Investors

Freddie shocks Wall Street and Fannie not much better

Written by Timothy Blake on November 20, 2007 under Archives, Economic Impact, Investors

Freddie Mac, the nation’s second-largest buyer and guarantor of mortgages, shocked Wall Street by announcing a $2 billion loss for the quarter. As upsetting as that was, Freddie Macwent on to say losses will deepen through 2009, and the company is considering cutting its dividend in half. Fannie Mae is the largest U.S. buyer and guarantor of home loans. Fannie Mae’s profits were down 36 percent in August, with investors asking if losses were greater than the company is reporting.

Status report on subprime, MBS and CDO

Written by Timothy Blake on November 20, 2007 under Archives, Economic Impact, Investors, Lenders

Mortgages classified as subprime provide collateral for $800 billion in securities. At the end of August, about $46 billion in subprime loans, representing 225,000 homes, had defaulted, according to Credit Suisse Group. The number will more than triple to $143 billion by the middle of 2009, said the bank. Total subprime loan defaults will top out at about $270 billion, or 1.52 million homes, in 2010 or later. Teaser rates apparently caused many of the problems. Mortgage-backed securities and collateralized debt obligations containing those securities are falling in price and will continue to slide due to falling home prices, defaults, and general distrust. The issue is not strictly a subprime issue. Here is why:

Federal ruling stops foreclosures as bank can’t prove ownership

Written by Timothy Blake on November 15, 2007 under Archives, Government Positions, Investors, Lawsuits, Risk Management

Pooling of home loans into securities has been going on for decades and helped increase real estate prices in recent years as investors sought higher yields that such mortgage trusts could provide. Some $6.5 trillion of securitized mortgage debt was outstanding at the end of 2006. Mortgages are recorded in the MERS system. It seems the system is causing problems relating to true ownership of the properties.

HSBC, Bear Sterns writedown billions

Written by Timothy Blake on November 14, 2007 under Archives, Economic Impact, Investors, Lenders

HSBC said today it will take $3.2 billion in provisions for credit losses, and Bear Sterns announced a new $1.2 billion writedown. It is interesting to note that Bear Sterns said problems were related to subprime. HSBC said almost the same, but analysts noted that HSBC is shutting down some HFC and Beneficial Finance offices. HFC and Beneficial make unsecured loans and second mortgage loans.

E-Trade Financial shares drop 59 percent

Written by Timothy Blake on November 13, 2007 under Archives, Economic Impact, Investors

E-Trade Financial was singing the mortgage blues on Monday and a rocky weekend pondering how the market would react to bad news. Apparently nobody apppreciated the bad news, and holding mortgage backed securities is still risky. Shares of the online brokerage E-Trade Financial Corp. plunged 59 percent after the company warned late Friday that the deteriorating value of its mortgage-backed securities may force it to take significant writedowns in the fourth quarter.

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