Wash, Rinse, Repeat: The Big Short Mortgages Are Back

This almost makes me wonder if Angelo Mozilo is running NASA Federal Credit Union.

A Short Seller’s Journal subscriber heard an ad for this mortgage product on his local radio in Atlanta. NASA Federal Credit Union is offering 0% down payment, 0% PMI (Private Mortgage Insurance. “This is unique because conventional lenders will normally require PMI when your down payment is less than 20% of the home purchase price. So, if that down payment was keeping you from getting into your new home, talk to a mortgage loan professional at NASA Federal!”

Fast closing guaranteed. If you don’t close by the contract data, NASA Federal will give you $1000 toward closing costs. Jumbo Mortgages are included in this offering.

The only thing guaranteed about this product is that a large percentage of the borrowers will eventually default.  With 0% down, the borrower is going to be underwater by at least 10% after all closing costs are factored into the equation.

What could possibly go wrong?  Lending Tree stock, which reflects loan demand, primarily from potential homebuyers shopping online for mortgages, is down 42% since early February:

Lending Tree reported that mortgage products revenue fell 9% from Q1 and 6% from a year ago when it reported its earnings yesterday. Easy-money mortgages offered by the Government have fueled home price inflation. TREE’s numbers tell us that mortgage activity is rapidly declining, which means that homebuyer demand is declining. NASA Federal is offering a subprime product at the top of the market in a desperate attempt to stimulate its mortgage underwriting fees. I can only wonder if the proprietors are counting on another Taxpayer bailout of the banks this time around…

I presented Lending Tree as a short idea to my Short Seller Journal subscribers in early June at $260. In the next issue I’ll update my view on TREE and how to play it with put and call options. One subscriber emailed me yesterday to report that he shorted August $300 calls for $2.92 when I suggested the idea in June and covered them for a dime. You can learn more about this newsletter service here:  Short Seller’s Journal information.

3 thoughts on “Wash, Rinse, Repeat: The Big Short Mortgages Are Back

  1. https://www.silverdoctors.com/silver/silver-news/french-analyst-someone-is-cornering-the-silver-market-to-cause-a-silver-shortage/ Dave, If this “corner” thesis is even half right, 2018 is volatility on crystal meth. Count on bank exposure to commodities fund giants wrongfooted in their trades, and other macro squeezes that this “french analyst” leaves out. Very vulnerable market, fast approaching a long-term technical decision point as well, silver’s chart is showing something big within a few weeks. As for the dollar, a quote from JF at http://www.twitter.com :

    “@joefriday_714

    Despite $DXY moving nominally higher today.. it’s basically gone sideways.. and has yest to break the recent $95.65 high or any noteworthy resistance…. so it’s still my view that it’s going to rollover… “

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