August 16, 2007
Monthly Sub-prime Mortgage Reset Schedule
Credit Suisse’s Investment Strategy team put out a piece yesterday called LTCM Redux? that included this tidbit and lovely graph, none of which is news to the market:
“… the financial squeeze on the US sub-prime borrower is set to intensify. A total of US$240 billion worth of sub-prime mortgages (equivalent to 39% of outstanding adjustable-rate sub-prime mortgages) are scheduled to reset over the next 12-months and US$370 billion (60%) over the next 18-months (Figure 12). Additionally, loan-to-value ratios should continue to deteriorate unless we see a significant rebound in house price inflation (which looks unlikely). Hence, sub-prime mortgage default trends are set to intensify moving forward.”
Warren Buffett back in May 2006:
“Dumb lending always has its consequences. It’s like a disease that doesn’t manifest itself for a few weeks, like an epidemic that doesn’t show up until it’s too late to stop it. Any developer will build anything he can borrow against. If you look at the 10Ks that are getting filed [by banks] and compare them just against last year’s 10Ks, and look at their balances of ‘interest accrued but not paid,’ you’ll see some very interesting statistics.”
Related: 80% of sub-prime ARM loans are 2/28s
August 20th, 2007 at 2:57 pm
[…] (When you look at the monthly subprime mortgage reset schedule I posted the other day, it makes you shudder.) Cat: […]
September 22nd, 2007 at 12:20 am
[…] Relevance to Bankwatch:The key is that there are $240 Bn worth of mortgages to be reset before the trickle arrives, and what impact that will have on the market. Relative to the US economy, it is probably not so large, and the bigger question, might be the impact on Banks and mortgage lenders, and how that will drive tightening on Bank lending policies over the next two years. “… the financial squeeze on the US sub-prime borrower is set to intensify. A total of US$240 billion worth of sub-prime mortgages (equivalent to 39% of outstanding adjustable-rate sub-prime mortgages) are scheduled to reset over the next 12-months and US$370 billion (60%) over the next 18-months (Figure 12). Additionally, loan-to-value ratios should continue to deteriorate unless we see a significant rebound in house price inflation (which looks unlikely). Hence, sub-prime mortgage default trends are set to intensify moving forward.”Maoxian […]