{"id":21149,"date":"2016-06-21T19:03:58","date_gmt":"2016-06-22T00:03:58","guid":{"rendered":"http:\/\/olduvai.ca\/?p=21149"},"modified":"2016-06-21T19:03:58","modified_gmt":"2016-06-22T00:03:58","slug":"ny-fed-warns-about-booming-subprime-mortgages-now-insured-by-the-government","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=21149","title":{"rendered":"NY Fed Warns about Booming Subprime Mortgages, now Insured by the Government"},"content":{"rendered":"<header>\n<h3 class=\"entry-title\"><a href=\"http:\/\/wolfstreet.com\/2016\/06\/21\/ny-fed-warns-government-insured-subprime-mortgages\/\">NY Fed Warns about Booming Subprime Mortgages, now Insured by the Government<\/a><\/h3>\n<\/header>\n<div class=\"entry-content\">\n<p><strong>\u201cAstronomical\u201d default rates and losses.<\/strong><\/p>\n<p>The New York Fed just\u00a0warned about the ticking mortgage subprime time bombs once again being amassed, and what happens to them when home prices decline. But unlike during the last housing bust, a large portion of these time bombs are now guaranteed by the government.<\/p>\n<p>Subprime mortgages are what everyone still remembers about the Financial Crisis. They blew up has home prices fell. Folks who thought they were \u201cowners with equity\u201d found out that they were just \u201crenters with debt.\u201d<\/p>\n<p>And they dealt with it the best they could: forget the debt and the rent and stay until kicked out. Cumulative default rates on subprime mortgages spiked to 25% in 2007, according to the\u00a0<a href=\"http:\/\/libertystreeteconomics.newyorkfed.org\/2016\/06\/risky-business-government-mortgage-insurance-programs.html\" target=\"_blank\">report<\/a>. Banks ended up with the properties and collapsed. Mortgage backed securities based on these subprime mortgages imploded. Bond funds that held them imploded. All kinds of fireworks began. While subprime mortgages didn\u2019t cause the Financial Crisis by themselves, they were an essential cog in a crazy machinery.<\/p>\n<p>Now, the machinery is even crazier, subprime mortgages are even bigger, and mortgage-backed securities, chock-full with subprime, are hotter than ever. Only this time, the taxpayer is on the hook.<\/p>\n<p>During the prior housing boom, from 2000 through 2005, government mortgage insurance programs covered less than 3% of all subprime mortgage originations, while private mortgage insurers covered over 20%.<\/p>\n<p>But during the housing bust, private insurance of subprime mortgages dropped to essentially zero. And the government \u2013 through various programs by the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), and the USDA\u2019s Rural Housing Service (RHS) \u2013 stepped in to pick up the baton, plus some, insuring subprime mortgages with a vengeance. By 2009, the government insured nearly 35% of new subprime mortgages. More recently, it still insured about 22% of new subprime mortgages.<\/p>\n<p>&#8230;click on the above link to read the rest of the article&#8230;<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>NY Fed Warns about Booming Subprime Mortgages, now Insured by the Government \u201cAstronomical\u201d default rates and losses. The New York Fed just\u00a0warned about the ticking mortgage subprime time bombs once again being amassed, and what happens to them when home prices decline. But unlike during the last housing bust, a large portion of these time [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[63,200,312,13598,7288,843,4254,4255],"class_list":["post-21149","post","type-post","status-publish","format-standard","hentry","category-economics","tag-banks","tag-default","tag-financial-crisis","tag-ny-fed","tag-subprime-mortgages","tag-us-government","tag-wolf-richter","tag-wolfstreet"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/21149","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=21149"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/21149\/revisions"}],"predecessor-version":[{"id":21150,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/21149\/revisions\/21150"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=21149"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=21149"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=21149"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}