Jumbo loan puzzle

A

Anonymous_IHB

New member
So, I was watching this video <A href="http://www.cnbc.com/id/15840232?video=1233249360&play=1">http://www.cnbc.com/id/15840232?video=1233249360&play=1</A> and there is a very strange chart.



The chart goes like this (it's for US jumbo prime mortgages):



Jumbo Prime Default Rates

2006 Vintage: 4.7 x Avg.

2007 Vintage: 12.1 x Avg.

2008 Vintage: 7.7 x Avg.



This really confuses me since the loan underwriting standards were supposed to have gone up in 2007, 2008. Anyone have an idea what's going on?
 
[quote author="Anonymous" date=1251941683]So, I was watching this video <A href="http://www.cnbc.com/id/15840232?video=1233249360&play=1">http://www.cnbc.com/id/15840232?video=1233249360&play=1</A> and there is a very strange chart.



The chart goes like this (it's for US jumbo prime mortgages):



Jumbo Prime Default Rates

2006 Vintage: 4.7 x Avg.

2007 Vintage: 12.1 x Avg.

2008 Vintage: 7.7 x Avg.



This really confuses me since the loan underwriting standards were supposed to have gone up in 2007, 2008. Anyone have an idea what's going on?</blockquote>


Negative equity is the biggest determinate of default.
 
[quote author="Anonymous" date=1251941683]This really confuses me since the loan underwriting standards were supposed to have gone up in 2007, 2008</blockquote>These are Prime loans; underwriting would not have to play many games to approve these. Something else is going on.
 
2007 Vintage were still "top shelf Kool-Aid". You could still get 95% financing, stated stated, and IO loans. Those loans were made when the roller coaster was beginning to downward velocity from the 2006 top. I call these buyers "the unawares".



2008 Vintage are economic distress, walk aways just becoming vogue, and over-buyers who thought when they bought, they were smart enough to time the bottom - AKA those to still listened to Steven Thomas et al about the certain bottom of the market "just around the corner".



My .02c



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