The distance between shockwaves from the nonprime meltdown seem to be slowing down. There are companies that continue to consolidate or fold (HSBC subprime and Nationstar subprime units) but it seems that we are now trying to find equilibrium in the new mortgage market.
While subprime is on its deathbed, the Fed is still trying to figure out how to extend their reach to the nonconforming market and provide liquidity. If we must have Federal involvement then the answer is simple—create a new entity that knows how to manage and price risk for the nonconforming markets. Fannie and Freddie seem the best candidates but are certainly subject to a high level of scrutiny in extending their charter beyond their existing limits. It was refreshing that Freddie Mac and their former executives finally settled government charges surrounding their accounting scandal.
On a more positive note, Wharton professor Susan Wachter, made news indicating that fixed rate mortgages are up 30.2% in the last 12 months which illustrates a flight to less risky products.
The technology front brought a new sale--LION Inc was able to sell off their mortgage 101 unit on Friday which may improve their financial position.
The National Mortgage Bankers Conference is October 14th-17th will certainly be a leading indicator of how things will trend in the next 12 months. Look for many consolidation and merger announcements within the next two weeks…..
MarketWise Advisors, LLC.
Investment Banking and Consulting Advisory
1-800-815-9484 (main)
www.marketwiseadvisors.com
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