health term: it’s a state of perception of abnormal cognitive function)
Anyway, if that happens, all bets are off. We could be looking at what - time wise?
It’s interesting today our elected officials are in denial. They seem to think they can give a quick fix and put this behind us.
They don’t want this catastrophe to happen on their shift b/c they know they will be booted out of office at the next election. Most of them want to be lifers. It’s a fantastic gig with great benes.
Some financial “expert” commenters think we are ok cause our exports are selling well and re prices haven’t dropped yet in certain high demand areas like NYC and San Fran.. HUH?
Does those cities pay the freight? Do exports? They overlook the devastion that has and is occuring in our cities that will get worse.
July 20th, 2008 10:03 pm
I just posted a response on Aaron Krownes Site which basically says. Websites aren’t going to change a thing. We need protest in the street!
We have to demonstrate in the streets/which will happen guaranteed in the near future. B?C things will demand it. Start organizing/thinking about it now!
And Aaron is a shill b/c on the air he said his purpose is to sell the site. Cash out. Go for it.
And what’s he gonna do if he gets lucky? Move out of the country? Good luck. You ain’t selling a thing. You’re site is a dime a dozen that no one rational will pay anything for. The news is out. You might get a sucker buyer, good luck.
But the fact is you don’t care about your country which is in dire need now. You as many don’t have a connection to this USA community. Go to another country and get lost.
The rest of us will stay and make this a great country again!
July 20th, 2008 10:11 pm
I did not want to name companies but you hit on two good ones…I had two retrain customers all the time who thought the loan was something else after they spoke to those companies. FYI: I own a small mortgage company in NJ and over the years I have spent a ton of man power training people when we sold these loans. Hopefully, I will not need to work for you in the near future. Interesting enough: the margin and index full calculated right now is about where 30 year fixed rates are currently holding. And Jumbo’s are another story. I know these loans were abused. My point was that not everyone who were put in them were hurt. Rental example is a prime one that you made. I had a COSI before grabbing a 15 fixed below 5.00%. A large % of people my company placed in over years had a set plan to sell in 3-6 years. 1 out of 100 is low but I would bring up to about 10-15% but your point is well taken. We buy marketing that Quicken does all the time. I have never been impressed with their talent and skill sets and have serious doubts if they will make it. Let’s just say I am not rooting for them.
July 20th, 2008 11:41 pm
Once the majority of general public starts hurting from loss of job/higher energy and food prices you will see a tidal change in the politics of this country.
More biz are filing BK, laying off. If you think your job is secure think again. If you are working for someone else, you are at risk. If you own a biz, you know.
How long can you go with no paycheck? Most only a month. Does the gov’t care about you? Or do they only care about the fat cats on Wall St.?
Whose got your back? Your Neighbors. Grass Roots Trump internet.
The Internet is bread for the circuses as in Roman times. Nero (Bush) fiddled while Rome burned! Look at history. The politicians gave the Romans Bread (easy CREDIT/MONEY of today) and Circuses (TV/Internet) to placate them into a funk where they wouldn’t CARE about the loss of their empire. Just like we are losing our empire today to the East.
If you don’t get it b/c our educational system is weak and you weren’t taught it is that Rome which was a mighty power when it lost it’s power used the Circuses (TV/Internet of our time), which were stadium events to draw the attention of the public AWAY from the REAL problems of their day.
The Internet is the Roman circus of 2008! People think they can go there and post and it means something. It doesn’t!!! It doesn’t mean a thing without taking further ACTION!!
You’re just kidding yourselves!!! Nothing will change with internet posts!!!!! NEVER. If you think so you are WRONG!
BLOGS DON”T MEAN ANYTHING!! They are the circus.
Rome and our gov’t never changed anything over the circus. It was a diversion. Keeping the people placated. In our day giving them an outlet for their frustration which doesn’t amount to ANYTHING!
Our politicians are conditioned to respond only to STREET PROTEST!!! Look at Viet Nam. opped that WAR. The politicians DON’T want you to get on the street. Otherwise they will have to act against their own financial interests!
They are bought and paid for by special interests with big money. The ruling Elite. It’s time to bring the ruling elite down!They don’t represent you! They do not have the interests of the general public at heart. Only their own.
July 20th, 2008 11:44 pm
The best thing would be to close your bank account and go radically liquid on banks and lendig institutions that abused and screwed the lenders. Kill them. Kill a couple of institutions by depriving them of liquidity. It’s the best way. More bank runs are about the best thing to slap in the face the godamn politicians and the bastards from the SEC and the FED. As for foreign investors like me, you can be sure that the place makes me PUKE ! What the hell happened to this country ? What the hell happened ?
July 21st, 2008 12:50 am
IS YOUR MONEY SAFE ? ANSWER: NO IT AIN’T !
http://prudentbear.com/index.php/GuestCommentaryHome
July 21st, 2008 2:30 am
Ohhh…. my head hurts from all this.
When will it end?
July 21st, 2008 3:27 am
Hi,
read this and get it forward (from CATHERINE AUSTIN-FITTS ):
Sometimes, it helps to step back and see the big picture.
Let’s say that I serve as the depository for a large government and I also own the central bank. I get my partners appointed to run the government’s treasury and key funds on a regular basis so I can also control financial system policies and regulation that help me finance what I want to do and mess up my competitors. Even that is getting cumbersome so I am arranging to move most of the regulatory control over to my central bank because I can control all of it privately.
Frustrated with having to deal with democratic processes, I decide to move a significant amount of money out of the government between 1997 and 2001 for reinvestment abroad. I and my partners and our syndicates engineer a serious of steps to bubble the economy so that when I move the money out the currency is high and because everyone was making money they did not notice that lots of capital was leaving. To ensure no one notices, I suppress the gold price which turns off the financial burglar alarm and shifts gold out of the government into my private control at below market prices.
Normally moving money out of a government in excess of the total taxes that year would be hard to do. However, I could use securities fraud. I could issue a lot more government securities and government agency (like mortgage agencies) securities than I recorded on the government books and sell them abroad. I would have to make sure not to publish audited financial statements as that would increase the liabilities of engaging in this kind of fraud. It would help a lot if I could pool mortgages and sell government agency securities to finance those mortgages in a process where the same mortgage could be sold many times into the same pool. Investors would not notice or care because the securities were government guaranteed.
I also engineer an internet and telecom stock bubble, and move trillions more out through that mechanism.
OK, so as I move the money out of the country at a high price because my currency is high, what do I invest? Well if places like Asia, Latin America and Russia experience economic crashes as a result of credit crunches that result as my cutting off credit, then their currencies will be low and they will welcome investment. Or if they don’t welcome investment, I can make sure that the IMF and World Bank can strong arm. So I can buy in really really cheap. Meantime, these currencies rise as I move manufacturing and jobs into the places where I now have big investment positions. So my investments go up.
Well, back in the U.S. the bubble bursts, and the institutions like Fannie and Freddie that financed the housing bubble experience significant losses. Their stocks drop by a lot. That hits the pension funds, 401ks, IRAs and other savings of the people who have lost money on their homes. It’s a double whammy. A lot of them also lose their jobs. Triple whammy.
The currency drops in value a lot. This means that the dollar I pulled out and put into other currency that has been going up, up, up, is now worth multiple dollars. As asset values drop, each remaining dollar can buy things cheaply.
Indeed, with Fannie and Freddie’s stock dropping like a stone, I could have one or more of my offshore investment vehicles fund a recapitalization plan and buy control of the senior positions directly or indirectly controlling 50% of the residential mortgages in the country with my profits — that is for a small portion of that which I shifted out of the government.
Think of it. The housing bubble has reached it’s logical conclusion. If you can get enough people to buy a home for no money down, you can buy their country for no money down.
July 21st, 2008 6:57 am
Yeah well, if you are that stupid, maybe you desserve being bought and controlled by foreigners. Personnally I really don’t care. I am not sure that Joe Blow even understands what is going on. Countries don’t count for these bums. Haliburton is now an arab company based in Dubai. These bums in Washington or Wall Street don’t care. They would sell the USA to the Martians if they were a buck to make. You really think that these bums from Goldman Sachs care. No they care about Goldman Sachs and that’s about it, nothing else. Dick Cheney care about Haliburton of Dubai, and that’s it. Pierre your are right. It’s the most probable scenario.
July 21st, 2008 7:21 am
Now you see the people at Bank of America say it’s all finished and everything is just great. The same old trick. The same old hogwash and BS. Oh by the way they did include the results of Countrywide. Arrogant bastards. Lie lie lier untill the suckers believe it’s true.
July 21st, 2008 7:24 am
Sorry they did not include in their results Countrywide but they say everything will just be fine. Hey the good times are ALREADY back ! The USA is the greastest country for bullshiting, specially the financial mafia gang. I cant’t get over how stupid investors are.
July 21st, 2008 10:42 am
Who’s next on the bank run list ?
July 21st, 2008 12:41 pm
Marc, I think the better question is this.
How many lenders are currently insolvent?
Let’s take a look at a few banks (no particular reason for these) to see where they stand in terms of solvency if forced to mark to market their holdings.
Wachovia – They have written down nearly 7 Billion in assets and raised just over 10 Billion in Capital and loss provisions, but maintain nearly 31 Billion in L3 assets. With even a conservative 30% loss on those assets amounts to an additional 9-10 Billion in losses. This would wipe out all of the recent capital raised leaving them on borrowed time. They will not be able to raise much additional capital at that point as well. Where do they go then?
Wells Fargo – They have written down nearly 3 Billion in assets and raised zero in Capital and loss provisions, but maintain nearly 24 Billion in L3 assets. With even a conservative 30% loss on those assets amounts to an additional 6-7 Billion in losses. This would basically wipe them out leaving them on borrowed time. They will not be able to raise any additional capital at that point. Where do they go then?
Fannie and Freddie… need I say anymore than what has already been reported over the last few days? They are technically insolvent already and just waiting for someone to clue them in, or for the U.S. Tax Payer to “Bail” them out. Their respective leaders will gladly take their 2008 $20 Million salaries though and laugh all the way to the bank at our expense. How do you think China, Russia and the Middle East investors feel about this recently uncovered quagmire? They will not be buying more of these assets unless they are just totally deaf, dumb and blind. In fact, I would love to see who will be the buyer of the recently announced possible 10 Billion bond sale backed by their mortgage paper. It will have to be a hedge fund, private investor, or the US Government. Who else would be stupid enough or being in the public spot light bold enough to do so? Nobody I can think off of the top of my head…
This is now an issue of raising capital to be able to survive the coming tsunami in resets on adjustable and alt-a loans coming and lasting through 2012. Any lender who has not already raised or does not already have on hand enough capital to withstand this coming tsunami is gone in my opinion. There just isn’t enough capital out there to get for the half way decent paper these lenders have left to sell. The idiots, I mean investors, have either run out of money or woke up to the reality that any lending at this point to many of these institutions is just tossing your money away. Most will never recoup what they loaned already and simply cannot continue to get burned. Foreign investments were the last bastion of hope for many of these companies, but they too are fed up with losses after losses on what was supposed to be AAA paper.
The party is over and the only thing left now is to sit back and watch them implode one by one until we level off sometime between now and 2015. The Government can only hurt us all now and not help any of us. We have run out of money as consumers, and as a working government. We now operate as a country on a debt model and that is simply unsustainable in a failing economy. Worked great when we all had money real or not, but those days are now officially behind us!!!
July 21st, 2008 12:44 pm
Wachovia. The next. OK.
July 21st, 2008 12:58 pm
Wouldn’t surprise me in the least…
July 21st, 2008 2:25 pm
http://www.reuters.com/article/marketsNews/idUSN2141836420080721
“we don’t intend to guarantee the public debt (of coutrywide) – we understand the ramifications of not paying at maturity”
Wow.
July 21st, 2008 3:15 pm
What are we talking about here? Maybe around $38 Billion or so? I would hate to be a bond holder when these losses are forced upon your books. I have tried to find out more on this, but don’t have the time or resources to do so. I know it is going to be a big issue when the time comes however…
Can anyone add to what this all means? When will the losses have to be realized? Who are the majority bond holders? Very important questions and depending on the answers, they could be key to future happenings in the world of finance.
They should start a new soap opera about this mess…
July 21st, 2008 4:26 pm
“The Days That Ended Our Lives”
“As the World Crumbles”
“The Young And The Indebted”
“All My Toxic Debt”
“The Bold And The Bailed Out”
“One Last Shot for Freddie/Fannie to Still Live”
July 22nd, 2008 7:59 pm
[...] The Pay Option Implosion - Subprime’s Big Brother [...]
July 22nd, 2008 9:51 pm
[...] The Pay Option Implosion - Subprime’s Big Brother [...]
July 26th, 2008 3:32 am
[...] The Pay Option Implosion - Subprime’s Big Brother [...]
July 26th, 2008 10:30 am
Investors are not stupid - they are an essential player of the ENDGAME being played (like the PPT). The strategy is to extend the Game until the time is right to ‘pull the plug’ on the American and Global Financial System. The plug was pulled as soon as the Event Horizon was crossed (some call it the Rubicon).
If you don’t know it yet, wake up to the fact that the plug HAS been pulled and the Game is just playing out to its inevitable (and PLANNED) End! (with NO EXIT).
Banks, corporations, institutions and PEOPLE will now ‘pop off’ (implode) in front of our eyes in growing numbers - like the Greatest Show on Earth (Fireworks).
“Mazel Tov, America and humanity, while we Rejoice!”
signed,
Your Zionist ‘friends’.
July 26th, 2008 8:42 pm
Jim Willie, the ‘Golden Jackass’ genius, says it (just about) all in his latest Hat Trick Letter:
http://tinyurl.com/5ck8ef
He clearly identifies Greenspan as the evil Sorcerer and correctly taps the other ‘evil ones’ for the coming ‘Financial Armageddon’. Who are the ‘evil ones’? The current ‘evil ones’ of Fascist ‘Capitalism’ bear a striking resemblance to the ‘evil ones’ of Communism (Trotsky and Lenin, etc.). They are all ZIONISTS (some are known as ‘Talmudic Jews’). Others call them AshkeNAZIS. If you insist on getting it from ‘the horse’s mouth’, read Benjamin Freedman’s speeches (1961 and 1974 - available on-line). It’s obvious, isn’t it!
July 28th, 2008 11:35 pm
Here’s Chas. Hugh Smith’s view (if you like graphs and charts). Like me, he’s an optimist.
http://tinyurl.com/ygsa6j
July 29th, 2008 10:09 am
PS ‘The Empire of Debt’
July 30th, 2008 4:02 pm
[...] Mr Mortgage: Mortgage Implosion Round 2: The Pay Option ARM [...]
July 31st, 2008 11:11 pm
[...] Mr Mortgage: Mortgage Implosion Round 2: The Pay Option ARM [...]
August 4th, 2008 8:00 pm
[...] look like a walk in the park. On July 17th, I posted some good info on the upcomming ‘Pay Option Implosion’ if you need a review on the [...]
August 5th, 2008 9:56 pm
[...] Mortgage Implosion Round 2: The ‘Pay Option ARM Imp [...]
August 6th, 2008 3:51 pm
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August 7th, 2008 11:59 am
[...] Mortgage Implosion Round 2: The ‘Pay Option ARM Imp [...]