Posts Tagged ‘strategic default’

Fannie Mae To Deny New Mortgages To Deadbeats, Aka Strategic Defaulters

Courtesy of Tyler Durden

It is now time to short Apple: Fannie Mae has just announced that it will no longer condone the same kind of irresponsible behavior that the Obama administration will soon be trying hard to codify into law, namely strategic defaulting. According to Dow Jones, bankrupt GSE Fannie Mae, announced "it won’t back new mortgage loans for seven years for homeowners who walk away from their mortgages although they were able to pay or did not seek a workout in good faith with their lender." Terence Edwards, an EVP for Fannie, after having been a recipient of trillions in moral hazard (and having a job as a result), finds out that being on the receiving end of a total lack of integrity is not quite as pleasant: ""We’re taking these steps to highlight the importance of working with your servicer. Walking away from a mortgage is bad for borrowers and bad for communities." Oh, now they tell us.

More humor from Dow Jones, as the GSEs finally realize just how screwed they are:

 

Fannie Mae said it also will sue borrowers who strategically default on their loans to recoup the outstanding mortgage debt in jurisdictions that allow for deficiency judgments.

Strategic defaults are becoming more common, various studies show --  a Morgan Stanley report pegged them at 12% of all home-mortgage defaults in February, up from "insignificant levels" three years ago. Lenders fear borrowers who "walk away" will greatly increase the industry’s foreclosure-related losses, which already total in the hundreds of billions of dollars.

In addition, growing social acceptance of this behavior could have ramifications not only for personal credit histories and the health of neighborhoods, but also for the future of mortgage lending, according to those studying the issue.

One possible reason the numbers are rising is some homeowners’ belief that lenders aren’t aggressively pursuing those who default, according to a report by the Chicago Booth/Kellogg School Financial Trust Index.

Our advice: short AAPL now. The Generation 293,394,459 iPhone (to be released by December 2010 at the latest) may not be the marginal boost to EPS that all analysts who think Apple at a $1 qunitillion market cap is a screaming buy, as US consumers soon realize that the choice between a gizmo and a roof to sleep under is really not all that tough. Alas, Obama’s plan to force…
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Strategic Default Data Suggests Foreclosure Prevention Tactics Useless

Strategic Default Data Suggests Foreclosure Prevention Tactics Useless

foreclosuresCourtesy of Mish  

An interesting report in the Los Angeles Times shows that a person with super-prime credit scores is more likely to walk away from an underwater mortgage than a person with a subprime credit rating.

Inquiring minds are reading Homeowners who ‘strategically default’ on loans a growing problem.

Who is more likely to walk away from a house and a mortgage — a person with super-prime credit scores or someone with lower scores?

Research using a massive sample of 24 million individual credit files has found that homeowners with high scores when they apply for a loan are 50% more likely to "strategically default" — abruptly and intentionally pull the plug and abandon the mortgage — compared with lower-scoring borrowers.

Among researchers’ findings are these eye-openers:

  • The number of strategic defaults is far beyond most industry estimates — 588,000 nationwide during 2008, more than double the total in 2007. They represented 18% of all serious delinquencies that extended for more than 60 days in last year’s fourth quarter.
  • Strategic defaulters often go straight from perfect payment histories to no mortgage payments at all. This is in stark contrast with most financially distressed borrowers, who try to keep paying on their mortgage even after they’ve fallen behind on other accounts.
  • Strategic defaults are heavily concentrated in negative-equity markets where home values zoomed during the boom and have cratered since 2006. In California last year, the number of strategic defaults was 68 times higher than it was in 2005. In Florida it was 46 times higher. In most other parts of the country, defaults were about nine times higher in 2008 than in 2005.
  • Homeowners with large mortgage balances generally are more likely to pull the plug than those with lower balances.
  • People who default strategically and lose their houses appear to understand the consequences of what they’re doing.

Those set of facts may at first glance be counterintuitive, if not shocking, but if one explores the psychology of the situation, one finds it is quite logical.

Psychology of the Subprime Strategic Default

The only "asset" many subprime borrowers have is their home. Although that asset has negative value, the homeowner may have nowhere else to go, especially if they have to put up a month’s rent plus a 1-2 month security deposit in


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Insider Scoop

Amazon Warehouse Workers Plan Monday Walkout To Protest Lack Of Coronavirus Protection

Courtesy of Benzinga

Amazon.com Inc.'s (NASDAQ: AMZN) workers at the company's Staten Island warehouse are planning a mass walkout on Monday to protest against what they call a lack of protection provided during the novel coronavirus (COVID-19) pandemic.

What Happened

Anywhere between 50 to 200 workers are expected to participate in the walkout, Christian Smalls, as assistant manager at the New York...



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Phil's Favorites

10 ways to spot online misinformation

 

10 ways to spot online misinformation

When you share information online, do it responsibly. Sitthiphong/Getty Images

Courtesy of H. Colleen Sinclair, Mississippi State University

Propagandists are already working to sow disinformation and social discord in the run-up to the November elections.

Many of their efforts have focused on social media, where people’s limited attention spans push them to ...



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Members' Corner

10 ways to spot online misinformation

 

10 ways to spot online misinformation

When you share information online, do it responsibly. Sitthiphong/Getty Images

Courtesy of H. Colleen Sinclair, Mississippi State University

Propagandists are already working to sow disinformation and social discord in the run-up to the November elections.

Many of their efforts have focused on social media, where people’s limited attention spans push them to ...



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Zero Hedge

"The Scope For Pain Is Immense" - China's Consumer Default Tsunami Has Started

Courtesy of ZeroHedge View original post here.

One month ago we reported that "China Faces Financial Armageddon With 85% Of Businesses Set To Run Out Of Cash In 3 Months", in which we explained that while China's giant state-owned SOEs will likely have enough of a liquidity lifeblood to last them for 2-3 quarters, it is the country's small businesses that are facing a head on collision with an iceberg, because ...



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Biotech/COVID-19

The world before this coronavirus and after cannot be the same

 

The world before this coronavirus and after cannot be the same

Gettyimages

Courtesy of Ian Goldin, University of Oxford and Robert Muggah, Pontifical Catholic University of Rio de Janeiro (PUC-Rio)

With COVID-19 infections now evident in 176 countries, the pandemic is the most significant threat to humanity since the second world war. Then, as now, confidence in international cooperation and institutions plumbed new lows.

While the on...



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Digital Currencies

While coronavirus rages, bitcoin has made a leap towards the mainstream

 

While coronavirus rages, bitcoin has made a leap towards the mainstream

Get used to it. Anastasiia Bakai

Courtesy of Iwa Salami, University of East London

Anyone holding bitcoin would have watched the market with alarm in recent weeks. The virtual currency, whose price other cryptocurrencies like ethereum and litecoin largely follow, plummeted from more than US$10,000 (£8,206) in mid-February to briefly below US$4,000 on March 13. Despite recovering to the mid-US$6,000s at the time of writin...



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The Technical Traders

These Index Charts Will Calm You Down

Courtesy of Technical Traders

I put together this video that will calm you down, because knowing where are within the stock market cycles, and the economy makes all the difference.

This is the worst time to be starting a business that’s for sure. I have talked about this is past videos and events I attended that bear markets are fantastic opportunities if you can retain your capital until late in the bear market cycle. If you can do this, you will find countless opportunities to invest money. From buying businesses, franchises, real estate, equipment, and stocks at a considerable discount that would make today’s prices look ridiculous (which they are).

Take a quick watch of this video because it shows you ...



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Kimble Charting Solutions

Broadest Of All Stock Indices Testing Critical Support, Says Joe Friday!

Courtesy of Chris Kimble

One of the broadest indices in the states remains in a long-term bullish trend, where a critical support test is in play.

The chart looks at the Wilshire 5000 on a monthly basis over the past 35-years.

The index has spent the majority of the past three decades inside of rising channel (1). It hit the top of this multi-decade channel to start off the year, where it created a monthly bearish reversal pattern.

Weakness the past 2-months has the index testing rising support and the December 2018 lows at (2).

Joe...



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Chart School

Cycle Trading - Funny when it comes due

Courtesy of Read the Ticker

Non believers of cycles become fast believers when the heat of the moment is upon them.

Just has we have birthdays, so does the market, regular cycles of time and price. The market news of the cycle turn may change each time, but the time is regular. Markets are not a random walk.


Success comes from strategy and the execution of a plan.















Changes in the world is the source of all market moves, to catch an...

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ValueWalk

Entrepreneurial activity and business ownership on the rise

By Jacob Wolinsky. Originally published at ValueWalk.

Indicating strong health of entrepreneurship, both entrepreneurial activity and established business ownership in the United States have trended upwards over the past 19 years, according to the 2019/2020 Global Entrepreneurship Monitor Global Report, released March 3rd in Miami at the GEM Annual Meeting.

Q4 2019 hedge fund letters, conferences and more

The Benefit Of Entrepreneurial Activity ...

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Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

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Lee's Free Thinking

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

 

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

Courtesy of  

The repo market problem isn’t the problem. It’s a sideshow, a diversion, and a joke. It’s a symptom of the problem.

Today, I got a note from Liquidity Trader subscriber David, a professional investor, and it got me to thinking. Here’s what David wrote:

Lee,

The ‘experts’ I hear from keep saying that once 300B more in reserves have ...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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