Sunday, August 06, 2006

subprime in trouble

roundtablediskussion im bezug auf subprimelender. bitte dazu auch das posting zu new century / new lesen. paß perfekt zu diesem bericht

http://www.nationalmortgagenews.com/columns/onroad/

highlights:

BRAD: Speaking of our morning keynoter, Brad Bradley, he said we are about to see a second wave of subprime companies crashing, the first wave occurring back in 1998. Now circumstances, he said, will lead to a second wave. Do you agree?

BRENDA: I agree with that. I think we are seeing it already. I don't remember who said it, but when they talk about the cost of origination being key, that is what created this new, third wave of companies that can originate efficiently. But I think, at least what I am seeing, is that buybacks -- what happened is that you had two months last year, maybe more, but in particular November and December that were really, really tough. It caused people to lose money. And I think they felt they had staying power. The spreads got a little better in January, and it got a little better after that, but then the companies started getting hit by buybacks, and some of the buybacks are exceeding the net worth that these companies have. That is what I think is causing the crashing of the second-generation companies.
hier sind mit buybacks der rückkauf der begebenen mbs gemeint

They're sitting there with these loans, that they have an opportunity to not take losses on, which helps their financial situation. So naturally they are going to take what opportunities are available to them to push those deals back so somebody else can take that hit, and the little guys don't have the balance sheet to take care of that. As a warehouse lender, I see a lot of the balance sheets. I can't tell you the last time I've seen a loan-loss reserve account on a balance sheet from a company. For somebody who doesn't have a big safety net in the first place, to not have some sort of sinking fund, in effect, they are just playing with fire at that point. Sooner or later there is going to be a repurchase and they're totally unprepared for that. ( mein reden. die riskantesten kredite/verbriefungen und trotzdem fast null risikovorsorge)

What I am seeing are two main drivers on the buybacks in the marketplace today. One is when you have out-and-out fraud from a broker, and no matter what you did you couldn't pick it up. The biggest driver of buybacks today are early payment defaults, and a number of companies that haven't negotiated contracts correctly, where they've agreed that they buy it back if the loan goes delinquent within 90 days or in the first three months of payments. In the nonprime industry, that is the kiss of death in my opinion

MICHAEL: Others take a percentage. Companies are not adjusting to the softening of the market, and they're still taking appraisals and not bothering to see if the value is holding. A high percentage of our appraisals in the last 45 days are getting cut. So we're lowering the values and everybody is screaming. But we're not going to go with increased values, and everybody is pushing to get the highest value out of the house.

BRAD: Who is cutting the appraisals?

MICHAEL: The review companies. We send them out to review companies to make sure that we've got a current, proper value. When the appraisal gets cut, and they document, "here are some more comps two doors away that you didn't utilize that sold for $15,000 less," they have the opportunity to go back to the original appraiser and have him try to support his value. Nine times out of 10 it is the lower value that ends up staying, at least in our organization.

MICHAEL: In general, the biggest fraud issue that I see -- and it is a relative term -- is dealing with the stated income and making the stated income reasonable for the right profession. Are they actually saying they are in the right profession? "I work at ABC doctors office and I am the office manager" and you call up and it's the appointment desk person. Is the $7,000 salary appropriate for an office manager or is it a $3,000 salary appropriate for somebody who is taking appointments for a doctor? So those are the things that you have to look at closely.(ein weitere punkt dem man sich hier in deutschland nicht vorstellen kann. es werden dort tonnenweise kredite vergeben wo der kreditnehmer sein gehalt angibt ohne belege dafür einzureichen. wie der typ aben der anscheined nur ne kleine nummer im laden ist und sich einfach als big boss ausgibt. nicht zu fassen)

MICHAEL: My competitors don't have the same discipline, but the investors we sell to are doing more due diligence. When you are delivering a $50 million, $60 million pool to the street, they're looking at them closer today than they ever did, as long as I have been doing it.( bedéutet das endlich auch wall street höhere risikoprämien für die hochexplosieven verbriefungen verlangt, wird trotz fedstillstand zu weiter steigenden finanzierungskosten führen)

verweise nochmal auf das posting von new. dort sind ziemlich viele sachen tatsächlich im letzten qaurtal zum tagen gekommen.

gruß
jan-martin

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