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User Info	Bush freezing adjustable interest rates; entered at 2007-12-02 15:43:09
Mtgspy Posts: 6202 Registered: 2007-10-27	Dude, let's look at the disaster portion of my book: Let's take 2 line items randomly. The first is 6.29% average rate Subprime, currently 26% of the balance 90Days+. Advancing at 3% a month the last 2 month. Will Reset in 8 months. How am I supposed to ask for a bid on this one? The second is 2.25% Option ARM, very new - 9 months, and under "Enhanced Underwriting" from one of the banks you short. 2% of the loan is bankrupt and 9% serious delinquency. Advancing at 1% a month, but keep in mind this is brand new and reset will come in 4 years and 3 months. FICO is decent, and LTV is 85 average, 89% full documentation. Who can price this loan? Can you? I can't. The only bid coming would be extremely "wide", like 80 cents on the dollar if I am lucky. Then the other non-disaster part of my book, which "monetize" the excess interest on the ARM NET OF DEFAULT. So I already paid the insurance for default, which will come anyway based on what I told you so far. But who in their right mind will take the "excess interest" from my hand at this point? Let's say it used to be 100c/$ it could be if sold right now 60c/$. Not joking. They'll price in probability the crazies in DC breach the contract and de-facto default. Mortgage industry is NOT ONE GUY loaning ONE America. In fact, it's not two sides. It's at the minimum, in any given deal 40-50 sides of the trades. All of whom will be handed "breach of covenant". Ironically, the guy long credit is STILL DEAD because the borrower default any way. This game WAS NEVER ABOUT RATE. EVER. 2007-12-02 15:43:09