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Subprime Crisis

Subprime Crisis. Housing finance in USA. Housing Finance in US depend on Capital market,ie.Bond Market (Thai depend on Bank Deposit Market) Housing Loans in US Fixed rate mortgage Adjustable rate mortgage (ARM) Mortgage outstanding : 50 % of GNP (Thailand 10 %). Prime.

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Subprime Crisis

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  1. Subprime Crisis

  2. Housing finance in USA • Housing Finance in US depend on Capital market,ie.Bond Market • (Thai depend on Bank Deposit Market) • Housing Loans in US • Fixed rate mortgage • Adjustable rate mortgage (ARM) • Mortgage outstanding : 50 % of GNP (Thailand 10 %)

  3. Prime • Prime Mortgage • Borrow <80 % of House price • Good record from credit bureau • Monthly payment < 25 % income • Good Credit Scoring

  4. Subprime • Subprime Mortgage • Tarnished credit records • Low Credit scoring • Pay Higher Mortgage Rates

  5. Subprime Boom • Low Interest rate, after September 11 crisis • Mortgage company increase subprime lending, low teaser interest rates • Investment Banks engineer higher yield, high credit rating bond from subprime-how? • Housing Boom in US

  6. Financial Engineeringto support subprime

  7. Subprime securitizationCollateralized Mortgage Obligation Subprime Mortgage Senior-saleable CD0s CMO Subordinate-hold

  8. CDOs Securitization (Collateralized Debt Obligations) CMO High yield bond MBS ABS CDOs

  9. CDOs Credit Ratings Senior : AAA CDOs Mezzanine AA to BB Equity : unrate

  10. Subprime Crisis • Oil Price increase • Inflation treat • Fed increase interest • House price start to fall

  11. Subprime Crisis • Subprime NPL much higher than forcast !! • Subprime Lender Mortgage Cos fail • US Mortgage lending crisis • CDOs Quality and Ratings fall • Worldwide investors suffer losses • CDO market in turmoil

  12. End

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