Subprime Market's Sinking Fortunes

Dankdude · #1 02-19-2007, 08:20 AM

Is a blowout taking shape in the impaired-credit mortgage market? Could lax underwriting standards during the housing boom years -- no verification of applicants' incomes or assets, low or no down payments, and big mortgages to people already saddled with heavy consumer debt -- finally be coming home to roost?

The omens are unmistakable:

Delinquencies in the $1.3 trillion impaired-credit mortgage market hit 12.6 percent in the latest quarter, up from 11.7 percent. Delinquencies exceeded 13 percent among borrowers with subprime adjustable-rate loans.

Some of the companies that make or invest in subprime mortgages are themselves facing financial distress, and some have shut their doors or filed for bankruptcy protection. HSBC Holdings, Europe's largest bank and a major subprime lender in this country, shocked Wall Street recently by announcing that home-loan delinquencies have gotten so bad that it has set aside $10.6 billion to cover potential losses.

New Century Financial, a California-based subprime lender, saw its stock plunge 36 percent on Feb. 8 when it announced that "buybacks" of delinquent loans have been more numerous, and more costly, than anticipated. Subprime lenders are required by Wall Street bond investors to repurchase loans that go into serious default early in their terms, suggesting poor underwriting, bad appraisals or other issues.

Ownit Mortgage Solutions, another high-profile California subprime mortgage lender, abruptly went out of business when buyback demands reached a reported $100 million. Ownit's chief executive, William D. Dallas, acknowledged problems in underwriting but also blamed bond investors' voracious demands for high-yielding no-income-verification loans.

Dozens of smaller subprime originators have ceased operations or are scaling back new lending. One of the mortgage industry's top executives, Angelo Mozilo, chief executive of Countrywide Financial, was quoted as saying: "There's probably 40 or 50 [subprime loan originators] a day throughout the country going down in one form or another. And I expect that to continue throughout the year."

What's going on here? At a recent Senate hearing, a leading consumer-protection advocate, Martin Eakes, chief executive of the Center for Responsible Lending, called the subprime market "a quiet but devastating disaster."

The "ultimate effects are very much like Hurricane Katrina," he said, but "the difference is that this disaster . . . is occurring every single day across the country, house by house and neighborhood by neighborhood."

Eakes's organization published a study last month that estimated that 2.2 million overextended subprime mortgage borrowers will lose their homes to foreclosure -- a projection hotly disputed by the mortgage industry. Eakes told the Senate Banking, Housing and Urban Affairs Committee that subprime lenders have "virtually guaranteed" high levels of delinquency and foreclosures by offering borrowers excessively risky loans with teaser rates and low payments for the initial two or three years that later explode into sharply higher payments.

Lenders also have allowed unqualified borrowers to merely "state" -- not verify or document -- their incomes, putting large numbers of them into loans they should never have been granted, Eakes said. He quoted industry research that found that 90 percent of stated-income mortgage applicants "had inflated incomes compared to IRS documents" and that 60 percent of them exaggerated their incomes by 50 percent or more.

Representatives of the lending industry challenged Eakes's analysis of rising subprime defaults and told the Senate committee that the real reasons for homeowner defaults are unanticipated economic difficulties such as job loss, income curtailment, illness, high consumer debt loads and marital problems.

Douglas G. Duncan, chief economist of the Mortgage Bankers Association, challenged the idea that "delinquencies are at crisis levels" or that unusually high numbers of borrowers, subprime or otherwise, are losing their houses to foreclosure. In mid-2002, for instance, subprime delinquencies exceeded 14 percent, then fell to just above 10 percent in 2004 and 2005, and have risen since then, Duncan said.

Whichever perspective you prefer, Eakes's or Duncan's, this much you can be certain about:

? With major players such as HSBC and New Century taking financial hits, the entire subprime industry is likely to tighten underwriting standards and throttle back on the highest-risk loans. Home buyers with marginal or poor credit are likely to be quoted even higher rates and fees than they would otherwise. Look for big cutbacks on the availability of no-documentation loans for subprime applicants.

? Congress, with a new Democratic majority in charge, is certain to push for tougher standards on loans that combine multiple layers of risk -- low down payments, limited documentation and the potential for hefty payment increases.

? Consumer lawsuits against lenders with high early default rates on high-cost subprime mortgages are almost guaranteed. Likely allegations: Loan originators steered borrowers into inappropriate loans, didn't explain how they worked and walked away with fat fees in the process.

ViRedd · #2 02-19-2007, 09:29 AM

Gee, thanks for the good news. It really made my day.

Vi

medicineman · #3 02-19-2007, 10:38 AM

Quote:

Originally Posted by ViRedd

Gee, thanks for the good news. It really made my day.

Vi

I'll bet. You can buy up all those foreclosed properties for a song, and turn them for a huge profit, Yea yea yea! Who cares about the poor suckers that lost their homes.

dankciti · #4 02-19-2007, 11:37 AM

hey med ure in vegas and last i checked there are what a billion new &empty houses out there in the suburb valleys of track homes and suburbanite living.... ackk!

i hope your in a nice ranch style property with lots of sqaure footage and a big electric allowance.

i swear 30%is casino workers 30%consrtruction workers 30%strippers/hookers 10% retired ppl that shouldnt be driving to thebuffet or palace sation
\
miami without a beach and shitty coke.

medicineman · #5 02-19-2007, 02:35 PM

Quote:

Originally Posted by dankciti

hey med ure in vegas and last i checked there are what a billion new &empty houses out there in the suburb valleys of track homes and suburbanite living.... ackk!

i hope your in a nice ranch style property with lots of sqaure footage and a big electric allowance.

i swear 30%is casino workers 30%consrtruction workers 30%strippers/hookers 10% retired ppl that shouldnt be driving to thebuffet or palace sation
\
miami without a beach and shitty coke.

Put me in the 10%, and your right, I shouldn't be driving to the Buffets, In fact I dont but once or twice a year. My neighbor works for Bellagios, and gives us free Buffet tickets every once in a while, then we go, but generally we stay home or go to a local restaurant, I like Mexican.

ViRedd · #6 02-20-2007, 10:40 AM

Quote:

Originally Posted by medicineman

I'll bet. You can buy up all those foreclosed properties for a song, and turn them for a huge profit, Yea yea yea! Who cares about the poor suckers that lost their homes.

And here again you speak of what you know nothing about ... and that is personal responsibility. Most of the forclosures we are seeing are due to people who got into properties with NOTHING down, right at the peak of the market. Not only did they get in with nothing down, many lied on their loan applications and got loans through crooked loan brokers. Those "homeowners" and crooked brokers are shaking in their boots right about now because the FBI is getting involved. You cannot defraud federally charted savings and loans and expect to skate free when you default on the loan by leaving the lenders holding the bag. That is against federal law.

Med ... its nothing other than more of the same old "Someone else owes me a living" bullshit.

Vi

medicineman · #7 02-20-2007, 05:35 PM

Med ... its nothing other than more of the same old "Someone else owes me a living" bullshit.
So prove that I said I expect someone else owes me a living, this is just more of your demeaning bullshit. Because I want a fair shake for all, you assume I want someone to give me money. I think you are just trying to push my buttons, trying to get me to go off on you so you can build a case for removing me from the site. Thereby leaving the field wide open for your right wing bullshit and Democrat bashing. You've turned the corner into Name calling I see, well I'm probably better at that than you so be prepared for reciprocation. I realize that you are a predator, but my nazi friend, I am not your lay down and die prey. I think you'll find me a competent enemy, so if this is the path you choose, then so be it. Maybe I should start by telling all my salesmen experiences, lying bastards all. If someone has to sell you something, you didn't need it in the first place, and a salesman is just another word for thief. So I guess we can assume that you are really a thief. You accuse the Taxman of being a thief, but in reality it is you that has been stealing from every client you've ever had. A salesman is nothing more than a bullshitter that wants your money, and most are egomaniacs, Dickheads all. They get off on conning the perspective buyer into buying something he never wanted in the first place and then brag to their friends how dumb the mark was and how smart they are, assholes all. What is 3% of a million bucks for 10-20 hours work, fucking thief! Honest people have to work 6 mos. for that kind of money

Indie · #8 02-20-2007, 06:23 PM

Quote:

Originally Posted by medicineman

[COLOR=\\"#0000ff\\"]Med ... its nothing other than more of the same old "Someone else owes me a living" bullshit.[/color]
[COLOR=\\"darkgreen\\"]So prove that I said I expect someone else owes me a living, this is just more of your demeaning bullshit. Because I want a fair shake for all, you assume I want someone to give me money. I think you are just trying to push my buttons, trying to get me to go off on you so you can build a case for removing me from the site. Thereby leaving the field wide open for your right wing bullshit and Democrat bashing. You\\\'ve turned the corner into Name calling I see, well I\\\'m probably better at that than you so be prepared for reciprocation. I realize that you are a predator, but my nazi friend, I am not your lay down and die prey. I think you\\\'ll find me a competent enemy, so if this is the path you choose, then so be it. Maybe I should start by telling all my salesmen experiences, lying bastards all. If someone has to sell you something, you didn\\\'t need it in the first place, and a salesman is just another word for thief. So I guess we can assume that you are really a thief. You accuse the Taxman of being a thief, but in reality it is you that has been stealing from every client you\\\'ve ever had. A salesman is nothing more than a bullshitter that wants your money, and most are egomaniacs, Dickheads all. They get off on conning the perspective buyer into buying something he never wanted in the first place and then brag to their friends how dumb the mark was and how smart they are, assholes all. What is 3% of a million bucks for 10-20 hours work, fucking thief! Honest people have to work 6 mos. for that kind of money[/color]

I get it, u want to be everybodys babysitter. Take from the rich give to the poor right? It should say, take from the producers and give to the non producers. If u\\\'r not reponsible enough to say no, then shame on u, not the salesman. I am not on the side of the salesman by no means, but they got kids to feed 2. u\\\'r taking food off their plate. Nobody want\\\'s to accept personal responsibility for what they do. I screwed up...... so what ,let the producers pay for it, cuz I am a peice of shit. Reality is a hard thing to accecpt for some. Indie.

ViRedd · #9 02-20-2007, 06:40 PM

"So prove that I said I expect someone else owes me a living, this is just more of your demeaning bullshit"

Your kidding, right? You have posted nothing from the beginning except class warfare bullshit. Its always the rich must pay for the poor bullshit. Its always the rich are assholes, management people are

es, corporations are evil, achievment is something to be ashamed of and all salesmen are thieves. Your entire political stance has been "Take it from one and give it to another." And to be quite honest with you ... you have one of the most negative attitudes I've ever encountered. If you have ended up in life with less than you think you really deserve, just look in the mirror. That guy in the reflection has been the one who has really fucked you over ... and no one else.

Vi

medicineman · #10 02-20-2007, 08:52 PM

Quote:

Originally Posted by Indie

I get it, u want to be everybodys babysitter. Take from the rich give to the poor right? It should say, take from the producers and give to the non producers. If u\\\'r not reponsible enough to say no, then shame on u, not the salesman. I am not on the side of the salesman by no means, but they got kids to feed 2. u\\\'r taking food off their plate. Nobody want\\\'s to accept personal responsibility for what they do. I screwed up...... so what ,let the producers pay for it, cuz I am a peice of shit. Reality is a hard thing to accecpt for some. Indie.

I guess you don't get it!