Naturally, the poster child for the financial crisis is the American homeowner, flim-flammed into buying a house and now being foreclosed. But see Subprime mortgages: Myths and reality for one take on this … and now it’s hitting the papers:
Whether it is their residence, a second home or a house bought as an investment, the rich have stopped paying the mortgage at a rate that greatly exceeds the rest of the population.
More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.
By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent.
Though it is hard to prove, the CoreLogic data suggest that many of the well-to-do are purposely dumping their financially draining properties, just as they would any sour investment.
One of the big problems with the US system is that, typically, mortgages are extended without recourse. Instead of layering on extra rules, as I reported Fannie Mae did on June 23, simply charge a premium for non-recourse mortgages. Piece of cake, and one big source of problems eliminated.
Low volume today, but prices did OK, with PerpetualDiscounts up 7bp and FixedResets up 5bp.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
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| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 2.80 % | 2.88 % | 24,323 | 20.33 | 1 | 1.2048 % | 2,073.2 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 1.1009 % | 3,133.7 |
| Floater | 2.30 % | 1.97 % | 45,062 | 22.47 | 4 | 1.1009 % | 2,233.5 |
| OpRet | 4.88 % | 2.20 % | 81,841 | 0.08 | 11 | -0.0035 % | 2,341.6 |
| SplitShare | 6.34 % | 6.23 % | 85,027 | 3.44 | 2 | 0.6606 % | 2,185.9 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0035 % | 2,141.2 |
| Perpetual-Premium | 5.97 % | 5.62 % | 116,382 | 1.84 | 4 | 0.0000 % | 1,919.3 |
| Perpetual-Discount | 5.91 % | 5.95 % | 179,872 | 13.99 | 73 | 0.0674 % | 1,827.5 |
| FixedReset | 5.36 % | 3.72 % | 313,229 | 3.49 | 47 | 0.0478 % | 2,204.0 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| GWO.PR.J | FixedReset | -1.01 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-30 Maturity Price : 25.00 Evaluated at bid price : 26.55 Bid-YTW : 4.18 % |
| BNA.PR.C | SplitShare | 1.08 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2019-01-10 Maturity Price : 25.00 Evaluated at bid price : 19.61 Bid-YTW : 8.00 % |
| HSB.PR.D | Perpetual-Discount | 1.19 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-07-09 Maturity Price : 21.25 Evaluated at bid price : 21.25 Bid-YTW : 5.94 % |
| BAM.PR.E | Ratchet | 1.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-07-09 Maturity Price : 21.67 Evaluated at bid price : 21.00 Bid-YTW : 2.88 % |
| MFC.PR.D | FixedReset | 1.61 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-19 Maturity Price : 25.00 Evaluated at bid price : 27.75 Bid-YTW : 3.78 % |
| BAM.PR.K | Floater | 1.92 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-07-09 Maturity Price : 15.36 Evaluated at bid price : 15.36 Bid-YTW : 2.86 % |
| BAM.PR.B | Floater | 2.32 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-07-09 Maturity Price : 15.41 Evaluated at bid price : 15.41 Bid-YTW : 2.85 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TRP.PR.C | FixedReset | 87,094 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-07-09 Maturity Price : 23.14 Evaluated at bid price : 25.05 Bid-YTW : 4.00 % |
| SLF.PR.D | Perpetual-Discount | 74,488 | Nesbitt crossed 65,100 at 18.45. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-07-09 Maturity Price : 18.45 Evaluated at bid price : 18.45 Bid-YTW : 6.09 % |
| SLF.PR.G | FixedReset | 68,400 | Nesbitt crossed 21,300 at 25.21 and bought 11,800 from TD at 25.20. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-07-09 Maturity Price : 25.16 Evaluated at bid price : 25.21 Bid-YTW : 4.01 % |
| TRP.PR.A | FixedReset | 54,118 | Nesbitt crossed 40,000 at 25.51. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-01-30 Maturity Price : 25.00 Evaluated at bid price : 25.47 Bid-YTW : 4.19 % |
| BNS.PR.O | Perpetual-Discount | 51,325 | National crossed 45,000 at 24.56. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-07-09 Maturity Price : 24.32 Evaluated at bid price : 24.54 Bid-YTW : 5.71 % |
| TD.PR.O | Perpetual-Discount | 46,316 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-07-09 Maturity Price : 21.11 Evaluated at bid price : 21.11 Bid-YTW : 5.76 % |
| There were 16 other index-included issues trading in excess of 10,000 shares. | |||