Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: John Pitera who wrote (8086)	8/7/2007 1:55:40 AM
From: Hawkmoon	Read Replies (1) \| Respond to of 33421

And executives at Fannie Mae, the government-sponsored entity that along with Freddie Mac provides funding for home loans, asked the companies' government overseer to raise the maximum amount of home mortgages and related securities Fannie can hold in its investment portfolio. The goal would be to boost demand for mortgages in general, proponents of the idea said. Boost demand for mortgages?.. or Make Fannie Mae up to be the buyer of last resort for mortgage loans being dumped by the commerical banks? It's interesting that the 10 year bond is sub-5%, but we're seeing mortgage rates fluctuating so severely last week that it would seem that 10 year rates decreasing would put a bid under mortgage rates (to decrease as well). I'm not much of a bond person so I really don't fully understand the mechanics of how the government, commercial, and mortgage debt markets intertwine. But I have to believe that someone dumping mortgage debt in exchange for lower yielding T-bills is a situation the Fed must be concerned about. And eventually this disparity has to be resolved by higher T-bill rates caused by people selling to buy higher yielding mortgage debt. Does Fannie Mae stand to make a killing from being the buyer of last resort in the mortgage markets? Hawk

To: John Pitera who wrote (8086)	8/7/2007 3:22:29 PM
From: John Pitera	Respond to of 33421

Slowdown restricts access to home loans Tue, Aug 7 2007, 18:48 GMT afxnews.com NEW YORK (AP) - A mortgage industry in turmoil is taking a variety of home loans off the shelf, meaning people with bad credit or who need flexible terms will end up paying more -- or in some cases not be able to obtain one at all. Two of the country's biggest home lenders -- American Home Mortgage Investment Corp. and New Century Financial Corp. -- went bankrupt this year. On Tuesday HomeBanc Corp. said it will not issue any more loans, and Impac Mortgage Holdings Inc. shut down a type of loan called "alt-A" for people with limited documentation or slight credit issues. Across the country, lenders large and small are closing their doors, and in some cases failing to meet commitments they already made to fund loans. "Every day I hear about a number of lenders that are reducing their products," said George Hanzimanolis, president of the National Association of Mortgage Brokers. "It is going to take a while before the dust settles." Stocks of many surviving lenders are at multiyear lows, and it is common to find shares in the industry that have lost 90 percent of their value in the past six months, or even weeks. The shocks to the industry are siphoning lenders and cash away from the market, which reduces competition and restricts people's access to home loans. Hanzimanolis said lenders have raised the minimum credit score that qualifies for financing. Most lenders now require bigger down payments, he said, and are eliminating exotic loans or making them more difficult to qualify for. The silver lining is that people with good credit who can document their income have the same access to home loans as they did a year ago. Richard Belling, president and chief executive of Community Financial Group Mortgage, said his bank has not scaled back its lending. The Grafton, Wis.-based lender does not issue "subprime" loans, or loans to people with checkered credit histories, and Belling said the bank's prime mortgage products "are still pretty much as available as they have always been." The reason marginal borrowers are being cut off from credit or being charged a lot more, while the market for "vanilla" mortgages is unscathed, stems from the buckling of a multitrillion dollar industry hatched on Wall Street. The market for investments backed by mortgage debt -- including bonds backed by home loans and a complex, risk-splicing security known as a collateralized debt obligation -- has exploded in the past few years. Investors bought more than *$2 trillion in mortgage-backed securities last year, according to the Securities Industry and Financial Markets Association. Issuance of mortgage-backed securities in the past five years was more than double the issuance in the preceding five years. With lenders accessing all that cash and competing for business, many eased their standards. By funneling so much cash into the industry, these financing markets encouraged lenders to offer a slew of exotic loans that stretched what had been the limits of past lending standards. Now, snakebit by a cold housing market and a breakdown in credit quality, these financing markets are in shock.* Prices for bonds backed by mortgage debt have tumbled, and there are few if any buyers for CDOs. "It is pretty bad," said Joyce DeLucca, founder and managing principal at Kingsland Capital, which manages $2 billion in low-grade assets and credit vehicles. "In many cases, you have the complete absence of buyers. ... The demand for the assets has kind of disappeared from the market." The difference between lenders that are closing down and banks that continue to offer loans at the same prices comes down to whether the lender relies upon Wall Street for financing. Banks that raise their own capital are surviving. Because of the turmoil in the credit markets, lenders that rely on investment banks are being cut off. "We have already seen quite a retrenchment in the availability of mortgages for subprime borrowers," said Sal Guatieri, senior economist at BMO Capital Markets. "There certainly will be less funds available because investors are pulling back. ... Suffice to say it will be increasingly difficult to get a mortgage at a fairly low rate unless you have pristine credit ratings."