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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: John Vosilla who wrote (24861)	1/18/2005 1:21:03 PM
From: russwinter	Read Replies (3) \| Respond to of 110194

Kind of what telecom looked like in early 2000, warning flags, yet nobody cared. Financial/housing Bubble Bust alert du jour: 2/10 year spread closes to 97 bps. gcm.com One year LIBOR rate up 3 bps from last week libor-loans.com 3.25% plus 2.75% = 6.00% for Libor ARMS holders being reset next month.

To: John Vosilla who wrote (24861)	1/18/2005 1:37:07 PM
From: C.N.S.	Respond to of 110194

The greatest risk going forward is the weakening of housing without a commensurate increase in other sectors of the economy. This of course has been analyzed in this forum & others in more depth & detail that I am capable of. Interest rate hikes are never good for Financial stocks. That said, some banks depend on mortgage lending a lot more than others. You mentioned regional midwest banks. NCC (for instance) is heavily into mortgage lending and will be affected a lot by its downturn. KEY ,on the other hand, is a small player in mortgage lending (it has a much larger focus on commercial lending). Anecdotally, I have heard of Loan pool sales / Securitization sales where the premium has been just 50bps-75bps (in many instances, the costs itself can be as high as 200bps). I am not sure if this is a local issue or if it is more widespread. IMO, because the housing market depends on some things very local, it still has some legs in some markets. For instance, in New Jersey, the Highlands Preservation Act will work to crimp the availability of land and keep prices for single family homes in Northern NJ high. Also, there are many areas in the NY metro area (outside of Manhattan), where the rent rolls for multifamily housing still exceeds the 30 Year fixed payment + RE taxes (with the abatement in effect for the first few years).

To: John Vosilla who wrote (24861)	1/18/2005 2:27:51 PM
From: croesus1111	Read Replies (1) \| Respond to of 110194

Who do you see as have the greatest risk going forward? I think the banks are mostly packaging their mortgages and re-selling them on a secondary market. I think the non-performance risk gets substantially socialized (as in bought by pension funds for example) in the form of CMO's. Are there companies that buy the packaged mortgages to hold them? Who are they? Which companies are not packaging their mortgages but holding them instead?