Ratings: Real Estate Funds
Real estate news By Kevin Baker
3/10/2007 10:13 AM EST
On March 6, the National Association of Realtors announced
that pending home sales for January fell 4.1% from December
and 8.0% from a year ago. The pending sales are a leading
indicator or predictor of what the actual home sales of
existing homes may be in the next few months.
The region taking the worst hit was the South, with contract
signings down 11.7%, the worst monthly decline since February
2001. Pending home sales in the South are at their lowest
level since January 2004. In lending, the worst loans are
made in the best of times. TheStreet.com Ratings' new senior
bank analyst, Philip van Doorn, explains that "during
the real-estate boom, mortgage companies lowered credit
standards, giving loans to some borrowers with no income
verification and no money down." He adds that "these
subprime loans to borrowers with low credit scores may lead
to record foreclosures."
The banks that financed the mortgage companies are now
forcing the mortgage companies to buy back some of these
bad loans and cutting off further credit for new lending.
Three subprime lenders, including Mortgage Lenders Network
USA, already are in Chapter 11 bankruptcy for reorganization.
The second-largest subprime lender, New Century Financial
(NEW - Cramer's Take - Stockpickr - Rating), plunged 75.6%
for the five trading days ending March 8, as it was forced
to buy back loans it had previously sold. The company's
lines of credit dried up, new loan activity ceased, and
4% of its workforce has been fired.
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