Upside Down Mortgage

Posts Tagged ‘economics’

2008 Subprime Crisis

Question: Understanding the Subprime mortgage crisis?

http://genxfiles.com/2008/09/21/the-mess-that-were-in/

This blog did a great job of explaining the crisis, but how do we get back on track?

Answer: Everybody is looking for a quick fix. A fix which involves little or no pain. Such a fix doesn't exist no matter what McCain or Obama says. There will be pain. Lots of it. Anybody who says there's an easy way out of this is lying to you. Housing prices will plummet as loans continue to be unavailable and as foreclosures continue. More people will be thrown out of their homes. Banks will continue to fail. They will be stuck with homes they cannot sell at a price to cover the mortgage. Deflation may occur. Hell, it's happening now with the drop in oil, gas, homes, gold, metals, grains and other commodities. The economy will slow. Interest rates will drop further. Unemployment will rise. Eventually (a year or two from now) a bottom will be reached. Interest rates will be so low and housing will be so cheap, that people will be able to buy them. At least those with the best credit records. The economy will begin to pick up again. Jobs will be created again. But this will all take time and pain. The government needs to let it unwind. I fear they won't and will just delay a more natural recovery.

Inside the US subprime crisis 01 April 2008

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Subprime Financing

Question: how does citibank writes off $XYZ billions work?

I mean I read in many places that major banks write off bad-debt(subprime loan etc...) . Is the real loss to those banks. From what I know, those banks intern have sold those mortgages as some kind of securities or bundles, which are at some point or other finally sold to individual investors. So how do those mortgage loans contribute to the $XYZ Billion write-off. The loss should be to the individual investors not the finance companies. Can somebody explain?

Answer: The bank also bought thos eCDO and MBS to park their cash. Banks seat on billon of cash. When they give you a 6 monbth CD at 3%, the money to pay your CD interest come from their own investment. Banks also set up off balance sheet entities that bought these CDO and MBS, and the bank gaurantee repayment on these off balance sheet arrangement. The write off comes from the issue or marked to market. As there is no liquidity for these type of investments (i.e. it is not being traded daily, nor even monthly) they have design complicated calculations to estimate the fair value of the CDO and MBS. The problem arised when the market froze itself and no one was buying these securities and the deliquency rate was increasing. The banks were stuck with these investments, with increasing delenquency rate and they had to market them down on their balance sheet (eventually that does not mean that the cash flow generated by the investment is bad). If noone can put a fair value to the security you have to writte it off to $0.
Hope this help
PS: bank buy each other bonds and securities all the time. That's how they lend each other.

Fresh Start Auto Loans. Cincinnati's leader in subprime financing!

Aig Subprime

Question: Whose fault it is actually?

for the financial slump now in the US and the fall of companies Lehman Brothers,Merill Lynch and now AIG...who is to blame for the subprime crisis and the slump now?

Answer: the american people for not rising up sooner and taking out the evil that is within are government.. its been there for along time but people are more concerned with dancing with the stars and american idol...
trust me on this its going to be worse then the great depression we are no longer united states of america we are the north american union and are currency is just a piece of paper so we will soon go to the amero.. most of are rights are being stripped away from us and people just continue to be slaves.. no one to blame but are selfs

Random Ass Theatre - AIG gives Congress Sub-Prime lulz