Wednesday, August 30, 2006

regulierung subprime

nachdem das kind in den brunnen gefallen ist .......

man kennt das ja. jetzt endlich und viel zu spät soll der amok gelaufene kreditmarkt zur ordnung gerufen werden. dürfte den verfall der immobilienmärkte wohl weiter beschleunigen. letztendlich muß man zudem abwarten was nachher tatsächlich in die tat umgesetzt wird. bisher hat sich die lobby noch (fast) immer durchgesetzt.

Dodging A Bullet

A band of five government regulating agencies led by the Comptroller of the Currency, appear likely in the next 60 days or so to pour cold water on the hot--and lucrative--nontraditional mortgage loan market adored by banks and mortgage brokers. These include the popular, but deadly interest only and pay-option adjustable rate, in which borrowers decide each month how much to repay.

The proposed guidelines--meant to be used by bank examiners--will address high loan-to-value, low documentation and other underwriting criteria perceived as too risky by regulators and even some industry participants. That means lenders would need to explain the loan more carefully, require higher down payments and better scrutinize borrowers’ income.

Mortgage insurers are egging on regulators to finalize language "in part because the most recent market trends show alarming signs of ongoing undue risk-taking that puts both lenders and consumers at risk," Suzanne C. Hutchinson, executive vice president of the Mortgage Insurance Companies of America, wrote in a July letter to regulators. Hutchinson cited first quarter data that indicate interest-only and pay-option mortgage products now account for 26% of loan originations, "a sharp increase from last year," she noted.

Non-traditional mortgage products are most popular in states with the strongest home price growth, according to data collected by the FDIC. Little surprise then that investors (speculators, really) comprise 15% of the borrowers in this niche market. While some on this playing field may be financially savvy borrowers with low credit risk, regulators have concluded "lenders have targeted a wider spectrum of consumers, who may not fully understand the embedded risks but use the loans to close the affordability gap."

ISI Group's Laperriere cautions that the government's new rules will reduce demand for mortgage credit--hurting bank profits.

"Tightening underwriting guidelines and requiring delivery of excessive disclosures to consumers may stifle innovative product development before we have evidence that these products are actually detrimental to either consumers or the financial institutions that offer them," Cindy Manzetti, chief credit officer of Fifth Third Bancorp (nasdaq: FITB - news - people ), wrote recently to regulators. Manzetti's letter did point out that her bank does not offer pay-option mortgage products.

Richard Kenny, president and chief executive of Charles Schwab (nasdaq: SCHW - news - people ), urged regulators not to paint all nontraditional mortgages with the same broad brush.

A letter from Countrywide Financial Corp (nyse: CFC - news - people ). disputed regulators' assessment of risks, saying payment-option adjustable mortgages have been tested in previous economic cycles and are fundamentally sound loan products.(war ja auch nicht anders zu erwarten )

According to his letter to regulators, Lehman Brothers' (nyse: LEH - news - people ) general counsel Joseph Polizzotto thinks the proposed guidance is too prescriptive and does not fully consider all factors relating to payment shock.

Sure, industry rarely welcomes enhanced regulation. But bankers' resistance ignores another political risk of a damaging drop in housing. In addition to high-risk mortgages creating potential credit losses, Laperriere foresees a "significant political backlash as consumers blame the lenders for deceiving them about the risk of those loans."

Don't expect politicians on Capitol Hill to react in a more forgiving way.



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