Subprime Burnout Link-o-rama
Chuck Ponzi January 31st, 2007
From the Bradenton Herald:
JPMorgan Chief Executive James Dimon said in an investor presentation Tuesday that the company has sold off most of the mortgage loans it made last year to people with weak credit histories. He said mortgages are the one area of subprime lending where “we really see something taking place that looks like a recession.”
From Reuters:
“We haven’t seen the turnaround yet,” Brad Morrice, chief executive of Irvine, California-based New Century, told investors late on Monday. “The goal is to keep making changes until the early payment default levels are acceptable.”
From Banknet360:
Citing deteriorating performance in the subprime mortgage market, Chase has reduced the volume of mortgages in its subprime portfolio to 65% from 72% in the third quarter.
And from Reuters:
Subprime mortgage lender Fremont Investment and Loan on Monday said it severed ties last quarter with some 8,000 brokers whose loans were responsible for some of the highest delinquency rates in the industry.
Which makes us question: where’s the soft landing? And, where are new buyers going to come from with the reduced amount of credit?
Freemont…
8000 brokers
10 loans per broker
500,000 per loan
Thats a lot of bad loans
8000 brokers?
The subprime burnout is probably happening now that appreciation is non-existent; for one full-year prices have been trending down and the reality is setting in that maybe there is a bubble. Now the question isn’t is there a housing bubble but how long will this “correction” last.
The quality of subprime credit and their respective borrowers is so bad that the thirst for these loans is no longer there. Lenders felt they could mix in bad loans with high quality loans and this mix would filter the bad taste out; kind of like watered down Heineken at a cheap bar. We are starting to see defaults hit portfolios and no longer is real estate a guaranteed proposition. Buyers of subprime loans realize that there is more water in their drink and at this point it is distorting their overall rate of return.
The party is ending.
Dr. Housing Bubble
In Reno, it is getting ugly. Still over 4000 houses, many of them empty, for sale, with less than 500k population. As the flow of people slows from the bay area it will get worse.