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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: kathtoo who wrote (88457)9/7/2007 6:32:24 PM
From: GraceZRead Replies (2) of 306849
 
Nobody is buying mortgage paper.

Fannie and Freddie are still open for biz and so is the jumbo loan market for people with good credit. What has been corrected is the price of bad paper and bad credit risks. That, to me, is a market that is starting to function as it should.

There is even a market for the toxic stuff, it's just a lot lower than where it was two or three months ago. I'm following a couple of short plays in mortgage lenders where huge chunks of mortgage assets have been sold in just the last few weeks. Maybe what you mean to say is that no one wants to buy that paper at the price the various holders need to get for it based on old assumptions that those assets carried little or no default risk.

The default rate had been at historically low rates and falling for many, many years. A lot of these fixed income assets were being priced as if defaults were something that had zero probability. Everyone woke up and remembered at the same time that default happens.

Did you here the guy on CNBC today say that the income market had come to a screeching halt?

I own a lot of fixed income and I can tell you it hasn't. It looked last week like it was all going to get taken out back and shot but this week everything I own is back to where it should be (not where it was but where it should be). That said, I don't expect all fixed income assets to go completely back to where it was. I'd be disappointed if it did. The toxic stuff has to go to debt heaven. Those hedgies operating with 1% margins in toxic sludge will have to be destroyed.
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