[lbo-talk] subprime

Dwayne Monroe idoru345 at yahoo.com
Tue Sep 11 13:50:41 PDT 2007


Doug posted:

[This is from the Washington branch of ISI, the entity run by Wall Street's fave economist, Ed Hyman.]

INVESTORS CHEER UNCLE SAM RIDING TO THE RESCUE, THEN RECONSIDER

<snip>

It is a myth that rate resets have been driving the subprime delinquencies. In fact, the vast majority of subprime mortgages that are delinquent are still paying below-market teaser rates and have not reset. It is not the interest rate that is burying these borrowers.

Instead, it is the fact that even with a low rate they are paying close to half of the gross incomes on their mortgage payment.

What's more, nearly half of them made up their incomes, so their true debt-to-income is actually much higher.

[...]

..............

I'm inspired to point out that this is almost precisely what Jordan stated months ago during a pre 'subprime-a-geddon' discussion.

That is, (paraphrasing now) 'people facing foreclosure are often pressed to the wall by larger personal financial issues and not by resetting rates alone.'

The point being that buying a house, even using tricky ARM instruments, is not always the oil slicked, downward sloping road to hell some of our most cantankerously enthusiastic list members seem to think.

As I recall, this became (yet another) point of contention.

.d.



More information about the lbo-talk mailing list