Skip to comments.Q: How Big Is the Subprime Mortgage Market? A: Not Very Big at All
Posted on 08/09/2007 12:48:38 PM PDT by Leroy S. Mort
Currently there are about 44 million mortgages in the U.S., and less than 14 percent of them are subprime. And only about 13 percent of those are late on payments, with the majority of late payers working through their problems with the banks.
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Leverage is all about using something small to move something big. The small subprime market unto itself is as you indicate...however, as this markets debacle filters thru the worldwide system, measurable effects will be seen worldwide..these effects are commented on everywhere...’ripple effect’ is what will define the relative importance of the subprime meltdown. Ripple effect has not reached its peak yet.
All the markets are presently under the full and complete control of computer trading systems or individuals with a lot of money, or simply aggregations of day trading pajamahadeen wannabees.
A French bank this morning stopped payments from a French bank regarding accounts with less than $3 billion.
That's chump change.
Still, world markets reacted in panic.
At the same time it rained across the cornbelt this week from Nebraska, through Iowa, Illinois, Indiana and Ohio creating the mother of all bumper crops of corn. Even ethanol futures dropped.
There was a time that rain would have rattled world markets.
I think even the Chinese are on vacation in August these days.
Big French fund affected by US subprime meltdown..here is link..many foreign funds are doing the same thing..this is just one..http://www.bloomberg.com/apps/news?pid=20601087&sid=aNIJ.UO9Pzxw&refer=worldwide
Just like I said on the other thread, it doesn’t matter what the market share is, because this mess is having a real effect on the global markets.
Yes, there is some panic in the world markets..that is how crashes occur. A little disaster causing panic out of all proportion to itself is the leverage principle in action. Hope this ‘subprime’ failure does not cause panic and destruction out of all proportion to itself...the issue is playing out and has not reached its peak yet.
Some attempts at propaganda are thin on their face. Little teeny banking interests like GS, MER, LEH, and BSC are taking all this in stride. Why, just today, the Fed threw $24 billion into the market and the ECB threw “unlimited” funds into their markets. So, there’s nothing to worry about. Especially when talking about the single topic of “sub-prime”. But the topic is a tad larger than “sub-prime”, it includes “alt-A” and it also isn’t strictly a matter of mort defaults: It is the systematic realization that virtually ALL credit has been based upon putting lipstick on a pig for a few years now. And, a very significant amount of the market’s recent advances have been based on these relentless corporate buyouts....buyouts for which the funding is likley to become quite a bit tighter.
And as I keep saying, the bulge in the curve as to mortgage resets will be occurring Sept-October this year. So, the S hasn’t completely hit the F yet.
Extremely vulnerable are high-yield money market accounts, which are likely invested in mortgage backed securities. You can argue with me about anything else, but these funds are nothing if not highly vulnerable.
But that is market psychology working to clear out the lending excesses, and nervousness about how some of the banks and hedge funds that aggressively invested in these products are now feeling the pain.
The markets are punishing people for bad economic/financial decisions, just as they are supposed to. Corporate earnings for most sectors, job growth, personal income statistics, are all in good shape.
The latest link from Bloomberg:
Yup, a long time. When Ahab promised to pay 6 bulls next year to Ma-Nu and poured copper into the bull mold to show good faith, the whole house of cards began to crumble.
That works out to 80,000 mortgages that are late. Assuming a 200,000 mortgage, that works out to about $16 Billion that is late.
The question is ... can the economy handle a $16 Billion default?
Folks are naive who believe this is just a SUB PRIME market issue, its not. Originators are having trouble finding buyers for A paper... Jumbo lenders are pulling out of the market.... This is far bigger than just SUB PRIME... and those that think its just SUB PRIME are fools.
Add to what you just said (which is all true) that much of the sub-prime slime has been packaged into CDO’s/CDO-squared with the deliberate goal of hiding the “toxic waste” debt in a composite package with AA-grade debt.
When the subprime components blow up, the buyers of the AA-rated CDO are waking up and saying “We bought what?!”
Yeah, ripple effects. That’s how global warming is supposed to work, right? I drive an SUV, the CO2 emissions trap sunlight, the polar caps melt, and we all drown.
Its not about defaults, its about ability to sell the assets.
The buyers are drying up, for all mortgage backed securities... REIT’s and others are moving away from the market. Without buyers for the paper, money available for mortgages evaporates... and you wind up with just funds of the lending institution tied up in the loans so they will cut back and lessen lending, raising rates, further eroding home values, and the value of already existing properties and paper... etc etc etc..
This won’t happen as fast as the tech bubble, but its impact will be far far broader.
BNP Paribas, of Oil For Food infamy...Go figure.
Are you kidding? The S&L industry was estimated to be $400 billion when it went under (of course, that was way over-hoopla-ed, just like this market is). We barely noticed it.
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