Anyone in MBS?

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mni

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I just read an article in the New York Times. It mentioned that someone's mortgage rate rose to 11% from 6% after the teaser rate expired. How?
 
5/2/5 cap structure on a hybrid MBS would allow for that if the index went high enough to cap out the reset.
 
Depends on the reset formula too. The most aggressive formula you may find it Libor+225 bps...

So it would reset to roughly 7.5%

They're talking about lenders raising their rates on some riskier loans to that high of a rate...I read about jumbos going from 6.5% to 8%. 11% is a little egregious.
 
Do Adjustable Rate Mortgages (ARM) have a legally-mandated maximum reset? Someone told me the max reset was 3%. Is there any truth in this?
 
Skiloa! Where did you go? They told me you left but didn't say where you went. Where did you land?
 
If there's a legal limit to mrtg rates it's very high, like 20% or more.

More pragmatic caps are imposed by resale conditions. Freddie, Fannie, and other investors don't like to buy (repackaged) loans with high likelilhood of default, so they'd balk at caps more than 5 or 7% or so.
 
The 8% was for a jumbo prime through broker networks at Wells. That was not for a Wells originated jumbo prime. Big difference.

11%, I could definitely see that right now for a subprime, no/low doc, 100% CLTV loan. Heck, toss in vacation property and investment property in there and you'll get above that probably.

You can almost always get money, it just depends on whether you get it from Wells or you get it from Guido.

Most RMBS is having a very hard time clearing right now. Fannie/Freddie are looking to try and head off problems with Alt-A prime jumbos by increasing the limit from 417k, but that's just stupid. They are already loaded down with a lot of subprime ABS (whic they can buy on senior levels) and their conforming portfolios, not to mention multi-trillion dollar mortgage guarantees.

CDOs are done, equity tranches are getter hammered. The marks are killing people at this point. The CDO guys are going to take a big bonus hit.
 
While all ABS are taking a hit on credit spreads, I think a great deal of it is more relative value focused/ technical than fundamental. I think you'll even see CRE CDO's/CMBS back in the picture soon enough. Of course the commercial stuff has it's own problems, but nowhere near the issues that some of the other sectors have...
 
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