Friday, December 15, 2006

"subprime subsidence / economist"

more good coverage of the big problems in the subprimesector. i suggest to read more on this topic at the "labels"

mehr gute infos zum wichtigsten sektor der hypothekenfinanzierung in den usa. i empfehle mehr dazu in den labels nachzulesen.
Parts of America's mortgage market are in turmoil. Some on Wall Street see this as an opportunity. Others are biting their nails


MORTGAGE lending is hardly the raciest business, but it has its moments. “It's a bit like the definition of combat: 59 minutes of boredom followed by a minute of sheer terror,” says Michael Youngblood, an analyst at Friedman, Billings, Ramsey, an investment bank. “And we seem to be going through another one of those minutes now.”......( youngblood is one of the worst forecasters out there)

subprime is now very much in the mainstream. Annual loan originations grew fivefold between 2001 and 2005,
With the traditional mortgage market flat, the growth has been in the one area nobody wanted to go into
But with rapid growth has come fragility. According to UBS, the rate of subprime-loan delinquencies of 60 days or more stood at around 8% in October, nearly double the rate of a year before. Foreclosures are also around twice as high as they were. Worse, loans are decaying remarkably quickly: the number of borrowers falling behind on payments in the first few months has leapt, to around 4% of the total.....
The lenders compounded their problems greatly by loosening their underwriting standards in a further attempt to keep business chugging along. Adding insult to imprudence, they lured borrowers with “alternative” mortgage products, such as “negative amortisation” deals (where payments are so low that the overall debt gets bigger, not smaller) and adjustable-rate products (where teaser rates jump after a couple of years)....

Dubious mortgages are now a growing share of the mortgage-backed market, so there is scope for more trouble. Of the $1.02 trillion of MBSs issued in the first half of this year, over 40% was linked to subprime loans, up from 6-8% in 2000-03, ...

Combined third-quarter profits for the country's nine largest mortgage lenders were $991m, less than half the level for the same period last year. ....

After years of loose money in financial markets, some observers think the mortgage morass could cause investors to rethink their attitude to other forms of credit risk, such as high-yield bonds. Housing loans are not the only area that has seen a weakening of underwriting standards. Where subprime goes, other businesses may follow..

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