U.S. REGULATORS ANNOUNCE CRACKDOWN ON SUBPRIME LENDING PRACTICES
March 5th, 2007Maybe I need to get a blinking siren thing for Cryptogon…
We’ve got a perfect storm situation in the markets now.
Via: Finfacts Ireland:
The Wall Street Journal reports that US Federal bank regulators have announced a crackdown on loose lending standards on subprime home mortgages as two major lenders struggled to cope with losses and regulatory problems.
Subprime customers are those who do not qualify for prime market rates because of blemished or limited credit. Consequently, subprime customers are charged a higher interest rate to compensate for the increased risk.
In February, global bank HSBC stunned the market when it disclosed that it was adding $1.76 billion to loan provisions of $8.8 billion because of a big rise in defaults in the US subprime home loan market.
New Century Financial Corp., one of America’s largest subprime lenders, announced on Friday that it has been informed of a federal criminal inquiry into its accounting and trading in its securities. New Century also said that a failure to obtain waivers from lenders or find new funding sources could prompt its auditors to warn of “substantial doubt” over its ability to remain in business.
Another big lender, Fremont General Corp., said it plans to stop making subprime residential loans and is in talks with various parties aimed at selling that business.
The Journal says that a proposed policy statement released Friday by regulators comes after rising defaults already have rattled investors and forced subprime lenders to be more cautious in extending credit.
With a rise in subprime lending in the past decade, many lenders have pushed home loans that carry a fixed rate for the first two years, then “reset” to a much higher rate that floats with the general level of interest rates. These loans — known as 2/28 mortgages — can lead to jumps of 50% or more in monthly payments after the initial period ends. Many of the borrowers refinance to avoid these “payment shocks,” generating more fees for lenders and mortgage brokers.
The Journal says that regulators, including the Federal Reserve and four other agencies, said lenders should assess whether potential borrowers can cope with payments once the higher rate takes effect. They also cautioned lenders against skimping on verification of borrowers’ income, and told them to clearly spell out risks to consumers. Lenders and other interested parties have 60 days to comment before the regulators produce a final version of the guidance.
Related: Inside a Wall Street Chop Shop
Follow the Credit Default Insurance…
http://www.dollarcollapse.com/iNP/view.asp?ID=48
“But something more interesting just happened. It seems that the markets have stopped mistaking the banking debt orgy for “innovation†and started seeing it for what it is: the last bit of debauchery in history’s greatest credit bubble. According to reports by Bloomberg and Associated Press, the price of “credit insurance†on the bonds of the big investment banks has spiked.”
Kevin,
Yes, you should have an alarm light on your site – and maybe long ago when you wrote your “Chop Shop” articles.
Today, the Beevis and Butthead’s of the world UNITE. Sold off of stocks big time for those that USE/SCAM Po’ Folk.
http://www.iht.com/articles/ap/2007/03/06/business/NA-FIN-US-Subprime-Lenders-Fallout.php
Not that one in a million who invest in Wall Street had a clue/problem with these scam artists – as long as they were making money on e-paper- but lordy. Look at them all of a sudden find the lord of mercy in their investing ways.
Finally figured out that when you SCAM Po’ FOLK, you are all of a sudden dirt cheap poor.Serves them effin right.