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Wednesday, August 29, 2007

Non-Agency Mortgage Market: "Worst Ever"

by Calculated Risk on 8/29/2007 02:06:00 PM

From Bloomberg: Non-Agency Mortgage Market Is the Worst Ever, Wakefield Says (hat tip Brian). A few excerpts:

K. Terrence Wakefield ... comments on the home-loan market. Wakefield is a former Salomon Brothers executive ...
On the market for U.S. mortgages not expected to be packaged into bonds guaranteed by government-chartered companies Fannie Mae and Freddie Mac:

"This is unquestionably the worst it's been. I've never seen a secondary market, since it was founded back in the late 1970s, where you couldn't sell loans. Where there was no bid."

On the future for bonds without guarantees from government-linked entities:
"I'm not suggesting the non-agency mortgage-backed securities market is dead. It will resuscitate but under a very different set of rules, because the rules of the past do not work."

On underwriting:
"All of these practices that are imprudent -- such as stated income loans where you'll lend somebody 95 percent of a property's value without lifting a finger to verify they can pay you back -- that's over. And that was a big piece of the business over the last couple of year."

"I would say 30 to 40 percent of the business done in the last couple of years was done under imprudent lending standards. I just see no circumstance in which those types of practices return."
These is no returning to the insanity of the last few years.