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| Subject: Re: This debt bubble is about to blow! | |
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Author: Oropan |
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Date Posted: 16:49:25 03/05/07 Mon In reply to: jw 's message, "This debt bubble is about to blow!" on 13:09:52 03/05/07 Mon This will turn out to be not much. The subprime market is but a tiny percent of the total mortage market. In fact, this will probably prove to be the bottom of the real estate market and a good time to buy. $83,000 income and a $190,000 mortage and can't make the payment????? That person needs help but I not sure what kind!!!!!! > Looks like the bill is finally comming due, and our >bubble economy is not prepared to handle it. If the >real estate crash spreads to wall street, look out >below! > >Lenders Take Beating in Subprime Fallout >Monday March 5, 2:25 pm ET >By Joe Bel Bruno, AP Business Writer >Lenders' Stocks Take Beating As Investors, Worried >About Defaults, Flee From Subprime Sector > > >NEW YORK (AP) -- Mounting concerns on Wall Street that >mortgage lenders might be hurt by increasing defaults >and delinquencies sent investors fleeing Monday from >some of the biggest names in the industry. >ADVERTISEMENT > > >The meltdown among lenders that specialize in home >loans to people with weak credit, known in the >industry as subprime lenders, again ravaged stock >prices. Financial institutions from Britain's HSBC >Holdings PLC to subprime leader Countrywide Financial >Corp. sank amid reports of strained portfolios as >loans went bad. > >The latest to rattle the markets was New Century >Financial Corp., the nation's second-largest subprime >lender. The Irvine, Calif.-based company disclosed a >criminal probe into the trading of its securities, and >into the lender's accounting procedures. > >Already beleaguered investors were swift to react. New >Century's shares lost 60 percent on Monday -- wiping >$532 million from its market value. Wall Street, still >wobbly after last week's huge plunge, also punished >the rest of an industry blamed for loosening their >lending standards amid an eroding housing market. > >"We see increasing evidence that this industry is now >in a downward spiral whereby each negative development >fuels additional deterioration in key fundamentals >including origination volume, pricing, credit and most >importantly funding," Stifel Nicolaus analyst >Christopher Brendler said. > >The troubles at New Century had been mounting since >February, when it announced that it lost track of how >severely the loans in its portfolio were losing value. >The company on Friday disclosed it is being >investigated the Securities and Exchange Commission >and the U.S. Attorney for the Central District of >California on its accounting methods and the trading >of its securities ahead of a Feb. 7 earnings >restatement announcement. > >Investors who buy the company's mortgage loans in the >secondary market have been selling the loans back when >borrowers default, New Century said. The company said >that because of accounting errors, it underestimated >how many loans would be resold and how much value >those loans would lose before ending up back in New >Century's portfolio. > >Concerns of a meltdown at New Century include the >possibility it will not be able to meet covenants with >major financial backers, the company said. Subprime >lenders enter into agreements with big banks to >finance their operations. These backers require >subprime lenders meet minimum financial targets, or >face breaching loan agreements that would force banks >to pull out of the deals. > >This dragged down shares of some of the top U.S. banks >and investment banks. > >Morgan Stanley Inc., which had a 5.5 percent stake in >New Century as of Dec. 31, dropped $1.33, or 2 >percent, to $72.03. State Street Corp., with a 3.8 >percent stake, shed 12 cents to $64.96. Citigroup >Inc., with 3.5 percent stake, traded as low as $49.56 >before recovering to post a 27-cent gain, at $50.24. > >Other subprime lenders also tumbled. Countrywide >Financial fell $1.03, or 2.8 percent, to $35.99, and >is down about 14 percent since January. Novastar >Financial Inc. shares plunged $2.17, or 30 percent, to >$5.07, and are down about 40 percent this year. > >Higher U.S. interest rates and a stagnant housing >market began to take their toll on borrowers who had >been relying on the rising value of real-estate >markets to help them refinance their mortgages. > >Last year, 13.5 percent of mortgages originated in the >U.S. were subprime, according to the Mortgage Bankers >Association. This is up from > >2.6 percent in 2000. The subprime market accounted for >about 20 percent, or $600 billion, of the $3 trillion >mortgage market. > >The New Century case is of particular concern because >of fears that trouble in the subprime business could >spread to prime mortgages, causing pain for many more >lenders. Leading those concerns was HSBC, Europe's >largest bank with significant operations in the U.S., >which warned in February its profits would be weaker >because of subprime lending. > >The world's third-largest bank on Monday reported its >highest annual profit of $15.79 billion for 2006. >Bad-debt charges jumped 36 percent to $10.57 billion, >roughly in line with expectations. > >Chief Executive Michael Geoghegan attempted to fend >off criticism that the bank had provided loans in the >United States to people who were not in a position to >pay their debts. > >"This is not trailer park lending," Geoghegan said, >adding that the typical HSBC Finance customer has >average household income of $83,000, is 41 years old, >has two children and a home worth $190,000. "This is >Main Street America." > >Concern about subprime exposure also has spilled into >major U.S. investment houses. Standard & Poor's on >Monday downgraded Lehman Brothers Holdings Inc. and >Merrill Lynch & Co., partly on subprime mortgage woes. >S&P noted that subprime loans are a small piece of the >company's overall assets, but was still concerned >about recent market trends. > >Merrill Lynch fell 73 cents to $81.34, and Lehman rose >9 cents to $72.19. > >Business Writer Jane Wardell contributed to this story >from London. [ Next Thread | Previous Thread | Next Message | Previous Message ] |
| Subject | Author | Date |
| Re: This debt bubble is about to blow! | jw | 20:02:45 03/07/07 Wed |
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