* Report: U.S. Banks To Curb Lending, Call in Existing Loans (NY Sun, June 26th): "Lombard Street Research' global strategist, Charles Dumas: The failed auction of assets seized from one of the Bear Stearns funds by Merrill Lynch… had to be called off after buyers took just $200 million of the $850m mix. "The banks were not prepared to bid over 85% of face value for CDOs rated ‘A' or better…We hear buyers were lobbing bids at just 30%. We don't know what the value of this debt is because the investment banks shut down the market in a cover-up... There is $750 billion of dubious paper out there in the form of CDOs held by banks that have a total capitalization of $850b."
* HUD: Colorado Can Recover From Foreclosure Crisis (Denver Business Journal, June 26th): "U.S. Department of Housing and Urban Development: Colorado's home foreclosures [situation]… still isn't as bad as… in the late 1980s and early 1990s. And because Colorado home owners recovered from that foreclosure crisis, they can recover from this one. So far this year, the percentage of loans in foreclosure in Colorado is roughly 1.4%, compared to 2.75% in 1990… [Though] Colorado's mortgage delinquency rate is up this year, with nearly 4% of such loans past due, it's still below roughly 4.7% nationwide. The last time the state's mortgage delinquency rate outpaced the nation's was in the early '90s."
* Homeownership Ethos And Subprimes (James B. Lockhart in the Washington Times, June 26th): "Fannie Mae (FNM) and Freddie Mac's (FRE) numerous problems in recent years show that since the debt market and rating agencies do not provide effective market discipline, the job of the regulator is even tougher. Putting their size in perspective, FNM and FRE own or guarantee almost 40% of all home mortgages. As of March 31, 2007, the combination of the mortgage-backed securities that they guarantee ($3.1 trillion) and their debt outstanding ($1.6 trillion) totaled $4.7 trillion; not that much smaller than the publicly-held debt of the U.S. of $5.0 trillion."
* Foreclosure Rates Spur Home Ownership Fair (Clayton News Online, June 26th): "Atlanta Regional Commission: Foreclosure rates in the south metro Atlanta region are soaring, particularly in Clayton County. In the year 2000, Clayton County had a foreclosure rate of 1.7%. In 2006, the rate rose to 4.3%, the highest in the 10-county metro region. The rise in the number of foreclosures is attributed in part to a high percentage of loans coming from sub-prime lenders. Sub-prime loans have higher interests rates, meaning that the borrowers pay more in additional interest payments. Clayton County ranked second in the nation with 38.2% of all conventional, home purchase loans coming from sub-prime lenders."
* CDO Market Near Halt Amid Deeper Subprime Worries (Reuters, June 26th): "J.P. Morgan Securities (JPM): Only $3 billion of new high-grade CDOs were marketed to investors in the latest week, down dramatically from just one month ago when the pipeline stood at over $20b. Since that time, $18b of those CDOs have priced. Foreign investors have been the dominant buyers of these exotic debt instruments in recent years, owing to their insatiable demand for yield. A change in foreign taste would be disruptive across many asset classes since this pooling of debt assets, including subprime mortgages, have resulted in a tremendous compression of yield spreads."
* Subprime Crisis Opens Banker, Broker Rift (Reuters.com, June 26th): "The crisis in the U.S. subprime mortgage market has heightened tension between mortgage lenders and brokers who both hope to shape any laws aimed at stamping out dangerous loans. Legislation [pending] requiring more disclosure by mortgage brokers… is likely to widen [the] rift… [In May,] Mortgage Bankers Association Chairman John Robbins… said [mortgage] brokers… need more oversight… In response, National Association of Mortgage Brokers President Harry Dinham said: "Most residential mortgage loans are quickly sold into the secondary market. In fact, most lenders are really just brokering the transaction but afraid or ashamed to admit it."
* Two Ways to Play Mortgage Lenders (The Street, June 25th): "Impac Mortgage Holdings (IMH) is a small-cap mortgage REIT that acquires, originates and sells Alt-A mortgages… A good chunk of Impac's mortgage assets likely will go bad. The [risky] bull case: The worst of times are behind [Impac] because the company has adequately set up loss reserves… [And there's] news of a dividend boost… IndyMac (IMB) is a large-cap mortgage bank [which] profits from buying and selling Alt-A mortgages. Historically, this business represents about 75% of IndyMac's net income, and lately it has been under pressure. Bank of America: We believe that Countrywide (CFC) and IndyMac's credit risk and anticipated increase in future credit losses are not yet reflected in their current stock prices and that their risk/reward profile support our sell rating."
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