Deja Vu All Over Again? Subprime MBS Demand "Oversubscribed" And S&P Says Risk Is "Contained"
Content adapted from this Zerohedge.com article : Source
Mortgage backed securities are starting to heat up. With many asset classes at all-time highs, investors are looking for a return. This is causing them to chase meaning MBS, specifically, subprime mortgage backed securies are coming back into favor.
This is a problem since anyone with a FICO score about 500 is getting a home mortgage.
Issuance of securities backed by riskier US mortgages roughly doubled in the first quarter from a year earlier, as investors lapped up assets blamed for bringing the global financial system to the brink of collapse a decade ago. Home loans to people with scratches and dents in their credit histories dwindled to almost nothing in the aftermath of the crisis, as litigation-weary lenders retreated to patch up their balance sheets.
But over the past couple of years a group of specialist firms has begun to bring the loans back, navigating a dense web of new rules drawn up to protect borrowers and investors in the $9.3tn US home-loan market. Last year saw issuance of $4.1bn of securities backed by loans that would have been called “subprime” before the last financial crisis, according to figures from Inside Mortgage Finance, with the pace picking up in the latter half of the year. The momentum has continued into 2018, with deals worth $1.3bn in the first quarter — twice the $666m issued in the same period a year earlier.
After the central banks spent trillions to get the world passed the last crisis, we see investors and buyers behaving like they did in 2006 and 2007.
Hedge fund managers are looking at this like it is just another investment class.
“The market is . . . starting from such a small base that it has a lot of room to grow,” said Jamshed Engineer, a partner at Axonic Capital, a New York hedge fund with more than $2bn in assets under management.
“[Investors] are definitely chasing yields. Whenever these deals come out, for the most part, they are oversubscribed.”
Proposed roll backs in the Dodd Frank bill would restart what happened 10 years ago.
Once again, the rating agencies think everything will be just fine.
"The risk is contained, in our view," said Mr Saha.
Non-adapted content found at zerohedge.com: Source
It is 2005 all over again in terms of the valuation extreme, the psychological excess and the denial. People don’t believe housing is in a bubble and don’t want to hear talk about prices being a little bit In the extreme. we are building more homes than we can afford. People are getting mortgages who can’t afford it. There is a reason their FICO is at 500. The banks already know they are in a big trouble. Eventually they will become a zombie, everyone will be selling to anyone, even if they can’t afford it. It already is housing, mortgage, debt, bond... everything bubble of all times and it’s coming. They will try to cover it up with what they usually use as a cover up. They will create a WAR!
harley1989 posted this before, you can check it
thanks for sharing! i will start following your exciting posts! Checkout my posts as well
To listen to the audio version of this article click on the play image.
Brought to you by @tts. If you find it useful please consider upvote this reply.
You got a 16.10% upvote from @postpromoter courtesy of @zer0hedge!
Want to promote your posts too? Check out the Steem Bot Tracker website for more info. If you would like to support the development of @postpromoter and the bot tracker please vote for @yabapmatt for witness!
We are supposed to learn with our mistakes, and the crisis was a very big one and very expensive...
I don´t know why there was no preventive measure to avoid making the same mistake, because what this people want is easy and fast profit, while they create an impossible situation to sustain...