The second wave: HW readers know that in a few interviews I've given I've noted that a second, strong default wave will hit during the middle of 2008. A graph courtesy of Mathew Padilla at the OC Register, who obtained an updated reset chart from BofA (click the image on the right), underscores the similar data I've been seeing from various investment banks recently (but can't publish here, lest my sources get canned). I'm guessing here that this chart doesn't include a potential "third wave" of option ARM recapitalization, the majority of which appears to be centered in the early part of 2009. (I've yet to really blog about this yet, but I'm sure I will soon.) Nonetheless, it's pretty clear that 2008 will be very ugly. Don't believe everything you're going to read this quarter about purging and a recovery in the secondary markets just yet -- those UBS and Citi write-downs may represent only a start. Where's HW?: American Banker launched its newly-redesigned, minimalist site design today. "The upgraded site enhances user interaction by providing simplicity and richness of experience," said David Longobardi, American Banker's editor-in-chief. "Every element of the site—from article pages to entry points—has been rethought and redesigned, with the needs of our end-users in mind." The site also makes a nod to the emergence of financial blogs, introducing a new section called Banker's Blog Watch, billed as a "one-stop shop for bankers too busy to Web surf but who still wish to keep one ear tuned in to Internet buzz by easily monitoring headlines from a compelling cross-section of industry blogs." It's essentially an RSS reader with a few blogs pumped into it. The RSS feeds listed there have some known financial blogs, and a few that left me scratching my head -- but nothing covering mortgages. (Not that I'd know of a large, well-read blog on mortgage finance or anything.) Chuck Norris: With a hat tip to the always well-written Inman News blog here, a story appearing on none other than Bloomberg making some much-needed fun of the housing market and resulting credit crunch. If you haven't seen the Web site chucknorrisfacts.com, you've been missing out on one of the Internet's longest-running and most famous series of jokes. Things like: "There is no theory of evolution. Only the things Chuck Norris lets live." Mark Gilbert at Bloomberg had the brilliant idea of taking Chuck Norris "facts" to the current housing and mortgage industry downturn, with some pretty funny results:
  • Chuck Norris doesn't target inflation. He roundhouse-kicks it until it begs for mercy.
  • Chuck Norris funds at Libor flat.
  • There is no market regulator. Just a list of securities Chuck Norris allows to be traded.
  • Chuck Norris doesn't mark-to-market. The market marks to Chuck Norris.
I've tried thinking of a few more:
  • Chuck Norris doesn't wait for margin calls. Margins hope Chuck Norris never comes calling.
  • Whenever Chuck Norris is bankrupt, creditors don't collect -- they run.
  • Chuck Norris can trade equity on a subprime CDO at 100 cents on the dollar.
I was thinking of starting a contest to see who could come up with the best "Chuck Norris fact" about the mortgage industry -- before I realized that running this blog takes most of my available time. IndyMac's delinquencies: A week or so ago, IndyMac issued an update on portfolio delinquencies that went little noticed -- but showed some interesting trends. The Pasadena, Calif.-based thrift said that 30+ day delinquencies (measured in unpaid balance) increased from 5.46% in July to 5.56% in August -- and that prime first liens continued to trend upward in delinquent borrower activity, although agnecy conforming loan delinquencies decreased as the thrift shifts its business to a GSE focus. Overall delinquencies for August pushed IndyMac above industry averages for the first time, however, something that in previous months IndyMac's communications team had touted as proof of its ability to weather the current industry storm and/or its prudent underwriting decisioning. This time around, IndyMac cited its relatively higher exposure to the Alt-A market as the driver for the increased delinquencies -- although paradoxically, the thrift also touted that its Alt-A delinquency patterns were trending well below industry norms. (Anyone care to reconcile that one? IndyMac doesn't allow questioning comments on its blog, from my past experience.) On CDOs and financial wizardry: I've been absolutely riveted lately by the Accrued Interest blog, but an archived post there does a better job explaining CDOs than I ever could. Given the number of questions I tend to get from those just learning this field, figured it'd be good to put the post back out there. (Hat tip here to Bill Coppedge). See everyone tomorrow.