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210 comments on DrumBeat: November 27, 2006

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AlanfromBigEasy on November 27, 2006 - 12:02pm Permalink | Subthread | Parent | Comments top
I think that they are reselling these mortgages on the secondary market (HUGE BTW).  Perhaps indicidual mortgages ocasionally, but typically, every couple of months they package them up, perhaps through Fannie or Ginnie Mae, and sell the package.

You, as an individual, can buy a small $100,000 slice of a Ginnie Mae.  China is one of the big buyers (higher yield than US T-Bills).  I am unsure of the sophisicated methods of reducing risk (they are there) and layering defaults. (One can buy the last xx% of value in a portfolio, so that mortgage losses hit those that hold the upper layers).

Hope this helps,

Alan

BTW, Housing bubble burst is good for New Orleans.  Should drive down cost of materials and we will get migrant construction workers.

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phineas gage on November 27, 2006 - 12:17pm Permalink | Subthread | Parent | Comments top
Alan, yea that makes sense.  It also makes it all the more perverse.  They avoid the anti-predatory lending laws by selling as a "for sale by owner" then immediately dump the loans into the secondary market.  Brilliant!  I should have been a banker!  (not really, I wouldn't be able to sleep at night if I made a living doing crap like that.)
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tate423 on November 27, 2006 - 2:29pm Permalink | Subthread | Parent | Comments top
Oh and they don't securitize these packaged loans every few months.  There is a market out there that satsifies this demand every single day.  This is how Fannie Mae/Mac are now on the hook for something like over 40% of the total market and over 60% of the sub prime market.  I would love to get updates on those numbers though as they are about 6 mos old and from memory.  
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phineas gage on November 27, 2006 - 3:28pm Permalink | Subthread | Parent | Comments top
The migrant construction worker thing is an odd phenomenon- they have it down to a science.  My in-laws are owner-operators of an RV park in central ohio.  20 minutes after the start of a bad hail storm, construction workers (mostly roofers) started calling, by 30 minutes after the storm ended every spot at the park was filled by migrant construction workers.  Now almost 2 months after the storm they're still full of migrant workers (and insurance adjusters!).  But I wonder why are there so many idle migrant construction workers sitting around watching the weather channel for the next job (most of them are from the carolinas and georgia) with the market in LA, TX and MS the way it is?

I know, I know- just save your comments about the cost of RV'ing and the future of RV parks.  My in-laws are doing very well right now and they're in their 60's.  They just need to make it a few more years then they'll retire.  Irrespective of PO, no one in the younger generation is willing to take over the family business from them when they retire.

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fleam on November 27, 2006 - 5:49pm Permalink | Subthread | Parent | Comments top
Phineas it does not sound like such a bad business model for someone who's handy. Get a smallish motorhome, and go around doing the work. You can often camp on city streets if you're crafty, and even here in Silicon Valley I've found odd little encampments of people living in motorhomes...... like the hobo jungles of old, they're neat and probably really frown on any activities that would create trouble and raise their profile. Motorhomes are expensive to fuel, but out on the Interstate, there's always a truck to draft off of.....
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210 comments on DrumBeat: November 27, 2006

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