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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Zero Hedge

6 Dead In Hours-Long Shootout At Jersey City Kosher Grocery

Courtesy of ZeroHedge View original post here.

Update 4: Just hours after the shooting began, it looks like the final tallies are in.

Reuters reports that six people have been killed, including the two shooters: (those killed include one police officer, three people who were inside the JC Kosher Supermarket when the shooting began, and both of the suspected shooters).

Jersey City Ma...



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Phil's Favorites

These Secretive Oil Companies Control $3 Trillion In Wealth

Courtesy of Anes Alic, OilPrice.com

They control the vast majority of the world’s oil and gas assets, yet the average person has never even heard of them, outside of those that are famous for things like getting attacked by missiles or becoming embroiled in a high-profile corruption scandal. 

State-owned oil and gas companies (aka, the national oil companies, or NOCs) control at least US$3 trillion in oil and gas assets, compared to around $2.5 trillion a...



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Insider Scoop

5 Stocks Moving In Tuesday's After-Hours Session

Courtesy of Benzinga

Gainers
  • Ollie’s Bargain Outlet Holdings Inc (NASDAQ: OLLI) shares are up 11% after reporting a third-quarter earnings beat. Earnings came in at 41 cents per share, beating estimates by 3 cents. Sales came in at $327.049 million, beating estimates by $4.549 million.
  • Dave & Buster’s Entertainment Inc (NASDAQ: ...


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Kimble Charting Solutions

Are Bank Stocks Sending Bullish Message To Investors?

Courtesy of Chris Kimble

Just as the health of the banking sector is a big deal to the economy, it’s equally important to the S&P 500 (SPY) and broader stock market.

Although the bull market has grinding higher, it’s awaiting confirmation from the banks and banks stocks.

Today’s chart is of the S&P 500 Bank ETF (KBE) and shows how the banks are at an important juncture in time and price.

KBE (the bank ETF) is testing the upper end of a falling channel, offering bulls an opportunity for a breakout – see point (2).

The banks were at a similar juncture nearl...



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Digital Currencies

The Road To Retirement: Millennials Put Their Faith In Bitcoin But Goldman Says Go With Gold

Courtesy of ZeroHedge View original post here.

"Drop Gold" - the ever-present tagline of Grayscale's Bitcoin Trust TV commercial - appears to be working its magic on a certain cohort of society.

2019 has seen assets under management in GBTC soar...

Source: Bloomberg

And for Millennials, according to the lates...



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Lee's Free Thinking

Chart Shows the Fed Ramping Up Not QE - Funding Almost All Treasury Issuance

 

Chart Shows the Fed Ramping Up Not QE – Funding Almost All Treasury Issuance

Courtesy of Lee Adler, Wall Street Examiner 

The Fed is ramping up “Not QE” .

The Fed bought $2.2 billion in notes today in its POMO, “not QE,” operations. Actually $2.15 billion because they sold back a whole $50 million. Must have been a little glitch in the force.

This brings the Fed’s total outright purchases of Treasuries to $170 billion since it started Not QE, on September 17.

It also did $107 billion in gross new repo loans to Primary Dealers to buy Tre...



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Chart School

Silver stock taking the sector higher

Courtesy of Read the Ticker

As the US economy begins to show late cycle characteristics like: GDP slowing, higher inflation, higher wage costs, CEO confidence slump. 

Previous Post: Gold Stocks Review

The big players in the market are looking for the next swing off good value lows. This means more money is finding it way into the gold and silver sector, and it is said gold and silver stocks actually lead the metal prices.

The cycle below shows prices are ready to move in the months ahead (older chart re posted).


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Members' Corner

Sacha Baron Cohen Uses ADL Speech to Tear Apart Mark Zuckerberg and Facebook

 

Sacha Baron Cohen Uses ADL Speech to Tear Apart Mark Zuckerberg and Facebook

By Matt Wilstein

Excerpt:

Sacha Baron Cohen accepted the International Leadership Award at the Anti-Defamation League’s Never is Now summit on anti-Semitism and hate Thursday. And the comedian and actor used his keynote speech to single out the one Jewish-American who he believes is doing the most to facilitate “hate and violence” in America: Facebook founder and CEO Mark Zuckerberg.

He began with a joke at the Trump administration’s expense. “Thank you, ADL, for this recognition and your work in fighting racism, hate and bigotry,” Baron Cohen said, according to his prepared...



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The Technical Traders

VIX Warns Of Imminent Market Correction

Courtesy of Technical Traders

The VIX is warning that a market peak may be setting up in the global markets and that investors should be cautious of the extremely low price in the VIX. These extremely low prices in the VIX are typically followed by some type of increased volatility in the markets.

The US Federal Reserve continues to push an easy money policy and has recently begun acquiring more dept allowing a deeper move towards a Quantitative Easing stance. This move, along with investor confidence in the US markets, has prompted early warning signs that the market has reached near extreme levels/peaks. 

Vix Value Drops Before Monthly Expiration

When the VIX falls to levels below 12~13, this typically v...



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Biotech

Why telling people with diabetes to use Walmart insulin can be dangerous advice

Reminder: We are available to chat with Members, comments are found below each post.

 

Why telling people with diabetes to use Walmart insulin can be dangerous advice

A vial of insulin. Prices for the drug, crucial for those with diabetes, have soared in recent years. Oleksandr Nagaiets/Shutterstock.com

Courtesy of Jeffrey Bennett, Vanderbilt University

About 7.4 million people ...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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