More Housing News
Speaking of housing... shares of NovaStar Financial (NFI) plunged 38% after the subprime mortgage lender said late yesterday it is considering changing its status from a real estate investment trust (REIT) after reporting a $14.4M, or 39 cents per share loss for Q4.
CEO Scott Hartman said that "during the fourth quarter, we experienced a greater level of loan repurchase requests due to early payment defaults than we have historically."
Chief Financial Officer Greg Metz said that "the company expects to see little taxable income over the next four years", do ya think?.
JPMorgan Chase (JPM) and Merrill Lynch (MER) have been hit; the banks are unloading the bad subprime loans they stocked up on in 2005 and 2006, and trying to force mortgage originators to take back the bad loans.
But "all is well" according to the MBA (Mortgage Bankers Association) which claims 35% of homeowners own their homes outright, 47% are in fixed rate loans, leaving 18% of homeowners in adjustable rate products.
Perhaps the MBA as the NRA, has a vested interest in downplaying any potential PR nightmares... Do ya think?
Subprime loans made up 12.75% of the $10.2 trillion mortgage market last year, an increase of 4.25% since 2001, according to Inside Mortgage Finance, a trade publication.
The percentage of ARM and interest only loans originated by prime and subprime lenders in the last 5 years is a staggering 80% in most major markets.
For example: the 2/28 or fixed for 2, variable for 28 comprises up to 80 percent of subprime loans today.
Having been in this business in another life time, I can assure you from first hand empirical experience that underwriting is lax, incomes are "pushed", debts are "shoveled", loan to debt ratios "fluffed" and appraisals "puffed" and that was then...
What is going on today in mortgage origination as opposed to the mid 70's & 80's... Well, lets put it this way, Bush, Chaney, Rumsfeld & I. Lewis "Scooter" Libby make Nixon, Dean, Haldemann & G. Gordon "Will" Liddy look like choirboys...
The problem is not just the percentage of interest only or ARMS that borrowers have been squeezed into, its the percentage of limited or no doc loans that have been portfolioed or packaged and sold by prime and sub prime lenders.
According to figures from sub prime lender Ameriquest, stated income loans fell to 11% of retail production last year, from a high of 19% in 2003. Limited documentation loans increased 4%, to 13% of retail originations.
Full doc loans rose by the same amount 4%, to 76%. If Ameriquest is indicative of sub prime, 25% of all sub prime loans are limited or no doc loans, and rest assured 15 to 20% of all prime loans are limited or no doc as well.
5 of the top 30 sub prime lenders in the last two months have stopped originating loans due to severe losses from loan repurchases.
Over the last 5 months, more than 20 subprime lenders have closed their doors, cut back or sold themselves to bigger companies.
As Napolean Solo said "Interesting Codicil": All along, giving their tacit approval...
Fannie Mae and Freddie Mac are purchasing the senior tranches of MBS (mortgage backed securities) backed by sub prime loans... loud guttural belching sound...
CEO Scott Hartman said that "during the fourth quarter, we experienced a greater level of loan repurchase requests due to early payment defaults than we have historically."
Chief Financial Officer Greg Metz said that "the company expects to see little taxable income over the next four years", do ya think?.
JPMorgan Chase (JPM) and Merrill Lynch (MER) have been hit; the banks are unloading the bad subprime loans they stocked up on in 2005 and 2006, and trying to force mortgage originators to take back the bad loans.
But "all is well" according to the MBA (Mortgage Bankers Association) which claims 35% of homeowners own their homes outright, 47% are in fixed rate loans, leaving 18% of homeowners in adjustable rate products.
Perhaps the MBA as the NRA, has a vested interest in downplaying any potential PR nightmares... Do ya think?
Subprime loans made up 12.75% of the $10.2 trillion mortgage market last year, an increase of 4.25% since 2001, according to Inside Mortgage Finance, a trade publication.
The percentage of ARM and interest only loans originated by prime and subprime lenders in the last 5 years is a staggering 80% in most major markets.
For example: the 2/28 or fixed for 2, variable for 28 comprises up to 80 percent of subprime loans today.
Having been in this business in another life time, I can assure you from first hand empirical experience that underwriting is lax, incomes are "pushed", debts are "shoveled", loan to debt ratios "fluffed" and appraisals "puffed" and that was then...
What is going on today in mortgage origination as opposed to the mid 70's & 80's... Well, lets put it this way, Bush, Chaney, Rumsfeld & I. Lewis "Scooter" Libby make Nixon, Dean, Haldemann & G. Gordon "Will" Liddy look like choirboys...
The problem is not just the percentage of interest only or ARMS that borrowers have been squeezed into, its the percentage of limited or no doc loans that have been portfolioed or packaged and sold by prime and sub prime lenders.
According to figures from sub prime lender Ameriquest, stated income loans fell to 11% of retail production last year, from a high of 19% in 2003. Limited documentation loans increased 4%, to 13% of retail originations.
Full doc loans rose by the same amount 4%, to 76%. If Ameriquest is indicative of sub prime, 25% of all sub prime loans are limited or no doc loans, and rest assured 15 to 20% of all prime loans are limited or no doc as well.
5 of the top 30 sub prime lenders in the last two months have stopped originating loans due to severe losses from loan repurchases.
Over the last 5 months, more than 20 subprime lenders have closed their doors, cut back or sold themselves to bigger companies.
As Napolean Solo said "Interesting Codicil": All along, giving their tacit approval...
Fannie Mae and Freddie Mac are purchasing the senior tranches of MBS (mortgage backed securities) backed by sub prime loans... loud guttural belching sound...
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