Subprime isn’t a major part of the U.S. mortgage market but mounting losses for the lenders in the sector are pushing the whole market around. The biggest percentage loser on the Nasdaq Tuesday is Accredited Home Lenders Holding Co.(LEND).
More than two dozen subprime lenders have quit the industry over the past year. An update from the Mortgage Bankers Association Tuesday, that late payments and foreclosures on U.S. homes reached rose in fourth quarter, is keeping the pressure on.
SeekingAlpha.com carries a report from Credit Suisse analyst Ivy Zelman that forecasts a 20 percent drop in new home sales. Among other views, Torsten Slok, senior economist at Deutsche Bank, tells Reuters that “mortgage delinquencies went up, but it’s not in dangerous territory. If you look at historical levels, we are still below previous peaks hit during the recession of 2001.”
Are you concerned about the impact of the subprime mortgage meltdown? Do you think it has been too easy to get a home loan in recent years? Should the government bring in controls to prevent such lending?
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13 comments so far
With the evidence available presently, the subprime problem is nothing more then a capital market distortion..
- Posted by Thomas KennyOf course it was too easy to get a home loan. If you can not afford to pay back the loan amount with a reasonable portion of your income, credit is too loose. What has been happening here is criminal with both the buyers and lenders gambling with someone elses money. Grandma will have to downgrade from eating catfood to eating crow in her fixed income investments.
- Posted by Anthony FlemingWe already know it was too easy to get a loan, the investors did not properly price to risk and therefore people got loans cheap and easy.
What is maddening for those who recognized it for what is was and chose not to participate is that Washington is proposing a bailout. It is infuriating.
- Posted by Caldo you remember bart litton;;;60’s;;;no different what goes around comes around;;;;what do you expect;;no paper work;;;;give me a loan;;;expect a 5 yr lull in real estate market;;;history shows 3 yrs up 3 yrs down this time the up ran 5 yrs now it will take 5 yrs to come to earth;;bet you i am right
- Posted by leonard chasedI am waiting for the market to fall below 10,000 on the DJIA, so I can enter the market again.
Bear-ly Yours,
- Posted by CraigCraig
Todays 250 pt market meltdown is further proof of a housing-driven recession. More details on my blog at http://infohype.blogspot.com
- Posted by CoreyAsk Greenspan if the Gov’t should bring in controls. He was encouraging buyers to use adjustable rate mortgages (ARM’s) in 2003.
- Posted by Dave CurrieGreed was behind the meteoric rise of subprimed lending and now that the tank is empty they have realized that they forgot to pack a parachute. The subprimes looked great when they were rising at incredible speeds. Unfortunately, the same speed is usually attained on the trip down and it won’t look so good when they collide with the ground… When will Wall Street ever learn?
- Posted by John VeevaertHousing is a basic human need. Speculation in housing is wrong. People are getting what they deserve for buying houses just to flip them. Unfortunately, most people who did that have already removed their profits, and many of the victims of the current meltdown were honestly trying to obtain a permanent home.
We should end housing speculation.
- Posted by Kurt LarsonThere are lenders still operating profitably who avoided irrational pricing, and overly agressive products. They are still in business by running lean and smart. That initial conservitism of these lenders is now paying off dividends, as their employees still have great products to sell, and places to work. To lump ALL subprime lenders into the basket is a negligent mistake. Some are merely reaping what they have sown. Anyone with any serious knowledge or time in the business has seen this coming for years. To simply say subprime should go away is silly.
- Posted by wrthomasThis meltdown has more to do with revolving debt than it does sub prime lending. The fact is sub prime lending is a necessity. Sure the lenders have been lax, but take away the monumental amounts of revolving debt and the current problem is greatly diminished. Sub prime borrowers are sub prime borrowers before they every buy a home. Sub prime lenders merely service this market.
- Posted by MikeWith no credit and low income, I got a 100% mortgage a year ago. Of course, I went in smart and got a fixed rate and picked a location that would have enough growth and demand to outlast the slump. Long story short, the loose credit of ‘06 gave me (a youngster) the head start I needed to get into home ownership earlier in my career than would otherwise have been possible.
Plenty of people abused that opportunity and they will pay for it with foreclosure. I feel bad for the businesses since I personally benefitted from the policies that may drive some to bankruptcy, but they shoulda known the risks of 100% ARMS as well.
- Posted by JohnLoose credit and sub-prime lending? I can’t comment on those, other than to say they probably have good uses. My point was that I don’t think there should be laissez-faire buying and selling of homes just to make a quick buck. It’s bad for society both locally (which we’ve been seeing for 10 years) and nationally (which we’re seeing now).
- Posted by Kurt Larson