Subprime-mortgage market recovers U.S.

01.04.2011 12:17
Articles about real estate | Subprime-mortgage market recovers U.S. Market for subprime mortgage bonds and other related real estate market debt in the U.S., it seems, is beginning to recover.

Currently, the cost of standard (benchmark) subprime mortgage bonds is now about 60% of par, compared with 30% of par in the midst of crisis.

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The growing interest of investors in mortgage bonds due to their relatively high yield: thus, although the yield of mortgage bonds, fell from around 20% in pre-crisis period to 5-7%, the income that the holder of these securities may be obtained, it is still twice as much, which will bring investments in US Treasuries (roughly 3.5%) or even a highly corporate bonds (4%).

Appetite for risk is growing in all sectors of the financial market. Investors willing to buy insecure bonds, and banks are willing to give them credit for it.

Although this is indirect, and indicates the possibility of repetition of the situation that led to the current financial crisis, ultimately supports are still located in an extremely difficult situation the U.S. mortgage market.

The bank's confidence that they can find buyers for pools of risky mortgage loans (which then serve as collateral for bonds), allows credit institutions are more likely to issue loans, including so-called jumbo mortgage (or a jumbo loan - a loan that exceeds the sum of the limits established the Federal National Mortgage Association, USA, and has therefore a higher interest rate).

From the moment a crisis in the rate for such loans dropped more than doubled - to about 5.5% to 5% on 30-year mortgages, the corresponding parameters Mortgage Association.

Characteristically, in recent months, prices of risky securities have stabilized, which allows you to confidently enter the market even quite conservative investors.

Demand for mortgage bonds in recent years has increased so much that even the Federal Reserve decided to take advantage of the situation and to sell part of its multibillion-owned package of these securities, which formed during the rescue AIG in 2008
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