The Epic American Credit and Bond Bubble Laboratory Message Board

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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: Perspective who wrote (37873)	8/5/2005 1:49:04 PM
From: Ramsey Su	Read Replies (2) of 110194

bobcor, 80% is an average, not a criteria. There are always going to be loans with very low LTVs. 80% average LTV is dangerously high for current bubble. The loans at 80% is marginally safe, at best. The loans at 90% LTV or above has zero equity. 10% is not enough. During the past few years of rapidly appreciating prices, the appreciation covered the mistakes of this unsound lending practice. That is not the case right now and all kinds of cracks are starting to show up. What happens next is something that we may not have experienced before. Funding for all these loans may shut down with NO notice. Interest rates may shoot straight up to a level that will attract the now gun shy MBS buyers back to the market. Would this pull up the rates of the agency papers? TNX? FVX? If the hedge funds stop buying the first loss tranches of a subprime RMBS, who the price for these RMBSs go straight up because no one is there to absorb the biggest risk? This can blow up so quickly, and may be happening as I type.

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