Central Banks, Commercial Banks, and Lies: America Has Been Bamboozled

I have produced a downloadable PDF which clearly shows exactly how far off the banks and SCAP bank stress tests are from the delinquency and foreclosure information that the Federal government distributes itself. This document is in response to the Government's release of the official bank stress test results, which I honestly feel is a slap in the face to anybody with two brain cells to rub together. Please reference page 7 of the document hyperlinked above, as well as the individual banks' "adverse scenario" projections for various loan categories (towards the end of the document) over the next two years and compare them to the loan loss snap shots that I have gathered below from last December and March, directly from the Federal Reserve's public web site. There is no need to wait two years when the worst case scenario is here and now.

This is the government's summary findings of the potential "WORST CASE" losses over the next two years for all 19 of the bank holding companies that were subject to the government's stress test.

Here are some highlights of interest from my report to compare and contrast:

Alt-A loans

• Nearly 36% of Alt A loans had least one late payment over the past one year. In Florida nearly 48.5% of Alt-A loans had at least one late payment over the past one year followed by Nevada (43.5%) and California (41.6%).
• Alt A loans 90+ days past due were 8.7% of total loans with California and Nevada having the highest 90+ days loans past due at 11.3% and 10.3% of total loans, respectively.
• Overall 30.4% of Alt-A loans are in risk of default based on prorate share (based on weighted average foreclosure / past due loans and REO loans for each state with weights based on average loan outstanding at each state).
• Nearly 42.8% of Alt-A loan outstanding were originated on or before 2005 while 35.6% and 21.6% of loans were originated during 2006 and 2007, respectively. With S&P Case Shiller declining by nearly 19% , 29% and 29% since 2005, 2006 and 2007, respectively most of these loans are currently underwater in view of the fact that average LTV at origination for Alt-A loans was at 81%.
• Overall net charge off for Alt-A loans (cumulative 2 years assuming current delinquent and foreclosed turn into expected charge-off over a two year time horizon) is expected to reach as high as 23.9% significantly higher than Fed's implied loss rate assumption of 9.5%-13.5% under the adverse case scenario. Fed's adverse case and base case assumption for subprime charge offs is even lower than current loans past due which is at 13.0%.

Subprime Loans

• Nearly 64% of subprime loans had least one late payment over the past year. In California and Florida nearly 67.1% and 71.8% of subprime loans had at least one late payment over the past one year.
• Overall 50.2% of subprime loans are in risk of default based on prorate share (based on weighted average foreclosure / past due loans and REO loans for each state with weights based on average loan outstanding at each state).
• Nearly 48.6% of current subprime loans outstanding were originated on / before 2005 while 36.3% and 15.1% of loans were originated during 2006 and 2007, respectively. With S&P Case Shiller declining by nearly 19% , 29% and 29% since 2005, 2006 and 2007, respectively most of these loans are currently underwater in view of the fact that average LTV at origination for Alt-A loans was at 84.2%.
• The current LTV for subprime loans is at 115% with Nevada and Arizona having the highest LTV at 154% and 146%, respectively.
• Overall net charge offs for subprime loans (cumulative 2 years assuming current delinquent and foreclosed turn into expected charge-off over a two year time horizon) is expected to reach as high as 41.4% significantly higher than Fed's implied loss rate assumption of 21%-28% under the adverse case scenario. The Fed's adverse case and base case assumption for subprime charge offs is even lower than current loans past due which is at 28.9%.

The full report, complete with sources and methodology is available here, free of charge. I simply ask that you forward it to your local congressman/woman and/or favorite media personality. The Truth shall set you free (or get you locked up, depending upon which side of the Truth you are on): BoomBustBlog.com's Realistic Recast of SCAP 2009-05-12 14:52:09

Comments

[John Lounsbury:]

Thanks Reggie. I have linked to the PDF document and it is a great analysis with excellent data. How much longer will we keep trying to apply bandaids instead of going into needed surgery?

May 13 10:54 AM

[bindlepete:]

Bamboozeled Hell we have just been lied to.

May 13 12:03 PM

[John McLeod:]

Shai Dorsai!

Full marks for throwing down the gauntlet of falsifiability. May your PDF be ruthlessly attacked by the best minds in the business today.

May 13 12:53 PM

[PainfullyAware:]

"How much longer will we keep trying to apply bandaids instead of going into needed surgery?" - John Lounsbury



Until The Flame Of Liberty Is Reignited.

The Ashes Are Beginning To Smolder.




On May 13 10:54 AM John Lounsbury wrote:

> Thanks Reggie. I have linked to the PDF document and it is a great
> analysis with excellent data. How much longer will we keep trying
> to apply bandaids instead of going into needed surgery?

May 13 03:06 PM

[dcb:]

More and more info every day about the web of deception and lies comes out each and every day. ignored by mainstream media (no surprise there). It has reached the point where it loos as if the vested interests are actually paying people to troll the internet to shout down those who raise their voices against manipulation.

Reggie, overall I find your articles to be some of the most well put together and researched. I find myself very surprised on a regular basis that your pieces are not among the editors pick for featured articles.

May 16 01:02 PM

[Reggie Midd...:]

Thank you, dcb. I'm glad I'm not the only one who noticed the lack of love from the editors. I suppose my content is not what the editors consider most appetizing to their core constituency. I have recently updated the mortgage loss model behind this report and made it available as an open source project. After input from the community (isn't open source grand) it is actually more dire than even I and my team have originally calculated. See boombustblog.com/Reggi...

May 19 03:22 AM