The Domino Effect
Jul 30th, 2007 at 2:11 pm by Susie
The Wall Street Journal today:
NEW YORK — Shares of American Home Mortgage Investment Corp. didn’t open for trading Monday morning after the company said late Friday its banks are demanding it put up more cash after the mortgage lender wrote down the value of its loan and security portfolios.
American Home’s shares have been hit hard by turmoil in the subprime mortgage market, despite the fact that the company doesn’t offer those types of home loans. The company specializes instead in adjustable-rate mortgages and Alt-A loans, which often require less or no documentation of a home buyer’s income.
[...] Earlier this month, A.G. Edwards analyst Greg Mason said that American Home’s mortgages are higher quality than those of subprime originators such as New Century Financial and Fremont General, which got into trouble earlier this year. Still, there’s been increasing concern about Alt-A mortgages in recent months.
Caught. Cookie jar. Hand in. Is there anyone left who doesn’t believe/hasn’t been brainwashed into believing that: debt equals wealth? I always thought the most perverse thing I’ve ever heard of was lenders selling debts to speculators.
“American Home’s shares have been hit hard by turmoil in the subprime mortgage market, despite the fact that the company doesn’t offer those types of home loans. The company specializes instead in adjustable-rate mortgages and Alt-A loans, which often require less or no documentation of a home buyer’s income.
And these aren’t somehow subprime?
WTF?
Maybe they’re sub-sub-prime.
and Alt-A loans, which often require less or no documentation of a home buyer’s income.
They’re also known as “liar loans.”
American Home’s problems were not helped by a desperate attempt to slip out some more bad news in the wee hours after the bell Friday.
For further analysis click here:
http://sneakybusiness.typepad.com/sneaky/2007/07/how-to-hide-bad.html
No, these are not sub-prime; sub-primes are loans made to those with substandard credit. Originally, to qualify for a no-doc or low-doc you had to have outstanding credit (they were designed for people with irregular but high incomes, like top salespeople). In recent years they, too, were extended to people with less than stellar credit or income, like many other mortgage loans, but that is not what they were originally intended for.