[djf]

It ain't the stuff you hear about that scares me.. it's the stuff you don't!

[Petronski]

Pritchard’s wet his pants again?

[Vn_survivor_67-68]

makes me think of the 1929 margin calls

[Ciexyz]

Distressing news.

[jiggyboy]

I read in another story that there were bids of only 30% of face value on this junk, which is what prompted Merrill to cancel the auction.

[B4Ranch]

>>Lombard Street’s warning comes as fresh data from the US National Association of Realtors shows that the glut of unsold homes reached a record of 8.9 months supply in May.<<

Right now we need at least 20 million foreign language speaking people who automatically qualify for welfare. I hope the Senate will do the right thing to help these people who have such fine work ethics, family values and no desire to become American citizens.

[tcrlaf]

But they were MORe than happy to book those origination, consultation, and transaction fees, weren’t they?

[chaos_5]

What exactly is all this subprime hype about?

I admit I’m a little confused. Does it refer to people who will default on a loan and not pay, or is it a poorly funded loan?

If it is the former, what exactly is wrong with a little deflation in the housing market. It will allow first time buyers a way in, and in time the market recovers its losses. Housing value goes down, demand goes up, housing value goes up...

[familyop]

We need more of a saving culture and less borrowing.

[2ndDivisionVet]

If this is correct, it would make the S&L crisis and the Great Depression look like a cash shortage at a lemonade stand.

[SteveMcKing]

"The worst of the US property crisis has yet to hit"

There is no crisis. Simply lower the prices until you sell more homes.

Or don't, but stop complaining in any case. "The industry" seems to want one-sided capitalism for themselves. They act as if buyers have no right NOT to purchase a home.

[DTogo]

This is going to aggravate the US hard landing.

Oh, we're in a hard landing right now, which is about to be aggravated?? Nonsense...

[Zack Attack]

Does this mean we don’t have enough unsecured credit in the hands of illegals yet?

[Proud_USA_Republican]

This is just the begining.

There is going to be a ton of defaults from the loans ranked between prime and subprime, the Alt-A loans as well.

Alt-A has been labeled lovingly by some in the industry as Liars loans because you could basically state whatever you wanted on the application, and the mortgage lenders wouldn’t do much work to confirm this.

It was like throwing 100 gallons of gasoline on a bbq (bbq being the fed lowering rates too low and for too long).

The housing speculators/flippers pounced on these loans and the mortgage lenders were only so happy to do this, figuring they could sell the loans off as soon as possible in these CLO and MBS packages to sell to other financial institutions, hedgefunds, pension funds, and foreign investors. THis way the risk could be spread out easily and everyone was praying for a soft landing. Now that the housing market has gone soft to bad to many areas, you now have these flippers sitting on multiple properties they bought that are now depreciating in value and don’t have the income or savings to keep paying the loans. All of them believed they could flip these properties for profit in a short period of time.

You now have something like a 9 month inventory of homes in the US and its going to get bigger every month as flippers walk away from these properties and buyers sit on the sidelines waiting for prices to bottom out.

[thegreatbeast]

It should read “swath of loans”, not swathe.

[WoofDog123]

i’ve heard that some funds have been marking cdo’s to market at or near par, rather than far below that.

[snowsislander]

This is the biggest bail-out since the Long-Term Capital Management crisis in 1998, which Bear Stearns refused to join at the time. Bear Stearns is now alone, a case of rough justice being served.

Business is business, but it does seem there might be at least a tinge of payback for Bear's intransigence back during LTCM.

[durasell]

They ain’t making any more land. Real estate always goes up. Best investment you can make.

[BuffaloJack]

Am I reading this right?
You get a mortgage on your house, then the bank sells it to another bank for 85% of its face value. Some bidders only offering 30%. Damn, if my mortgage company offered me the opportunity to pay off my mortgage at these discounts, I’d use my savings and jump on it.

[starbase]

Lombard Street’s warning comes as fresh data from the US National Association of Realtors shows that the glut of unsold homes reached a record of 8.9 months supply in May. Sales of existing homes slid to an annual rate of 5.99m.

The median price fell for the 10th month in a row to $223,700, down almost 14pc from its peak in April 2006. This is the steepest drop since the 1930s.

Here on FR, the housing pessimists have long posted negative threads, which I have enjoyed reading, and always the housing optimists would respond sarcastically with "oh the sky is falling" and "oh, 5% decline, what a tragedy".

Well these measurements here are quite drastic, and drastically consistent, and in verifiable decline.

I think all the last 15 years have been an absolute fantasy land. It should have ended with the absurd tech bubble, but the real estate/debt bubble came to the "rescue" and kept the false readings going.

There's never any free lunch, and this claim that "all the risk has been packaged and sold off" was always mathematically impossible at the end of the day.

Looks like we know where the end of the road is. It's a place were math comes back into being.

[sergeantdave]

So what exactly is Pritchard referring to with this: “...the vast nexus of collateralised debt obligations known as CDOs.”

Is this an English thing?