Underwriting the SubPrime Crisis

Thursday, December 06, 2007 | 01:00 PM

Foreclosures continue to tick higher, reaching all sorts of nasty levels in Q3, climbing to 20 year highs:

"The rate of homeowners going into foreclosure hit a record high in the third quarter, while those late with their payments rose to the highest level since 1986, according to mortgage lenders' trade group, which forecast that the meltdown in the mortgage and real estate markets shaking the U.S. economy will continue to worsen over the next year.

The Mortgage Bankers Association reported that 0.78 percent of mortgages entered the foreclosure process in the three months ended Sept. 30. That figure is up from 0.65 percent in the second quarter - the previous record high - and more than double the 0.32 percent rate a year earlier. The homeowners entering foreclosure brought the total percentage of loans in the foreclosure process to a record high as well of 1.69 percent, or 768,000 homes.

The report also showed that 5.59 percent of borrowers are now at least 30 days late making their mortgage payments, which is just below the record high of 5.68 percent set in 1986. And 1.26 percent of the borrowers were 90-plus days late, putting them at significant risk of going into foreclosure."

Hey, that's good stuff. How did the simple process of securitization go so far awry? I'm not sure how, but at least we know who to thank for the too clever by half excesses of the past cycle, thanks to this nice table from this morning's NYT on who was underwriting all of the sub-prime securitized products:




"The Wall Street banks that foresaw problems say they hedged their mortgage positions as part of their fiduciary duty to shareholders. Indeed, some other companies, particularly Citigroup, Merrill Lynch and UBS, apparently did not foresee the housing market collapse and lost billions of dollars, leading to forced resignations of their chief executives.

In any case, the bankers argue, buyers of such securities — institutional investors like pension funds, banks and hedge funds — are sophisticated and understand the risks.

Wall Street officials maintain that the system worked as it was supposed to. Underwriters, they say, did not pressure colleagues on trading desks or in research departments to promote securities blindly."

Nevertheless, the loans that many banks packaged are proving to be increasingly toxic. Almost a quarter of the subprime loans that were transformed into securities by Deutsche Bank, Barclays and Morgan Stanley last year are already in default, according to Bloomberg. About a fifth of the loans backing securities underwritten by Merrill Lynch are in trouble.



Foreclosures reach record high
Chris Isidore
CNNMoney.com, December 6 2007: 12:34 PM

Wary of Risk, Bankers Sold Shaky Mortgage Debt
NYT, December 6, 2007

Thursday, December 06, 2007 | 01:00 PM | Permalink | Comments (18) | TrackBack (0)
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The CEO of "douche" bank reportedly turns down the top job at C.

Seems to me he could have lessened the blow to himself had he just changed addresses, at least with respect to what C has in default over douchebank.

perception seems to be ALL that matters at this point.


Posted by: michael schumacher | Dec 6, 2007 1:05:41 PM

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