Six-Month Libor: Five year chart
From Citigroup via Bloomberg:

About 121,000 mortgages will reset for the first time next month, according to the Citigroup report, which looked at only securitized mortgages. About 1.8 million loans have already begun adjusting based on benchmark rates, the report said, while 3.7 million face resets scheduled for after next month.

“Almost all” subprime and Alt-A ARMs with a few years of fixed rates, about 60 percent of those prime-jumbo mortgages and about 75 percent of such loans in Fannie Mae, Freddie Mac and Ginnie Mae bonds are linked to Libor, the report said. The loans most often are pegged to six-month Libor.

Over the past three weeks six-month Libor has climed from three percent to over four. And if you’ve held for over three years (or under one), it’s likely higher than before.
Libor Rise to Boost Subprime ARM Defaults 10%, Citigroup Says [Bloomberg]
JustQuotes: ARM Holders Take Note, Libor Lifts Off [SocketSite]

16 thoughts on “Six-Month Libor Lifts Off As Well (Just In Time For That Reset Redux)”
  1. LIBOR, SCHMIBOR. This is only a reflection of a new reality: RE assets are still overpriced (and grossly so in some niche markets), people and govs who rode the bubble got into way too much debt and the correction will probably intensify.

  2. Remember all those posts mocking the SS “arm chair economists” and the “doom and gloom” crowd?
    I miss those posts.

  3. Yeah, I am missing the systematic ad-hominem attacks somehow.
    I’m pretty sure the f!uj still believes SS posters are solely responsible for the RE/financial/economical global meltdown.

  4. I thought “arm chair economist” was a good term?
    At least it sounds better than “professional investment banker”.

  5. fronzzz,
    “I’m pretty sure the f!uj still believes SS posters are solely responsible for the RE/financial/economical global meltdown.”
    probably not but i am sure that he still thinks you are an idiot..

  6. I just spoke to Kenneth and he assures me that this is just a subprime/district 10 problem. Nothing to see here now move along…

  7. Stock prices are back at 1998 levels. Lending practices should go back to pre-bubble standards. The volume of derivatives and CDS’s should probably also decline to pre-Phil Gramm legislation levels (and CDS’s should be regulated as insurance). And real estate prices (in general) would probably continue to decline to about 1998 levels. Then we could all start buying, selling, and developing again.
    None of these markets should be propped up. We can declare 1998-2008 our lost decade. We don’t need to lose 2008-2018 as well.
    Not sure how we clear the current gridlock – but the Paulson plan doesn’t seem to be working. How about a 6-month moratorium of clearing any CDS transactions? Set up an international court at the Hague and let the counterparties fight it out. Those found guilty (or bankrupt) could be sent to wherever they put the Serbian war criminals.

  8. LIBOR will likely be all over the place going forward, so not sure what to make of where it is today.
    as I’ve said before, it will be difficult to make any sense of any of the financial metrics that we usually use since they are all now able to be arbitrarily suspended or altered without notice with governmental intervention.
    for instance, it is possible that we get a coordinated 1-2%+ drop in interest rates from the various Central Banks. This could perhaps drop LIBOR.
    Or perhaps we’ll nationalize our banks or buy up all the bad mortgages.
    Or there could be even more rediculous things that happen. who knows?

  9. Let’s not get obtuse here. The old rules no longer apply, gang. Not sure if anyone has noticed, but we’re now living in a centrally planned economy, at least as it regards financial services and lending.
    Buy up bad mortgages? You betcha. It’s coming. Manipulate global rates? Sure. Suspension of mark-to-market accounting and short sale prohibitions? Why not. Throw commercial paper backstops in there, too. Up next: ZIRP 2 – Japan redux.
    My point is don’t bet against the Fed and Treasury. They’re now in total control, regardless of what their mandate may be or some LIBOR chart says. There are no more useful debt market indicators. Paulson and Bernanke ARE the market. Please await further instructions.

  10. No he didn’t. He said that fl*j said you are.
    And you are the one who started putting words in fl*j’s mouth, then paco, then Michael.
    Michael how was your discussion with him today. How’s he doing? did he ask about me? No, wait, I’m him, almost forgot.

  11. “Paulson and Bernanke ARE the market. Please await further instructions.”
    They’d like you to think that, but the market dropping like a rock is telling us they don’t think there is enough money to bail everyone out.
    You can’t have a 12 year, worldwide misallocation of resources (first via a dot com bubble, then a housing a credit bubble) and expect to buy your way out of it in a few months. Jobs have to disappear. Companies have to disappear. There are too many people doing things the economy no longer needs.
    The market is telling us that the banks are all in BIG trouble, and they are going to soak up that $700 Billion like a sponge. The credit markets won’t see dollar 1 of it.

  12. We’re living through history. How exciting!
    Generations of Phd students in economics will be writing theses on this period.

  13. Yeah tough / scary times. No doubt.
    Wells Fargo seems to have good rates right now based on my unscientific check rates every-now-and-then practice.
    the increase to the conforming loan limit is till the end of the year.
    not a rep of any bank…just a simple observation that it might be a good idea for those concerned about a loan reset to look around now before the end of ’08.

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