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 When does Alt-A and Prime hit the fan? (see CFC and WF) View next topic
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bakersfieldbubble
Dyn-o-mite!


Joined: 25 Jan 2007
Posts: 488

When does Alt-A and Prime hit the fan? (see CFC and WF)
PostPosted: Wed Mar 14, 2007 10:29 pm Reply with quoteBack to top

And when it does when will CNBC starting parroting it all day long.

Once this happens will the CFC's and Wells Fargo's of the lending world be implode-o-meter candidates?
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slantedvu
Dud?


Joined: 12 Mar 2007
Posts: 17

Re: When does Alt-A and Prime hit the fan? (see CFC and WF)
PostPosted: Wed Mar 14, 2007 10:49 pm Reply with quoteBack to top

I'd like to know as well so I can buy some appropriately timed puts. CFC was up a bit today.

Others have mentioned keeping on eye on some of the S&Ls that funded loans.
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bdc63
Schumpeter Reincarnate


Joined: 16 Feb 2007
Posts: 4392
Location: Maryland

Re: When does Alt-A and Prime hit the fan? (see CFC and WF)
PostPosted: Thu Mar 15, 2007 1:14 am Reply with quoteBack to top

CNBC is pure rear-view-mirror reporting ... they will report on it after it has already happened.

But to your broader question of when/if does the mess spread beyond subprime, did you see today's article by Peter Schiff titled "From the Subprime to the Ridiculous"? (gotta love that title)

Read it here:
http://news.goldseek.com/EuroC.....899520.php

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qwopzxnm
Flash in the pan


Joined: 09 Feb 2007
Posts: 95
Location: Irvine, CA

Re: When does Alt-A and Prime hit the fan? (see CFC and WF)
PostPosted: Thu Mar 15, 2007 2:56 pm Reply with quoteBack to top

I think it will be fairly soon. Obviously subprime was the first to get hit in a turning market but the same life events (Lose a job, medical bills, credit debt etc.) can also happen to Alt-A and prime borrowers as well. With home values not being too kind to LTVs there's no equity to take out anymore to help cover these events.
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slantedvu
Dud?


Joined: 12 Mar 2007
Posts: 17

Re: When does Alt-A and Prime hit the fan? (see CFC and WF)
PostPosted: Thu Mar 15, 2007 4:38 pm Reply with quoteBack to top

The other subprimer stocks were sent tubmling on big layoffs, delayed earnings reports, etc. I could imagine it would take at least the same to seriously damage CFC. They're climbing today.
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Fraudbuster
Cherry Bomb


Joined: 14 Mar 2007
Posts: 193

Re: When does Alt-A and Prime hit the fan? (see CFC and WF)
PostPosted: Thu Mar 15, 2007 5:48 pm Reply with quoteBack to top

qwopzxnm wrote:
I think it will be fairly soon. Obviously subprime was the first to get hit in a turning market but the same life events (Lose a job, medical bills, credit debt etc.) can also happen to Alt-A and prime borrowers as well. With home values not being too kind to LTVs there's no equity to take out anymore to help cover these events.


Yup.

Remember that the TRUE problem here is not the buyer's credit rating per se, but the TYPE of mortgage used. All of these "exotic" loans are NOT confined to the sub-prime market, but are used in the prime markets, too. If anything, it is only a delayed risk, where the sub-prime loans used a 2 year ARM, and the prime loan used a 5 year ARM. Those prime borrowers are just as susceptable to mortgage payment shock of an ARM, and are also betting that the "real estate values always go UP" mantra is God's Truth (and the last year, as well as the history of past real estate bubbles, has definitively proven that to not be the case). Many got into their McMansion, thinking they would have some time for riding up the appreciation, then bailing out before that ARM came due. Of course, with falling prices and homes sticking on the market for many months, that's a risky strategy, indeed.

Classic bubble dynamics, and the last sucker holding the hot potato is screwed. While the sub-prime lender is more likely to get swept up in a bubble scheme, don't think for one second that the guy with a decent credit FICO is not even MORE primed for getting caught up in this kind of thinking. I've seen MBAs buy into this logic, and the worm is turning.

Also remeber that alot of people with good credit have such, simply becuase they haven't really bought anything yet! My nephew has good FICO score, but I know I wouldn't loan him $10! A strong FICO is not synonymous with good financial sense (whereas a low FICO IS a strong indication of poor financial sense, with a PROVEN record of poor judgement).

But another large element here is mortgage fraud: many of the recent defaults happened when NO mortgage payment was ever made. A 'good faith' borrower will make at least a few payments, but seeing NO payment is a red flag for insider mortgage fraud: this kind of risk is NOT confined to the sub-prime market, either. Identity theft is HUGE, and here's one manifestation of how it has created problems for everyone.

So will this unwinding be confined to the sub-primes? I wouldn't hold my breath....

Despite all of this, the ONLY thing potentially saving companies like CWF and Wells Fargo is that they are not mono-line lenders, i.e. they are diversified into other product lines, not just mortgages (financial services such as business banking/loans, etc). Regardless, the sloppy business practices and poor regulation (not to mention the extravagent lifestyles of the rich and famous in the mortgage business) are coming home to roost.

PS I can't believe how even Angelo's lips seem to be tanned! WTF?
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qwopzxnm
Flash in the pan


Joined: 09 Feb 2007
Posts: 95
Location: Irvine, CA

Re: When does Alt-A and Prime hit the fan? (see CFC and WF)
PostPosted: Thu Mar 15, 2007 8:26 pm Reply with quoteBack to top

I think the fact CWL isn't overreacting and is shifting their products accordingly helps set them up for when the market turns. They are taking up huge market share from banks who are playing very conservative but the question is weather or not they (CWL) can weather the storm and come out on the other side. I personally think they will come out with a gain in market share when everything is said and done but if I could predict the future I wouldn't be working for someone else Laughing
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