Saturday, December 09, 2006

crash boom bang part II / subprime

this is in addition to the "crah boom bang" from the prior day abou the "ownit" bust! if you havn´t read this make sure you read this first!

das ist ne bestätigung des artikel vorm vortag über den untergang von "ownit". solltet ihr das bisher nicht gelesen haben empfehle ich das zuerst zu lesen.

Sub-Prime Mortgage Derivatives Fall as Lenders Fail
dank an russ winter für den chart

Dec. 8 (Bloomberg) -- Sub-prime mortgage bonds had their worst week of the year on concern about the failure of two lenders, the slowing housing market and the ability of borrowers to repay the loans, derivatives based on the securities suggest.

An index of credit-default swaps based on bonds rated BBB- and consisting of sub-prime mortgages made this year fell 2.6 percent, to 95.36 today. Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on the odds the debt will be repaid.

Traders reacted after two sub-prime lenders, Agoura Hills, California-based Ownit Mortgage Solutions Inc. and Sebring Capital Partners LP of Carrollton, Texas, closed this week, ......

Default Swaps
The annual cost to protect against default for $10 million of 2006 BBB- mortgage bonds rose to $389,000 from $310,000,..... Default protection on General Motors Corp.'s bonds, which have below-investment-grade ratings, for five years costs $410,000 annually, .....

Premiums on credit-default swaps for individual low-rated bonds and yield premiums on the asset-backed securities also have showed increased concerns,

Asset-backed securities rated AA to BBB lost 0.31 percentage point this week, .......

Defaults on adjustable-rate sub-prime mortgages made this year and packaged into bonds surged 25 percent last month to the highest level for new loans in five years, .....

The percentage of such loans delinquent by 90 days or more, in foreclosure or turned into repossessed properties rose to 2.52 percent in October from 2.01 percent in the prior month,

Lippmann said the direction of the market will depend on CDOs and hedge funds, and how each react to changes in housing data and credit-rating changes.

Change in Behavior
At the then-current price of 98.3, the index-linked contracts on BBB- bonds from this year's loans appeared to be priced for losses of less than 4 percent,

There is a risk that sub-prime loans from this year will experience higher cumulative losses than the 2000 vintage, the worst-performing ever, which as of today are around 5.5 percent, Michael Youngblood, an analyst at Friedman Billings, (this is the guy that said in july that the market will be fine / das ist der typ der noch im juli alles rosarot gesehen hat.)

Sub-prime mortgage bonds rated BBB- from a securitization by Wells Fargo & Co. were sold this week at a yield 1.73 percentage points more than the one-month London interbank offered rate, he said. Similar bonds from Countrywide Financial Corp. carried 2.75 percentage points in extra yield

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