I wasted some money on options yet the short side cranks out dollars like an ATM. Thank you Merrill:
Shares of Mortgage Lenders Plummet on Merrill Lynch's $7.9 Billion Charge
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CFC Option Arms Update:
$325 billion of these loans will default
Countrywide ... being forced to hold on to more loans
Washington Mutual recognized $706 million in uncollected interest
major option-ARM lender, IndyMac Bancorp Inc., has been even harder hit
CFC, IMB, WM:
Countrywide falls to 4 1/2 year low on option ARM concerns
By Alistair Barr
Last Update: 11:37 AM ET Oct 24, 2007
SAN FRANCISCO (MarketWatch) -- Countrywide Financial Corp. (CFC 13.83, -1.22, -8.1%) shares fell more than 9% to a 4 1/2 year low on Wednesday after the Wall Street Journal reported that delinquencies on a type of prime mortgage originated by the company are rising rapidly. Option adjustable-rate mortgages, or option ARMs, give borrowers a range of repayment choices, including some that allow people to pay none of the principal and only part of the interest due each month. That choice tacks on more money to the total size of the loan, a process known as negative amortization. UBS AG (UBS 53.55, -1.46, -2.6%) prepared an analysis for the WSJ showing that 3.55% of option ARMs originated by Countrywide in 2006 and re-packaged into mortgage-backed securities are at least 60 days past due, the newspaper said. That compares with an average option-ARM delinquency rate of 2.56% for the industry, the WSJ noted. Countrywide shares fell 9.3% to $13.65 during morning trading on Wednesday. The stock touched a low of $13.47 earlier in the day. That's the lowest level since March 2003
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See how bad it is?
In total Countrywide's plan would reach out to about 82,000 borrowers for some kind of relief.
Subprime mortgages -- those made to people with poor credit histories -- have become a problem for the global economy. As people who took out subprime mortgages from 2005 through the first half of 2007 defaulted at increasing rates, bonds backed by those mortgages began to lose value.
More than 50 mortgage lenders have gone out of business this year. A seizure in the global credit markets precipitated by the mortgage crunch has led a consortium of banks to propose a fund of up to $100 billion to buy distressed assets.
So far this year, Countrywide has completed about 20,000 loan modifications -- a figure that represents less than 5 percent of the more than 500,000 loans the lender reports were behind in payments as of last month.
The figure amounts to about 24 percent of the roughly 82,000 loans the company said were in foreclosure as of September.
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REPEAT: The Q4 2006 Alt-A production has a 30-day delinquency of 10.13% (this needs to be compared to the total pool standing at 5.40%).
In Q3 the corresponding number was 8.40%. In Q1 when all was well the number was under 3%. |
