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Category Archives: housing
Greenspan’s Legacy: The Housing Bust
Alan Greenspan accepts little if any responsibility for fueling the housing boom: I do not doubt that a low U.S. federal-funds rate in response to the dot-com crash, and especially the 1% rate set in mid-2003 to counter potential deflation, … Continue reading
Posted in fiscal and monetary policy, housing
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How to Test the Accuracy of the ABX
The WSJ takes a look at the notorious ABX today, and although it’s more polite than me, it still shows how bad the index is as a gauge of the subprime mortgage market Wachovia Capital Markets analysts Glenn Schultz and … Continue reading
Posted in derivatives, housing
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The SF Chronicle’s Atrocious Mortgage Conspiracy Theorizing
The San Francisco Chronicle published on Sunday a grossly irresponsible opinion piece from one Sean Olender, headlined "Interest rate ‘freeze’ – the real story is fraud". I would dearly like to hold someone at the Chronicle to account for printing … Continue reading
Who Says the Mortgage-Freeze Plan Doesn’t Benefit Investors?
(HT: Alea)
Posted in housing
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The Myth That Lending Rates Rise in Response to Policies
There’s a credit crisis going on right now. Credit is what you get when a lender lends money to a borrower. Therefore, any attempt to address any credit crisis is, by definition, going to affect lenders. For pundits of a … Continue reading
Posted in bonds and loans, economics, housing
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Barney Frank’s Opposition: It’s Not Hank Paulson
Paul Krugman blogged the mortgage-freeze plan on Friday; today he has a column on the subject in the NYT. What’s interesting to me is that the column is so much more partisan than the blog entry was. Krugman’s take on … Continue reading
The “Bailout” Artists: A Roster of Shame
I clearly spend too much time reading blogs, because I stupidly thought it was only right-leaning bloggers who would be so thoughtless as to refer to the mortgage-freeze plan as a bailout. Tinbox, however, notes that in fact it’s the … Continue reading
A Plea, Part 2
Tyler Cowen stops short of calling the mortgage-freeze plan a bailout, so he’s exempt from the last plea. But this kind of thing is still very annoying: There are two main arguments for breaking the loan contracts. The first is … Continue reading
A Plea
Please can the punditosphere stop referring to the mortgage-freeze plan as a "bailout"? As Edmund Andrews says in his first sentence on the front page of the NYT today, it isn’t. The FHA’s FHASecure plan, which has existed for ages, … Continue reading
Posted in housing
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The Mortgage-Freeze Plan: Still Very Little Litigation Risk
Yves Smith today plays gotcha with the American Securitization Forum, the private-sector group which was instrumental in putting together the mortgage-freeze plan officially announced yesterday. It turns out that the plan is at odds with earlier ASF guidance on loan … Continue reading
Posted in bonds and loans, housing, law
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Why Lenders Love the Mortgage-Freeze Plan
I just got off the phone with a former colleague of mine, who was wondering who the losers are in the subprime freeze. What will this do to the balance sheets of banks and buy-side institutions who ultimately own the … Continue reading
Posted in housing
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Subprime Reading
The Milken Institute has chosen today to launch three big studies on subprime mortgages, which certainly makes it timely. In the first one, we’re told that subprime mortgages do help increase homeownership. (Whether that’s a good thing or not is … Continue reading
Posted in housing
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The Subprime Monologues
Thanks to the wonders of webcasting, I spent a large chunk of this afternoon listening to president George Bush, Treasury secretary Hank Paulson, HUD secretary Alphonso Jackson, ASF executive director George Miller, FDIC chairman Sheila Bair, as well as men … Continue reading
Posted in housing
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The Subprime Plan: Now, It’s Political
The Paulson subprime mortgage plan, it would seem, is now the Bush subprime mortgage plan. According to the WSJ, the plan "includes" a non-binding agreement by servicers and investors to freeze the teaser rate on some loans for five years. … Continue reading
NYT Revisits Goldman’s Mortgage Underwriting, Sensibly
If I was an editor at the New York Times, the first thing I’d do after Chris Dodd started waving a Ben Stein column around would be to wonder if there was anything in it at all which could be … Continue reading
Posted in housing
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What’s a CDO?
I could tell you, but it’s more fun to show you.
Posted in bonds and loans, housing
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Subprime: It Never Did Help Homeownership
Student of the Tao goes mythbusting, after reading the Seattle Times: Myth 1: Sub-prime mortgages allow bad credit risks to buy homes. Locally and nationally, nearly all of Ameriquest’s loans went to people who already owned homes, The Times found. … Continue reading
Posted in housing
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Subprime Prescience at MetLife
Lavonne Kuykendall quotes Steven Kandarian, MetLife’s CIO: Mr. Kandarian said MetLife identified the risk from subprime loans early and stopped buying subprime mortgage-backed securities rated single-A and below in late 2004. Note that MetLife’s fund managers aren’t the kind of … Continue reading
Posted in bonds and loans, housing, investing
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Cuomo Stalks Wall Street, Mortgage Edition
Andrew Cuomo is on a fishing expedition for mortgage-related malfeasance on Wall Street, specifically sins of omission: The inquiry raises questions about the extent to which securities firms are obligated to dig into the mortgages before slicing them up to … Continue reading
Posted in bonds and loans, housing, law
1 Comment
Subprime Paper of the Day
Kristopher Gerardi, Adam Hale Shapiro, and Paul Willen of the Boston Fed: This paper provides the first rigorous assessment of the homeownership experiences of subprime borrowers… We present two main findings. First, homeownerships that begin with a subprime purchase mortgage … Continue reading
Posted in housing
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The Weakness of Marking Subprime Bonds to Market
In the case of subprime bonds, marking to market is a pretty crappy way of working out how much those bonds are worth.
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Posted in bonds and loans, housing
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Which Bondholders Benefit From the Paulson Plan?
Last week, when the Sheila Bair subprime-modification plan became the Hank Paulson subprime-modification plan, I tentatively suggested that junior bondholders might be winners, while senior bondholders could lose out: In reality, it’s almost certain that some bondholders would benefit from … Continue reading
Posted in bonds and loans, housing
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Why Paulson Needn’t Worry About Litigation Risk in his Mortgage Plan
Elizabeth Warren is worried about the investor lawsuits that Hank Paulson’s mortgage-relief plan might trigger. "There is no clear legal basis for doing this kind of wholesale revision of the value of the collateral and forced revision of the mortgage … Continue reading
Signs the Housing Bubble Still Hasn’t Really Burst, Bestseller Edition
The most-gifted book at Amazon.com is Be a Real Estate Millionaire: Secret Strategies for Lifetime Wealth Today. Interestingly, although it’s the most-gifted book, it only ranks at #197 on the overall Books bestseller list. Weird. Are people buying dozens of … Continue reading
Posted in housing
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Treasury’s Subprime Plan and the Danger of Tactical Delinquencies
Of all the ideas floated to help solve the subprime mess, I never really believed that Sheila Bair’s plan to simply lock in teaser rates would be the one to gain traction. As I said when it was first mooted, … Continue reading
Posted in housing
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