US sub-prime lenders hit by high missed home payments

Many home buyers are over-stretched and can't manage their debts. There could be an even bigger fall in prices and tightening of lending rules.


BBC NEWS
Missed home payments hit markets

Late mortgage payments and home repossessions in the US have hit their
highest level since records began, official figures showed.

The Mortgage Bankers Association (MBA) data for the last three months
of 2006 confirm investor fears that the sector is struggling and may
weaken more.

The figures gave urgency to the sell-off of shares in sub-prime
lenders who are particularly vulnerable.

The Dow Jones and Nasdaq both lost about 2% in Tuesday trading.

'Unhappy'

Sub-prime lender Accredited Home Lenders Holding saw 65% wiped off its
value on Tuesday, having lost 28% a day earlier, after it revealed
that it may have to raise extra funds, seek debt waivers, cut jobs and
put back its earnings announcement.

As well as the sub-prime lenders, other fallers included major Wall
Street lenders with exposure to the mortgage industry - including Bear
Stearns and JPMorgan Chase, which lost 4%.

Overall the 1.97%, or 242.66 points slump to 12,075.96 on the Dow
Jones offset gains from the past three sessions.

Meanwhile the Nasdaq fell 51.72 points, 2.15% to 2,350.57.

Late or missed payments on mortgages rose to 4.95% the MBA figures
showed, rising to 13.3% in the sub-prime market.

And lenders launched repossession actions against more than one in
every 200 mortgage borrowers in the period.

The figures were the highest in the 37-year history MBA's national
delinquency survey.

"Unfortunately, it appears delinquency rates will likely worsen before
they improve," said Gina Martin analyst at Wachovia Securities.

"The delinquency data released today only reflects the state of
mortgage markets as of the end of 2006. No wonder the equity market is
unhappy."

Rock-bottom

Sub-prime lenders provide money to clients with a poor credit history,
and the current problems have been sparked by a rise in defaults and
bad loans.

These, in turn, have been triggered in part by a relentless rise in
interest rates from rock-bottom levels in the past four years, and
falling house prices and rates of homebuilding in many parts of the
US.

Another lender, New Century revealed that US markets regulator the
Securities & Exchange Commission was investigating it.

New Century has stopped making loans and its shares have been
suspended, with some analysts now predicting bankruptcy

The company has warned that it may have to buy back more than $8bn
(£4.2bn) in loans, and its creditors are claiming that the company is
in default of loan agreements and have halted financing.

And Countrywide Financial, the biggest US mortgage company, has warned
that the current problems would hurt profit in the short-term and
added that it would cut 108 jobs.

Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/6447973.stm

Published: 2007/03/13 20:48:56 GMT

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