i was doing some back-of-the-envelope calculations...
there are approximately 35-40 million mortgages in the US
subprime mortgages represent 18-21% of those
in 2007 there were 1.3 million foreclosures
in 2008 there were 3.2 million foreclosures
as of March 2007 subprime mortgages were estimated to be worth US$1.3 trillion
IF we assume the above foreclosures were in respect of subprime mortgages (as we keep being told), then foreclosures for 2007 and 2008 represent approximately say USD$750 billion (valued at time of purchase)
foreclosed properties are either kept on banks balance sheets or sold, and if sold, sold at a large discount to 004/05/06/07 purchase prices...
regardless of the disposition or retention issue, we are still looking at a loss for mortgage originators in the area of USD$500 billion after you devalue all the foreclosed properties to current amrket values (say)... when you take that figure and divide it conservatively (and average it) among say 5 major players in the mortgage industry, you are left with 5 major players holding the can for about USD$150 billion each (still has to be 750 divided by 5 representing what they originally lent out)...
now i thought we have seen institution after institution post losses again again last year and this year well in excess of USD$150 billion...
so even assuming another wave of mortgage defaults and foreclosures from mid 2009 into 2010, i'm still left perplexed why there hasn't been a greater movement in credit lending given the extent of bailout money that has been handed out
this was a real quick exercise on the back of the envelope as i said, but from what i see, not only have the banks adequately written their mortgage exposures down and written off large losses, but they have also been given money they don't seem to have actually needed - at first blush that is... - which then begs the question... what have they really needed it for?
are we entirely talking about the exposure of these institutions to the CDS & CDO market, (the estimated USD$60 trillion toxic secuurities market) that took the basic value of US mortgages and inflated it up into the trillions, thereby creating false or fictional values surrounding their domestic property market?
have these guys created real legal liabilities based on imaginary and fictional values?
are these questions meant to be sending me apparently nuts because the answers are in the affirmative?
are we all being played for suckers about the world right now due to an ongoing game being played by the big instos based on values even more fictional than the dollar notes we pass around?
can anyone tell me if i have gotten this all wildly wrong?
(20min delay)