Skip to comments.Fitch: Alt-A Mortgages Deteriorating More Rapidly than Expected
Posted on 12/15/2008 5:31:52 PM PST by TigerLikesRooster
Fitch: Alt-A Mortgages Deteriorating More Rapidly than Expected
By PAUL JACKSON
December 15, 2008
Citing a rapid deterioration of U.S. Alt-A RMBS performance, Fitch Ratings again took the hatchet to its previous assumptions for Alt-A mortgages on Monday morning, revising its surveillance methodology and updating loss projections for all U.S. Alt-A RMBS.
Fitch said it now expects losses on all Alt-A collateral to far exceed the estimates of its moderate stress scenario in its late ratings update earlier this year. Market developments, ongoing home-price declines and loan performance trends in the Alt-A sector over the prior six months have effectively eliminated the possibility of this stress scenario, said Fitch in a statement.
The rating agency said it now expects average cumulative losses om 2005, 2006 and 2007 vintage Alt-A transactions to hit 2.72, 6.78 and 9.58 percent, respectively, up dramatically from expectations at the agency earlier this year.
Fitch cited a rapid increase in 60+ day delinquencies experienced over the past six months, despite servicers collective efforts to hold off on actual foreclosure sales likely implying that a halt to foreclosures is having little effect in resolving borrower delinquencies. Between May and October 2008, Fitch said that 60+ day delinquencies for the 2007 vintage increased from 8.80 percent to 14.65 percent; 2006 and 2005 vintages also experienced steep increases rising from 10.30 percent to 14.24 percent and 6.57 percent to 8.79 percent, respectively.
(Excerpt) Read more at housingwire.com ...
The end is frawing near, we’ll all be on our own soon. Stay strong and put away a few canned goods. We’ll be snipping off pieces of gold necklaces for groceries before long. The do-gooders, welfare recipients, and greedy corporate types will have sent us all over the economic cliff.
Gee, announce a policy that if you don't pay there will be no immediate consequences, coupled with an unfounded belief that "Obama gonna pay my mortgage" ... what could possibly go wrong???
Here's how it works. You borrow the money for the house (and you may not even be asked for full documentation..how 'bout that?). The bank figures out the full monthly payment, let's say $1500 per month. But, you won't have to pay the full monthly amount if you choose not to. You can pay only $500 if you wish. The bank will then take the $1000 you're short and attach it back to the principle amount. So you make a minimum payment (just like a credit card) and your balance keeps increasing. So far so good. Except for that clause about "negative amortization." When the principle grows to a set amount, normally between 110%-125% of the original amount, the mortgage will "recast" (a bankers term) to a higher monthly payment that could be as much as 65% above the full monthly payment. Such a deal!
These pay option adjustable-rate mortgages gave borrowers a choice of payments each month. They also carried a feature that came as a nasty surprise to some borrowers, called "negative amortization." If the homeowner opted to pay less than the full monthly amount, the difference was tacked onto the principal. When the loan automatically recasted in five or 10 years, the owner would be locked into a new, much higher, set monthly payment.
I don't get it, what is the problem?
Outside of our system crashing totally, I won't lose my home.
Perhaps I just don't see the light....
Snippet from today’s Daily Reckoning:
“Last night following the Ravens/Steelers game (ouch! What a game!), 60 Minutes covered what they called, ‘The Second Mortgage Disaster on the Horizon’.
“That’s right. Looks like the mainstream media is finally picking up on something we’ve been covering in these pages for over a year now: Alt-A and option ARMs.
“For those who are new to the game, Alt-A and option ARMs are two other types of exotic mortgages that have been lurking in the background, while the rest of the country worries about subprime alone.
“Although these loans were made to people with higher quality credit, these types of loans, specifically the option ARMs, still lured borrowers in with ‘low teaser rates.’ The problem with these rates, however, is right in the description they are just a ‘teaser’. Eventually, they reset. And a mortgage that was $800, can shoot up to $1,500 and many homeowners are ill-equipped to deal with this. In fact, one out of every ten homeowners in the United States right now is behind in their mortgage payment.
“Back in September of 2007, Strategic Short Report’s Dan Amoss warned, ‘The housing market will remain sluggish far longer than most expect. $800 billion of ARM resets can only add to the supply of distressed sellers in 2008. This will further depress an already sluggish housing market that’s having enough trouble working through a huge supply overhang.’
“And we are nowhere near the end of the pain that will (and is) being felt from the rate resets and subsequent defaults. Whitney Tilson, the fund manager that 60 Minutes interviewed for this story gave viewers this uplifting tidbit:
“’We had the greatest asset bubble in history and now that bubble is bursting. The single biggest piece of the bubble is the U.S. mortgage market and we’re probably about halfway through the unwinding and bursting of the bubble It may seem like all the carnage out there, we must be almost finished. But there’s still a lot of pain to come in terms of write-downs and losses that have yet to be recognized.’”
Yep. And the effect on house prices is only now being felt in the “core” markets of the bubble, New York, San Francisco, etc. There is some distance to go here.
The people who don’t pay are going to be offered deals - great rates - bonus months without having to pay - I’m surprised anyone is paying.
This makes me wonder what happens to those of us in conventional mortgages who have never missed a payment. Are we going to be flushed down the glory hole along with the bad loans? My mortgage holder is Citi.
And if they are gonna screw up their credit rating by not paying their mortgage, why on earth would they pay off their credit cards. Heck, charge em all to the max. Thousands are doing that and have been doing that. We quite literally are being led by some of the dumbest leaders in world history. As others have pointed out, time to get ready for their fall.
Could you afford to continue making your mortgage payment if you were laid of for a year? Extended recessions have some nasty tricks they play on society.
>Fitch warned in its note Monday that it expects that it will downgrade many senior bonds to below investment grade just in time for fourth quarter earnings.<
What level is below investment grade? Wall paper?
If tricks are played, maybe I can't however I have a nasty habit of surviving.
It's a personal thing... ; )
I know what you mean. Some things just happen to be more important than others when push comes to shove.
Were’d you get the photo of the G450 on floats? Is it photoshopped? They look like the same floats that Twin Otters use.
It's a GV and the floats are photoed....
The rest of the pic's are original and posted with personal conviction. ; )
Ask your representative and the elected representative who sits in the "Office of the President - elect".
Emails are an effective conveyance.
That ain’t the half of it. 2004 was a big year for 5 year ARMs and they adjust in 2009. Yes, some people already got out of them and yes lower rates will help others lock in on a 30. But some folks who have fallen on hard times won’t be able to afford refinancing. So unless the mortgage lenders can afford to modify the terms, look for another wave of defaults in the summer. This is going to get very interesting.
If they're lucky their loans use a low Treasury rate or a prime rate as the base for the loan rate. If they're not so lucky they have a much higher LIBOR based rate.
Have you seen the rates lately...I can get a 30 year fixed at 4.625% and a 15 year fixed at 4.50%...unbelievable...no points on either one...
I’m seriously considering refinancing my current 15 year fixed at 5.325% for the 30 year rate...save over $1,200 per month. No problem paying my current mortgage but it looks like opportunity to me.
Like you I’ve got about 12 years left but I believe I would be paying back that 30 year note in seriously inflation reduced dollars.
Am I crazy?
I like the idea but can’t imagine that it would be approved. There is too much suction at the intakes for a rear mounted jet engine to be operable on floats, IMO.
Maybe ZZTop rolling paper?
It's going to be a Long, Hot, Summer for sure!
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