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> Historic Deal to End Crisis > End > Crisis Shit's starting. Fasten your seat belts. One week from now things will be different.

nemo44x 4y ago
Indeed. I think a lot of people are unaware or misinformed than hundreds of banks are insolvent right now. Something like 700B in deposits were pulled last week and that will accelerate. 50% of existing mortgages were written between 2020 and 2022 at around 3% interest at 30 years. The banks holding all those are underwater as interest rates on much safer treasuries are higher. Imagine if we start to see a bit of defaulting on those mortgages! Mix in all the long dates treasuries they’re sitting on. The FDIC doesn't have enough money to even cover the <250k deposits at the hundreds of banks that are insolvent when marked to market. So we’ll either see emergency rate cuts which will increase inflation or we see the fed ignite it and the system collapses. Or they print money to backstop it all resulting in more inflation. Possibly hyper inflation.
- deleted 4y ago
  [deleted]
- loeg 4y ago
  I don't know about other borrowers but my 2.5% 2020 mortgage was sold to (government owned) Fannie Mae (or Freddie Mac, I forget which) more or less immediately.
  - nemo44x 4y ago
    That’s maybe half of existing mortgages but the problem has been that banks sell to Freddie to get cash to loan. Well, loan demand was incredibly low. So they bought bonds and held onto mortgages. Also keep in mind many mortgages are non-conforming so Freddie can’t buy them.
  - wombatpm 4y ago
    Same here. And I’m never going to default on a 2% loan. Hell I may never sell again unless I can pay cash, because I never want an 8% mortgage again
- bombcar 4y ago
  Housing prices haven’t cratered yet - the banks wouldn’t mind some of those loans defaulting, because they could sell and get the principal out there at higher rates. Worse for the banks, those on low rate loans will sit tight.
  - spacebanana7 4y ago
    Even without defaults the value of those loans falls as rates rise because of the change in net present value
baq 4y ago
Don’t become a permabear though, liquidity is so thin a spark can start a 15% rally

nemo44x 4y ago

Indeed. I think a lot of people are unaware or misinformed than hundreds of banks are insolvent right now. Something like 700B in deposits were pulled last week and that will accelerate. 50% of existing mortgages were written between 2020 and 2022 at around 3% interest at 30 years. The banks holding all those are underwater as interest rates on much safer treasuries are higher. Imagine if we start to see a bit of defaulting on those mortgages! Mix in all the long dates treasuries they’re sitting on. The FDIC doesn't have enough money to even cover the <250k deposits at the hundreds of banks that are insolvent when marked to market. So we’ll either see emergency rate cuts which will increase inflation or we see the fed ignite it and the system collapses. Or they print money to backstop it all resulting in more inflation. Possibly hyper inflation.

deleted 4y ago
[deleted]
loeg 4y ago
I don't know about other borrowers but my 2.5% 2020 mortgage was sold to (government owned) Fannie Mae (or Freddie Mac, I forget which) more or less immediately.
- nemo44x 4y ago
  That’s maybe half of existing mortgages but the problem has been that banks sell to Freddie to get cash to loan. Well, loan demand was incredibly low. So they bought bonds and held onto mortgages. Also keep in mind many mortgages are non-conforming so Freddie can’t buy them.
- wombatpm 4y ago
  Same here. And I’m never going to default on a 2% loan. Hell I may never sell again unless I can pay cash, because I never want an 8% mortgage again
bombcar 4y ago
Housing prices haven’t cratered yet - the banks wouldn’t mind some of those loans defaulting, because they could sell and get the principal out there at higher rates. Worse for the banks, those on low rate loans will sit tight.
- spacebanana7 4y ago
  Even without defaults the value of those loans falls as rates rise because of the change in net present value

baq 4y ago

Don’t become a permabear though, liquidity is so thin a spark can start a 15% rally