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Hammer blow to the U.S. economy:
Mortgage market teeters near meltdown
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by George Mitchell, Unknown News
Aug. 4, 2007
A most interesting development: the market
for securitizations of mortgages seized up
this week. No one wanted to buy mortgage
backed securities this week. And only
"conforming" loans can be offloaded by the
originating banks.
What this means, until the situation changes,
is that banks might only loan what they themselves
want to keep on their books -- which means that
the mortgage market would be unable to access the
global markets for capital (e.g. Uncle Achmed
cannot "invest" his oil wealth in U.S. mortgages.)
This is a hammer blow to the U.S. economy, and
after the levees break and millions of people
die horrible deaths, the Federal Reserve will
lower interest rates, Congress will bail-out
wealthy corporations, and the Bush Administration
will encourage the Treasury to monazite debt
(print money).
What we will see, to steal words from
Charles Stross (The Atrocity Archives) is
another government program to close, nail shut and
weld closed the barn doors in the wake of
equine departure. Then Congress will pass some
laws outlawing open barn doors in the absence
of equines.
Blame can be apportioned for the mortgage mess
to the Bush Regime as well as the Federal Reserve.
Oversight and regulatory enforcement of corporate
activities during the last six years has been
totally absent. And most knowledgeable observers
will acknowledge that during just the last two
years the "bubble" of sub-prime, Alt-A an
mortgage backed securities went totally insane,
without a peep from bank regulators, etc.
Go ahead and apportion blame the Congress, which
has rubber stamped everything spewed out by the
Bush Regime, except Bush and Cheney's proposal
to replace all future voting with rule by
executive decree. (Just kidding.) ...
© by the author.
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Secondary market stalls mortgage lenders| |
Excerpt: ... Scott Valentin, a mortgage
company analyst at Friedman, Billings, Ramsey [said] "We're hearing securitizations have frozen up. ... No one wants to bid on these things and then find out that the loans are worthless tomorrow."
The private, secondary mortgage market hasn't totally shut down, according to Andy Chow, portfolio manager at SCM Advisors LLC, a $14 billion San Francisco investment firm specializing in fixed-income and structured-finance markets.
The spread between bids and offers has widened in the past week, but trading still is occurring for AAA-rated parts of mortgage-backed securities, Chow said.
However, the volume of activity is down dramatically, and it's currently not possible to complete a securitization of so-called Alt-A mortgages, Chow also said. ... |
* * *
IndyMac, rivals make 'major
changes' in home lending| |
Excerpt: The market for mortgage bonds has become ''very panicked and illiquid," CEO Michael Perry wrote in e-mail to employees yesterday. National City Corp. this week stopped buying second mortgages from other lenders and making some stated-income loans. Wachovia Corp., the fourth-biggest U.S. bank, today decided to stop making Alt A mortgages through brokers. ...
'Over the past week there's been no liquidity in the non-conforming mortgage market," Edmunds said. He said he has less ability than ever before in his career to sell loans to companies other than Washington-based Fannie Mae or McLean, Virginia-based Freddie Mac, or in securities guaranteed by them. That includes so-called prime jumbo loans, or ones with little risk that are larger than the companies can buy, he said. ... |
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