Think i figured out whats going on with the repo market

Think i figured out whats going on with the repo market. Mortgages are getting margin called in the shadow banking system.

This was co-authored by some federal reserve board members 2 years ago

brookings.edu/wp-content/uploads/2018/03/KimEtAl_Text.pdf

Attached: foreclosure sign.jpg (735x447, 57.15K)

from the link:

III.C. The Warehouse-Lending Process shows the two stages of the warehouse-lending process. In the initial stage, shown on the left side, the mortgage borrower is approved for a mortgage from the nonbank originator, who funds the mortgage using a draw from a line of credit provided by a warehouse lender. Typically, the warehouse lender will only fund about 95 percent of the mortgage balance, so that the nonbank originator has some skin in the game for each loan. The collateral on the loan is the mortgage, and the nonbank in turn transfers the mortgage to the warehouse lender to collateralize the draw on its line of credit. Since the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, mortgage-collateralized warehouse lending has been eligible for accounting and legal treatment as repurchase agreements (repos).

Next, turn to page 16: III.D. Vulnerabilities of Warehouse Funding, to keep it simple its the equavlant to adding stop loss to every warehouse line of credit (which are used to fund mortgages). Since the margin call is on the loan for the mortgage instead of the mortgage itself, we don't see forclosures yet, but instead the margin call money is funded by the repo. Shawdow banks take the margin call. They pay the call via repo loan and pay that back via bonds, hence why the fed is buying those, junk bonds to be specific

quote from link: Ginnie Mae servicers can only obtain unsecured financing, such as unsecured corporate bonds, to cover their advances. The rates on this financing are high, especially because many nonbanks have highyield credit ratings.

tl;dr most high risk mortgages(over 50% of total mortgages) that a bank wouldn't lend, was lent by shadow banks via a link of credit from the banks. Banks have tight stop losses set on these and have been issuing margin calls on tons of them.

this is fucked man

Yes. You're correct.

The banks instead made a shell company to continue their practices of 2008.

> Does this mean that when people don't pay > their mortgages, NBOs are forced give more > money to banks, and get the money by >selling crap bonds bought by the Fed?

yes. And basically that means if the real estate market crashes....It directly triggers the money printer to print more. So real estate collapase would cause the dollar to collapse this time as well, i think?

I don't get it. Brainlet here. Is the same thing gonna happen like in the last crash?

>implying banks can ask for full repayment of mortgage loan

>implying banks unironically believe the majority of home owners have hundreds of thousands of dollars in cash somewhere

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>retards depend on their shitty "investment" to not crash
>lessons never learned from 2008 as a result

whack

Simply if the fed had any balls, they'd let it crash for the next generation to pick up. They're not only preventing future generations to make bank off a credit bust, they're killing the dollar too.

Boomers are annoying.

What would happen if their positions are closed? Could this even happen. It would require the FED to stop high levels of REPOs, right?

>what is a fixed rate mortgage
you people are all unbelievably stupid

Hyperinflation followed with an asset crash.

>implying banks can ask for full repayment of mortgage loan

>implying banks unironically believe the majority of home owners have hundreds of thousands of dollars in cash somewhere

banks can ask for full repayment at any time. The non-bank would pay that, not the home owner. The fed gives the money to nonbank.

So basically now, every mortgage is callable to be paid in full at any given second, but the fed is the one who pays via money printer. The home owner is not effected by this

>the bank can’t take your house if you owe them $200,000 and they own the house!
Retard alert

Guys..
Have almsot 100k saved up
Was thinking of buying a house soon..

What should i do

>The home owner is not effected by this
then i think you need to read what a foreclosure is.......

the fed would print 16.8 trillion dollars and give it to the repo market.

money then goes to the banks, while they laugh at you as your home value falls

not sure what that had to do with my post. people can be underwater for many a reasons if that's what you're suggesting I said. a fixed rate doesn't solve that and qualifying for one is a slightly higher barrier.

Is this going to realistically cause a crash? Is there a metric that you could use to measure this going downhill?

I assume this will result in repos and a housing market crash like last time, the question is how can I The Big Short TM it?

they cant, dumbass. if you are making the agreed monthly payments they can not """margin call""" you and ask for repayment in full

jfc you are unbelievably retarded.

reminder: rentcucks are nigger-tier

This is a margin call on the loan, foreclosure would come way later. I meant the homeowner is not immediately effected. But yes the homeowner gets screwed, because house prices would deflate as we hit hyper inflation everywhere else

2008/2009 crash was largely caused by adjustable rate mortgages and the banks preying on dumbasses, baiting them with "balloon rates"

>foreclosure would come way later
wrong

banks getting margin called has NOTHING to do with the home owner nor their ability to pay their mortgage

And giving loans to niggers on welfare.

That was the time that black ppl become less of a home owner than white ppl. Thanks Obama.

correct. i meant in a downturn market, they would get foreclosed later and unrealted to this

If 2008 was any indication the banks would rather let people live in the houses that have been foreclosed upon than flood the market with them. Most houses also fairly rapidly go to shit when uninhabited giving them added incentive not to evict

Wrong.

My inability to understand banks using a mortgage as a line of credit is directly correlated with my parents loosing their house due to the banks fault of not paying their bills.

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fuck

But would they rather someone who CAN afford the house and underlying mortgage buy it off them? If so, that would still mean all those houses go on the market and flood it, causing a price crash.

are there any numbers and metrics in that report?

lol i worked both of those diagrams ask me anything

do you agree with my interpretation of them?

>they're killing the dollar too

maybe thats the point?

Is this an actual apocalyptic dark ages world ending event?

How severe will the inflation be?

can i get a brainlet version?
and will the repo market cause a wider market crash?