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LA_Renter.
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March 27, 2007 at 11:28 AM #8687March 27, 2007 at 12:46 PM #48535
Anonymous
GuestThanks for the link, LAR.
When the heck is PrudentBear.com going to be back up? I depend on those guys to pick up important stories like this.
March 27, 2007 at 3:35 PM #48560LA_Renter
ParticipantFrom the Market Watch Blog;
Beyond Subprime, Continued…
As we continue to connect the dots from subprime to midprime, take a look at last night’s press release from Fulton Financial (fult). Seems its Resource Bank subsidiary is being forced to buy back first and second loans that were sold into the secondary market because the borrowers were defaulting early in the payment cycle. These early payment defaults are a common snafu in the subprime slime, but here’s the twist: For Fulton these 80/20 loans, otherwise known as mortgages with zero down payment, appear to be Alt-A, with credit scores above 620. The company says that in recent months Resource “has experienced an increase” in the rate of early payment defaults “primarily related to one specific product sold to one specific investor.” While the total number of loans isn’t significant, with Fulton taking a pre-tax loss of $5.5 million against its total assets of $15 billion, the trickle-up effect seems to be underway.
March 27, 2007 at 4:44 PM #48564PerryChase
ParticipantConsidering the prices in California, most buyers were Alt-A or below.
Given that it takes $150k income to qualify for $400k mortgage, few buyers met the truly “prime” qualifications.
As this housing cold spreads, I wouldn’t be surprised to see the mid prime and prime markets getting infected also.
March 27, 2007 at 7:11 PM #48584LookoutBelow
ParticipantWhat's in a word ?It would seem to me that a person that has a 950K mortgage and only makes 65K per year and barely making ends meet, (although he may have good credit at the time of original loan placement) would quickly become SUB-prime if his mortgage "resets" with a 45% increase in monthly debt service……So what is a "sub Prime" loan really ?If the terms and conditions of the ARM loan can be "Adjustable" then should the characterization of SUB prime be "Adjustable" too ?Alt-A is taking losses now. (as we knew would happen)Lets see how they pull a rabbit outta their asses on this one ! ……They are good, we'll see just how good soonMarch 28, 2007 at 5:40 PM #48650Wiley
ParticipantI would love to know how many full doc loans had an IRS tax return form completed and requested to verify income. Any mortgage people here to provide info?
I believe there was sooo much money chasing these loans that the fraud involved in all levels of credit/classifications is enormous. There isn’t anyone I know from my hair dresser to my cleaning guy that didn’t buy a house in the last two years.
I predict the lending will get very tight next year and the real bloodletting will begin then. This is only a prelim.
April 2, 2007 at 7:43 AM #48907ParticipantThe drum beat continues.
“Recent, well-publicized problems in the subprime residential mortgage lending market have had a negative effect on the rest of the residential mortgage marketplace, specifically with regard to alternative (“Alt-A”) residential mortgage loans that M&T actively originates for sale in the secondary market. Alt-A loans originated by M&T typically include some form of limited documentation requirements, as compared with more traditional residential mortgage loans. Unfavorable market conditions and lack of market liquidity impacted M&T’s willingness to sell Alt-A loans in the first quarter. At a recent auction of such loans fewer bids than normal were received and the pricing of those bids was lower than expected. In accordance with generally accepted accounting principles, loans held for sale must be recorded at the lower of cost or market value. As a result, the carrying value of M&T’s Alt- A portfolio that had been held for sale was reduced by $12 million in the first quarter of 2007, which M&T estimates will result in an after-tax reduction of net income of $7 million in the quarter, or $.07 per diluted share.”
April 6, 2007 at 11:07 AM #49408ParticipantIt looks like this thing is spreading all over the place.
“American Home Mortgage Investment Sees Lower 1Q, Full-Year Earnings
MELVILLE, N.Y. (AP) — Mortgage lender American Home Mortgage Investment Corp. said Friday it expects lower first-quarter and full-year earnings due to secondary mortgage and mortgage-backed securities markets conditions.
“These markets were characterized by far (fewer) buyers offering materially lower prices, both for loan pools and for ‘AA,’ ‘A,’ ‘BBB’ and residual mortgage securities. These changes had a significant, adverse impact on our company’s first-quarter results, reducing our gain on sale revenue and causing mark-to-market losses in our portfolio,” Chairman and Chief Executive Michael Strauss said in a statement.
The company sees first-quarter net income of 40 cents to 60 cents per share. In January, American Home forecast quarterly earnings coming in 9 percent to 15 percent higher than prior-year results of $1.02 per share.
Analysts surveyed by Thomson Financial estimate profit of $1.06 per share.
American Home assumes current market conditions will persist, resulting in a lower full-year outlook.
The company now anticipates full-year earnings between $3.75 and $4.25 per share. It previously predicted net income of $5.40 to $5.70 per share.
Analyst consensus estimates put full-year profit at $5 per share.
The company will reduce its quarterly dividend to 70 cents per share because of the reduced first-quarter and full-year outlooks. The new policy applies to the second-quarter dividend payable in July. American Home raised its quarterly dividend by 6 cents to $1.12 in January.
Some of American Home’s business comes from subprime mortgage loans, but its main focus is on the prime mortgage market.”
The interesting thing about this is what they said about the A paper loans.
“In particular, these markets were characterized by far few buyers offering materially lower prices, both for loan pools and for “AA”, “A”, “BBB” and residual mortgage securities”
This is getting interesting.
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