Mortgage Crisis Hits Securitizers,
Realtor Forecasts Get a Bit More Real
April 11, 2007 (EIRNS)As the International Monetary Fund's report on world financial stability was forced to warn on April 10, the so-called "U.S. sub-prime mortgage crisis" has definitely now spread beyond sub-primes into "Alt-A" mortgages and jumbo loans, and more importantly, into the mortgage-backed securities market.
Focussing on the illustrative case of American Home Mortgage Investment Corp., numerous wire reports on April 11 described how mortgage lenders outside the "sub-prime concentration" are slowly but steadily being shut out of the mortgage-backed securities market; i.e., banks and funds are not buying these lenders' securities. This shrinkage of another part of the MBS market, is occurring although foreclosures and delinquencies in this area have not gotten near as high as with sub-prime mortgages.
Alt-A lenders which have "taken hits" include American Home Mortgage, whose stock and credit ratings have rapidly been downgraded since Monday; First Horizon National Corp. of Memphis, which is sliding towards a sell-off to another bank; and M&T Bank Corp. Other big ones in the "heavily Alt A" line of fire, include Countrywide (the nation's biggest), ResCap (part of GMAC), EMC Mortgage (part of Bear Stearns), and Washington Mutual, Inc. of Seattle.
Mortgage Bankers Association spokesman Doug Duncan, while downplaying the problems as best he could, acknowledged that mortgage originations (total lending) in 2007 was likely to fall to near $2 trillion, no more than half of the 2003 level. "The fact remains that for some of the riskier products they originate, there's a lack of demand for them."
Even the National Association of Realtors got a bit more real about the crisis, in their new 2007 forecast released April 11. It foreseesthrough glasses still very rose-coloreda drop in existing home sales by 2.2%; a fall of new home sales by 14.2%; and a drop in the median home price nationally by 0.7%. Hardly crediblebut the "just hit bottom and rising again" talk has disappeared.