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Post by jeffolie on Aug 1, 2007 13:09:34 GMT -6
Moody's Puts a Fork In What's Left The non-agency mortgage business was killed this evening. Most ALT-A paper is now essentially being rated as "subprime", with huge increases in overcollateralization and such required. ""Actual performance of weaker Alt-A loans has in many cases been comparable to stronger subprime performance, signaling that underwriting standards were likely closer to subprime guidelines," said Marjan Riggi, Moody's senior credit officer, "Absent strong compensating factors, we will model these loans as subprime loans."" The short answer to "what will this do" is that it is going to destroy most of what is left of the CDO mortgage marketplace by forcing spreads high enough that you'll think you took out a credit card loan to fund your mortgage. Effectively, the market has spoken. 30% of all mortgage activity in the US, based on 2006/early 07 levels - has just been shut down. Nobody writing other-than-agency paper will be untouched by this. Even presumed "reasonably safe" big lenders such as Countrywide are going to get severely roached, and the ALT-A "boutique" lenders will simply be taken out and shot. market-ticker.denninger.net/
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Post by jeffolie on Aug 1, 2007 14:02:21 GMT -6
Alt-A: No Bid? Yesterday I received an excerpt from a Wells Fargo notice to mortgage brokers suggesting their Alt-A programs were "discontinued until further notice": "Due to the appetite and demand for this product in the secondary market, we are not able to obtain pricing from our investors." Now, on the Broker's Outpost (hat tip Cal): Due to Current market conditions National City is making the following changes effective immediately: All Expanded Criteria Products/Alt A - No New Registrations and No New Locks calculatedrisk.blogspot.com/
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Post by jeffolie on Aug 1, 2007 16:05:16 GMT -6
Smackdown for premier mortgage fund BOND BIG IN TROUBLE By RODDY BOYD August 1, 2007 -- A well-known New York bond manager is teetering on the brink of collapse, which could be bad news for the two mortgage insurance companies backing it. Credit Based Asset Servicing and Securitization, better known as C-Bass on Wall Street, announced that $260 million worth of margin calls "have adversely affected liquidity." This has forced the mortgage- and asset-backed bond player to pursue "all options," including seeking another investor. The news was a sharp blow to C-Bass' two outside investors, mortgage insurers MGIC and Radian Group, which later said their combined $1 billion stake in the company may be worthless. The announcement came after lenders to both companies demanded that they put up additional collateral, given the collapse in C-Bass's primary markets. MGIC is in the process of buying Radian. A C-Bass spokeswoman did not return a call. C-Bass' reputation among Wall Street's trading desks has been as a conservative and savvy manager of some of the riskiest residential mortgage pools. While the $930 million C-Bass bond portfolio had modest leverage of only two times its capital base, The Post has learned that its leverage in managing a portfolio of collateralized debt obligations - bonds created from other bonds - was anything but conservative. A senior Wall Streeter who oversaw loans to C-Bass said its portfolio of CDOs used leverage of between five times and eight times the underlying capital. As many sectors of the bond market collapsed in value, investment banks demanded more collateral to keep loans open for the CDOs. While its credit default swap hedges might have provided some protection, it could not offset the increasing margin demands. www.nypost.com/seven/08012007/business/a_hook_catches_c_bass_business_roddy_boyd.htm
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Post by jeffolie on Aug 1, 2007 16:12:48 GMT -6
Harvard lost $350 mln in Sowood investment: report Wed Aug 1, 2007 6:43AM EDT NEW YORK (Reuters) - Harvard University lost about $350 million in the past month through an investment in hedge fund Sowood Capital Management, the Wall Street Journal reported on its Web site on Wednesday. www.reuters.com/article/ousiv/idUSN0129254420070801
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