Friday, September 12, 2008

Reset Shock Mitigation

Sadly, I have been dragged into the Fed Funds drop next month camp. The Fed needs to give everyone, borrowers, lenders more time to swap out of adjustable products as resets peak. Rate shock on the patient might prove fatal so the Fed is lowering the voltage. This won't help WaMu with the deal they made with me for a prime +0% HELOC however and it surely won't goose new business because the banks are not going to pass the drop through to new loans.
This is yet another unintended consequence of the nation being placed under house arrest. The velocity of the housing market isn't just slowing, it is crashing. Sure much of the activity 2001-2005 was unsustainable but now we are in a period of significant overshoot to the downside. Lately we've seen "right priced" houses selling quickly but that was a phenomena a mile wide and an inch deep. Next up is a time where even low prices are going to require 6 months or more to close.

My latest wacky idea is when the time comes to buy more investment properties I'll offer to put $10,000 per $100,000 borrowed into a long term deposit with the same bank effectively self financing at a 10x leverage.

27 comments:

Zintradi said...

so, wild ass rumor of the day....
This is a 'friend of a friend' source from someone that works in the high ups office at Wamu up here in Seattle that if you have an account at Wamu, pull out your money today. Things may or may not happen by the end of the day, i.e. pull an Indymac. Make sense if it does because that would put it in the weekend news cycle, however Like I said, wild ass rumor.

Rob Dawg said...

Until proven wrong by events I'll stick to my prediction that Downey goes first shortly followed by WaMu. The FDIC just doesn't have the resources to close WaMu yet. For bank failure friday (BFF) more likely is a west coast or Nevada small/medium. The local Affinity Bank is newly on but high on my list.

Zintradi said...

like I said, wild ass rumor from a 'friend of a friend' source but I thought I would throw it out there for discussion and intrigue... in other words, stir the pot.

Lost Cause said...

Kind of shocking that Lehman Brother and WaMu would go down in the same week. But I suppose Ike could strike Houston.

Bill in NC said...

As long as you're under the magic $100,000 per 'named' account why worry?

Heck, you WANT a mortgage or home equity line of credit when the feds take over - the feds will give you several more months minimum even if you're in foreclosure (i.e. Indymac)

And I bet they won't suddenly terminate your HELOC (as sane lenders are doing)

Zintradi said...

"And I bet they won't suddenly terminate your HELOC (as sane lenders are doing)"

which is why i got out of my 80/20 into a tidy 30 yr fixed.

Rob Dawg said...

The Dawg needs his HELOC for reasons the HELOC was originally intended. Next is either remediation landscaping or solar roof. They wouldn't possibly terminate my line. Less than 30% LTV? Try to justify that one.

Property Flopper said...

Nice Nurse.

Rob Dawg said...

That's a prisoner under house arrest.

Akubi said...

Palin/Vick '08

Rob Dawg said...

Akubi,
Who was our most Conservationist President? Really, how can anyone deny it was Teddy? Guns, hunting, respect for the environment without being overwhelmed?

Slowly, methodically, he went up the political ladder from councilman in Northampton to Governor of Massachusetts, as a Republican. En route he became thoroughly conservative.

From a biography of Calvin Coolidge.

Funny Circus Bears said...

It's looking like Barry and Joe combined are a testicle shy of Sarah alone. If that doesn't change the Dem's will once again snatch defeat from the jaws of victory.

The campaign they are waging against Palin is turning against them, and they just don't get why.

Akubi said...

@Dawg,
As I recall Teddy didn't partake in inhumane and pathetic aerial hunting.

Rob Dawg said...

Teddy had "drivers."

Jean ValJean said...

Nurse, prisoner..

do we really care what she is?

segfault said...

Well, if she is in jail or prison, I might consider taking one more pro bono case...

For what reason were HELOCs originally intended? I'm guessing cash management flexibility? I don't think I'll have enough equity to be comfortable applying for one until sometime next year.

Property Flopper said...

Wow, missed those handcuffs completely... can't imagine why I wasn't looking at her hands. :)

I'll amend to "Nice Prisoner".

BTW: Just checked out CS's site, not much happened in the couple weeks I was gone - bad sign.

Anyhow, he's starting a fast that includes laxatives... fasting he does not need, the laxatives may do some good though - he is quite full of shit.

Also - he mentions his "special friend 'A'". Any thoughts on who that is? Arthur?, Arron?, Andy?

Who's started the pool for when he folds up this site?

Property Flopper said...

Segfault - Was that a pro-bono case or a pro-boner one?

penny said...

can someone explain this for me? All the money these financial companies are losing are from bad mortgages. so when lehmans lost $4B this last quarter, is that loss from people not paying their mortgages?

penny said...

can someone explain this for me? All the money these financial companies are losing are from bad mortgages. so when lehmans lost $4B this last quarter, is that loss from people not paying their mortgages?

Akubi said...

I've been trying to remain in Casey ignore mode, but this is just disgusting:
Just wanted to warn u. The salt water flush can cause sudden diarea. Just happened to me, caught me by surprise. Stay close to the bathroom

Rob Dawg said...

Penny,
In the simplest form Lehman's is banckrupt/insolvent because they were betting on those loans not actually holding them. Worse however is that they leveraged those bets and the bets triggered faster than they could place new bets elsewhere.

Akubi,
Ewwww. That's not what we needed to hear.
Talk about jumping the shark. Sad doesn't cover it. I thought it was gross when he was talking and eating.

wagga said...

Moral hazard: (stolen from TOD)

"I'm watching live video of the Balinese night club built out on a pier at Galveston. the waves are already starting to take out this huge structure and the storm is still 9 hrs away. It leaves me beyond words that people will invest their money on the edge of a sandbar in a hurricane zone. I've also heard via CNN that only 25% of the people on that sandbar have evacuated.

We often speak of moral hazard, which is aiding and abetting stupid behavior. What really jerks my chain is that these enormous losses will be socialized through a nation that has become a giant insurance company that insures against -- I won't say stupidity, because its beyond that -- its INSANITY. If another 6,000 people die on that sandbar, my reaction will be "good riddance." This kind of behavior is suicidal.

The NHC has just issued a warning that anyone staying on that sandbar will likely die.

Its about time that all insurance, support and assistance to people who want to live on the edge of disaster and death be withdrawn."

Santa Flipper Clause said...

Ho Ho Ho - It's Santa Flipper Clause

Made $91K and still lives on his mama's couch?

Santa F. Clause

Rob Dawg said...

Wagga,
Righton, righton, righton.

Santa,
Casey saying he made $91k and Casey making $91k are two different things. He says he's straight, he says he'll get Galina back. He says lots of shit.

Santa Flipper Clause said...

Ho Ho Ho - It's Santa Flipper Clause

I hear ya, Dawg. My point being the only way we will know he is making any money is when he moves out of his Mamas.

Santa F. Clause

Santa Flipper Clause said...

Ho Ho Ho - It's Santa Flipper Clause

Of course, maybe he'll be thrown out.

Santa F. Clause