The stock prices of mortgage lenders and banks that generate a big chunk of their profits from lending took a big hit today. Both HSBC (which does Alt A lending through their De scion 1 unit) and NewCentury ( a very large subprime player) got whalloped today. Why? Because it is getting much tougher for clients w/ poor credit and little equity to refinance once there initial fixed rate period is over. Lenders are raising the bar to get these loans done because Wall Street has less of an appetite for the increased risk that these types of loans now carry.
I fear that the default rates will get much worse before they begin to get better....right now I am glad that we are brokers and not bankers... I would not want too many of these deals on our books!!
Check out the article on Bloomberg for more info.
http://www.bloomberg.com/apps/news?pid=email_en&refer=us&sid=a3ztUp9Z6_UE
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