Big banks and investors that purchased subprime mortgages originated by small lenders over the last couple years are responding to an increase in defaults on the products by ordering the lenders to buy them back.Many subprime originators are now facing bankruptcy because they lack the money necessary to comply, and some experts argue that the subprime mortgage market is weakening at a faster pace due to these repurchase demands.
New Century Financial Corp., for instance, is among the lenders on the brink of bankruptcy, fielding repurchase orders from Morgan Stanley, Citigroup Inc., Goldman Sachs Group Inc., Credit Suisse Group Inc., IXIS Real Estate Capital Inc., and Bank of America Corp. The company reportedly owes a total of $8.4 billion to these creditors, and Piper Jaffray analyst Robert Napoli says that repurchasing the loans at a 20-percent loss would eliminate New Century shareholders' equity.
Source: The Wall Street Journal, Carrick Mollenkamp, James R. Hagerty, and Randall Smith (03/13/07)
Jennifer Bunker, CRS, GRI
Utah Real Estate Broker
No comments:
Post a Comment