...things aren't going well.
NYT: Mortgage Security Bondholders Facing a Cutoff of Interest Payments
NYT: Mortgage Security Bondholders Facing a Cutoff of Interest Payments
For all the pain in the mortgage market, investors who hold bonds backed by risky home loans have continued to receive their monthly interest payments — until now.
Collateralized debt obligations — made up of bonds backed by thousands of subprime home loans — are starting to shut off cash payments to investors in lower-rated bonds as credit-rating agencies downgrade the securities they own, according to analysts and industry executives. Cutting off the cash flow, which is governed by rules and mathematical formulas that vary by security, is expected to accelerate in the months ahead.
Such a cutoff would be the latest blow to financial markets as investors try to anticipate the next problem that might shake confidence.
Next problem = an escalating wave of defaults, leaving the institutions holding this paper even more broke than the poor schlubs who took out mortgages that they couldn't afford.
This is going to be a real show.
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1 comment:
Redefining the term "Junk Bonds" for a new generation. If they'd been gambling in Vegas at least they'd have gotten dinner and a show.
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