Mortgage & Loan: Subprime Market Collapse Accelerates

HSBC is calling out the U.S. mortgage market for increasing defaults as the subprime sector implodes:

HSBC management made the mistake of “going for volume” and selling second-lien mortgages, he said. HSBC’s mortgage-broker business will focus on packaging and selling loans for HSBC’s investment bank.

Of course, when the market was hot, money was cheap, and you could loan to anyone for a song, no matter their credit or income level, then it was all about volume. Now, though, it's a much different story:

Richard Shane, a mortgage analyst at Jefferies & Co. Inc., said it's hard to determine how severe the credit downturn is going to be in the subprime mortgage market. He said usually lenders can mitigate the effect of defaults by tightening underwriting standards, for example.

As predicted, this is how it starts. Tighter credit, less capital, fewer loans, and even fewer buyers on the market. The squeeze play is beginning. Take a look at what's happening in Massachusetts:

Shapiro blamed subprime mortgages, which are tailored to borrowers with poor credit, and "exotic" mortgages, with low initial payments that allowed people to buy homes they may not have been able to afford, for the sharp rise.

Take a look at your future. Grim, isn't it? The only thing that will ride this out is lower prices for homes, more workforce housing, tighter lending standards, and most especially, stronger laws against predatory lending and subprime profiteering. We have the way...we just need the will.

Posted at February 8, 2007 06:25 PM

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HSBC is calling out the U.S. mortgage market for increasing defaults as the subprime sector implodes: HSBC management made the mistake of “going for volume” and selling second-lien mortgages, he said. HSBC’s mortgage-broker business will focus on packaging and selling loans for HSBC’s investment bank. Of course, when the market was hot, money was cheap, and you could loan to anyone for a song, no matter their credit or income level, then it was all about volume. Now, though, it's a much different story: Richard Shane, a mortgage analyst at Jefferies & Co. Inc., said it's hard to determine how severe the credit downturn is going to be in the subprime mortgage market. He said usually lenders can mitigate the effect of defaults by tightening underwriting standards, for example. As predicted, this is how it starts. Tighter credit, less capital, fewer loans, and even fewer buyers on the market. The squeeze play is beginning. Take a look at what's happening in Massachusetts: Shapiro blamed subprime mortgages, which are tailored to borrowers with poor credit, and "exotic" mortgages, with low initial payments that allowed people to buy homes they may not have been able to afford, for the sharp rise. Take a look at your future. Grim, isn't it? The only thing that will ride this out is lower prices for homes, more workforce housing, tighter lending standards, and most especially, stronger laws against predatory lending and subprime profiteering. We have the way...we just need the will.