Jumbo RMBS Defaults Triple

how long does it take for this to turn into lower prices is the question

you say triple, I say 10% of RMBS delinquent... or 1/10 has cancer, 1/10 will die in the next year, 1/10 will get a sexually transmitted disease.. see how more impactful it is?

None of those jumbos are in Manhattan. Manhattan is immune to all things negative when it comes real estate.

I sort of agree. Not as many underwater properties. More coops which required larger down payments and generally better credits. Should be fewer problems.

yea just put a piece up on this too, its gathering speed in prime, alt-a too.

http://www.urbandigs.com/2010/01/arm_recasts_starting_already_d.html

with a huge carry trade on, and search for yield with balanced risk harder to find, I wonder when this may come to a head..especially with recasts coming

Noah, have you looked at option arm loan mods, from what I can tell the fear over the neg-am limit triggering a recast is way over-blown. Banks are fully prepared to extend and pretend on this one and avoid the recast. I've seen a number of these converted to ten year io's.

Besides it could be argued the defaults have already occurred. Many of the pools have already experienced 50% losses with defaults beginning on day one.

Get a grip ppl. Ppl are walking cause they know even if they can carry it, their intention was and never will be to live there till they die or to "pay" a renter $3K to $4K/month till the mkt "turns." 60 to 70% of the 2004-2007 did it cause it was "easy" money with no taxable event. HELLO, its 2010 and its starting to sink in their "home" trade ain't working out.

To me if the banks gave me more rope to hang myself, I'd say stick it up your first year associate.

hmm, no I havent. hardly any free time with new site development. sucks, I feel kind of out of the loop. But I can see banks prepared to e & p with these, as they do with every prob loan or security. but how does it help the borrower?

If they can manage the IO-payment, then it helps. Banks know there's no equity, so they're prepared to gamble on some HPA. If the borrower still fails, it's back to square one I guess.

Riversider, aren't you the one that said NYC is different? Dude, get a grip.... I got an old mba friend at manhattan mortgage that was selling option arms but the bucket fulls in 2003-2007.. I mean bucketfullzzz.... his speal... you're a banker, why tie up your money.. pay off mortgage balance when you get bonus paid.... a side wink.. hey maybe even go out and double down in NYC Re? That was his speal.... never a mortgage denied... dude used to say I could get you a $2MM loan by this afternoon.

Trust me, I'm an anonymous blogger... you ain't seen nuthin yet in manhattan. The lemmings keep a buying... the smart ones keep a selling...

Not a Manhattan issue, in my opinion.

hey you know that girl on "cluesless", well she's dead.

"Deutsche Bank predicts that the number of underwater loans in the New York metro area will jump from its current 11 percent to 77 percent by 2011. In addition, between October 2008 and October 2009, the city lost 110,000 jobs, according to the state Department of Labor. And if job losses continue at the current monthly rate of 3 percent, another 45,000 people will lose their jobs during the next six months.

Unemployed homeowners, with no money to make mortgage payments, have little hope getting out of their financial bind anytime soon."

"( )State Senator Jeffrey Klein said, "I think banks are going to be a lot more willing to change the terms or modify mortgages."

The willingness of those banks could be the city's only hope of curtailing the mounting wave of foreclosures, and the destruction left in its wake."

http://therealdeal.com/newyork/articles/second-wave-of-foreclosures-hits-middle-class-and-upper-end-nyc-neighborhoods

Oops, never mind. Jason already posted this, sorry:

http://streeteasy.com/nyc/talk/discussion/17732-foreclosures-are-now-hitting-the-high-end-manhattan-market

Uhhh...I was joking. About Manhattan, Riversider.

riversider doesn't have a sense of humor.

Sorry Jason, thought it was sarcasm.

"Housing Crisis Getting Uglier in 2010.
Nearly 6 Million Foreclosures in Past 3 years - 3 Million More Expected in 2010"

"Jessica and Aaron Jenkins got in way over their heads when they bought their 5-bedroom dream home in Corona, California for over $700,000. They paid $2,800 dollars a month on their interest-only loan -- never touching the principal.

"It's cheaper than a 30-year fixed," Aaron said. "We can afford it so that's why we did it."

But this year, their loan would reset, adding $1,100 dollars to their monthly payment. In the next two years, nearly 361,000 loans will reset nationwide - increasing mortgage payments by an average of $1,000 per month.

That's why a record 3 million more foreclosures are expected in 2010. "

http://www.cbsnews.com/stories/2010/02/02/eveningnews/main6167610.shtml

they mean RECAST?

Rate resets and there's a newpayment. Unless we're talking POA, it's just a semantics issue.

"Prime Jumbo Delinquencies Soared In January, Again"

"Overall, prime jumbo RMBS 60+ days delinquencies rose to 9.6% for January (up from 9.2% for December 2009). "

"--New York: 6.1%, up from 5.8% (7% share);"

http://www.businessinsider.com/prime-jumbo-delinquencies-soared-in-january-again-2010-2

This article has an interesting chart on resets,showing rises in resets through 2010 and 2011....

http://www.hussmanfunds.com/wmc/wmc091109.htm

Do any of you have an idea of the typical condo purchaser in 2006 in Manhattan, who put down say 10%, as to what kind of mortgage it was, and what the magnitude of a reset would be.

in other words, what is the typical "type" of mortgage people were getting to buy condos in 2006, 2007

Option Arms were popular for investment properties which were not meant to be held very long. I'm not sure if the same applies to Alt-A.

"Deutsche Bank predicts that the number of underwater loans in the New York metro area will jump from its current 11 percent to 77 percent by 2011"

wow, i'm not religious, but i'd pray for that to happen!!! that's the best shot to bring prices back to where incomes are...

religion gotz nothing to do with this bubble being pricked IMHO. Unless you kowtow to the God of Cash Flow.... then it is useful to offer alms with cash into CDs at the moment...

lol w67th, americans with cash on CDs are hard to come by nowadays.

hey, i nominate you for Deccan of the Church of Cash Flow... are REOs in Manhattan gonna be common by 2012?

lol w67th, americans with cash on CDs are hard to come by nowadays.

hey, i nominate you for Deccan of the Church of Cash Flow... are REOs in Manhattan gonna be common by 2012?

"The banks own the titles on the properties, the banks hold the titles on the cars, etc. Just about everyone I know is making payments on houses and cars.
If you are making payments on something, it’s not really yours is it? Why would you make payments on something you “own”?"

wow, i feel the same way about ownership of something we have to pay property taxes on... till now i thought i was the only one

"Deutsche Bank predicts that the number of underwater loans in the New York metro area will jump from its current 11 percent to 77 percent by 2011"

They have a history of these types of predictions:

http://streeteasy.com/nyc/talk/discussion/14668-deutsche-bank-says-new-york-area-will-see-a-further-39-reduction

http://streeteasy.com/nyc/talk/discussion/9802-deutsche-bank-nyc-real-estate-could-fall-another-47

Has not yet panned out, although things are trending down.

notadmin... got a note from God of CF, the answer is "yes"... I can't believe all the non-believers, I personally knew an MBA chum who worked at one of the top mortgage shops in nyc from 1999 to 2008. That dude alone did like $10MM/month in IO, you're an I-Banker pay off w/ YE bonus money... his shop had like 40 mortgage brokers... day in day out... IO, HELOC, 5% down... and that was conservative mortgage...

i know a couple of modest borrowers that bought on harlem in 2004 and 2005. ugly small 2 bedrooms that should have been 1 bedrooms at the most. price was around half a million neither put $ down, they took money for "remodeling"... around 5%.

back in the day CFC was doing this type of +100% LTV "remodeling" BS. where the hell was the Church of Cash Flow back then? no idea if they were neg amort. these are non wallstreeters without bonus type of income structure.

A couple of qustions. If real estate borrowing has become much like credit card purchases in the sense that they are less collateralized (a default is clearly lose/lose) than previously thought, when will home mortgage interest rates start approaching those found with plastic? When will the effects of NYC tax liens come to the fore? There seems to be no shortage of delinquent real estate.

once the burden of the losses fall on the lenders/ MBS holders and not more on the taxpayer thanks to geithner and NobamaS through the FHA, FNM and FRE.

67....you are so certain about this, and so sure about how deluded and dumb the lemmings are, so what is the catalyst going to be that will make this appear in actual further price decreases?...is it only higher interest rates?...i ask because there doesn't seem to be any raw fear element scaring off buyers or scaring sellers into taking lower prices...

(ar -- if he keeps making this point, i dont see why i cant ask when and why...smile)

I think its less an issue of defaults around here than an issue of how many more buyers can and will pay these 2004 prices...and over time, will there be as many new buyers as there will be families leaving. Its also not a default to see your new payment when the ARM rolls up and decide its too much.

jim, just a couple of years ago most people had zero ability to imagine ANY decline in manhattan prices. ANY. and they were wrong. now many people have little ability to imagine FURTHER declines.

in 2002-3ish the mortgage industry set the condo/single family market on fire with the piggyback product. development being what it is in NYC, we immediately had a huge shortage of units, given that financing was available to SO many more people. that backlog lasted for quite a few years, and helped push prices up for all product, along with the money that was floating around due to the industry itself.

i've been told by a number of brokers that the new development success here could not have happened but for the piggyback loan. huge numbers of people used this product, and it was available at large loan amounts (prior to 2002ish it was difficult to get pmi for a condo purchase over $1mm, very rarely happened). it takes a long time for the foreclosure process to hit here, but hit it will. you still have developers with huge numbers of units, and they are and will continue to be competing against resales. if your bank won't authorize a short sale, what can you do? you're stuck, until the system unsticks you or you walk away. banks aren't forcing the issue. it won't all magically go away.

"it takes a long time for the foreclosure process to hit here, but hit it will. "

unfortunately it's the case in nyc & ny state. now paterson even made the longest process in the country even longer. i only hope that mortgages begin to discriminate different state legislations and increase premiums for NY state accordingly.

a state that doesn't allow the lender to access the collateral after a year of the default, should pay the price through higher credit costs. on the opposite side it's texas, where the lender has access to the collateral a month and a half later (instead of a year and a half). texas risk premiums should be smaller just cause of this. a shorter FC process means less vandalism, less carrying costs, less "live rent free" by the borrower that defaults.

ar..i put a question about foreclosure in my what will trigger thread....but basically, are there stats out there on how many delinquent payments there are in nyc....

jim, i've tried to find them, and no. there's citywide info on subprime (much worse in the other boroughs, obviously). someone posted a listing of tax liens, which obviously is one stress indicator, but i'd guess that since the city is more likely to take action, people would be more likely to pay their taxes than their mortgages.

the data has to exist. since it's a long process, and unemployment was slow to hit here, with many who were unemployed receiving substantial severance, i'd guess that the banks don't really want to publish the numbers. but i'll keep looking.

this market will be reset one distressed sale at a time. and a few major building meltdowns. because this occurred later here, the banks had already entered the extend and pretend phase. when miami blew up the banks were still demanding their money back.

"Why Homeowners 'Walk Away' From Their Mortgages"

"Bryant bought his home three bedroom townhouse in 2006 for $582,000 and says it's worth about $315,000 now. He says he has never missed a payment on any of the homes or cars he's bought over the years. But that's changed.

"I thought about the moral hazard," Bryant admits. "But look at what's going on. Big banks are not helping anyone out. Big investors are walking away from debts. I'm angry how the system works. There's no way I'm going to feel guilty about this."

http://www.cnbc.com/id/35426944