OT - Alt-A mortgages

Option-Arm ones already exploded, as far as I remember (this is always a drawn out process, but much of it has happened).

These defaults should track unemployment.

Note that Option-Arm loans are usually of much worse quality than Alt-A.

Yep, phase two of this financial fu***up is about to rear its ugly head. Same regulators, same CEO's....business as usual. They didn't see it coming, don't know why it happened. But they have it under control. Yep, I'm impressed.

========= Several demolition charges are set to explode at about the same time.

The option adjustible rate mortgages [option-arms] are indeed resetting. Not only is the interest rate rising, but the "option" of paying interest only, or even less that "interest only" with the result that the total mortgage increased is about to expire. The result is generally at least a 2X increase in the monthly payment.

The second demolition charge is that many of the commercial mortgages on shopping malls, office parks and apartments coming due and must be paid or refinanced. It is common practice that commercial property is financed with a short term 2 to 7 year balloon note, many of which are interest only, i.e. no amortization of principal. Not only has credit dried up, but in many cases the appraised value of the property will not support a new loan of the size required, even when a lender can be found.

For some info on this see

Unka' George [George McDuffee]

------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).

So is this going to lead to another dose of massive bail-outs? Or is that what the banks have been holding on to cash for?

========== I have no direct information from the banksters on this but it appears:

(1) Much of the bank capital reported is not Yankee dollars that you can spend at Walmart but rather spodulicks, which may or may not have any dollar value. Additional reported "capital" was generated by the accountant's pencil, not earnings.

(2) Any actual "coin of the realm" appears to have been expended or encumbered for critical items such as bonuses for the banksters, office redecoration and new corporate aircraft.

(3) When [not if] the option-ARM and more importantly the commercial mortgage grift [many CDOs were created and sold based on commercial mortgages] blows, the banks and banksters will again discover they have no money available, and to keep from wrecking the economy, the taxpayer will again have to guarantee their bad loans + some "small processing fees." Before you ask, no one but the lowest level employees such as the janitors and the "coffee lady" will be arrested.

Unka' George [George McDuffee]

------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).

On the other hand, if you have been prudent, there will be DEALS GALORE out there in the next few years. I've already started buying (cautiously).