Yes, some effort to work things out is to be expected on an individual level.
The macro problem is that work outs and deeds in lieu of foreclosure along with actual foreclosures and ratings downgrades on the collateralized debt insurers will have an leveraged effect on banks' capacity ability to lend. Thus, if I were in trouble, I would refinance or work things out now before credit dries up even more.
About 25%, $991bn or so, of the total 2005-2006 RMBS market, $3.6 trillion or so, is subprime.
A lot of the ARMs are just now re-setting and will continue to reset throughout the year.
Plus, we are going headlong into a recession, so the ability to pay even on mortgages which have been worked out will be stressed.
I don't mean to rain on your parade, but there are in my estimation too many things working against an easy solution of this credit crisis. I think we are going to see much more pain in the future than we have in the past few months, e.g., the commercial mortgage side of the credit has not yet been well and truly appreciated.
I don't for a minute believe the banks have been upfront about their exposure to toxic credit sludge, and it is not necessarily all their fault or because they are sleazy, though they are that to some extent and stupid, too. While FASB 157 obligates them to use somewhat objective measures of market value of their collateralized crap, I just read a very interesting article on how difficult it is for potential buyers of this distressed garbage to make intelligent offers offers because the crud is so complex. It simply cannot be intelligently priced even by a vulture who wants to pick it up for a pittance.
A lot of these vehicles already have had 'events of default' which is not a good thing. Who knows how many actual liquidations are ongoing.
Anyway, pardon my diatribe. I don't see light at the end of the tunnel for some time, though I am not surprised to see a few individual cases of workouts and refis. I don't think they'll make any difference in the long run. |
