Mortgage Bankers Association

Merrill Lynch 8.4 billion U.S. dollars on mortgage write-down its effect was a surprise to most analysts. Unfortunately, I can do more harm to come. According to my calculations, the collapse of the subprime loan problem of the $ 300 billion for home mortgage lenders and holders of mortgage related securities, almost double the size of the savings and loan crisis that took place in the United States 80s and 90s.

1456 bilioner dollars of subprime mortgages.In March 31, 2007 were approximately 11.2 trillion U.S. dollars in loans outstanding residential on approximately 13% of the debt was considered that the subprime Fannie Mae and the other 12% of this debt is considered "Alt-A" is the next most dangerous category. If 13% of the total subprime is still pending for a total of $ 1456 bilioner in subprime mortgages. Looking at the various statistics, about 1.2 trillion U.S. dollars of subprime mortgage debt was incurred during 2005 to 2006 on top of the housemarket.

A subprime default rate of 19%? In December 2006, the Center For Responsible Lending projected that about 19% of subprime loans originated in 2005 and 2006 would end in default. The Center argues reasonably persuasively that the combined effect of declining house prices and interest rate increases on the 80% of subprime mortgages that are adjustable rate mortgages (ARMs) will significantly reduce the ability of homeowners to sell their way out of their mortgages.

Trends support for a rate of 19% of subprime mortgage defaults. I think a default rate of 19% is implausible, regardless of the reputation of the Center as a group of consumer protection with particular attention as possible to exaggerate the impact of mortgage crisis on consumers. In June 30, 2007, said the National Delinquency Survey from the Mortgage Bankers Association that 12.4% of subprime ARM was already seriously criminal. Other recent Mortgage Bankers Associationsurvey found that approximately 15% of subprime loans are past due in some form. With the upcoming reset of over $1 trillion ARMs in late 2007 and through 2008, it seems likely that the past due rate will exceed 15% and that the natural progression into serious delinquency and default will follow. In 2001, the Office of Federal Housing Enterprise Oversight did a study of the worst cumulative credit losses experienced by all loans originated during a period of at least two consecutive years in consistency of Member States, of which at least 5% of the population of the United States. The winner was the 1983 – 1984 period in the states of Arkansas, Louisiana, Mississippi, and Oklahoma. These loans have a cumulative default rate of 14.9% and an average loss severity of 63.3%. A 19% default rate is only 4.1 percentage points higher than the level in 1983-1984, an increase that seems realistic, given the recent inflation in prices of unprecedented housing and subscription free.

Based on something other than a40% refund on foreclosed subprime loans. According to a study conducted by a regulatory authority of the United States bank, bank losses in default between 1975 and 1983 ranges from approximately 20% of the balance of the loans on loans improved by about 50% of the balance of the loan lending more poor. The expected loss on a loan with a 81-90% loan to value (LTV) ratio is approximately 34% and the expected loss of around 48% for loans with a LTV ratio of 91-95%. The average loss was about 40%. Based on statistics, the averageLTV in 2005 and 2006 vintage subprime mortgages was around 86%, use an average loss of 40% which is well below the historical 63% rate of loss recorded during the worst period 1983-1984. With 40% the number of loss on an assumed 19% standard rate of 1.2 trillion U.S. dollars 2005-2006 subprime mortgages, we want to have a loss of about 91 billion dollars alone on these subprime loans.

Fall in house prices could further reduce reimbursements. Forecasts at the national level by an average decrease of 10%local property prices to fall by 25-30%. The accommodation of at least 10% have increased in value, on average, like gravity lenders' loss in the previous example, is 50%, not 40% to 19% of loans in default, or a total loss of about 114 billion U.S. dollars in just the subprime loans started in 2005 and 2006. If we have a default rate of 15% and a loss rate of 50% for the remaining 256 billion dollars in subprime loans outstanding demand, there will be a further loss of 19.2 billion dollars for a total of 133.2 billion insubprime losses.

The 9744 bilioner dollars of subprime loans will not be affected. There will be some repercussions of the subprime mortgage defaults mass. According to the Mortgage Bankers Association, 80% of all mortgages in coming since 2002 because of the large amount of refinancing. Many of these borrowers ended with a risky loan than what their financing. Several factors suggest that a significant uptick in the country isThe overall rate of default: (1) overall, because prices have already spent more than 2% higher in a strong market, like San Francisco and more than 5% in other markets, the prices which have a much higher compared with the historical default rate of around 1%, (2) an extraordinarily high number of risk Alt-A loans and other loans to be standard, and (3) dramatic increase in the vacancy rate for U.S. House approximately 1.5% in 1995 to more than 2, 7% today. If we use a figure 25% loss is the loss of 2% of total$ 9744 bilioner in non-subprime mortgages was 48.72 billion kroner. So the total losses on loans, subprime mortgages and non-sub, about 182 billion U.S. dollars.

The total losses could easily exceed 300 billion dollars. Remember that the regulators rely on data for 1983 and 1984 their worst case projections and the loan was considered a cumulative default rate of 14.9% and an average loss severity of 63.3%. If the United States there is a modest (by these standards) for a total of 7% flat rate of 11.2 trillion U.S. dollarseverything is a modest (by those standards), the overall loss of 40%, total mortgage losses at 313 billion dollars. I remember when a violation is only about 60% of the nominal value of a person who is willing to keep him through the process of foreclosure, it is a buyer of that loan is the matter of 10% to 40% more reduction, which means that a bank has to solve a portfolio of loans should not be surprised to be offered 20-50 cents. If we use the 20% discountsuch sales of loans (beyond the rate of 40% loss), the total loss for holders of existing mortgage debt would be about 470 billion dollars.

For various reasons, I believe that the number of 313 billion dollars will prove to be more realistic figure compared to the losses, based on only subprime loans, amounting to about 182 billion dollars, I estimate the above guides for all losses. First, the size of the mortgage market and the scale of the national housing slowdown means that the task of managingMillions will issue bonds at the same time disturbing truth. Secondly, millions of people are economically disadvantaged in the same way as a rule leads to litigation, including class action lawsuits. Millions of loans through brokers and insurers that have not been subjected to a thorough investigation by bank regulators and countless documented compliance time bombs are buried in paperwork and will give ammunition to defend owners against exclusion. If this newnon-profit, can at least delay recovery and thus aggravate losses.

Implications. Expected losses on subprime loans 133 billion U.S. dollars, almost as though the total cost of savings and loan rescue in the 80s and 90s, which was recently compiled by the FDIC 153 billion dollars. On the positive side, the loss of one of the United States and the global economy absorbed grown incredibly since the 1980s. Moreover, the loss to the private sector much more widespread than it wasloss of S & L situation. On the negative side, the private sector is expected to absorb these losses, unlike much of the federal government included in the S & L rescue. Including Merrill Lynch's 8.4 billion U.S. dollars, only about 30 billion dollars had been canceled so far, as most of the losses to be recorded. The problems of analysis will continue, will be to identify the losers because of the coverage of credit default swaps, structured investmentvehicles and other exotic financial instruments. Analysts still expect a few surprises.

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