Home Loan Lenders Continue Recent Wall Street Struggles
Countrywide Mortgage and New Century Financial led shares of U.S. mortgage lenders falling for a third straight trading day as a new report suggested that even U.S. homeowners with good credit may be defaulting more often.
Shares of Countrywide Mortgage, the largest U.S. home loan lender, fell as much as 4.2 percent, while shares of New Century, the second-largest lender to Americans with bad credit histories, fell as much as 8.8 percent.
On Monday, Moody’s Investors Service said delinquencies of 60 days or more on securitized prime jumbo mortgages rose to their highest point in 2006: 0.323 percent as of November.
That was also 8.7 percent higher than the 0.297 percent in November 2005, when the rate reached a “temporary apex” following the destruction from Hurricane Katrina three months earlier, Moody’s said.
Investors began fleeing mortgage lenders on Thursday after HSBC Holdings announced it will set aside more for bad debts amid problems in its U.S. bad credit mortgage operations.
New Century said it expects to lose money in the fourth quarter and will reduce three quarters of earnings.
Then on Friday, Countrywide said foreclosures rose to their highest level since at least 2002, while delinquencies held near a five-year high.
Other lenders that fell on Monday included Accredited Home Lenders Holding Co., whose shares dropped up to 6.6 percent. That home loan originator is scheduled to report results on Wednesday.
Most of the focus has been on bad credit home loans, and analysts say the risks of holding subprime-related debt are rising.
Early this month, Friedman Billings Ramsey & Co. said the default rate on loans made through subprime lending that were packaged into bonds reached their highest level this decade.
Then on Wednesday, in a report titled “Inferno,” Credit Suisse analysts said the 60-day delinquency rate for second-quarter loans that were six months old had doubled from a year earlier to 5.7 percent.
Countrywide shares fell 3.1 percent in afternoon trading, compared with their Wednesday close. New Century shares fell 4.8 percent. Accredited, meanwhile, fell 5.3 percent.
SOURCE: Reuters