HowardMortgage Backed Securities Going Down Next
April 27th 2007 04:47
April 25, 2007 -- SECURITIZERS WHO CREATED HOUSING BUBBLE ARE
NOW
HIDING BIG LOSSES. The next few months are likely to see extremely
large
securities losses breaking out in mortgage-backed securities (MBS)
which
have been the international banks' essential tool in creating the
now-exploding U.S. and other housing bubbles. These losses, which
various
investment bank reports are now estimating at up to $100 billion, may,
in
fact, be much larger than that, as the fall in home prices accelerates.
They
will hit those banks, and commercial banks as well, exposing how
worthless
are the large part of their assets which are based on the mortgage
bubbles.
Bloomberg news service on April 24 reported a Merrill Lynch estimate
that
the MBS of 2006, the most hyperinflated bubble year, have now sunk in
value
by up to 37%. The large bond fund Pacific Investment Management (PIMCO)
estimated losses at about $75 billion. {New York Times} columnist
Gretchen
Morgenson reported Lehman Brothers' estimate that MBS securities losses
so
far are $20 billion, but will rise during 2007 to 11-13% of the entire
outstanding volume of sub-prime mortgages, which is over $1.5
trillion.
Since 2005, two-thirds of all mortgages have been "securitized," sold
by the
lending companies to investment banks which in turn package and sell
them as
high-profit securities, building a huge mortgage bubble over $15
trillion.
Half of all the banking system's assets are now real-estate
mortgage-based.
Since the investment banks' MBS markets are unregulated, the hedge
funds,
banks, and other funds holding these securities are so far succeeding
in
hiding these huge losses, simply because the credit rating agencies
have
obliged them by not officially downgrading the falling mortgage
securities. This thin wall will collapse soon, and the crash will be
on, as
the fall in home prices nationwide gets serious.
The real plunges in market value of homes, are still to come in future
months. The National Association of Realtors ruefully reported on April
24
that March's U.S. existing-home sales fell by 8.4% from February (the
largest month-to-month drop since 1989), and are down 11.3% from March
2006.
The median existing-home price in March was still only 0.3% below March
2006, and 0.9% below for single-family homes. But the separate
Schiller/Case home sales report, says that March prices in the 20 largest metro-area
markets, were 1.5% down from March 2006; the unsold inventory of homes
rose from 6.8 to 7.3 months. "No bottom in sight for the housing market,"
was one S&P analyst's response to the unexpectedly large drop.
NOW
HIDING BIG LOSSES. The next few months are likely to see extremely
large
securities losses breaking out in mortgage-backed securities (MBS)
which
have been the international banks' essential tool in creating the
now-exploding U.S. and other housing bubbles. These losses, which
various
investment bank reports are now estimating at up to $100 billion, may,
in
fact, be much larger than that, as the fall in home prices accelerates.
They
will hit those banks, and commercial banks as well, exposing how
worthless
are the large part of their assets which are based on the mortgage
bubbles.
Bloomberg news service on April 24 reported a Merrill Lynch estimate
that
the MBS of 2006, the most hyperinflated bubble year, have now sunk in
value
by up to 37%. The large bond fund Pacific Investment Management (PIMCO)
estimated losses at about $75 billion. {New York Times} columnist
Gretchen
Morgenson reported Lehman Brothers' estimate that MBS securities losses
so
far are $20 billion, but will rise during 2007 to 11-13% of the entire
outstanding volume of sub-prime mortgages, which is over $1.5
trillion.
Since 2005, two-thirds of all mortgages have been "securitized," sold
by the
lending companies to investment banks which in turn package and sell
them as
high-profit securities, building a huge mortgage bubble over $15
trillion.
Half of all the banking system's assets are now real-estate
mortgage-based.
Since the investment banks' MBS markets are unregulated, the hedge
funds,
banks, and other funds holding these securities are so far succeeding
in
hiding these huge losses, simply because the credit rating agencies
have
obliged them by not officially downgrading the falling mortgage
securities. This thin wall will collapse soon, and the crash will be
on, as
the fall in home prices nationwide gets serious.
The real plunges in market value of homes, are still to come in future
months. The National Association of Realtors ruefully reported on April
24
that March's U.S. existing-home sales fell by 8.4% from February (the
largest month-to-month drop since 1989), and are down 11.3% from March
2006.
The median existing-home price in March was still only 0.3% below March
2006, and 0.9% below for single-family homes. But the separate
Schiller/Case home sales report, says that March prices in the 20 largest metro-area
markets, were 1.5% down from March 2006; the unsold inventory of homes
rose from 6.8 to 7.3 months. "No bottom in sight for the housing market,"
was one S&P analyst's response to the unexpectedly large drop.
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