Housing Bubble Bursting?

[Greg Bell]

Big bank ..Big Troubles..

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HSBC's record write-off to ruin results
By David Prosser
Published: 05 March 2007

http://www.belfasttelegraph.co.uk/business/article2329310.ece

HSBC, Britain's biggest bank, is today expected to stun the stock market by warning that misadventures in the US mortgage market have forced to it to write off up to $11bn (£5.7bn).

The scale of the write-off is likely to overshadow HSBC's announcement of record profits in 2006.

While HSBC has already warned investors to expect bad news, today's announcement of an $11bn impairment charge to cover the US problems will exceed the most pessimistic of forecasts. The figure represents half the total pre-tax profits earned last year by the bank around its entire global operation, and is higher than the total profits earned by several of its leading UK rivals.

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[Randolph Kinney]

New Century headed for graveyard

http://www.marketwatch.com/news/sto...x?guid={CC3F81FC-1BDE-4410-8B0D-0E4210E07C52}

'Death spiral' envisioned as possibility for subprime lender

NEW YORK (MarketWatch) -- Several analysts agreed Monday that New Century Financial Corp., one of the nation's largest subprime mortgage lenders, likely faces liquidation or bankruptcy following revelations that it's under criminal investigation and in violation of debt covenants with several lenders.

 

[Randolph Kinney]

Another hit on subprime borrowers

http://www.marketwatch.com/news/story/how-one-late-credit-card-payment/story.aspx?guid=%7BA5BC6C3F%2D257F%2D4CB2%2D8839%2DFB193D263173%7D

NEW YORK (MarketWatch) -- If you've ever made a late payment on a credit card, utility bill or car payment, it's not just the late fee you have to worry about. You risk getting stuck with a higher -- if not exorbitant -- interest rate on all your other credit cards.

Plenty of banks issuing credit cards employ the universal default policy. In a 2005 survey (the latest data available) of 45 banks issuing 144 credit cards, 44% of the banks used a universal default clause.

Known as universal default, this common credit-card practice enables a bank to increase a consumer's interest rate if he or she makes late payments on any bills. And the rate jump can be staggering: Advocacy group Consumer Action found that default interest rates can be as high as 35%, while most hover around 30%.

 

[Randolph Kinney]

'Panic' strikes subprime

http://www.marketwatch.com/news/sto...x?guid={75E1EE31-0F63-422D-8715-2CB945DFF410}

SAN FRANCISCO (MarketWatch) -- Shares of subprime lenders including NovaStar Financial, Accredited Home Lenders and Fremont General dropped more than 25% on Monday as investors dumped holdings in an industry rocked by tighter regulation and bad debts.

 

[moh malekpour]

http://www.bloomberg.com/apps/news?pid=20601103&sid=a3ol67o3P4eU&refer=us

Builders continue to suffer. Hovnanian Enterprises Inc., in preliminary results for the first quarter ended Jan. 31, last week reported a loss as the number of contracts dropped and it took charges to write off land and deposits.

Housing-related services also are getting hurt. Countrywide Financial Corp., the biggest U.S. mortgage lender, said March 1 that payments were late on one-fifth of the subprime loans that it manages for clients. Subprime loans are those to borrowers whose ratings fall short of the highest criteria.

 

[Randolph Kinney]

Mortgage Crisis Spirals, and Casualties Mount

http://www.nytimes.com/2007/03/05/business/05lender.html?_r=1&th&emc=th&oref=slogin

Now an escalating crisis in the market, which seemed to reach a new crescendo late last week, is threatening a wide band of people. Foremost are the poor and minority homeowners who used easy credit to buy houses that are turning out to be too expensive for them now that mortgage rates are going up, but the pain is also being felt widely throughout the business world.


Large companies that bought subprime lenders during the boom, like H&R Block and HSBC, are now scrambling to sell them or scale back their exposure. Many investors are also likely to suffer: Wall Street firms made billions in fees, commissions and trading revenue from packaging and selling subprime mortgages to them as bonds. Weakening home prices and rising default rates have rocked the subprime business.


Southern California is the epicenter of the boom in subprime where 5 of the 10 biggest providers of subprime mortgages last year had their headquarters in the region.

 

[Steve Owen]

Of course, the poor who bought on a fixed rate, didn't pay too much, and still have a job are sitting pretty right now.

 

[moh malekpour]

http://www.latimes.com/business/la-fi-subprime6mar06,1,286365.story?coll=la-headlines-business

New Century is "much closer to death spiral, if not already in it," analyst Kenneth Bruce of Merrill Lynch wrote in a note to clients. "Bankruptcy could prove to be the best way to preserve value."

Shares of New Century plummeted $10.09, or 69%

 

[moh malekpour]

http://www.bloomberg.com/apps/news?pid=20601087&sid=asTgvtVwBMeg&refer=home

March 6 (Bloomberg) -- Former Federal Reserve Chairman Alan Greenspan said there's a ``one-third probability'' of a U.S. recession this year and that the current expansion won't have the staying power of its decade-long predecessor.

``We are in the sixth year of a recovery; imbalances can emerge as a result,'' Greenspan, 81, said in an interview yesterday at his office in downtown Washington. ``Ten-year recoveries have been part of a much broader global phenomenon. The historically normal business cycle is much shorter'' and is likely to be this time, he added

 

[Brad Ellis]

Moh,

Quoting Greensopan? I am proud of you!

So, here is my question: What happens when we get into or near a recession?

The Fed lowers rates and makes money more affordable.

Might that solve some of the problems with adjustables resetting based on the LIBOR rate that most lenders use?

that is, of course, IF it happens.

Brad