easy to understand...this will help with the papper i'm writing... THANKS!

Suggestion by 70.99.73.11 on 2008-11-28 22:41:13

easy to understand...this will help with the papper i'm writing... THANKS!

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clearer about actual credit crisis caused by subprime and affects on eco...

Suggestion by 167.21.254.12 on 2008-05-07 13:13:50

clearer about actual credit crisis caused by subprime and affects on economy :]

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This article is experiencing a ton of scope creep. To be fair to the su...

Suggestion by 63.111.194.175 on 2008-05-05 17:45:55

This article is experiencing a ton of scope creep. To be fair to the subject, there should probably be a cleaner cut between subprime lending as an actual practice and the whirlwind that is the current crisis in the credit markets (obliquely addressed in the "mortgage market meltdown" page).

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Bear Stearns is now out of business...not exactly a winner if you ask me

Suggestion by 199.67.131.151 on 2008-03-31 18:05:51

Bear Stearns is now out of business...not exactly a winner if you ask me

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Wonderful article. Wiki is the best

Suggestion by 151.151.73.163 on 2008-02-06 19:11:33

Wonderful article. Wiki is the best

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Subprime is a volatile subject, in many ways. This article give a nice o...

Suggestion by Tim Plaehn on 2008-01-02 16:41:59

Subprime is a volatile subject, in many ways. This article give a nice overview of what has happened. Because the story is still evolving, the major participants in writing this article should make sure it is updated with the latest news. I find the paragraph on "Subprime Winners" to be laughable. When ever there is this big of a disruption in a financial market, there are those creative thinkers out there who will figure out how to make a killing on it. I am sure there are many savvy real estate investors picking up properties at very attractive prices. For some discussion on this fact read "T" at his blog "Investing from the Right". He is very high on buying rental real estate at this time, and he has been doing it for 35 years.

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The chart of charge-offs relating to sub-prime exposure is useful, but d...

Suggestion by 205.188.116.206 on 2007-12-31 17:40:06

The chart of charge-offs relating to sub-prime exposure is useful, but does not address total exposure to this sector, which can be expressed by showing total CDO's and other instruments outstanding on the balance sheet, as well as total off balance sheet exposure. As demonstrated by some substantial buy-backs of securities sold ostensibly on a non-recourse basis, this exposure could also include total subprime instruments outstanding that were originated by the respective banks. This is especially relevant in the case of Bank of America due to the continuing decline to intermediate lows despite the absence of any recent significant sub-prime losses recognized or guidance in that regard.

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Ihave learned that I can't lose in Real Estate because in a market decli...

Suggestion by Plato007 on 2007-12-28 03:09:00

Ihave learned that I can't lose in Real Estate because in a market decline, if I'm in over my head a simpathetic government will step in and save me!

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what about bond insurers

Suggestion by Jwsmith6 on 2007-12-19 19:08:06

what about bond insurers

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It seems that home prices became extremely overinflated as a direct resu...

Suggestion by 65.74.145.134 on 2007-12-17 13:15:31

It seems that home prices became extremely overinflated as a direct result of the reduction in interest rates by Alen Greenspan. Over priced homes with interest rates so low there is no place else to go.

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This article should be split into a "Subprime lending" section, describing the practice of subprime lending, its history and current trends as well as a "Subprime Liquidity crisis" section, describing the events in 2007. As of now, the article is currently a hybrid of the two.

Is the idea to split it into two seperate articles, or just make sections clearer between these two things? I like the latter idea, but am less wild about the former - but it may be I just don't entirely understand the logic for the division. 64.121.197.178 09:43, October 10, 2007 (PDT)

Also, the style of the article is largely conversational and needs to be cleaned up a bit. -Irvin


Tracking Market Sentiment of Subprime Loans

An index, called the ABX index tracks the cost of insurance on a pool of loans. As the perceived risk of the loans increases, the cost of the insurance increases. For example, a pool of $100 million of AAA loans will have a coupon and a price reported each day. Since AAA is the highest quality of loans, they will have the lowest coupons (AAA tranches normally are institutional borrowers, whereas AA tranches are likely borrowers with 20% equity, and BBB- tranches are subprime borrowers with risk layering). Coupons are positively correlated to the risk, so as the risk increases, the coupons increase too. Coupons are the highest for BBB-. The price (posted daily at 3:00pm EST) is the additional cost of insuring the loans, the premium.

For example: If an investor wants to insure $100 million of loans originated in the first half of 2007 with a BBB- credit rating on October 31, 2007, the investor would find the coupon to be 3.89% and the price to be 18.94. To find the cost of insuring the $100 million of loans, take the coupon (3.89%) and multiply by the amount of loans to be insured, in this case $100 million ($100 million x 3.89% = $3.89 million) and next add the premium to the coupon. The price is inverse to the cost of the premium (the lower the price, the more expense it is to insure). In this case it it would be 100-18.94 = 81.16% = $81.16 million premium. So, to insure the $100 million of loans on October 31, 2007, it would cost $81.l6 + $3.89 = $85.05 million.

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