while i understand your definition of subprime, lumping a loan portfolio like that of AHM and one like that of NEW into the same "subprime" basket doesn't seem realistic IMHO
even if you call AHM's portfolio subprime by your definition, a FICO score of 710 and an LTV of 70% is many degrees of risk different from a FICO score of 620 and an LTV of 81%, so that's far too wide a grouping to be functional for evaluation
while i think the chances are good that NEW will survive, i sure wouldn't want to bet any of my money on it, because i think even the current housing situation bodes poorly for their portfolio in the short to medium term
on the other hand, i think it would take a severe downturn in the housing market to damage AHM's portfolio
obviously we disagree on where the housing market is going, and perhaps that is the majority of the difference...i think the bulk of the damage to pricing has been done, and while the fact that lenders are tightening their standards will take the lower end buyer out of the market to a large extent, i think all that will do is keep prices in check for the time being...there still seems to be plenty of capital out there, so it may even be that a lot of marginal buyers will be able to buy houses, just with rates and terms that more realistically reflect the risk the lenders are taking
if the economy were to worsen significantly and/or suddenly, then the outlook would change to some degree, but that seems unlikely for the time being
JMHO of course, and like you, i've been wrong before, and likely will again <g>
here's a guy who thinks it's too late to short the subprime lenders...i'm not sure i agree with his calculations of NEW's book value, but he does make some interesting points...note also that on the site that anializer posted, AHM isn't even listed, and resmae, which is at the end of the list, went out of business due to 300M of loans being "put" back to them by merrill...as such, at least in what seem to be the troublesome loans so far, AHM appears to have little or no exposure...at the end of Q4, AHM had a total of just over 200M in loans that were delinquent, and had already fully reserved against all of those loans going bad, with a loss severity of 17%, so they appear to be very conservative in their reserves
thestreet.com
as always, time will tell |
