Monday, May 07, 2007

Links of the day

Who's at risk from subprime implosion?..."The Orange County Register analyzed all 920,000 home purchase mortgages made in California in 2005, the last year for which complete data is available...The analysis showed a strong geographic pattern to subprime loans"...this is what I like to see from a newspaper; original research and analysis rather than just reprinting AP wire stories...

Washington Post on loosening of lending standards..."
Mortgage-backed securities based on New Century loans had been performing better for investors than those from other subprime lenders, in some cases producing two or three times the return of a U.S. Treasury bond. Many banks felt they had to loosen their standards and agree to return fewer bad loans in order to win the auctions, the traders said. The head of a large Wall Street bank's mortgage group contended that his firm regularly lost out on New Century's business because its due diligence process was stringent and it had been returning a high number of loans. New Century wanted the bank to ease its standards, and the issue became a source of friction between the companies.
A New Century spokeswoman said negotiating with banks to reduce both their due diligence and the number of loans they returned was a "generally accepted practice" that was "always a matter of discussion." . . .it appears we now have evidence as to where some of the ultimate financial loss related to NC's loans will end up...i.e.banks that agreed to take NC loans, because they essentially enabled the issuance of bad loans by caving to NC's demands...

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