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User Info	What am I missing about ABX ?; entered at 2007-12-02 09:55:26
Mtgspy Posts: 6202 Registered: 2007-10-27	Yal, Q1: should I repeat ? OK you have shown 20% defaukts before the reset of rates but the ABX look forward trying to guess what would be the defaukt rate AFTER the reset. A1: The increase was 1% default a month going now to 2.25 more a month. At this rate, by reset we are looking at 40% default. Now at that point I expect 30% of the pool PREPAID. So there's 30% left. How much of the 30% to default at this point if they haven't prepaid? Do I think it's the reset? Doubt it. At month 24 their finances is not worse or better on average than 25. They are wishful about the house prices coming back up to refinance. Q2: So maybe stopping the rate increase redce defaukt range from 50%-60% to 25%-30% ? this is a great improvment. A2: Look at the above. Also since probably you aren't trading this. The 30% that prepaid from 2006 goes into, YUP, you guessed it, the DEFAULT IN 2007 DURING TEASER RATE. REALLY. We tracked them and 40% of those refi are now 60 days+. MUCH WORSE than the original 2007 ITSELF. So desperation Refi is worse than magical thinking, just a few counterintuitive point most haven't learned yet. Q3: Much is unknown about the way people will behave in the future when their rates reset - now this unknown is reduced by keeping their rates where they are. A3: Look at the above about a)defaulting at teaser rate, and b) defaulting at teaser rate after getting a refi. It's not wrong to be hopeful Yal, but look at the data. It's telling me as investor not to EVER go LONG CREDIT until house prices showed another ponzi scheme. Last modified: 2007-12-02 09:56:07 by mtgspy 2007-12-02 09:55:26