Option ARM timebomb set to explode....

mbga9pgf

They look cheap now; they wont in 6 months.

"morgan stanley and barclays capital in trying to shift toxic asset shocker"

mbga9pgf

Joeskeppi wrote: »

I just find it very hard to believe that they'll start resetting and banks will say "Oh no what's happening! Didn't see this coming!"

I reckon its being done on purpose. No conspiracy. Better to spread out the pain than have it all happen at once. I am not talking about another Lehmans; I am talking about difficult time for lending, perhaps another bailout. Eitherway, the market (currently built up on very thin volume) isnt expecting a W shaped recession; they are expecting a V.

Price to earnings arent looking particularly attractive at the mo.

You can take the pi$$ all you want. I am not expecting the horses of the apocalypse, I am expecting a very weak recovery, followed by recession redux, with decent recovery from 2015 onwards.

System

I'm not taking the pi$$, I just can't see this having the impact people expect it to.

bubblesmoney

StevieJ wrote: »

Does that include the auditors

ofcourse it does. the auditors can and do cook up things on a grand scale since time immemorial especially from the big 5 (oops big 4) auditing companies. btw lehmans accounting cookbooks showed 26 billion assets in last quarter of operation in july 2008 but now bancruptcy team has discovered the actual position to be 100 billion in the red and btw this hasnt even made it to the accounting scandals hitlist on wiki!!!!! guess a hundred billion in the red or black isnt anything these days when bailout costs go into trillions of dollars.

wasnt the recent lehman episode more evidence of the same, i wrote about this today on another thread, here is the link to that

chucky

mbga9pgf wrote: »

You can take the pi$$ all you want. I am not expecting the horses of the apocalypse, I am expecting a very weak recovery, followed by recession redux, with decent recovery from 2015 onwards.

do you mean like you predicted here... :rolleyes:

mbga9pgf wrote: »

More support for "option ARM" Armageddon

http://finance.yahoo.com/tech-ticker/article/243889/Beware-Crisis%27-Next-Wave-Option-ARM-Foreclosures-More-Debt-Defaults?tickers=XLF,FAS,C,^GSPC,JPM,BAC,^DJI

to be fair most people are expecting a slow and not an immediate recovery...

mbga9pgf

http://www.glgroup.com/News/Deutsche-Bank-Recognizes-the-Depth-and-Width-of--A--Paper-Crisis-to-Come-42642.html

he depth of the "Alt A" mortgage crisis is coming home to roost. We are likely to see the depreciate creep (or flood as the case may be) is going to hit the areas that the subprime loans barely touched.
Learn what Gerson Lehrman Group can do for you
Analysis

Deutsche Bank, while prompting new concern about the severity of the "A" paper mortgage crisis, is simply being forthright about the depth and width of the problem. Other lenders have been avoiding the truth as a means to avoid panic and to prevent further declines in their respective stock prices.

The "subprime crisis", while bad, was nothing compared to the potential crisis looming within the "A" paper and "Alt A" paper markets. I have been shouting from the mountaintops that the Option-ARM portfolios outstanding pose a substantial threat to our recovery. Negatively amortizing loans, combined with sharp declines in value, combined with lender hesitance to embrace loan mod options, combined with nominal loan mod options for this particular product, combined with the communal shamelessness of "walking away", are all conspiring to create the perfect storm for the real estate markets and banks.

Option-ARM's aside, as the article explains, we are seeing the creep of depreciation in more affluent communities and those where values were the highest at the peak of the market. The community mood is such that people are willingly walking from properties as a business decision, without the shame that that accompanied foreclosure in the past: "Why pay for a million dollar home that is worth $600,000.00?" Furthermore, "The value is not likely to come back for ten or more years!" In the communities that have been hardest hit, the latter point is even more valid than in the "Heartland". People in California, Florida, Las Vegas, etc., are certainly more nomadic than other regions of the country. These nomads are not willing to wait out the markets. The problem is that the population's, portfolios, and aggregated net worth of these nomadic areas is a substantial percentage of the country’s overall wealth. Thus, as the saying goes, "where California, et al, goes, so goes the country".

Of course, the unfortunate homeowner's who bought in the few years prior to the real estate run are going down with the ship.

The bankers who recognize the depth of the problem and openly address it will likely come out on top. Loss mitigation solutions, further consolidation of troubled banks, and real bleeding are necessary to get things back to equilibrium. I personally believe that is will be three years before we can foreclose, negotiate, or sell the inventory of houses that will be necessary for the market to start rising again.

mbga9pgf

http://www.citywire.co.uk/money/how-the-foreclosure-crisis-has-swept-across-america/a444175?re=11598&ea=245278

One in every 139 American homes received a foreclosure notice during the third quarter of 2010. Around 2.5 million properties are currently in the process of being repossessed, the same amount again in serious arrears, and 11 million (that’s a quarter of all mortgaged properties) are in negative equity (incentivising the owner to pass the keys back to the lender). The result is a chronic logjam, as borrowers fail faster than lenders can process. Critics accuse the banks (and the lawyers who work with them) of performing to type. The same people who got the economy into this mess in the first place, they argue, by lending vast amounts of money to sub-prime borrowers on a nod and a wink, have now turned the repo-business into a new goldrush enterprise, in which care and diligence are the victims of volume and bonuses.

According to the industry itself, the whole issue has been overplayed. Yes, the Bank of America has finally admitted to an error rate in foreclosure processing that’s higher than it should be (as high as 3.5%), but almost all of those errors are technical, meaning names have been mis-spelt, first names and last names swapped, signatures missing. Nobody – they’re keen to point out – has been evicted following an error. Most of the borrowers who have been served an imperfect foreclosure notice were in arrears. What’s certain is that the whole subject presents a nightmare for Barack Obama. The President who, in early 2009, announced a $75 billion plan to 'end this crisis and preserve for millions of families their stake in the American Dream', also knows that the American economy, and the property market in particular, can’t move on until this backlog has worked its way through the system. But it’s a brave president who, on the eve of a mid-term election, will make that his message.

Yep, looks as if that timebomb went off pretty good didnt it?

One Florida law firm office manager was caught signing at a rate of 1,000 files a day. When her hand hurt, a paralegal was allowed to take over and forge her signature. Mortgage firms hired temporary staff – hairdressers, burger flippers, factory workers – to sign documents stating records had been checked and properties were ready for foreclosure. Some, later, admitted to not knowing what a mortgage was, and to changing dates on documents when necessary. Offices were turned into make-shift repo-factories, files spread across floors, some lost, while the 'robo-signers' attached their names to affidavits they didn’t understand.

:rotfl:

I wonder if Chucky bought any of that RMBS paper he was boasting about was such a good buy?

sabretoothtigger

Ben Bernanke "had an adjustable-rate mortgage and it exploded." so he reset it to 5% fixed for 30 years courtesy of usa government and federal reserve purchasing mortgage debt

If anything these guys are seeming quite smart for the moment, nice system. wheres the downside

http://en.wikipedia.org/wiki/Ben_Bernanke#Adult_life

mbga9pgf

The downside is when you are underwater, have no job and cant get a remortgage as your only income comes from a low paid job, with your original mortgage repayment based on a negative ammortization scheme.

I dont think chopper ben fits into this category just yet!

Lets face it, the US is F00ked. Destroyed economically from the east. Got to say, I doff my cap to those in the far east; they arent stupid and have run rings around the western economic system.

sabretoothtigger

Alot of the stuff in the east is also stupid, communists and stupid Japanese politics plus other stuff.

The main failure in usa to me is democratic not economic, they should and could do much better.
I see their government as a spoilt child given too much, its going to take some kind of major failure to reset all that bad learning but in general I would not bet against america. Lots of things are in favour of usa still excluding politics

http://www.youtube.com/watch?v=hX_AmdTwmlk