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S&P, whose massive downgrades in the ratings of mortgage related assets in the summer of 2007 helped to exacerbate the credit crisis, this week again boosted its assumptions of losses on subprime and so-called "Alt-A" mortgages, which require less documentation and were often handed to borrowers with no equity stake in the property.
The new assumptions indicate up to $450 billion, or 85 percent, of "AAA" rated 2006 vintage subprime securities will default, and may lead to a raft of downgrades that pressure financial institutions to face a "new reality," said Vivek Tawadey, head of credit strategy at BNP Paribas in London.
The pressure of credit downgrades for companies follows, and in turn may encourage, falling home prices. Through May U.S. house prices had already slumped 18.3 percent since the peak in July 2006, according to S&P/Case Shiller index of 20 metropolitan areas.
Deep downgrades on even the safest, "AAA" rated mortgage bonds will lead to more credit tightening due to the need to raise capital reserves and take mark-to-market losses, Tawadey said in a note about "Hurricane Housing" on Friday.
"Turbulent market conditions lie ahead, would probably be an understatement" considering the early impact from Merrill Lynch & Co and other institutions that have taken "painful steps," he said.
For Fannie Mae and Freddie Mac, further drops in home prices since the first quarter will probably force them to increase reserves by a material amount, said Moshe Orenbuch, an analyst at Credit Suisse in New York. Their reluctance to deem market losses on Alt-A and subprime mortgage bonds they own as "other-than-temporary" will be challenged, he said in a note.
The more than 40 percent drop in the shares of Fannie Mae and Freddie Mac last month, and government plans to ensure backstop funding for the companies are indicators that writedowns for the companies are more likely, he said.
Analysts surveyed by Thomson Reuters expect Fannie Mae to report a second-quarter loss of $920.8 million, or 78 cents per share, compared with a $1.83 billion profit, or $1.86 a share a year ago. Freddie Mac is seen losing $319 million, or 59 cents a share, compared with net income of $729 million, or 96 cents per share a year earlier.
Delinquencies on mortgages with "credit enhancement" increased to 3.56 percent in May from 3.33 percent in April, representing a "disproportionate" jump for certain loans, including Alt-A, he said.
Fannie Mae has about $70 billion in subprime and Alt-A securities in its portfolio. Freddie Mac is more at risk, with nearly $150 billion in the securities, analysts said.
Seule solution:interdire les shorts et les ventes d actions....comment ces gens là ont ils pu acheter 250%M de Alt a......ensuite il faut les sauver ?? c est 100% n importe quoi....
Amha,ca montre une encroyable evolution du capitalisme américain ,qui ne supporte plus les pertes...enorme changement lourd de menace pour le dynamisme futur du pays....
S&P, whose massive downgrades in the ratings of mortgage related assets in the summer of 2007 helped to exacerbate the credit crisis, this week again boosted its assumptions of losses on subprime and so-called "Alt-A" mortgages, which require less documentation and were often handed to borrowers with no equity stake in the property.
The new assumptions indicate up to $450 billion, or 85 percent, of "AAA" rated 2006 vintage subprime securities will default, and may lead to a raft of downgrades that pressure financial institutions to face a "new reality," said Vivek Tawadey, head of credit strategy at BNP Paribas in London.
The pressure of credit downgrades for companies follows, and in turn may encourage, falling home prices. Through May U.S. house prices had already slumped 18.3 percent since the peak in July 2006, according to S&P/Case Shiller index of 20 metropolitan areas.
Deep downgrades on even the safest, "AAA" rated mortgage bonds will lead to more credit tightening due to the need to raise capital reserves and take mark-to-market losses, Tawadey said in a note about "Hurricane Housing" on Friday.
"Turbulent market conditions lie ahead, would probably be an understatement" considering the early impact from Merrill Lynch & Co
For Fannie Mae and Freddie Mac, further drops in home prices since the first quarter will probably force them to increase reserves by a material amount, said Moshe Orenbuch, an analyst at Credit Suisse in New York. Their reluctance to deem market losses on Alt-A and subprime mortgage bonds they own as "other-than-temporary" will be challenged, he said in a note.
The more than 40 percent drop in the shares of Fannie Mae and Freddie Mac last month, and government plans to ensure backstop funding for the companies are indicators that writedowns for the companies are more likely, he said.
Analysts surveyed by Thomson Reuters expect Fannie Mae to report a second-quarter loss of $920.8 million, or 78 cents per share, compared with a $1.83 billion profit, or $1.86 a share a year ago. Freddie Mac is seen losing $319 million, or 59 cents a share, compared with net income of $729 million, or 96 cents per share a year earlier.
Delinquencies on mortgages with "credit enhancement" increased to 3.56 percent in May from 3.33 percent in April, representing a "disproportionate" jump for certain loans, including Alt-A, he said.
Fannie Mae has about $70 billion in subprime and Alt-A securities in its portfolio. Freddie Mac is more at risk, with nearly $150 billion in the securities, analysts said.
Seule solution:interdire les shorts et les ventes d actions....comment ces gens là ont ils pu acheter 250%M de Alt a......ensuite il faut les sauver ?? c est 100% n importe quoi....
Amha,ca montre une encroyable evolution du capitalisme américain ,qui ne supporte plus les pertes...enorme changement lourd de menace pour le dynamisme futur du pays....
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