Date: Fri, 23 Nov 2007 00:25:17 -0800
From: =?UTF-8?B?U01TIOaWr+iSguaWh+KAoiDlpI8=?=
Newsgroups: misc.invest.stocks misc.consumers.frugal-living misc.invest.real-estate
Subject: Re: Where did the 400 billion USD in subprime mortgage losses go
Bytes: 2833

Wilson wrote:
> I keep reading about the 400 billion us dollars in subprime losses to date,
> e.g, see this bloomberg article http://tinyurl.com/2vjgq7
> 
> Where there is a 400 billion dollar loss there is a 400 billion dollar
> gain.

> I don't understand WHO gained from this 400 billion dollars?

Most of it went to the sellers, especially developers, that were able to 
sell houses for greatly inflated prices because easy credit made the 
competition for these houses greater. The savvy seller that cashed out 
before prices plunged, and the developer that sold new homes for 1.5-2x 
what they currently sell for, got their money and ran.

The loan companies made out very well because sub-prime loans generate 
large commissions from points and fees. The loan wholesalers (banks) 
ended up with the bad loans. Since there was very little down payment, 
even a foreclosure doesn't get the bank back what they loaned.

What's so strange is why the banks weren't taking the initiative to 
renegotiate these loans, i.e. lowering payments by stretching out the 
term, or lowering interest rates--anything to keep the buyer from 
defaulting.

> Who wins here? How?
> I'm cash rich - can I benefit by taking some action?

Unfortunately no. If you had had the foresight to sell some stocks short 
then you might have done okay.

One area that's doing well right now is rental properties. If you can 
pick up some bargain basement rental units right now, then you could 
break even, but it's really too early to do this as prices are still 
falling in most areas.