Detailed market commentary at The Market Ticker and Ticker Classics
(The Year 2012 In Review)
Donations accepted; we offer GOLD ACCESS for enhanced privileges. T-Shirts, caps, coffee mugs? Click here.
BlogTalkRadio - Mondays at 3:30 Central - Yes, TickerGuy has a radio show (kinda)
RSS available You are not signed on; if you are a visitor please register for a free account!
|MarketTicker Forums Single Post Display (Show in context)||
User: Not logged on
|User Info||Wells writeoff was on PRIME loans.; entered at 2007-12-02 02:44:27|
Registered: 2007-08-10 Charlotte
I have said before that my take on Wells is they are better than some of their peers in the fact that they did not get into some "hot" products as big as others. However the counter arugument is that they are heavily invested in California. The nature of home prices and amount of leverage required in California is going to be problematic for companies with a large concentration in the state.|
Please remember that FICO is going to be largely irrelevant (therefore prime vs. subprime distinction) for most consumer loan categories if home prices decline in California as many expect them. Unemployment is already on the rise here and I would argue is largely understated because of the self employed service nature of our state economy.
The LTV and DTI ratios that were overly aggressive in the past few years are going to hurt accross the board. The attempts to "bailout" certain homeowners may actually make matters worse if walking away from homes becomes widespread.
Traditionally other asset classes have fared worse than residential real estate in this type of credit downturn. Folks have traditionally tried everything to save their home. This event could be different in that it might become economically smart and socially acceptable to walk away from the first and second mortgages. In that case folks rent for much less and you may actually see less losses in other categories such as auto and card paper.
Don't get me wrong - I think in the event of a fairly severe recession the losses in all lending categories are going to increase significantly from current levels. The capital levels and loan loss provisions are clearly not prepared for a recessionary scenario. The worst case scenario would be that the securitization mechanism freezes up for all asset classes and then the vicious cycle is really going to accelerate.