Monday, December 3, 2007

Subprime Debacle Traps Even Very Credit-Worthy

From the Wall Street Journal:

One common assumption about the subprime mortgage crisis is that it revolves around borrowers with sketchy credit who couldn't have bought a home without paying punitively high interest rates. But it turns out that plenty of people with seemingly good credit are also caught in the subprime trap.

An analysis for The Wall Street Journal of more than $2.5 trillion in subprime loans made since 2000 shows that as the number of subprime loans mushroomed, an increasing proportion of them went to people with credit scores high enough to often qualify for conventional loans with far better terms.

In 2005, the peak year of the subprime boom, the study says that borrowers with such credit scores got more than half -- 55% -- of all subprime mortgages that were ultimately packaged into securities for sale to investors, as most subprime loans are. The study by First American LoanPerformance, a San Francisco research firm, says the proportion rose even higher by the end of 2006, to 61%. The figure was just 41% in 2000, according to the study. Even a significant number of borrowers with top-notch credit signed up for expensive subprime loans, the firm's analysis found....MORE

From MarketWatch:
Nomura CEO sees credit woes creating investment opportunities

Nomura Holdings Inc. (8604.TO) is seeing new investment opportunities overseas as the U.S. credit crunch has led to some lower asset prices and forced overseas rivals to spend time on restructuring, Chief Executive Nobuyuki Koga said Monday.
Nomura will consider taking advantage of such market conditions to expand its overseas businesses, Koga said in a briefing without elaborating on specific steps.

"Seeking a better competitive position simply by making acquisitions is a course of action that we will need to be very cautious about. But investment opportunities are actually increasing, and we should make the best use such conditions while carefully examining how we can assume risks," Koga said....MORE

From FinancialWeek:
Citi, HSBC moves signal bank SIV era’s end

Analysts: Subprime shows balance-sheet games no longer work
With the bailout fund for structured investment vehicles proposed by the Treasury Department and three major banks still under construction, banks are starting to restructure, unwind or extend lifelines to the SIVs they sponsor to avoid fire sales of the assets they hold.

HSBC, the second-largest manager of SIVs after Citigroup, said last week that it is restructuring two of its SIVs, exchanging existing investors’ notes with new ones issued by new asset-backed commercial paper conduits. Meanwhile, WestLB provided a credit facility of unknown size to Kestrel Funding, a SIV it sponsors, to repay maturing commercial paper....MORE