Home › Forums › Housing › Conversation with another friend in the “innards” of the mortgage industry
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August 5, 2007 at 6:52 PM #9722August 5, 2007 at 6:57 PM #70569lindismithParticipant
keep it coming, Dave. It’s much appreciated.
August 5, 2007 at 6:57 PM #70682lindismithParticipantkeep it coming, Dave. It’s much appreciated.
August 5, 2007 at 6:57 PM #70689lindismithParticipantkeep it coming, Dave. It’s much appreciated.
August 5, 2007 at 7:02 PM #70573JWM in SDParticipantDave,
did he have anything to say about Country Fried Financial and CEO Godzilla? My Jan 08 puts and I thank you in advance π
August 5, 2007 at 7:02 PM #70687JWM in SDParticipantDave,
did he have anything to say about Country Fried Financial and CEO Godzilla? My Jan 08 puts and I thank you in advance π
August 5, 2007 at 7:02 PM #70695JWM in SDParticipantDave,
did he have anything to say about Country Fried Financial and CEO Godzilla? My Jan 08 puts and I thank you in advance π
August 5, 2007 at 7:10 PM #70579HereWeGoParticipantThis all comes down to people defaulting on their debt obligations. If the Fed lowers rates enough, and people can refi at a lower rate (where they can meet the debt service), then most of these problems simply disappear.
August 5, 2007 at 7:10 PM #70693HereWeGoParticipantThis all comes down to people defaulting on their debt obligations. If the Fed lowers rates enough, and people can refi at a lower rate (where they can meet the debt service), then most of these problems simply disappear.
August 5, 2007 at 7:10 PM #70701HereWeGoParticipantThis all comes down to people defaulting on their debt obligations. If the Fed lowers rates enough, and people can refi at a lower rate (where they can meet the debt service), then most of these problems simply disappear.
August 5, 2007 at 7:17 PM #70582bsrsharmaParticipantWhat are his assessments on Countrywide, Bear Stearns and Wells Fargo? Survivable? Come out healthy?
August 5, 2007 at 7:17 PM #70696bsrsharmaParticipantWhat are his assessments on Countrywide, Bear Stearns and Wells Fargo? Survivable? Come out healthy?
August 5, 2007 at 7:17 PM #70704bsrsharmaParticipantWhat are his assessments on Countrywide, Bear Stearns and Wells Fargo? Survivable? Come out healthy?
August 5, 2007 at 9:32 PM #70694daveljParticipantHe didn’t mention Countrywide, Bear Stearns or Wells Fargo specifically, but they’re all obviously in varying degrees of trouble. I’d say Countrywide has the most risk of the three, followed by Bear Stearns and Wells Fargo, respectively. Wells’ exposure to the mortgage business, while large in an absolute sense, is probably the smallest of the three relative to their total business and balance sheet. But I don’t know what volume of LBO pier exposure Wells has, while we know that Bear Stearns has some and Countrywide practically none. That’s probably not very helpful, but that’s all I know.
HereWeGo, you’re mistaken if you believe this is simply a short-term interest rate issue. It is not. It’s a “risk premium” issue. Here’s the problem: even if the Fed lowers rates to 2% tomorrow, the institutions that made the ridiculous 2/28 and 3/27 subprime loans won’t be loaning out at the 2004-2006 teaser rates (2%-4%). The market won’t take the paper. Those days are over for the foreseeable future. The problem is the risk premium that gets attached to whatever “base” teaser rate the lenders need to charge (to sell the paper) is now considerably higher and will remain so for quite some time. This increased risk premium will offset any decline in funding costs. In other words, short-term rates could plummet but mortgage rates for subprime/non-conforming paper probably won’t budge (that is, unless they go higher). The market has a newfound respect for risk premia and that won’t change anytime soon. Believe me, most of these problems will not “simply disappear.” I think you have a misunderstanding of the problem.
August 5, 2007 at 9:32 PM #70809daveljParticipantHe didn’t mention Countrywide, Bear Stearns or Wells Fargo specifically, but they’re all obviously in varying degrees of trouble. I’d say Countrywide has the most risk of the three, followed by Bear Stearns and Wells Fargo, respectively. Wells’ exposure to the mortgage business, while large in an absolute sense, is probably the smallest of the three relative to their total business and balance sheet. But I don’t know what volume of LBO pier exposure Wells has, while we know that Bear Stearns has some and Countrywide practically none. That’s probably not very helpful, but that’s all I know.
HereWeGo, you’re mistaken if you believe this is simply a short-term interest rate issue. It is not. It’s a “risk premium” issue. Here’s the problem: even if the Fed lowers rates to 2% tomorrow, the institutions that made the ridiculous 2/28 and 3/27 subprime loans won’t be loaning out at the 2004-2006 teaser rates (2%-4%). The market won’t take the paper. Those days are over for the foreseeable future. The problem is the risk premium that gets attached to whatever “base” teaser rate the lenders need to charge (to sell the paper) is now considerably higher and will remain so for quite some time. This increased risk premium will offset any decline in funding costs. In other words, short-term rates could plummet but mortgage rates for subprime/non-conforming paper probably won’t budge (that is, unless they go higher). The market has a newfound respect for risk premia and that won’t change anytime soon. Believe me, most of these problems will not “simply disappear.” I think you have a misunderstanding of the problem.
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