The Mortgage Lender Implode-O-Meter

[bdc63]

the seepage out of just the subprime area is beginning, according to standard & poor's ........

(impode-o-meter update: 22)



NEW YORK, Feb 15 (Reuters) - Rising delinquencies on U.S. home loans are hitting higher-quality mortgages for the first time, Standard & Poor's said on Thursday, as it put some of the bonds backed by the largest U.S. mortgage lender's loans on review.
The rating company said that it placed a Countrywide Financial Corp. (CFC.N: Quote, Profile, Research) mortgage-backed bond issue under review for downgrade. It was the only so-called "Alt-A" loan from 2006 to be placed on such a review based on poor performance of underlying loans.
S&P on Wednesday also put 10 subprime issues on CreditWatch negative.

Representing one of the fastest growing segments of the $10 trillion U.S. mortgage market, Alt-A loans are typically given to borrowers with better credit than subprime but still fall short of the most stringent requirements, such as proof of income.
FICO credit scores below 620 in a range from 350 to 850 usually put borrowers in the subprime category.
A spokeswoman for Calabasas, Calif.-based Countrywide, the biggest U.S. mortgage lender, declined immediate comment.
The reviews follow others in the subprime sector where the riskiest home buyers have run into credit problems in the aftermath of the housing boom.
Before Wednesday's announcement, there were at least seven subprime issues already flirting with downgrades based on the rapid increase in loan delinquencies, including some in the first month of the loan's life. The top driver of delinquencies were second-lien "piggyback" loans taken by borrowers that are often used as a downpayment, S&P analyst Ernestine Warner said on a Thursday conference call.
The Countrywide loans backed its Asset-Backed Certificates Trust 2006-IM1 mortgage bond issue, S&P said. The other deals placed on CreditWatch were sold by units of companies including Goldman Sachs Group Inc. (GS.N: Quote, Profile, Research), Lehman Brothers Holdings Inc. (LEH.N: Quote, Profile, Research) and New Century Financial Corp. (NEW.N: Quote, Profile, Research).

 

[redfisher]

The lemmings ran from real estate to Wall street. What's next?

Oh Bob, don't lament the rats... The market will snap back 10% or so by end of summer and you and Shelly will feel much better about yourselves...

BTW, thanks for votin' for W


Shelly, I'd like to know a little more about this theory of private equity ipo business for the masses

 

[SHELLY]

Shelly, I'd like to know a little more about this theory of private equity ipo business for the masses

In simple terms, for the past several years, Private Equity groups (largely unregulated groups of folks with cash) were buying up public companies, real estate, and other "stuff," fixing them up, and selling them back and reportedly making outstanding returns on their investments. Soon, more and more PE groups were jumping on the bandwagon and lately they find themselves all chasing after the same "stuff." As a result, Private Equity groups and Hedge Funds are looking for alternative ways to generate cash and juice returns (in order to buy even more and bigger stuff and, more importantly, fatten the wallets of the original members of the group)...so they have started selling shares of their groups to the public. Now "Joe 6-Pack" has the opportunity to run with the big boys, like when he was given the opportunity to be a Trump Mini-Me by buying up pre-sale condo contracts to flip for fun and profit.

Last week Fortress Investment Group went public with much fanfare under the watchful eyes of other PE & Hedge Fund Groups who are considering the same.

 

[Bob]

Oh Bob, don't lament the rats... The market will snap back 10% or so by end of summer and you and Shelly will feel much better about yourselves...

BTW, thanks for votin' for W


Shelly, I'd like to know a little more about this theory of private equity ipo business for the masses

Which market? Ameritrade or Remax?? Voted for W...Pavlovian vote when the flag wavin' commences. Winning strategy is, wave flag, cut taxes, start war, borrow like hell, repeat.

 

[TooFarTampa]

SHELLY very nice explanation for those not in the know. Thanks. I'll be calling my broker in the morning. ;-)

SHELLY

Again I agree with you !! This is scary. I totally agree the masses will run after hedge fund and private equity ipo's. And the masses will lose their asses !!

What I can't help but wonder is how many people will continue to chase the next big thing instead of getting smart and going back to basics. We've seen two historic boom/bust cycles in a little more than a decade. Who out there hasn't learned a little bit about irrational exuberance?

 

[SHELLY]

What I can't help but wonder is how many people will continue to chase the next big thing instead of getting smart and going back to basics. We've seen two historic boom/bust cycles in a little more than a decade. Who out there hasn't learned a little bit about irrational exuberance?

The masses will always chase the "next big thing" because there's a new sucker born every minute...to add to the population of born-again suckers.



.

 

[spinDrAtl]

BDC, no docs are not gone. I just did one for a customer with 750+ credit score. Conforming lenders will do them to 90-95% on purchases depending on exactly where the score falls.

Option ARMS with neg am are very available as well. However, they are for customers who understand how they work and what purpose they serve. It's the broker's responsibility to help determine if the product is a good fit and is understood.

The main things we are seeing is the tighter scrutiny of appraisals everywhere and changes in the subprime market on credit score tiers. For example, a program that 6 months ago was available to a 580 score might require a 620 now.

 

[Bob]

BDC, no docs are not gone. I just did one for a customer with 750+ credit score. Conforming lenders will do them to 90-95% on purchases depending on exactly where the score falls.

Option ARMS with neg am are very available as well. However, they are for customers who understand how they work and what purpose they serve. It's the broker's responsibility to help determine if the product is a good fit and is understood.

The main things we are seeing is the tighter scrutiny of appraisals everywhere and changes in the subprime market on credit score tiers. For example, a program that 6 months ago was available to a 580 score might require a 620 now.

Do you believe 620 is a subprime score?

 

[spinDrAtl]

620 is right on the border, IMO. As I said, some subprime lenders are requiring 620 for some programs. There are other mid-level, alt-a type lenders that have 620 as a minimum for some programs and lend up to 680.

I also have had borrowers approved conforming with less than 620 with other factors - low ltv's, substantial reserves, very low dti's etc.

 

[bdc63]

spinDrAtl

Thanks for your posts. Very interesting information. As you see other changes, I hope you'll post here in this thread and keep us all up-to-date.

Thanks again.

(Implode-o-Meter update: 23)