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

To: Ramsey Su who wrote (70847)	10/3/2006 3:11:43 PM
From: CalculatedRisk	Read Replies (2) \| Respond to of 110194

Maybe the MBA data will tell us something about the guidance (not this week since the report is for applications pre-guidance). Maybe next week ...

To: Ramsey Su who wrote (70847)	10/3/2006 3:14:42 PM
From: ild	Respond to of 110194

I still think that low/no doc programs (liar loans) should take a big hit.

To: Ramsey Su who wrote (70847)	10/3/2006 4:12:06 PM
From: russwinter	Read Replies (1) \| Respond to of 110194

The main spin I've heard is that Wall Street will some how move in with their unregulated entities, take away the toxic business, and just continue on with the abuses, even if the regulated entities are impacted. It's the ole worm hole theory, although not sure how valid it is? Maybe the question we should really be asking now is, who holds, or is hiding mortgages like these, and in what manner are they hidden, and where are the examiners? There seem to be too players pretending they just hold staid 150k, 30 year fixed mortgages from Peoria. Message 22873763

To: Ramsey Su who wrote (70847)	10/3/2006 5:38:48 PM
From: Lizzie Tudor	Read Replies (1) \| Respond to of 110194

If I use a middle of the road front DTI income of 35%, I think this DTI income number of 35% is obsolete- maybe somebody can help me out here- what was the historic rationale for this? I think it could be that household living expenses and other must haves such as auto expenses have declined over the years. For a dual income family bringing in 16K/mo - a DTI of 35% means they have $10,400 per month left over for living expenses. Unless they have a bunch of kids, this is excessive. This family could likely pay 50% of their income in housing expenses if need be.

To: Ramsey Su who wrote (70847)	10/4/2006 2:13:57 AM
From: Clarksterh	Read Replies (1) \| Respond to of 110194

Ramsey - The difference between yours and Wall Street's view can have only two real possibilities: a) That you believe that over the last two or three years there have been a very high percentage of loans given out without significant consideration of ability to pay... But in contrast Wall Street believes that the vast majority of mortgages over the last 2 or 3 years DID take into account ability to pay etc. . So WS believes that the new guidance is not a change. b) WS believes the FED has no ability to actually enforce the change. Or some combination of the above. You might ask some of your contacts. I'll bet they mention both a and b in their explanation. So, what is your metric to support the contention that recently the banks have been ignoring ability to pay etc? Some interesting metrics might be: 1) The booked rate of interest plus principle vs income amount. (But I'll bet no one reports a metric anywhere close to that) 2) For a given type of loan (e.g. IO ARM) the average income vs initial loan payment. 3) The average FICO scores of first mortgages in 2003 vs 2004 vs 2005, ... . But other data such as increasing rate of ARMS is circumstantial at best. E.g. lots of folks who are more than able to pay a fixed rate loan choose ARMS. So an increase in the rate of ARMS is not necessarily a direct indicator of poorer lending practices. Thus WS may not actually believe that there is a problem? Clark