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NEW -> Contingent Buyer Assistance Program
<p><a href="http://www.wachovia.com/inside/page/0,,131_10466_10469,00.html#offer">http://www.wachovia.com/inside/page/0,,131_10466_10469,00.html#offer</a></p>

<p>"Will World Savings continue to offer the same loan products?"</p>

<p> </p>
 
lendingmaestro - Do you have any estimate of what percentage of ARMs are based on the LIBOR? It rose from 5.35% to 5.86% last night, probably due to the ECBs little additions.
 
<p>It is really impossible to tell. I can tell you that ALL of my banks tradtional 3/1 5/1 7/1 and 10/1 fixed rate loans are based off of LIBOR. This fact doesn't affect the borrower until their rate is set to adjust. </p>

<p>Most monthly adjustable option arms are based off the 12 month treasury avg (MTA), the COSI, CODI, COFI, or LIBOR.</p>

<p>Most people that received 5 year ARMS in 2003, this was when rates were at their lowest, will adjust next year. Their new rate will be the index plus a preset margin. Most margins are between 2-3% for prime borrowers. Most of the indices I mentioned above are all over 5%. This means the borrower's new rate will be close to 8% or even more.</p>
 
Wachovia just picked up a trojan-horse virus called World Savings. I'm sure they did it to acquire the large deposit base World has. I wonder how deeply they looked into the loans they serviced?
 
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Will your client be safe down the road?







World Savings



Competitors





Recast

10 Years

5 Years





Forced Recast

125% or original LA - good for your borrower

110% of original LA - problem waiting to happen?











<p>In fairness, I didn't see any reference to scores under 650, but I may not have everything.</p>

<p>The 10- versus 5-year recast helps, but "safe"?</p>

<p>I just think the entire notion of a loan going over the value of a property is plain stupid.</p>

<p> </p>

<p> </p>
 
<p>That got jumbled.</p>

<p>Translation:</p>

<p>World recasts at 10 years, competitors at 5.</p>

<p>World goes to 125%, competitors to 110%</p>
 
I don't watch the LIBOR enough to know the answer, so I'm going to ask the question here. Is 50bp in a night a medium, big, huge, enormous, etc. ?





Seems to me that a 5.3 to 5.8 jump would be enough to put a big hiccup in a health market, let alone this one.





My 2 cents, soon to be worth 0.8 cents adjusted for inflation.
 
Darin - BB's helicopter drop today, yes not a huge one nor permanent, was due to a credit crunch. The big banks did not want to loan money for just about anything and they wanted to charge too much interest. The LIBOR's rise probably had something to do with the banks decisions not to loan. All this is a long way of saying, yes, it was a big deal.
 
Eva - Yes, I saw. At one point I think it reached 117.36. Thoughts? I would guess that the momentum behind the yen was one of the factors in Ben's decision making today. I would further guess that the 117 number was causing more than few hedge funds and banks to be reluctant to lend out whatever reserves they were carrying.
 
Why was the discount rate 6% at open? Banks saw an opportunity to turn their agency paper over to the government at 5.25%. Treasuries of all maturities are below 5.25%. So we end up with a Benanke put on Fannie, Freddie, and Ginnie at 5.25%? My understanding is most of the securities delivered were agency.





The yen is increasing since many banks and hedge funds were using yen as a borrowing currency. They are presumably trying to sell assets to get funds to buy yen.





The big story is Chinese monetary aggregates: http://www.forbes.com/markets/feeds/afx/2007/08/10/afx4007220.html. Eventually China will have to choose between its currency or inflation. There is no way to sustain 4.4% inflation and 15% M0 money supply growth that I can think of.
 
<p>awgee - World Savings was a Golden West Financial company. Not sure if the article that Janet posted references that or not, I didn't click it. Non-subprime ARMs are based on either the 6 month LIBOR plus a margin of 2.25% or the 1 year CMT plus a margin of 2.75%. All fannie mae bonds were down 25bps today so even conforming rates might start to go up. All the technical signs show further dropping.</p>

<p>To the mortgage people - Downey Savings used to have a pay option arm for borrowers with as low as a 580 FICO. It was a higher start rate but usually better than any thing else. But their service truly sucked.</p>
 
<p>Just got an email from Indymac.</p>

<p>It annouces a guideline change limiting alt-a stated to 95%.</p>

<p>I presume this means they have lifted the freeze on those submissions.</p>

<p>I wonder if this is simply a result of Bernanke's move, or if there is something else we don't know about.</p>

<p>Maybe this thing can be unwound in a more orderly fashion.</p>

<p>I personally don't want to see chaos.</p>
 
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