![]()
- US Debating What to Do With Billions of TARP Money Left
- For Video Game Makers, Stakes Are High for Holidays
- In Charity Tax Filing, a Real Glimpse of Goldman Sachs
- Obama Begins Asia Trip, Burdened by Jobs, Economy
- FHA Reserves Fall Below Required Level: HUD Chief
- 30-Year Mortgage Rate Falls Again; Lowest in Five Weeks
- Ford, Hyundai, Audi Gaining Consumer Interest
- US Mortgage Refinancing Up; Buying Demand Sinks
- Intel Agrees to Pay AMD $1.25 Billion to Settle Disputes
- Big Bounce Coming — Play These 6 Stocks: Chief Investor
- Wal-Mart Looks Even Better Next Quarter: Strategist
- Fourteen Stocks that Could Gain from Dollar's Decline
- Busch: Another Obama Opportunity
- Light the Lights! Buffett and Gates Prepare to Answer Students' Questions at Columbia
- Farrell: Retailers?
- A Public Hearing That Isn't Public
- Boise State's Brilliant Stock Plan
- Apple's Global Retail Invasion
MOST SHARED
- Jobless Claims Post Another Drop as Picture Improves
- Obama Plans Jobs Summit But Not Second Stimulus
- Meet The Leaders of the New Retail Revolution
- Wal-Mart Holiday Forecast Light, Profit Beats
- A Public Hearing That Isn't Public
- "Friending" Big Pharma
- Obama Most Powerful Person in World: Forbes
- 30 Year Mortgage Rate Falls Again; Lowest In Five Weeks
- Activision Says 'Call of Duty' Sets Launch Record
Subprime mortgage lenders created a surge in delinquencies in the past year by repeatedly breaking their own underwriting guidelines to capture business, analysts said.
So-called "exceptions" to loans were made as written standards did not change much, Michael Youngblood, a managing director and portfolio manager at FBR Investment Management, said on a panel of an Information Management Network asset-backed securities conference in Miami.
"The amount of loan exceptions made in 2006 must be historically the highest," he said.
Youngblood said lenders have not been providing information on how many times they strayed from their own underwriting standards, even when he asked. In any event, it is clear they represented the "wholesale" relaxation of underwriting practices that sent delinquencies to a business cycle high of about 11.4%, he said.
Subprime lenders -- both those that have failed and those still standing -- in the last year also paid scant attention to "soft" guidelines, such as how they analyze "FICO" credit scores for each applicant, Mark Milner, chief risk officer for PMI Mortgage Insurance, said on the panel.
For instance, relying on a credit score that was generated by an applicant paying back bills to a doctor and securing a $200 credit line "is just not enough," he said.
PMI chose not to insure many of the subprime loans outstanding, he said.
Delinquencies and foreclosures on subprime loans have soared in the past year as lenders such as New Century Financial [NEWC
Loading...
()
]
The panelists conceded that 2006 may go down in history as the worst year ever for subprime credit quality, but said the worst projections for double-digit losses on bonds backed by the collateral won't materialize.
"I don't think the problems will be as widespread as some of the forecasts out there" said Allan Berliant, a portfolio manager at Grantham, Mayo, Van Otterloo.
Losses to subprime bondholders will probably average between 5% and 7%, Youngblood said. That compares with expectations by the top three bond rating companies for losses between 6% and 8%, he said.
He said delinquencies on 2006 subprime loans may creep slightly higher in 2007 and post a slight decline in 2008.
- CNBC is blogging a talk given by Warren Buffett and Bill Gates to students at Columbia University.
- US real estate prices have fallen dramatically, but some places are still doing well. See the best-performing zip codes this year.
- Vote and suggest your own, and remember--there's a fine line between a hero and a zero.
- A European dating site finds lovelorn singles from one country to be consistently uglier. Which is it?
- Contributor David Pogue looks at two of the latest efforts to perfect the digital pocket camera.
- Just in time for the holidays, the Triumph company of Japan offers the latest innovation in women’s undergarments.













