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If anybody, and I mean anybody, still reading this is on a a teaser-rate loan or primary/secondary loan pair or any other form of thing that you can't afford when the rates jump up to whatever high they can jump to when the introductory rates expire, and if your refinance option is anything other than a fully-conforming AAA-grade mortgage, then for the love of the gods, try to refinance Monday; you are out of time. And go read that article now please to see why.
Did you read that? Okay, good. What's causing this is the collapse of the secondary CDO market - the private market where these loan instruments are financed and sold after closing. For nonconforming and jumbo loans, it's all but dead. (I talked about this again last week; it hasn't gotten better since then.) Without that market functioning - and right now, please understand, it is in demand failure - non-prime/non-conforming loans are somewhere between not affordable and not happening, as lenders price themselves out of that market, as per the article above.
None of that is speculation. It is, at this point, history. I'm not guessing about anything above this line; these are things that have already happened. (I suppose I'm relying on interpretation of motives by others, but it's not a big leap.)
All this is why that Jim Cramer guy was freaking out on CNBC on Friday, begging for rate intervention from the Fed. When he says only rich guys like him can get new loans now? Sure, that's hyperbole (as is his segment, usually) but the above market failure is what he's talking about. Here's the bigger problem: he's right in that if Bernanke doesn't live up to his "Helicopter Ben" moniker, this doesn't get better soon, and more things implode. Unfortunately, the host is also right when she says a substantial rate cut would be "armageddon" - it'd be armageddon in the accelerated-collapse-of-the-dollar sense. That's what that means.
I think he might well be wrong about the idea that a rate cut would save the situation, though. That might not be enough.
Now if you want to get into speculation - well, I don't usually talk about my worst-case scenarios, because I really don't believe in them myself most of the time, but...
( here it is... )
(As an aside, the thing to note about the good consumer confidence number which came out last week is that the figure has become detached from everything except gasoline prices, with which it is dramatically well linked over the last several years. And meanwhile, gas prices have been falling steadily even as crude oil set a new record high last week before finally giving back a couple of dollars. That's neat. Oh, and not to call shenanigans, but, um, I'm callin' shenanigans on this sudden revision of American personal savings rate to "almost entirely positive" for the last 26 months instead of negative that entire time, which had been the report until a couple of weeks ago. Surprise! Combine that with the monkeyshines on the unemployment birth/death model (that model they won't release for public perusal), and dropping the M3 on the basis that "we don't need it," I'm getting an awfully sketchy feeling about this stuff. But that's at least partly my own native sense of distrust, and besides, I digress.)
( Now, why does this matter if you don't have a house? )
I leave the rest for you. And before you ask: I don't know what the market is going to do tomorrow. It could jump 250 points. It could drop 250 points. That's about the range we've been seeing. I've seen this kind of volatility in the market before, in '99-2000; I didn't like it then, and I don't like it now. Good luck.
Did you read that? Okay, good. What's causing this is the collapse of the secondary CDO market - the private market where these loan instruments are financed and sold after closing. For nonconforming and jumbo loans, it's all but dead. (I talked about this again last week; it hasn't gotten better since then.) Without that market functioning - and right now, please understand, it is in demand failure - non-prime/non-conforming loans are somewhere between not affordable and not happening, as lenders price themselves out of that market, as per the article above.
None of that is speculation. It is, at this point, history. I'm not guessing about anything above this line; these are things that have already happened. (I suppose I'm relying on interpretation of motives by others, but it's not a big leap.)
All this is why that Jim Cramer guy was freaking out on CNBC on Friday, begging for rate intervention from the Fed. When he says only rich guys like him can get new loans now? Sure, that's hyperbole (as is his segment, usually) but the above market failure is what he's talking about. Here's the bigger problem: he's right in that if Bernanke doesn't live up to his "Helicopter Ben" moniker, this doesn't get better soon, and more things implode. Unfortunately, the host is also right when she says a substantial rate cut would be "armageddon" - it'd be armageddon in the accelerated-collapse-of-the-dollar sense. That's what that means.
I think he might well be wrong about the idea that a rate cut would save the situation, though. That might not be enough.
Now if you want to get into speculation - well, I don't usually talk about my worst-case scenarios, because I really don't believe in them myself most of the time, but...
( here it is... )
(As an aside, the thing to note about the good consumer confidence number which came out last week is that the figure has become detached from everything except gasoline prices, with which it is dramatically well linked over the last several years. And meanwhile, gas prices have been falling steadily even as crude oil set a new record high last week before finally giving back a couple of dollars. That's neat. Oh, and not to call shenanigans, but, um, I'm callin' shenanigans on this sudden revision of American personal savings rate to "almost entirely positive" for the last 26 months instead of negative that entire time, which had been the report until a couple of weeks ago. Surprise! Combine that with the monkeyshines on the unemployment birth/death model (that model they won't release for public perusal), and dropping the M3 on the basis that "we don't need it," I'm getting an awfully sketchy feeling about this stuff. But that's at least partly my own native sense of distrust, and besides, I digress.)
( Now, why does this matter if you don't have a house? )
I leave the rest for you. And before you ask: I don't know what the market is going to do tomorrow. It could jump 250 points. It could drop 250 points. That's about the range we've been seeing. I've seen this kind of volatility in the market before, in '99-2000; I didn't like it then, and I don't like it now. Good luck.
