by Calculated Risk on 3/15/2007 02:23:00 PM

From CNNMoney: Greenspan: Subprime risk may spread

Former Federal Reserve Chairman Alan Greenspan said on Thursday there was a risk that rising defaults in subprime mortgage markets could spill over into other economic sectors.

Speaking to the Futures Industry Association, Greenspan conceded that it was "hard to find any such evidence" about spillover from housing yet. But he added: "You can't take 10 percent out of mortgage originations without some impact."
...
He said that subprime woes were "not a small issue" ...

by Calculated Risk on 3/15/2007 11:08:00 AM

In a research note titled "Mortgage Credit Quality Problems Go Well Beyond Subprime", Goldman Sachs suggests (short excerpt):

According to our (very rough) estimates, the credit quality of so-called “teaser-rate” debt—prime ARMs with very low initial interest rates—is deteriorating at pace that is similar to that of subprime ARMs. Since teaser-rate ARMs typically have a longer reset schedule than subprime ARMs, this suggest that the teaser-rate problem could ultimately well exceed the subprime problem.

by Calculated Risk on 3/15/2007 11:01:00 AM

From USA Today: Workers find it tough to relocate

The offer was too good to turn down. Just after selling his home and moving to a new place, Joe Cashen landed a marketing job with Nissan North America. The catch? He would have to sell his newly purchased home and move his wife and two young daughters from Los Angeles to Nashville.

Two years ago, amid the feverish housing market, such a relocation would have been simple.

But the real estate slowdown means there's no such thing as an easy move anymore: Slumping prices have put a sudden chill on employees' ability to relocate for a job and employers' ability to get new hires to move. Cashen's house languished on the market for more than three months, and he was eventually forced to take a $90,000 loss.

I mentioned a similar story yesterday. Escrow to sellers: "Bring money to closing".

by Calculated Risk on 3/14/2007 10:53:00 PM

Wells Fargo has confused investors by including co-issue loans in their subprime loan production.

According to most sources, Wells Fargo was the #1 originator in 2006 with $83 Billion in subprime loans.

But that included co-issue loans. Going forward Wells Fargo will only report the subprime loans it originates.

From MarketWatch: Top 10 subprime originators lean to left coast

... San Francisco-based Wells Fargo [reported] $7.4 billion in subprime mortgages [in Q4 2006]. That [appears to be] a steep drop from the third quarter when the banking company was the biggest subprime originator by far, with $23 billion in loans ...

The drop reflects a change to the way Wells Fargo reports its subprime mortgage originations to the trade press.

Prior to the fourth quarter, the banking company included co-issue loans, or mortgages for which it had bought the servicing rights while an investor such as an investment bank purchased the underlying loans.

"Including co-issues in our nonprime loan production was confusing investors and others," said Wells Fargo spokesman Jay Lawrence. As of the fourth-quarter, the company started to report only the subprime mortgages it originated, he said.

by Calculated Risk on 3/14/2007 05:32:00 PM

From Fleckenstein on Alt-A:

My friend in subprime updated me last night, as follows: "The Alt a space has deteriorated very quickly, but not yet public. $40 billion in subprime still waiting to find a home. No loans will be bought at attractive prices until May production as it will be underwritten to new guidelines. The triple bbb's are a mess. The hedge funds that bought it are all in trouble. ... warehouse guys and Alt a guys are now next. Alt a guys may be worse as less insurance on those loans to protect them. The loan sizes are bigger as well."