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Mortgage debt hit by HSBC sub-prime default news
http://www.marketwatch.com/news/story/mortgage-backed-securities-sell-off-after/story.aspx?guid=%7B9428DE45%2D66AB%2D49CB%2DBDB5%2DA5FC63F64724%7D
Mortgage debt hit by HSBC sub-prime default news
By Leslie Wines, MarketWatch
Last Update: 3:06 PM ET Feb 8, 2007
NEW YORK (MarketWatch) -- News from HSBC Holdings and New Century Financial of an increase in sub-prime mortgage defaults sparked heavy selling of some types of mortgage-linked securities.
There were also reports of heavy selling of home-equity collateralized debt obligations, traders said. These are structured finance products, similar to a mutual fund, in which owners buy a stake in a pool of mortgages or home-equity loan products.
Rod Dubitsky, a fixed-income analyst at Credit Suisse, wrote in a research note that his agency is reviewing for possible downgrades 24 asset-backed securities that were created from sub-prime home-equity deals in 2006, a vintage year for such deals.
Late Wednesday New Century Financial Corp. warned that its total loan production for 2007 will fall short of expectations. The company said it now expects loan production to be 20% below 2006 levels. Previously, New Century had forecast that it would be flat for 2007.
Kathleen Shanley, a GimmeCredit analyst, noted that HSBC's problems are much worse than it expected a few months ago, but said that the bank is large and diverse which gives it "a strong base of earnings to support provisioning."
The developments reignited a debate as to the extent to which deteriorating conditions in the housing market are spilling over into the financial services industry and the broader economy.
New York University economist Nouriel Roubini in his blog said the rate of sub-prime defaults and foreclosures is rapidly increasing.
"The number of sub-prime lenders going belly up increases every week and even those big ones that have not closed shop are showing increasing signs of losses, retrenchment and/or willingness to sell their operations," he wrote.
"The political storm over 'predatory lending' is gaining strength," according to Roubini. "The risk of serious litigation and class action lawsuits over predatory lending is increasing."
http://www.marketwatch.com/news/story/mortgage-backed-securities-sell-off-after/story.aspx?guid=%7B9428DE45%2D66AB%2D49CB%2DBDB5%2DA5FC63F64724%7D
Mortgage debt hit by HSBC sub-prime default news
By Leslie Wines, MarketWatch
Last Update: 3:06 PM ET Feb 8, 2007
NEW YORK (MarketWatch) -- News from HSBC Holdings and New Century Financial of an increase in sub-prime mortgage defaults sparked heavy selling of some types of mortgage-linked securities.
There were also reports of heavy selling of home-equity collateralized debt obligations, traders said. These are structured finance products, similar to a mutual fund, in which owners buy a stake in a pool of mortgages or home-equity loan products.
Rod Dubitsky, a fixed-income analyst at Credit Suisse, wrote in a research note that his agency is reviewing for possible downgrades 24 asset-backed securities that were created from sub-prime home-equity deals in 2006, a vintage year for such deals.
Late Wednesday New Century Financial Corp. warned that its total loan production for 2007 will fall short of expectations. The company said it now expects loan production to be 20% below 2006 levels. Previously, New Century had forecast that it would be flat for 2007.
Kathleen Shanley, a GimmeCredit analyst, noted that HSBC's problems are much worse than it expected a few months ago, but said that the bank is large and diverse which gives it "a strong base of earnings to support provisioning."
The developments reignited a debate as to the extent to which deteriorating conditions in the housing market are spilling over into the financial services industry and the broader economy.
New York University economist Nouriel Roubini in his blog said the rate of sub-prime defaults and foreclosures is rapidly increasing.
"The number of sub-prime lenders going belly up increases every week and even those big ones that have not closed shop are showing increasing signs of losses, retrenchment and/or willingness to sell their operations," he wrote.
"The political storm over 'predatory lending' is gaining strength," according to Roubini. "The risk of serious litigation and class action lawsuits over predatory lending is increasing."