Chart Of The Day - " 90 Day Delinquency Rates In Spanish RMBS"

One or two more quarters and the 2008 vintages are already catching up with 2005....Let´s hope the ECB with their € 60 billion QE in covered bond purchases ( Update : ECB Said to Have Debated 125 Billion-Euro Asset Package in May ) isn´t getting as reckless as the Fed ( for their latest latest stunt see Fed Bends Over Backward For CMSA, Will Feed Inflation Capacitor With More Toxic Garbage via Zero Hedge ) or the spanish central bank with their brilliant move in selling gold to buy spanish mortgages ( see here).....

Noch ein oder zwei Quartale und die 2008er Daten der "überfälligen" Hypothekenzahlungen werden bereits die für das Jahr 2005 locker hinter sich gelassen haben.....Bleibt zu hoffen das die EZB mit Ihrem QE Versuch ( Kauf von € 60 Mrd Covered Bonds / Pfandbriefen UPDATE: ECB Said to Have Debated 125 Billion-Euro Asset Package in May ) zumindest nicht ganz so unverfroren und unverantwortlich agiert wie es die Fed ja momentan im Wochenryhthmus praktiziert ( siehe gestriges Beispiel Fed Bends Over Backward For CMSA, Will Feed Inflation Capacitor With More Toxic Garbage via Zero Hedge ). Wie bereits vorher berichtet ( siehe hier ) übertrumpft die spanische Zentralbank mit der Entscheidung Ihre Goldreserven zu vertickern und dafür in spanische Hypotheken zu investieren aber selbst Bernanke. Und das ist wirklich ne reife Leistung........ Geradezu Oscarverdächtig......



Hat tip FT Alphaville

With unemployment running close to 20 percent i think it is a safe bet that we are just starting to see the pain ( despite the relief from lower interest payments, almost 100 percent of mortgages have variable rates ( see European Mortgage Market / Percentage Of Variables Rates ) and the Spanish borrower is benefitting heavily from the 1% EZB rate ) But i doubt that this will lead to a much different outcome than in the US ( see A Delinquent Spike / Chart US Delinquencies ) .......

Dank einer Arbeitlslosenquote von knapp 20% dürfte hier demnächst eine Explosion an faulen Krediten fast garantiert sein ( und das trotz der massiven Entlastung durch die sinkenden Zinsbelastungen, im Gegensatz zu Deutschland werden fast 100% der Hypotheken variabel verzinst ( siehe European Mortgage Market / Percentage Of Variables Rates ). Es gibt europaweit wohl kaum eine Kreditnehmergruppe die mehr vom momentanen 1% Leitzins der EZB profitiert , ich denke das selbst dieser Fakt ein ähnliche Entwickluung wie in den USA ( unbedingt den Chart angucken A Delinquent Spike / Chart US Delinquencies ) bestenfalls verlangsamen kann......

UPDATE: Scrutiny of Spain’s potential banking pain increases & Spanish banking pain, Caja Madrid RMBS edition

Caja Madrid - Spain’s second-largest savings bank - said it would skip EUR1.12m in interest payments on residential mortgage-backed securities due to soaring defaults on the underlying home loans.

Caja Madrid issued its RMBS II bonds in 2006....

When defaults reach 18.3 percent, all investors except for those in the highest-ranked notes will be cut off, according to Standard & Poor’s. About 16 percent of the underlying mortgages are now either in arrears by more than 90 days or have already defaulted, S&P data show.

Caja Madrid has sold 9.2 billion euros of mortgage-backed bonds since 2006 in four transactions, according to data compiled by Bloomberg. The lender packaged home loans it made to borrowers at the peak of Spain’s 14-year real-estate boom

Spain Bubble Watch

For a decade, the Spanish housing sector enjoyed uninterrupted growth, as low interest rates encouraged borrowing. Average house prices have nearly quadrupled during the past 10 years. About 750,000 homes were built in Spain in 2006 -- more than in France, Germany and the U.K. combined.

Fundamentals, not liquidity conditions, are behind MBS crash

Good luck to all the banks and especially the monoline insurers that still think that the ABX Indices ( see also The AAA Trap via Sudden Debt ) are not reflecting the market price....... But as long as they can convince the auditors.......

Viel Glück all denen die die immer noch glauben das die ABX Indizes ( siehe auch The AAA Trap von Sudden Debt ) nicht den wahren Wert wiederspiegeln..... Aber solange die Buchprüfer diese Zahlen abnehemen......


Fundamentals, not liquidity conditions, are behind MBS crash / FT
Many banks, if not financial institutions in general, would have you believe that the current rout in mortgage-backed debt is largely being driven by irrational fear. A few bad subprime debts buried around the structured universe are scaring buyers out of markets.

But, said CreditSights, in a note to clients on Wednesday, current pricing levels reflect fundamentals, even for the most highly-rated debt. Mortgage securities across the board are overrated and overvalued:

The harsh truth about the outlook for the AAA tranches - necessary downgrades, if not defaults - should put the lie to the argument that current low prices in AAA RMBS tranches - let alone AAA tranches of mezzanine RMBS CDOs - are somehow the victim of poor liquidity conditions, and do not reflect the true fundamentals of the situation.

CreditSights publish the results of a survey they have conducted on “188 individual relatively large RMBS deals”. The outlook, by all accounts, is grim.

Hat tip to Barry Ritholtz who has also more on this topic Financials: Worse than they look?

Dank an Barry Ritholtz der zum Thema ebenfalls treffendes zu sagen hat Financials: Worse than they look?

At root, CreditSights calculate a severity loss ratio for lenders on individual defaulting subprime mortgages based on mortgage market data collected over the past few weeks. The survey results indicate that such loss severity rates on mortgages are “painfully high”. They range from 24 per cent to 55 per cent - with a weighted average at 35 per cent. And they’re expected to rise. For second-lien mortgages - that is, second mortgages on a property, the loss severity rates average 94 per cent.

> By the way MBIA is on the hook if the losses for their RMBS CDO´s are greater than 22-28 percent.........

> Ganz nebenbei bemerkt ist MBIA ab Verlusten von 22-28 % bei Ihren RMBS CDO´s in der Haftung.....

So how do those figures translate into the capital structure of structured mortgage-backed debt? Foreclosure rates are rising higher and higher - which means the number of occasions when the above loss severity ratios have to be applied are increasing.

And it doesn’t look like the blame can be pinned on any particular vintages of MBS. Here’s a graph of foreclosures on vintages since 2004:

According to CreditSights, that should “up-end the idea that the 2004 vintage was perhaps sufficiently seasoned and composed of loans that had enjoyed enough home price appreciation since 2000, to avoid any further erosion.”

As it is, foreclosure rates are hovering at around 13 per cent on 2005 and 2006 mortgage debt. But CreditSights say there is “no end in sight” when it comes to that figure rising.

Consider then the outlook for delinquancy rates - a measure of mortgage loans not yet in foreclosure, but in trouble:

Add the 7 per cent delinquency rate for the 2006 vintage to the 2006 foreclosure rate at 12.6 and it’s already close to 20 per cent.

How then does that translate into the world of structured finance, and those RMBS tranches?

To trigger a default on the most secure subprime RMBS debt - rated AAA, and structured with a typical 18 per cent attachment rate - foreclosure rates would have to reach the 30 per cent.

As can be seen from the results of CreditSights’ survey, that scenario is indeed becoming “less and less unthinkable”. Adding the foreclosure and delinquancy rates takes us close to 20 per cent. Both are set to increase. Then there’s those painfully low severity loss ratios. Add it all together and that AAA debt is far, far, far from safe.

And we haven’t even mentioned prime tranches lower down the structure.

Far from mispricing RMBS, CreditSights even go so far as to suggest that actually, the ABX indices (which list AAA RMBS debt at around 80 cents in the dollar) are throwing up some pretty appropriate figures.

MBIA, AMBAC & ACA Update

I suggest to read MBIA / Denial ? from the day MBIA released its earnings before you continue. Since then the stock has lost over 25 percent.

I find some numbers & comments from the MBIA earnings release quite interesting. MBIA has rushed into the RMBS/Commercial Real Estate market. All deals are including 2006 and 2007 commercial loans. Can´t help but i´ve heard some scary things about Commercial Real Estate and looking at CMBS Markit isn´t giving me much comfort either.......

The multi sector CDO´s are also including subprime. The spiking business comes in large part from banks that want to hedge their CMBS and CDO exposure on their balance sheets (after they failed to unload it.....). MBIA believes that their underwriting and their premiums earned are overcompensating their risk (based on their models....) .......They assumed that their worst case for their RMBS ( largely subrime) exposure with a buffer of 22-28 percent was enough when they signed the exposure in the recent years!!!!!!...... Mhhhh........

What will happen to the balance sheets from these banks if MBIA & Co won´t be able to pay the claims..... Just from looking at the chart it feels like at least some have some doubts...... It looks like the report from the short seller Pershing Square Capital Management, L.P. and the post about comon sense wasn´t so far of the mark....
Ich empfehle dringend sich zuvor MBIA / Denial ? durchzulesen. Seitdem hat die Aktie deutlich über 25% nachgegeben.

Ich finde diese Zahl aus der Ergebnisveröffentlichung von MBIA interessant. MBIA ist mit Schaum vorm Mund in den Bereich des gewerblichen Immobilienmarktes gerannt. Alle Papiere basieren Kredite aus den Jahren 2006/2007. Nachdem was ich gehört hat genau dieser Zeitraum den Peak markiert.

Die Multi Sektor CDO´s beinhalten zudem noch Subprimebestandteile. Das explodierende Geschäfft kommt fast ausschließlich von den großen Banken die verzweifelt versuchen die Papiere die sich in Ihren Bilanzen befinden abzusichern ( Nachdem Sie das in den Vorjahren nicht nötig hatten, dort wurden diese Papiere schnell weitergereicht ohne die Bilanzen zu belasten).

MBIA behauptet das die Risikoprämien mehr als ausreichend für die garantierten Risiken sind. Das war bis zu diesem Quartal allerdings auch das Argument für den Rest des Portfolios..... Immerhin haben diese Modelle vorhergesagt das Ihr Puffer von 22-28 % bei den gegebenen Garantien im Immobiliensektor (davon Großteil Subprime) mehr als ausreicht um nicht zur Zahlung herangezogen zu werden....... So kann man sich irren...... Im Nachhinnein sieht der Report vom Shortseller Pershing Square Capital Management, L.P. und über den gesunden Menschenverstand doch nicht so aus der Luft gegriffen aus...... :-)

Unschwer auszurechnen was in den Bilanzen der Banken los ist wenn MBIA sich erneut "verrechnet" hat . Und wenn man sich die Charts ansieht scheinen das zumindest einige zu glauben......

In the third quarter, U.S. structured finance ADP increased 294 percent compared with 2006 ( makes over 50 percent of earned premiums!) Several sectors contributed to the increase in global structured finance production, with particularly strong increases from CMBS pools (over 50 percent!), Collateralized Debt Obligations (CDOs) of investment grade corporate credits, commercial mortgage-backed securities pools and multi-sector (including subprime) CDOs ( 35 percent!) , as well as a whole business securitization, which generated the largest ADP for the quarter

Adjusted Direct Premiums (dollars in millions)
		Three Months Ended September 30									Nine Months Ended September 30
			2007			2006		% Change				2007		2006		% Change
Global Public Finance
United States		$	109.6		$	67.5		62	%		$	259.1		$189.2		37	%
Non-United States			66.9			31.6		112	%			187.7		133.8		40	%
Total			176.5			99.1		78	%			446.8		323.0		38	%
Global Structured Finance
United States			291.0			73.8		294	%			612.5		163.4		275	%
Non-United States			46.7			37.2		26	%			175.2		123.2		42	%
Total			337.7			111.0		204	%			787.7		286.6		175	%
Total		$	514.2		$	210.1		145	%		$	1,234.5		$609.6		103	%

If you have enough time i think it is well worth listening to the call. Scary! At least a large part from the anaylst are asking the right questions. Remembering that they are on the hook for over $ 600 billion it makes me want to buy more gold......

Wenn Ihr genügend Zeit habt kann ich empfehlen sich den Call anzuhören. Immerhin stellen einige Analysten die richtigen Fragen. Wenn man aber bedenkt das diese Firma über 600 Mrd $ an Garantien ausstehen hat möchte man doch am liebsten gleich seien Goldpsoition aufstocken.....

Replay
of MBIA Inc. Third Quarter 2007 Earnings Conference Call

This is one of the rare things were i am with Cramer Cramer: MBIA Is Toxic

Und das dürfte eine der wenigen Umstände sein das ich mit Carmer übereinstimme Cramer: MBIA Is Toxic

via Mish Downward Spiral of Deep Junk

At Thursday's close, Ambac's swaps implied a rating of "Caa1," seven levels below investment grade and 14 notches below its actual rating.

MBIA Inc's default swap spreads, meanwhile, are trading as though they carry a rating of "B2," five levels below investment grade, and 12 notches below the company's "Aa2" rating, according to Moody's data.Ambac was down another 20% on Friday.

MBIA was down another 6.7%. Clearly the market is beginning to wonder just how much those "guarantees" are worth.

> Looks like the rating agenciues are as usual way behind the curve......

> Sieht mal wieder so aus als wenn die Ratingagenturen mal wieder hoffnungslos der Musik hinterherrennen....