Analysis

Investment Banks, Hedge Funds May Implode by August 15th

Written by Timothy Blake on August 04, 2007 under Analysis, Archives

As a torrent of corporate debt hits the market in the weeks ahead, losses could grow for both investment banks and hedge funds, some say. The availability of credit has disappeared, and there are $220 billion of leveraged-buyout loans that need to be financed. One analyst thinks the problem will hit investment banks hard and many more funds be singing the mortgage blues.

Lack of American Savings Accounts Enabled Subprime

Written by Timothy Blake on August 03, 2007 under Analysis, Archives

Americans have little or no savings. When a family needs savings as a fall-back plan there are no savings to speak of. Money must come from other areas. Since 1994 savings as a percentage of disposable income dropped like a rock. See this chart for an alarming look at history. The subprime and predatory lending industries started in full swing by 1994, which flows perfectly with the chart referenced above. For more on this subject refer to our “History of Subprime and Predatory Lending.”

Subordinate Mortgage and HELOCs Will be Hardest Hit

Written by Timothy Blake on August 01, 2007 under Analysis, Archives

The primary risk in the mortgage sector does not exist solely with sub-prime mortgages. Borrowers with low credit scores and previous bankruptcy are charged higher borrowing fees and interest rates over the life of the loan. The lenders expected some foreclosures. Apparently investors expected the word “mortgage” to dissipate the risk of the higher returns on the products.

American Home Mortgage Survival Blues

Written by Timothy Blake on July 31, 2007 under Analysis, Archives

American Home Mortgage is singing the blues today but their issues are not clear at this time. Mortgage Blues reports that American Home Mortgage is not involved in the subprime market. To survive, American Home needs the secondary credit markets to stabilize, so the company can re-sell its loans for a profit. Their shares fell 42% in NYSE trading on July 30.

Mortgage Blues Hit GMAC (ResCap) and Cerberus

Written by Timothy Blake on July 30, 2007 under Analysis, Archives

GMAC today reported that second-quarter net income fell to $293 million from $787 million a year earlier. Its mortgage unit, Residential Capital LLC, had a loss of $254 million, compared with a profit of $548 million a year earlier, because of loans to buyers with poor credit ratings.

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