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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (12504)	8/17/2003 4:45:32 PM
From: Ramsey Su	Read Replies (2) \| Respond to of 306849

MBAA estimated that $965 billion worth of mortgage would be originated during the 2nd quarter this year. Since this report came out in July, that should be a pretty accurate number. mbaa.org Say that is $300 billion per month, and Capitol is at $3.7 billion per month, that means the total "problem" is about 81 times that of CCM. Now there are two questions. Whose problem is it? How big is the problem? (I have no answers to neither) Scenario 1: Lets assume it is common practice that mortgage brokers/originators lock in rates, fund the loans and then count on being able to sell them to the secondary market. Then the originators are in trouble. They can either sell the loans at a loss or portfolio them and pray. Scenario 2: Same as Scenario 1 except all the originators already have commitments from the secondary market to buy the loans at the rates of the lock in. Then it is the secondary market who will have to eat the difference. FRE, FNM would be in really sad shape with this scenario. Scenario 3: Same As Scenario 2 except while the secondary market committed to buying the loans at the lock in rate, they hedged their commitments with derivatives. Then it is the counter parties of these derivatives who are in trouble. Who are they? I don't know. I guess my point is someone has to pay for this 100 basis point jump in the last 4 weeks.