Posts filed under “Think Tank”

3 yr note auction goes well but no different than expectations

The $40b 3 year note auction was about in line with expectations and the recent average. The yield at 1.229% was a touch above where the when issued was trading. The bid to cover at 2.98 is above the average seen in ’09 of 2.70 but is below the 3.33 seen in the prior one. Indirect bidders totaled 60.9%, slightly above the average over the past 6 of 55.4%. On the heels of the Greece and Dubai credit rating moves today, Bernanke reiteration yesterday that rates are unlikely going anywhere soon and the pullback today in global stock markets, selling a 3 year was easy for the Treasury, albeit no better than expected. The real test comes tomorrow when they need to sell a 10 yr note and on Thursday when they come to market with a 30 year.

Category: MacroNotes

Its All Greek To Me

The European view is from a major trading desk morning comment, where the author cannot be cited: ~~~ I’ll dispense with the usual prose today and break this thing down as logically as I can (source for all data below is Bloomberg): A) We’re witnessing a mild retreat from risk this morning. B) Another way…Read More

Category: Credit, Think Tank

Millions More At-Risk of Default Than Most Think

Mark Hanson is a mortgage banking veteran specializing in wholesale and correspondent sales, operations management. His primary focus was upon residential mortgages working closely with most mortgage and Wall Street investors. Since 2006 his primary focus has been upon his work as an independent real estate and finance sector analyst, consultant, and risk enlightener to the financial services sector. His years of on-the-ground experience, extensive research, and access to proprietary data few have available has led him to make an extraordinarily large number of early and accurate predictions about the great mortgage and housing meltdown and company-specific events.


Happy Holidays. This reports contains material from various 2009 Mortgage Pages reports and is a great segue into 2010 events.  Talk to you then. Mark Hanson

Why Millions More Homeowners are At -Risk than Most Think

  • Up to 20 Million Borrowers may be in Imminent Risk
  • What 50% DTI Really Means Relative to Time-Tested 28/36
  • Going Exotic in Plain Sight
  • Borrower’s Always Borrowed the Max
  • The GSEs – A Culture of Fraud
  • Affordability – Out of Control
  • HAMP – More Exotic Than Bubble-Year’s Loans

Our mission is to provide our clients a significant edge. This is done by turning the daily, market-moving real estate and mortgage news flow and events into old news by the time it makes headlines. – Mark Hanson

- Overview – Millions More Homeowners are At -Risk than Most Think

Most look to loan type and equity position as two of the most important factors when forecasting loan default. In fact, I believe that epidemic negative-equity is the overarching reason that the default, foreclosure and housing crisis remains in the early innings. But…negative-equity with a caveat.

While negative equity is a threat in and of itself, being in an over-leveraged household debt position is the true default catalyst for most in a negative-equity position. And being over-leveraged is also the primary default catalyst for those is a positive equity position. Being in a negative-equity position with lots of top line and disposable income each month is generally more of a mental burden than a reason to fly the coop.

How many homeowners are over-levered and at imminent risk of default? This answer is…a lot more than most think, especially those who got a loan from 2003-2007 due to a radical, yet subtle shift in loan guidelines across the mortgage spectrum that kicked-off the bubble-years.

Yes, even Prime full-doc borrowers in 30-year fixed mortgages with 20% equity who got their purchase or refi from 03-07 are at much greater risk than most think. Being over-levered was condoned – all the lenders, investors and loan programs operated in the same manner.

In my research, I often assume that everybody knows the subtle idiosyncrasies of how loans are really structured. I understand this is not the case. So, in an attempt to highlight why the total residential mortgage risk exposure is so much greater than anybody’s expectations, this report drills down on Prime, Alt-A and Subprime allowable debt-to-income (DTI) ratios that were made ridiculously lax relative to pre and post 2003 – 2007. This, in my opinion, is the real tempest in the mortgage teapot that buckets millions more loans that are still in existence today across all loan types, as risky.

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Category: Real Estate, Think Tank


David A. Rosenberg is Chief Economist & Strategist at Gluskin Sheff, with a focus on providing a top-down perspective to the Firm’s investment process. Mr. Rosenberg has earned both Bachelor of Arts and Master of Arts degrees in Economics from the University of Toronto. Prior to joining Gluskin Sheff, David was Chief North American Economist…Read More

Category: Think Tank

Yesterday no one cared about Greece, today they do

Following yesterday’s S&P move to put Greece on credit watch negative, Fitch outright downgraded them today to BBB+ and kept the outlook negative. This followed a Moody’s downgrade of 6 Dubai related entities and another 6% drop in the Dubai stock exchange. I brought up the S&P/Greece news yesterday in order to search for the…Read More

Category: MacroNotes

Consumer credit falls but jump in car loans tempers drop

Consumer Credit outstanding in Oct fell by $3.5b to $2.483t, about $6b less than the expected drop and Sept was revised to a decline of $8.8b from the initial report of a fall of $14.8b. It has declined for 12 out of the past 13 months and is down 3.8% from the peak in July…Read More

Category: MacroNotes

Chairman Ben S. Bernanke’s Frequently Asked Questions

At the Economic Club of Washington D.C., Washington D.C.
December 7, 2009

Frequently Asked Questions

It is a pleasure to speak once again before the Economic Club of Washington. Having faced the most serious financial crisis and the worst recession since the Great Depression, our economy has made important progress during the past year. Although the economic stress faced by many families and businesses remains intense, with job openings scarce and credit still hard to come by, the financial system and the economy have moved back from the brink of collapse, economic growth has returned, and the signs of recovery have become more widespread.

Understandably, in a situation as complicated as this one, people have many questions about the current situation and the path forward. Accordingly, taking inspiration from the ubiquitous frequently-asked-questions lists, or FAQs, on Internet websites, in my remarks today I’d like to address four important FAQs about the economy and the Federal Reserve. They are:

  1. Where is the economy headed?
  2. What has the Federal Reserve been doing to support the economy and the financial system?
  3. Will the Federal Reserve’s actions lead to higher inflation down the road?
  4. How can we avoid a similar crisis in the future?

Where Is the Economy Headed?
First, to understand where the economy might be headed, we should take a look at where it has been recently.1 A year ago, our economy–indeed, all of the world’s major economies–were reeling from the effects of a devastating financial crisis. Policymakers here and abroad had undertaken an extraordinary series of actions aimed at stabilizing the financial system and cushioning the economic impact of the crisis. Critically, these policy interventions succeeded in averting a global financial meltdown that could have plunged the world into a second Great Depression. But although a global economic cataclysm was avoided, the crisis nevertheless had widespread and severe economic consequences, including deep recessions in most of the world’s major economies. In the United States, the unemployment rate, which was as low as 4.4 percent in March 2007, currently stands at 10 percent.

Recently we have seen some pickup in economic activity, reflecting, in part, the waning of some forces that had been restraining the economy during the preceding several quarters. The collapse of final demand that accelerated in the latter part of 2008 left many firms with excessive inventories of unsold goods, which in turn led them to cut production and employment aggressively. This phenomenon was especially evident in the motor vehicle industry, where automakers, a number of whom were facing severe financial pressures, temporarily suspended production at many plants. By the middle of this year, however, inventories had been sufficiently reduced to encourage firms in a wide range of industries to begin increasing output again, contributing to the recent upturn in the nation’s gross domestic product (GDP).2

Although the working down of inventories has encouraged production, a sustainable recovery requires renewed growth in final sales. It is encouraging that we have begun to see some evidence of stronger demand for homes and consumer goods and services. In the housing sector, sales of new and existing homes have moved up appreciably over the course of this year, and prices have firmed a bit. Meanwhile, the inventory of unsold new homes has been shrinking. Reflecting these developments, homebuilders have somewhat increased the rate of new construction–a marked change from the steep declines that have characterized the past few years.

Consumer spending also has been rising since midyear. Part of this increase reflected a temporary surge in auto purchases that resulted from the “cash for clunkers” program, but spending in categories other than motor vehicles has increased as well. In the business sector, outlays for new equipment and software are showing tentative signs of stabilizing, and improving economic conditions abroad have buoyed the demand for U.S. exports.

Though we have begun to see some improvement in economic activity, we still have some way to go before we can be assured that the recovery will be self-sustaining. Also at issue is whether the recovery will be strong enough to create the large number of jobs that will be needed to materially bring down the unemployment rate. Economic forecasts are subject to great uncertainty, but my best guess at this point is that we will continue to see modest economic growth next year–sufficient to bring down the unemployment rate, but at a pace slower than we would like.

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Category: Think Tank

Will Greece go the way of Dubai?

On the heels of the Dubai news a few weeks ago where their stock market is down 17% over that span, S&P about an hr ago put the Greece sovereign rating on creditwatch negative. Greece’s benchmark 10 yr bond is down 1% with a yield up by 12 bps to 5.11% (spiked to 5.17% Thanksgiving…Read More

Category: MacroNotes


Lakshman Achuthan and Anirvan Banerji are co-founders of the Economic Cycle Research Institute in New York City. Last week’s news of a drop in the unemployment rate to ten percent is a welcome development. It was presaged by earlier strength in reliable leading employment indicators, which suggest that this improving pattern will persist next year….Read More

Category: Employment, Think Tank

Where do we go…ah, where do we go now

Following the biggest rally in terms of speed and distance since the 1930′s, Friday’s better than expected Payroll figure begs the question of what happens now. First thing is determining whether the # was a harbinger of a sea change in the economy, is it sustainable or was it just an outlier that will be…Read More

Category: MacroNotes