Tuesday, Mar 13, 2007
Here we go! Enron 2! Hold onto your hats!
BBC: US probes sub-prime mortgage firm
US markets regulator the Securities & Exchange Commission is investigating troubled sub-prime mortgage lender New Century, the firm has revealed.
New Century has stopped making loans and its shares have tumbled, with some analysts now predicting bankruptcy.
The firm also said it had received a grand jury subpoena for documents.
Posted by tyrellcorporation @ 04:52 PM (148 views) Add Comment
7 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. tyrellcorporation said...
Nor entirely sure why the Dow is tumbling but it could be because of this!
2. tyrellcorporation said...
I wonder how exposed Barclays is as it's mentioned as one of the main creditors. I doubt they'll have their Bond-villain style castle reposessed though!
3. Sam said...
it's only down by 1% but the biggest loser is Chase.
4. Cstanhope707 said...
We are heading for the Next Great Depression, eventually everyone will be paying so much just to keep up with the mortgage payments that there will be no money for other Goods and Services.
I hope when it happens that a certain shabby Tabloid goes to the wall.
5. This comment has been removed as it was found to be in breach of our Blog Policies.
6. Layersoftheonion said...
The issue with the US sub-prime housing market is threefold. First is the enormous debt that has been created by providing loans on over priced property to people who probably work in MacDonalds (and I don't mean that in an arrogant way) and saw a way to buy in and make a quick buck as property prices continued to rise. BUT, on average people lied about income and although they could probably make minimum payments based on virtually zero interest rates, they certainly couldn't when their payments doubled due to the 18 consecutive qtr interest rate rise, thanks to Greenspan.
Second pillar to the house of cards is the way that this debt, that no-one in their right mind would purchase from said lenders, has, thanks to the 'innovative' minds on Wallstreet been 'securitised', ie carved up, mixed with other lending obligation loans, and wrapped in still more debt instruments and then passed onto the market to be bought as a 'product': also know as Derivatives.
So now just about everybody from the US to Timbuktu has some risk to these non-performing loans. So, can this pass-the-passel WMD be negated by enough Global liquidity...?
And thirdly, and this is really important. The vast majority of sub-prime loans were funded through ARMS, or adjustable rate mortgages, which means that in H2 of this year, these interest rates for sub-prime loans will reset from bug*er all to at least the current rate plus a few bonus points: say 6-7%.
Bang goes the sub-prime.
Worse, this will also seriously affect the 'regular' mortgage loans as the middle class in the US is being outsourced, closed-down or off-shored. And guess how much debt they have thanks to the illusion of the never-ending ATM that was once your house. Don't forget wages are not moving for anyone except the 'elite' 1%.
Now, how will this affect the UK? Well I've been predicting this for years, but that doesn't mean it will happen. We are truly living in interesting times.
7. Whiteknight said...
Unfortunately your wonderings are probably shared by the Board of Barclays on down.
They will probably know in a few months time.
How many times do we have to watch the same movie?
Quite a few obviously.
The people in charge of lending policy with a direct responsibility for bank stability need to watch the Act where the Enron executives went to jail a little more closely. ( and by the way... resigning early and taking the winnings won't get you far enough way .. .. watch the film again).
Also, lets start to stop calling this a problem with sub-prime. Lending (AND borrowing .. lets not foget that) standards over the last 5 years at a minimum have been a shocking affair.
In addition remember the other factor in rate decisions; defence of currency. Its no use responding to a bit of weakness by reducing rates if everybody else finally decides to blow off your currency. In such circumstances as i recall - rates move sharply higher.
Other countries are likely to demand to know shortly what they are getting in return for a transfer of a goods at current Sterling strength. They probably don't all want to live in our houses. Then a problem ensues.
I am bored of City reports that talk of rate rises if things are getting a little hot and rate reductions if things are cooling. At the end of the day you cant do this excessively for ever.