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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: loantech who wrote (37758)8/4/2005 3:25:41 PM
From: Ramsey Su  Read Replies (1) of 110194
 
so Tom is loantech, sorry I did not catch that earlier.

I was in the business for a long time but certainly not as current as you.

Russ and others are simply confused by the thousands of combinations of programs out there, which really amounts to the same thing. Your interest is either going to be fixed (30 and 15 being the most common) or your interest is going to be variable. Forget the teasers, your variable is most likely going to be 2.5ish + 1yr treasury, 11th district cof or libor.

Your payments is going range from IO to fully amortized. The reason negative amortization exists is due to teaser programs that create initial payments to be less than IO.

Average LTV of 80% is very high. If we assume the average consists of 1/3 at 70% or better, 1/3 at 80% and 1/3 at 90% or worse, it could mean 2/3 of their portfolio is at risk if the market turns.

80% sounds good on paper but if you take away a 7% selling cost, a 5-10% BS factor in the appraisal, then a 5-10% drop in value would take that loan to 100% LTV+. Now if that is a foreclosure, add another 10% in lost interest, costs and others, that is a wipe out.

I don't think any lender nor mortgage insurer is reserving at this level. It will be a big surprise.

There will be a mad dash to cut cost. Will we see a sea of pink slips?
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