Thursday, Mar 15, 2007
Better hope you've paid off your mortgage in full
Bloomberg: Subprime Defaults to Soar, Lenders to Fail, Hedge Funds Say
Investors holding mortgage-backed bonds stand to lose $100 billion from defaults on $10 trillion in outstanding home loans, Citigroup Inc. bond analysts said this month. Hedge funds have profited from the rising costs of insuring against defaults and from fears that Wall Street will finance fewer subprime loans, hurting new-home sales and the economy.
Banks ``will shut down their origination platforms,'' and the business of pooling subprime loans into packages of securities ``will all but disappear,'' Paulson said in its letter. ``While the bonds have fallen significantly, we think they have much further to fall.''
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