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Why Everyone Is About To Rush Into Subprime Mortgage Debt (Again)
If there is one thing the investing public has 'learned' in the last few years, it is 'no matter how bad the fundamentals, if it's been working, buy moar of it'. And so, it is with almost certain confidence that we should expect a resurgent flood of yield-chasing muppetry into no more egregious idiocy than the subprime-mortgage-debt market. As Bloomberg reports, the subprime-slime-backed securities that were created in the years before the financial crisis in 2008, which marked the last time they were issued, have gained almost 12% this year, or six times more than junk-rated corporate debt, according to Barclays. As one money 'manager' proclaims, "a lot of the uncertainty around the asset class has been taken away." Indeed, home prices will never go down ever again, right? (Just ignore this and this)
Remember when nobody wanted to touch U.S. subprime-mortgage debt? That’s just a distant memory as it delivers some of the bond market’s best returns.
The securities that were created in the years before the financial crisis in 2008, which marked the last time they were issued, have gained almost 12 percent this year, or six times more than junk-rated corporate debt, according to Barclays Plc. After contributing to the collapse of Lehman Brothers Holdings Inc., bonds tied to the riskiest home loans have returned 75 percent since 2010, topping speculative-grade corporate debt for three straight years.
The reason...
“A lot of the uncertainty around the asset class has been taken away,” Tom Sontag, a money manager at Neuberger Berman Group LLC, which oversees about $250 billion, said by telephone from Chicago.
While almost 30 percent of the subprime mortgages tied to bonds are at least 60 days delinquent, the percentage has fallen from as much as 41 percent in 2010, data compiled by Bloomberg show. In the broader market for mortgage securities without government backing, which also includes loans known as Alt-A and jumbo debt, the default rate has fallen to 23 percent from 30 percent in 2010.
So - because historical default rate trends (in a ZIRP/QE/no-foreclosure environment) has fallen - but remains high - we should back up the truck because all is forgiven on subprime debt.
And sure enough, the 'pitchers' are out en masse... "get 'em while they're hot, they're lovely"
“It’s going away, there’s a dedicated buyer base and there’s strong fundamentals,” said Carl Bell, the Durham, North Carolina-based deputy chief investment officer at Amundi Smith Breeden, the U.S. unit of the money manager that oversees more than $1 trillion globally.
* * *
What could go wrong? Oh apart from FHFA's Mel Watt enabling 3% downpayments and subsidized homes for the poor and needy...
Four words - It's different this time.
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Cause pensions are going to get sacked..and brokers will still be paid?
Same as it ever was....
RIPS
I'm gonna need a 'teaser rate' to get into that cardboard box I've been looking at under the interstate.
MF or SF ?
According to Charlie Gas'bag'arino and the rest of the MSM, banks aren't lending, and home sales are down because of low paying jobs.
I guess we have some sort of paradox taking place. ;-)
I think he means the taxpayers are lending and no one needs a home because they spend all their time at their 3 part time jobs.
I wonder how much a CDS is on one of these things?
Now that CONgress has put the taxpayers on the hook for derivatives with the cronybus bill, the banks will start lending more.
Just watch sub-prime go up 25% in the next six months.
Keep it together.
https://www.youtube.com/watch?v=-Jm-_5CjY34
Keep your panties on. The market for the old distesed bonds is strong, reflecting falling delinquencies, improved home prices since the bottom, high coupons and short durations. This has absolutely nothing to do with the market for newly originated non Agency mortgages, which is still limited to high quality lower leverage loans and is a tiny fraction of ore crisis issuance.
for now
no way wall street allows a demand not be supplied
Those 2% 10-year coupons and the 4% junk bond coupons are making me salivate
go long appraisal fraud
I have managed to save up 6300 dollars of unused EBT benefits I would like to put up as collateral for the down payment. My husband gets out of jail next week, so we will have that potential income coming in also. Where do I sign? and what does this ARM thingy do again?
I have a way to solve this problem. Every subprime borrower should be required to have an ATM machine on their front porch, next to the flat screen tv and EBT hotline.
Sippin' on some siz-ZIRP!!
New for 2015 - Transformer houses for the new pseudo-nomadic economy. We call them Optimus Subprime.
They used to be called Winnebagos
Nice observation/
Barbarous relic
Nice try Clint.
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Nahhh...Winnebago went retro with the Brave this year. Totally hip 1960's machine:
http://www.gowinnebago.com/products/2015/brave/
Why? Because the low income, bad credit future home buyers and big banks have nothing to lose
Relatives of mine just bought a fairly average suburban home in Vallejo, CA, home of high crime and the recent municipal bankruptcy, for a whopping $370,000. The funny thing is that they bought at the peak of the last bid real estate bubble, ended up losing everything, but now they are buying at the peak of the new mini-bubble.
People never learn because their greed and sense of entitlement is vastly stronger than their ability to see clearly and think for themselves. My foolish relatives tend to be almost a perfect reflection of larger societal trends.
because "owning" a house is the Murkin Dream
Well it is different this time -the magic printing machine really works -if anyone objects, invade, bomb and sodomize the countries leader with a stick -destroy their currency and then bomb and kill them some more - Mr. Yellen will never let housing prices go down, and even if it all collapses, the taxpayers will pick up the tab. $18 trillion in debt hasn't hurt us. Debt when you never have to pay it back. This can go on forerever-at least during our lifetimes.
Sure - aa long as foreign countries keep paying Uncle Sam's bills. Oh wait... they started to create money out of thin air (ie without proper collateral) as well.
The shit-and-piss rating agencies will declare it AAA right before the crash.
Fitch, S&Poopski, Bloomturd, Moody's?
Credit ratings are like the cheap "tin foil" hucksters purchase to legally assrape the next set of serfs during the Hawaiian luau.
Yen you crazy fucker. Merry Fucking Christmas to you and yours.
Keep your stick on the ice. See you in 2015.
North Dakota and Texas should be just starting to ripen up for sub-prime scams.Hell,I'll even stick my neck out and through in Oklahoma and California.
Texas isn't ripe for subprime scams. Any state that has lots of land and high property taxes can weather a credit bubble easier than other states that use income taxes/no land.
The way FIRE credit works is through bidding for rent values. Let's say there are two people bidding for a liquour store. The one who takes out the biggest loan wins the bid.
Banker creates credit money from nothing and gets the usury value and first seigniorage on this money. Winner of bid tries to beat up the market with prices in order to pay banker usury.
This rent seeking mechanism is thwarted somewhat by land taxes. The tax must be taken into calculation during the bidding. In this way, the banker does not take all the rental value, and instead some productive output vectors to government.
Government may then respend into the commons. But, banker gains usually go to Oligarch and luxury goods, or colluding to try to take over the world.
Private Credit money and hypothecation has a dark underbelly. This is why we have just concluded an acceleration of the industrial revolution, yet there are no real gains for the working class. Labor has their output vectored away from them via debt instruments and the losses are reflected in prices.
That we are entering into another subprime credit bubble, with the last being in Autos, should tell anybody who has more than two digits IQ something: Namely, the U.S. is a banker/Wall Street Credit Spreading Democracy. It is NOT a republic under poltical control.
The Left Right political dichotomy is only a dialectic for the sheeple to consume.
+1000. I wish I could add something, but I would only diminish your great post.
Well, it's not just a subprime mortgage either, look what it did for Larry Summers at the Lending Club as they slowly destroyed the peer to peer model it started out with. They posted a loss of 23 million and look what the IPO rolled in for Mr. Summers. They are right back to selling the loans to banks and hedge funds wrapped up in a CDO.
Maybe time to look at the Quants of Wall Street Documentary where some real key players talk, even Mike Osinski who wrote the software that all the banks used and abused for the initial subprime fall.
http://ducknetweb.blogspot.hk/2012/09/quants-alchemists-of-wall-street-video.html
Keep that debt rolling in...and keep the public stupid and keep tossing fake numbers at them, don't change the portfolios, just change the math and off we go again. Peer to peer loans is nothing but that, software with analytics that allows people to quality with a different model.
Be aware too that the banks are coming to market some more of your personal data too. Did you miss that Acxiom the big data broker who sells information about us right and left will be issuing credit cards now for TD bank? Did you notice that Oracle bough Datalogix this week (another big data broker that Facebook uses to mine all your information)? Bank profits are down 17% the last two months so they're coming for the easy money selling more of our data. The east coast banks are all opening up Silicon Valley Labs to write more apps that work at the back end to mine and sell more of your data, so be careful with some of the Fintech stuff you see out there. We've been through some of this already with healthcare apps. Mining and selling data is easy money once it is set up with the appropriate algorithms as it's pretty automated business. Data rolls out and money comes in.
This also keeps inequality accelerated too as along with selling your data, they "score" you with analytics so that's why the middle class can't get ahead, you're scored to stay where you are at with some access being denied somewhere. It sucks, but get a look at the video at this link, "Data Dealer" the game.."break into other data dealers data bases" "set up online ventures""they'll all come running, banks, insurers..."
http://ducknetweb.blogspot.com/2014/06/data-selling-and-direct-correlation-to.html
So add this little deal on to the subprime as yet one more way for money to be made and they don't care if your data is correct or flawed..look at this hospital buying up your Acxiom and credit card records now...Master Card went after this and convinced the hospital they needed all your credit card transactions for the doctor to review...yuk... they don't want to do it either..
http://ducknetweb.blogspot.com/2014/06/oh-crap-now-hospitals-are-now-buying.html
Here's more on the privacy campaign I have going if you want to read it. I started it 3 years ago and I think the FTC is finally listening to me, we need an index on who's selling this data and you know the banks will be getting their best quants on the job to see what models they come up with. Health insurance policies are already being remodeled by quants, why they change all the time. So this time along with the loans being sold, well for a few extra dollars with the CDO, they may toss in a whole bunch of "scored" data about you.
http://www.youcaring.com/other/help-preserve-our-privacy-/258776
watch them go just a little further on sub-prime with a first year no payment (interest reserve/capitalized interest of course) component, or something thereabouts..
I wouldn't be surprised. then again, maybe Student Loan Debt loses its magic status in BK courts with this new legislative body, and CAN be dischared like the rest of unsecured CONSUMER debt, but its the season for hopeful thinking I know.
merry, merry!
Saw a ReMax billboard advertisement just yesterday, which read:
"Buy a house with just $2500 down (or less)!"
I could scarcely believe my eyes and thought, "bubble-pop 2.0 is upon us."
I have an L.A. Area residential property I'm putting up for sale in early spring. I hope to have it sold before September.
Do you think I have enough time before the bubble pops?
Hopefully so...
Don't be greedy and take the first reasonable offer. SoCal has gone full retard again. The correction is imminent as the specuvestors are insolvent.
Excellent advice, and I will follow it with gratitude. First reasonable offer and I'm out. I don't mind selling below market, I'd still be profiting.
Thanks for your helpful reply, it's much appreciated.
rich fuckers get to buy CDS on this shit
we sit here with our thumbs up our asses
fuck you blythe masters!!
Two quotes come to mind...
Aperson is smart - people are stupid.
&
Never under estimate the stupidity of people in large numbers.
I have taken the time to copy some of the best ZH quotes/jokes over the year, hope you enjoy and recognise one of your own...
· Good health is merely the slowest possible rate at which one can die.
· If you’re looking for sympathy, you’ll find it in the dictionary between “shit” and “syphilis”
· When you choke a Smurf, what colour does it turn?
· See, the problem is that God gives men a brain and a penis, and only enough blood to run one at a time.
· 100,000 sperm and you were the fastest?
· Sex at age 90 is like trying to shoot pool with a rope.
· I’d rather have a bottle in front of me than a frontal lobotomy.
Why is the man who invests all your money called a broker?
A Chinese man rings his boss, “Me no work I sick.”
Boss says, “When I’m sick, I make love with my wife. Try that.”
Two hours later the Chinese man rings back, “Me better, you got nice house.”
Wife: “Windows frozen.”
Husband: “Pour some warm water over them.”
Wife: “Computer completely screwed up now.”
A man called his friend’s house and a small voice greeted him.
“Is your Daddy there?” he asked.
“Yes.”
“Could I speak with him?”
“He’s busy,” the little voice replied.
“Well, can I speak to your mother?”
“Nope, she is busy, too.”
“Well then, let me talk with your brother.”
“He’s busy, too.”
“For goodness sakes, what are they so busy doing?”
“They are looking for me!”
Light travels faster than sound. This is why some people appear bright until you hear them speak.
If I agreed with you we'd both be wrong.
Men have two emotions: Hungry and Horny. If you see him without an erection, make him a sandwich.
Children: You spend the first 2 years of their life teaching them to walk and talk. Then you spend the next 16 years telling them to sit down and shut-up.
Politicians and diapers have one thing in common. They should both be changed regularly, and for the same reason.
Evening news is where they begin with 'Good evening', and then proceed to tell you why it isn't.
If God is watching us, the least we can do is be entertaining.
If 4 out of 5 people SUFFER from diarrhea... does that mean that one of us enjoys it?
If you think nobody cares if you're alive, try missing a couple of payments.
Better to remain silent and be thought a fool, than to speak and remove all doubt.
Some people are like Slinkies ... not really good for anything, but you can't help smiling when you see one tumble down the stairs...
God must love stupid people. He made SO many.
The voices in my head may not be real, but they have some good ideas!
A clear conscience is usually the sign of a bad memory.
Laugh at your problems, everybody else does.
Never get into fights with ugly people, they have nothing to lose.
Artificial intelligence is no match for natural stupidity.
Always borrow money from a pessimist. He won't expect it back.
He who smiles in a crisis has found someone to blame.
A diplomat is someone who can tell you to go to hell in such a way that you will look forward to the trip.
We have enough gun control. What we need is idiot control.
Some cause happiness wherever they go. Others whenever they go.
I always take life with a grain of salt, ...plus a slice of lemon, ...and a shot of tequila.
Does this rag smell like chloroform to you?
Nostalgia isn't what it used to be.
Some mistakes are too much fun to only make once.
The reaons are obvious.
You taxpayers are now on the hook legally for even more leverage and Corzine-ing than ever before.
Hard to make a buck when rates are basically zero.
For eternity (feds-speak notwithstanding).
So lever up......and chase that yield bitchez!!!!
Merry Christmas to all!
Please, for the sake of Christmas - free Corzine!