Lehman Bros. 2007 Mortgage outlook: Bracing for a Credit Downturn

[FRED]

Bracing for a Credit Downturn

As suggested by our bearish title, credit is set to dominate headlines in 2007. We expect mortgage collateral performance to deteriorate significantly next year and, accordingly, we have an overall bias to be up-in-credit.

Lehman Bros. 2007 Mortgage outlook

[jk]

Countrywide Says Late Payments on Subprime Loans Rose

Countrywide Says Late Payments on Subprime Loans Rose (Update1)
By Will Edwards and Jody Shenn
March 1 (Bloomberg) -- Countrywide Financial Corp., the biggest U.S. mortgage lender, said payments were late at the end of last year on almost 20 percent of the subprime loans it tracks for other companies and investors who own them.
Delinquencies of at least 30 days on ``nonprime'' loans, those made to borrowers whose credit rating fell short of the highest criteria, widened to 19 percent as of Dec. 31 from 15 percent a year earlier, the Calabasas, California-based lender said in an annual regulatory filing with the U.S. Securities and Exchange Commission. The rate stood at 17 percent at the end of September, according to the company's last quarterly filing.




http://www.bloomberg.com/apps/news?p..._.w&refer=home

[jk]

alt-a deterioration on top of subprime deterioration

the Damage Isn't Spreading If You Ignore the Damage According to a piece in the Wall Street Journal today, there ARE signs that pain in subprime mortgages is beginning to spread. Hey, didn't the Fed just say...? Uh, never mind.

• The WSJ story today is a catch-up piece to something we noted in Five Things on Tuesday; late payments in the so-called Alt-A market, which caters to consumers with slightly better than subprime credit, but below prime borrowers, is running at four-times the historical norm.
• Do you know how many so-called "in-between" Alt-A loans were originated last year? A record $400 billion according to the Journal.
• That accounted for 16% of all mortgage originations last year, the Journal reported, and with subprime loans the segments together made up about 40% of all loan originations.
• Data from UBS AG show that the default rate for Alt-A mortgages has doubled in the past 14 months, the article said.
• Meanwhile, here's something else for the isolated subprime mortgage & mild housing correction camp to consider:
  - Home Depot (HD) says it's bracing for slower growth due to slumping sales in its retail segment this year thanks to... the housing market.

http://www.minyanville.com/articles/index.php?a=12269