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

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To: Ramsey Su who wrote (54610)	2/24/2006 9:22:57 AM
From: russwinter	Read Replies (1) of 110194

Excellent matrix, obviously the real time prices of housing via Housing Bubble blog reports is crucial. I'd also add the term "credit conditions" to this. Are lenders just going to ignore the fact that very high percentages of borrowers have no equity, given a 5-10% drop in housing prices since last summer? Do appraisers just ignore the resale comps and discounting going on in new housing? If you have access to the last CI, there is an great discussion of MEW cash outs and fixed rates in the 4th quarter. 80% of all mortgage refis resulted in more than 5% cash outs. Hopefully, Ild can capture this chart? Alot of 4th quarter refi activity occured in October and then really dropped off, and then enjoyed a little bounce in January: MBAA refi index: October 1970 Nov. 1633 Dec 1371 Jan: 1683 We know that little or no advantage is being gained now on interest rates, so this suggests that debtors are willing to even pay more on their rates to take out even more debt. It also suggests that lenders so far are ignoring housing prices, or are behind the curve. Finally the ability to refi to fixed rates. 30-35% of mortgage apps are still being done as ARMs suggesting to me that a body of borrowers simply don't have the ability to qualify for fixed, and are high dependant on toxics. However with the big rally in 30 year bonds, perhaps we should look for a boomlet of 40 year refis in the first quarter. It's difficult for me to visualize that lenders think this is intelligent, but perhaps so, if FNM enables it, and in turn sell billions to clueless, sloppy FCBs? Message 22199762 If the lenders ignore housing prices then we might see another wave of rob Peter to pay Paul equity extractions. That combined with declining house prices means we will see more people with even less equity than the First American data. Are lenders going to wake up to the fact they have weak collateral backing extremely long term loans, translate lots of 40 year equity extraction loans to people with no equity (phoney appraisals)?

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