Tuesday, August 07, 2007


Borrowers with good credit are getting locked out and more mortgage companies are going under:

Turmoil in the U.S. home-mortgage market is starting to pinch even buyers of high-end homes with good credit records, in the latest sign of rising anxiety among lenders and investors.

This surge in rates on so-called jumbo loans is particularly notable because rates on 10-year Treasury bonds have been falling. Normally, mortgage rates move in tandem with Treasurys, but market jitters have caused investors to ditch mortgage securities.

Meanwhile, American Home Mortgage Investment Corp. finally succumbed yesterday to the mortgage-sector chaos that had crippled it in recent weeks and filed for protection from creditors under Chapter 11 of U.S. bankruptcy law.


Among other signs of distress, Aegis Mortgage Corp., Houston, notified mortgage brokers that it is unable to provide funds for loans already in the pipeline, a spokeswoman said. And Luminent Mortgage Capital Inc. of San Francisco said it faced calls for repayments from creditors and is suspending its dividend.

Lenders -- having already slashed lending to subprime borrowers, as those with weak credit records are known -- now are jacking up rates on jumbo mortgages for prime borrowers. These mortgages exceed the $417,000 limit for loans eligible for purchase and guarantee by Fannie and Freddie. They account for about 16% of the total mortgage market, according to Inside Mortgage Finance, a trade publication, and are especially prevalent in California, New Jersey, New York City, Washington, D.C., and other locales with high home costs.

Because of the spreading contagion from the subprime mortgage mess and the sudden credit crunch for both individual and corporate borrowers, Wall Street is hoping that Federal Reserve policy makers will take some steps to reassure mortgage lenders, investors and home buyers that the Federal Reserve will cut interest rates if things get really bad when they issue a statement after their meeting today.

My guess is that Bernanke will acknowledge the credit crunch and subprime mess, soothing Wall Street into double digit gains for the Nasdaq and S&P and triple digit gains for the Dow before the end of the day.

Nonetheless, the real problems underlying all the volatility in the markets will remain after all is said and done.

Unless, of course, the fed really does lower rates soon.

In which case we can have more bubbles!!!!

American Home Mortgage can get protection from creditors, but most working Americans can't escape Visa and Master Card, thanks to a bankruptcy bill vetoed by Bill Clinton and signed into law by The Decider.

Catastrophic medical emergency? Too bad.
Yup - and some Dems helped get that bill made into law - including Joe Lieberman (who voted against the bill but voted for cloture to get the bill to come to a vote), Joe Biden (D - State of Capital One), Mary Landrieux, Ben nelson and a few others.

Every Republican in the Senate voted for it, btw.
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