Word: mortgagees
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Dates: during 1980-1989
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The financial community was stunned at not only the immensity of the loss but also the identity of the trader: Howard Rubin, the head of Merrill Lynch's trading desk for mortgage-backed securities. Rubin, who has been fired but not charged with any criminal wrongdoing, was a respected trader...
But Rubin was apparently dealing in one of the tricky, relatively untested new types of securities. The bonds that tripped up Merrill Lynch are interest-only/principal-only securities, known as IOPOs. Investment houses create them by buying mortgage-backed bonds -- typically those issued by the Government National Mortgage Association, or...
In just two weeks the national average interest rate on a 30-year fixed- rate mortgage jumped from 9.25% to 10.25%, and at some banks to about 11%. A 1 percentage point increase on a $100,000 mortgage at 9.25% would boost a homeowner's monthly payments by $73, to...
Lenders laid the blame for the increase on the bond market, where interest rates have risen sharply in recent weeks in reaction to the widening U.S. trade deficit and the falling value of the dollar. Home loans are now more sensitive to volatility in such markets because of a trend...
Economists generally believe the mortgage shudders are unlikely to become a long-term trend. Contends Lyle Gramley, chief economist for the Mortgage Bankers Association of America: "There is no reason for interest rates to continue going up. That would slow the economy so much that the run-up wouldn't...