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How Wall Street Relates to Mortgage Refinancing
As suspected here last week, long-term interest rates have stabilized: the all-powerful 10-year T-note is in a broad range below 5.2 percent, and mortgages are at 6.75 percent to 6.88 percent.
Everyone assumes the 10-year T-note will make a run through 5.25 percent, and mortgages will climb to 7 percent, but I don't think we will stay that high unless there is worse news on inflation or the global economy runs away from the central banks.
In the 2000-2006 Wall Street-backed extension of mortgage credit on suicidal terms, I had assumed normal Wall Street operations: if you've got a client who is desperate for yield and self-deceptive about risk, sell them what they want, and caveat emptor. The Securities and Exchange Commission protects widows and orphans; institutions are on their own. You may not cheat other institutions, but you have no duty whatsoever to save them from themselves.
The stunning thing in this Bear fiasco: Bear and all its lenders are the insiders in the suicidal mortgage credit game. These are the guys who offered to buy mortgage trash from Main Street in any quantity, designed bizarre structures to satisfy their co-dependent, credit-rating agencies, and sold them to feed the insatiable global demand for yield. Insiders entered the market for mortgage trash in the fall of 2006 when several million civilians knew that you might as well juggle nitroglycerine.
Hipotecas Prestamos June 23, 2007 01:58 AM