Another Snippet

I found a little inside info on what happens when you make your mortgage payment and how they split the payment up and actually create additional income of the same money.

But what happens when you don't make your payment?

In some cases, the original lenders are taking the biggest hits. In typical contracts, mortgage banks agree to buy mortgages back from Wall Street in the case of a payment default within the first 90 days. H&R Block (owner of Option One Mortgage Corp.) set aside $219 million for buybacks. Defaults forced Fremont General Corp to buy back more loans totaling $238 million in the 2nd quarter. But Wall Street is hurt as well. A few lenders have refused to buy back loans, prompting arbitrations and lawsuits. EMC is suing MortgageIT over $70 million in disputed buybacks. Lehman Brothers Inc. is trying to recoup $20 million on toxic loans bought years ago from Beverly Hills Estates Funding. Many analysts think that smaller lenders will be hit the hardest, since many are undercapitalized.

Foreclosures are going to happen even in the best of times, but look again at those numbers...
H&R (a pretty big company) has put $219 million in an account in anticipation of having to buy back loans gone bad! And the loans that Option One does are not all risky loans. I wonder what the big subprime players have cached for buybacks.

And just to make one point clear, this has nothing to do with a pre-payment penalty (or what is sometimes called a commitment period).

In Rate News:
The minutes from the September 20 FOMC policy meeting indicated that the Fed remained quite concerned about inflation but believed that slower economic conditions and previous rate hikes would work to keep it contained, lessening the risk of holding the target for the fed funds rate steady at 5.25%. Most of the economic slowing was attributed to the correction in the housing market which is expected to abate sometime next year.


Way back in September, the Fed's did what they did but they told give details of the why they did what they did, or at least right away.


Yesterday the minutes of that meeting were released. The market finally now gets to look inside their decision making process.

Does that make sense?

Initially the Dow has crossed into record territory again this A.M., The 10 Yr. opened lower today but that's in relation to where it closed yesterday.
We had a pretty big spike after the minutes were released.