NightBlogger

Source: Mr. Mortgage
The MBA just put out a new foreclosure study with results that match exactly what I have been already seeing for months and mirrors where I think it is going. This is in-line with my long-term predictions made in 2006 about the fall-out.

As a matter of fact, when a good friend Herb Greenberg (rest his journalistic soul) published my time-line in Nov 2007 the story was one of the most ‘read and responded-to’ blog posts in MarketWatch history. If you read through the comments section, the number of mortgage and real estate professional comments and confirmations is staggering. How could so many have known exactly how this would play out, yet it each development always catches everyone off-guard. Link: Straight-Talk From a Mortgage Insider

This newly released MBA research is solid. It is some of the only solid research I have read as of yet. When reading, pay special attention to the underlined portion below. It is especially concerning and what many still don’t fully appreciate…home owners looking at the home as an investment and not a place to live with the negative equity effect being a driver in foreclosures. This is also what many fear the most. This has what has led to the jump in paper-grade defaults from Subprime to Alt-A to Jumbo Prime then Prime that I have been watching occur now for six months, about which others are just beginning to speculate. For those die-hard Mr Mortgage readers, you already knew this was happening…but it is great to get public confirmation from a source that has every reason to hide it. Hat-tip to the MBA.

There is no doubt that the ooze is spreading from Subprime to Pay Options, Alt-A, Jumbo Prime and A paper. It is what it is. It is kind of funny that we have all of these names differentiating the paper grades at this stage anyway. It is all nonsense because after so many rounds of downgrades from the raters, values being off so much and between 2003 and 2007 the line between all paper grades becoming so blurred due to all sensibility and risk management leaving the mortgage sector, everything is likely several paper grades lower than its initial ratings anyway. At this point in time, they are all just ‘mortgages’. More

Posted by Karl Denninger
The Fed can halt deflation only in the instant case, and in the four dimensions that actually govern reality that fourth dimension, time, derails attempted printing every time. Why? Because The Fed cannot control what people will demand in order to loan out their capital. It can set a target rate and then defend it by either injecting or withdrawing liquidity, but if it tries to set the rate too far under the actual trading rate (that is, the true cost of borrowing is higher than what the fed funds target is set to) the amount of money necessary to defend that too-low rate rises to infinity! Once The Fed prints the perception is that they will do so again. As such interest rates in the market rise to the actual monetary inflation rate plus a margin for the risk of The Fed doing it a second time. See the problem? The margin is always positive, otherwise nobody would lend at all! More