Dr. Housing Bubble 07/30/09

Alt-A Loans and Pesky Resistant Subprime Loans: The Lingering Mortgage Beast. $1.1 Trillion in Active Toxic Waste Mortgages. PennyMac Ready for Toxic Mortgages. What Happened to the Public-Private Investment Program?

It would seem that all the housing problems are now washed away in the ocean of government bailouts. Many readers after reading the Alt-A and option ARM tsunami report sent me a few articles showing how option ARMs are not going to be such a big problem. I disagree. If toxic mortgages and debt were not a problem why don’t we remove the additional $13.5 trillion being dished out to Wall Street? By the way, over $4 trillion of that commitment has already been used and spoken for. That $4 trillion was worth a 45 percent stock market rally (too bad it is on the back of taxpayers many who are losing their jobs in the real economy). The problem of course goes beyond the option ARM loan which is a monstrosity and a beast with no purpose in this financial universe. The Alt-A galaxy includes option ARMs but also includes: stated income, stated asset, no income verification, debt-to-income ratios that Fannie Mae and Freddie Mac wouldn’t touch which tells you something, weak credit history, and maximum loan to value ratios. Now how much of this Alt-A crap is outstanding today? Try $660,000,000,000.

And let us not forget about the $446 billion in subprime loans that are still out there floating in the abyss. The toxic mortgage problem is still largely present. Doubt it? On July 30th PennyMac (PMT), a real estate investment trust went public to buy up toxic mortgages. You would think that they would avoid the “Mac” in the title given IndyMac and Freddie Mac don’t exactly inspire public confidence. One of their goals is to buy and modify mortgages keeping buyers in their home before selling the loans once the value goes up. Does this crap sound familiar? It should. One of the top managers of PennyMac is none other than Stan Kurland, a former Countrywide Financial executive. The company had a weak performance on Thursday even though the stock market is flying high like an eagle strung out on drugs. If you were wondering what happened to the public-private investment program, here we are starting to see the inbred nature of bailing out those who actually were responsible for this crisis.

One thing the happy cheerleaders in the financial circuit fail to have is basic logic. Think of it this way. Why would we need all those trillions in backstops if we are now officially out of the recession? I’ll tell you why. These are the same people who led us to financial Armageddon and here they are promising the public once again that all is well yet quietly, they are developing methods to unload the remaining toxic mortgage waste so they can effectively be absolved from their massive financial sins. Who better to know what crap is on their balance sheets than the mortgage manure producers? This is certifiable insanity! Now wouldn’t you think it would be prudent to at least call in folks who were whistle-blowing before the crisis to buy up some of these mortgages at the right price or at the very least, didn’t produce the actual junk? Of course this isn’t going to happen because crony Wall Street knows that once we open up the books, we know what kind of toxic mortgage waste we are going to find in their Pandora ’s Box. Their plan is to unload this mortgage chum to the U.S. taxpayer now that they are drunk on financial happy talk so once things sour again, the mortgages will now be fully on the taxpayer’s back. Whoops! Now it’s your problem.

http://www.doctorhousingbubble.com/alt-a-loans-and-pesky-resistant-subprime-loans-the-lingering-mortgage-beast-11-trillion-in-active-toxic-waste-mortgages-pennymac-ready-for-toxic-mortgages-what-happened-to-the-public-private/