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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: Ramsey Su who wrote (46545)12/4/2005 11:14:10 AM
From: mishedlo  Read Replies (1) of 110194
 
Why is the 2001 vintage showing a decline after 48 months, at the beginning of 2005?

Likewise the 2000 series shows a decline after 60 months.

In fact the 2000 series shows a clear leveling off after 24 months so that does not match your theory either.

Here is my explanation for the discrepency.
The 2000 series leveled off after 24 months because that is when the FED started slashing rates.
The 2000 and 2001 series dropped in 2005 because that is when housing peaked. I seem to recall default rates being way lower in California than other places (because of the rapid rise in housing prices masking other problems?). Do you have that recollection as well.

Now we have a potentially lethal combination of housing well passed peak (in many key areas but peaking in other areas) and the 2 year reset coming up.

Rather than be a "waterfall" I think it may be more like a cascade starting about the time you propose, the cascade steepening as more and more arms get reset and more and more lenders and homeowners get spooked about refis on falling property values.

I may do a blog on this incorporating all the ideas that people say on this topic.
Thanks

Mish
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