A hedge fund whose identity we know is having subprime-related problems similar to Bear Stearns, oneveteran investment banking source told us. We are not releasing the name of the fund until we can confirm moreinformation about the fund and its problems. Stay tuned. Meanwhile, several sources tell us that the CDO (collateralizeddebt obligations) market is in serious trouble. CDOs that invested in subprime assets are being hammered. "Mostof these are held by insurance companies and foreign accounts," said one banker, requesting anonymity...
If you think a near-term rate cut by the Federal Reserve is in the cards -- a rate cut that would aidmortgages/housing -- think again. Some 20 or so prominent economists recently surveyed by Securities Industryand Financial Markets Association, believe short-term rates will hold steady at 5.25% for the next seven quarters.Some of these same economists also believe oil is going to be at $50 a barrel next year. (At press time oil wasat $70 a barrel.) I would venture that a few probably think the Yankees will be in the World Series...
On Friday morning the Federal Deposit Insurance Corp., and other banking regulators did their best tooutlaw 'stated-income' and 'reduced documentation' loans by telling lenders that they should not fund these productsunless "there are documented mitigating factors that clearly minimize the need for verification of a borrower'srepayment capacity." The Mortgage Bankers Association immediately issued a statement saying, "Thisis a strong statement that will help curb abuses, but will likely also constrain consumer credit choices."MBA wants Congress to quickly pass FHA modernization. FHA, of course, is the government's "subprime"program which means when the loan goes south Uncle Sam bleeds red ink, not private investors. Then again, sincethe private sector has so screwed up the market, we might as well give it back to Uncle...
With the subprime market still in a tailspin, good old-fashioned private mortgage insurance is looking good.According to a new report issued by Friedman Billings Ramsey, "Mortgage insurers witnessed anotherstrong month of insurance-in-force growth (+2.2% to $712B)." FBR notes, however, that cure rates continueto deteriorate (which is not surprising)...
IN CASE YOU MISSED IT: The mortgage division of H&R Block (of which subprime giant OptionOne Mortgage is the largest piece) lost $808 million for the fiscal year ending April 30. The loss figure includespreviously announced impairment charges, the writedown of residuals, loss provisions on mortgages and other items.)The previous year the unit earned $192 million. Option One is slated for sale to Cerberus Capital, a hedgefund. In related news, Richard Breeden, a former chairman of the Securities and Exchange Commission,this past week said he plans to seek three seats on H&R Block's board, citing his disappointment with the taxgiant's financial performance. H&RB's "efforts to diversify into activities including subprime mortgagelending, securities brokerage and banking have resulted in substantial lost shareholder value," Breeden saidin a statement...
Green Tree Servicing -- which is owned (more or less) by a handful of hedge funds including Cerberusand Fortress Investment Group -- is being sold to another hedge fund: Centerbridge Partners LP. GreenTree Servicing represents the remnants of the Conseco Finance Corp., which last decade rode the manufacturedhousing boom up -- and then down. The manufactured market is still in the tank...
The reverse mortgage market continues to look up. According to the Reverse Mortgage Lenders Association,in 2006, some 76,351 'Home Equity Conversion Mortgages' (the most common reverse mortgage out there) were insuredby the FHA compared to 43,131 in 2005, a gain of 77%...
Jumbo loans originated in 2006 are experiencing an "uptick" in delinquencies, according to a new reportissued by Standard & Poor's. The overall delinquency rate on prime '06 jumbo loans is 2.2% which ishigher than the rate for jumbos funded from 2000 to 2005. Still, S&P says the overall losses will be "negligible"...
Sandler O'Neill's preview on Washington Mutual's 2Q earnings: "The Home Loans Group willbe a key focus in the quarter. We are expecting a narrowing of spreads in the subprime business and a reductionin MSR hedging expenses. We would expect the subprime business to be closer to break-even in the quarter, withprofitability in the other segments of the portfolio. We continue to believe production volumes will be down byan additional 12% - 14% in 2007, versus a 21% decline in 2006"...
Former MBA chief Regina Lowrie is back in the biz. Ms. Lowrie will manage Vision Mortgage Capital,a new mortgage banking company whose goal (according to its press release) is "dedicated to meeting America'semerging housing and changing demographic needs." VMC is owned by American Home Bank of Pennsylvania...
MORTGAGE PEOPLE: American Brokers Conduit, the wholesale lending division of American Home Mortgage,named Bruce Madden senior vice president in charge of direct lending channels. Lenders One,a cooperative of independent mortgage bankers, appointed Drew Schindewolf its new secondary marketing manager.The National Association of Mortgage Brokers elected George Hanzimanolis its new annual president.Mr. Hanzimanolis is president of Bankers First Mortgage of Tannersville, Penn.
DATA NOTICE: The first quarter edition of NMN's Quarterly Data Report is now available-- as is the 1Q issue of the Alternative Products Quarterly Data Report. Find out which three subprime shopsmanaged to grow production in the first quarter. Exclusive research conducted by NMN for the QDR revealsthat lenders funded just $88 billion in subprime mortgages in 1Q. For more information on the QDR and AP-QDRemail:
