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US Subprime mortgage market


JohnHoward

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Here is a report on Germany. I cannot remember 1931 but it doesn't sound like champagne & cream cakes.

 

http://www.ft.com/cms/s/46fe1d80-4063-11dc...00779fd2ac.html

 

The German government has pulled together a rescue operation ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâہ¡ÃƒÆ’‚ drawing in all three pillars of the countryÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s banking system ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâہ¡ÃƒÆ’‚ to shore up EuropeÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s first major casualty of the subprime crisis.

 

The rescue of IKB, a specialist lender based in Dusseldorf, began on Sunday when Peer Steinbruck, the German finance minister, called leading banking executives to discuss a bailout. According to people who took part in the conference call, Jochen Sanio, head of GermanyÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s financial regulator, is said to have warned of the worst banking crisis since 1931.

 

IKB announced a big fall in its earnings because of subprime exposure. The news sent its shares plunging and prompted KfW, the state-owned development bank, to step in with a pledge to guarantee obligations of more than E8 billion ($10.93 billion) ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâہ¡ÃƒÆ’‚ more than five times IKBÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s stock market value.

 

The intervention suggested that the problems at IKB are much worse than thought. Mr SteinbrÃÆâ€â„¢ÃƒÆ’ƒâ€Â ÃƒÆ’¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒ¢Ã¢â‚¬Å¾Ã‚¢ÃƒÆ’ƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚¼ck phoned several banking executives, including Josef Ackermann, chief executive of Deutsche Bank, on Sunday to bring them on board.

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We all kind of thought it may take the (potential) implosion of a big financial institution to shake and push the sharemarkets lower;

 

Bear CFO: Bond turmoil 'extreme'

 

Is Bear Sterns to be the LTCM of 2007/08??

 

Enron bonds were apparently graded as 'investment grade' by the ratings houses right up to 1 month before their demise!

 

Best of Luck to all - whatever happens!

 

DYOR.

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In reply to: ibisibis123 on Saturday 04/08/07 09:36pm

ibisibis123

Lyndon LaRouche is a complete nutcase, look him up on Wikipedia to see his bio.

 

having said that ,if his trillion$$$ mortgage figures he is talking about in his article

are correct then their will be a lot of damage done from subprime.

Difficult to find out the true scale of it , some market analysts quote small

amounts , & some very large amounts.

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In reply to: datum on Monday 06/08/07 02:21am

So it seems most commentors are saying that the problem is far more extensive than first thought. I would hazard a guess that this is not limited to the subprime mortgage market, that defaults will pick up in "more secure" loans.

 

What will be interesting is the RBA meeting this week. All indicators are saying we should have a rate rise. If we don't get a rate rise, well, it may signal that the RBA is worried about our ability to repay our personal debt. Things are about to get very messy in my opinion.

 

Time will tell

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It seems that we in the market are willing to pay around a billion dollars

for a project in an african country with no infrastructure. (SDL)

 

We are also willing to pay large prices for low grade Uranium assets

during a period of bubble prices.

 

We also thought MBL and BNB were going to continue for years pulling

off incredible deals.

 

Thats why we needed are market correction.

 

It also adds good buying opportunities that have not existed for a few months.

 

Cheers

 

CO

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In reply to: datum on Monday 06/08/07 02:21am

Thanks Datum - I had no idea this guy was a nutcase. I read his article through my usual trawl which includes www.321gold.com (though I'm out of all golds atm)

Cheers

Ibis

Holding ADI, STX, CUE, HZN, NZO, EGO, PCL

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I'm here in the US and the penny has finally dropped for me on exactly how this whole mortgage issue will bring down the US economy. I've got heaps of stories to tell, but that will have to wait until I get back. In brief - here are the stages of the downfall:

 

1) Mortgages granted for people who cannot repay them

 

2) Forclosure rate skyrockets

 

***These have already happened

 

3) Brokers step in to negotiate a "short sale" . Here's how it works: House purchased for 750,000 2 years ago and is now only worth $600,000 and the borrower is $25,000 in arrears on the payments. Mortgage balance is $650,000 which is more than the house is worth. Broker arranges a short sale where the lenders agrees to accept $600,000 as payment in full for the loan and the borrower walks away. This sounds all ok until you get to step #4

 

***This is happening now

 

4) Lender issues a 1099 (tax income statement) to the borrower for the amount of the loan which is forgiven, plus forgiven payments plus commissions and fees. Borrower gets a 1099 for $100,000 which is treated by the IRS (tax department) as INCOME!!! The borrower must now pay taxes on the amount of forgiven debt.

 

***Start to look for this in the news in coming months. Taxes were due April 15th. Extensions due in October

 

 

5) Borrower now has a $35,000 tax debt which of course he cannot pay

 

***This is where is really gets ugly

 

6) After about 6 months the IRS gets brutal. They will zap any and all bank accounts without notice and drain it down to zero to pay off the debt. They attach your wages and can take almost 50% of your net pay which doesn't leave people with enough money to live on. With penalties (which are severe) and interest, a $35,000 IRS debt can grow to over $100,000 in a few short years

 

 

____________

 

This senario is happening to A paper and subprime mortgages alike. And yes, they are still making rediculous subprime mortgages. Unfortunately a friend of mine was granted a subprime mortgage last week that she has no chance in hell of repaying. It's a forclosure waiting to happen. Why did the lender make this loan? Let's add it up:

 

7 points origination fee on $300,000 loan =$21,000

Prepayment fee of another $20,000

12% interest

God know how big the forclosure fees will be

20% equity position

 

The lender should be able to take back this house in about 6 months and pocket about $50,000 in profit. My friend will be left with nothing but bad credit

 

_______________

 

In my previous life BC (before children) I owned a mortgage company in the US. I'm meeting with several former associates this week. I'll have more stories to tell when I get back to OZ

 

 

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