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Started By
Message
Wells Sees 60-70% Loss Severity in Option-ARMs
Posted on 10/11/09 at 5:39 pm
Posted on 10/11/09 at 5:39 pm
1
Posted on 10/11/09 at 6:13 pm to kfizzle85
quote:What exactly does that mean? I couldn't tell from reading the link.
60-70% Loss
Posted on 10/11/09 at 6:18 pm to LSURussian
When the a loan defaults, they're anticipating recovering 30-40% of the principal (or losing 60 to 70% of the principal).
Posted on 10/11/09 at 6:22 pm to kfizzle85
On ALL of their options ARM's? No way that's correct, is it? 
Posted on 10/11/09 at 6:52 pm to LSURussian
Nah, I think that is an average for the asset class as a whole, but option arms are pretty much the worst of the worst.
Not sure how much the non-option portion skews that cum rate (I would think considerably), but that's still not pretty.
quote:
Cumulative losses should range between 6% and 11% among Alt-A/B ARMs and between 11% and 36% among subprime ARMs.
Not sure how much the non-option portion skews that cum rate (I would think considerably), but that's still not pretty.
Posted on 10/11/09 at 6:54 pm to LSURussian
quote:
On ALL of their options ARM's? No way that's correct, is it?
the article is poorly written. But I think she means on each foreclosure.
Based on this
quote:
Cumulative losses should range between 6% and 11% among Alt-A/B ARMs and between 11% and 36% among subprime ARMs.
if it was on all, those numbers would be much larger. However, they don't break out option arms specifically.
Posted on 10/11/09 at 7:04 pm to MileHigh
Yeah. I thought that was pretty much inferred. It's not 70% of the outstanding loan pool, its 60-70% of the outstanding loan pool expected to default. You obviously aren't factoring in loss rates on mortgages that you, by definition, anticipate recovering 100% on.
Posted on 10/11/09 at 7:05 pm to kfizzle85
quote:
Yeah. I thought that was pretty much inferred.
you have to speak slowly. Russian is a banker.
Posted on 10/11/09 at 7:06 pm to MileHigh
I used that line on an Auburn fan who was on campus for the game (why she was there, I have no idea).
Posted on 10/11/09 at 7:08 pm to MileHigh
One of the reasons Option-ARMs are so devastating is that they aren't saved by interest rates being low. Most borrowers have been paying less than the fully amortizing payment - and in a lot of cases, they've been making the "credit card minimum" payment. So on top of being recast to the fully amortizing payment, the principal is also higher due to neg-am. Good stuff.
Posted on 10/11/09 at 7:09 pm to kfizzle85
quote:
I used that line on an Auburn fan who was on campus for the game (why she was there, I have no idea).
the speak slowly bit?
and did you hit it?
Posted on 10/11/09 at 7:30 pm to MileHigh
She was some nasty 35ish year old that was beyond drunk, so no.
Posted on 10/11/09 at 8:07 pm to kfizzle85
quote:
She was some nasty 35ish year old that was beyond drunk, so no.
those are the easiest, btw.
Posted on 10/11/09 at 9:07 pm to MileHigh
Duly noted.
Posted on 10/12/09 at 6:18 am to MileHigh
What?
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