Monday, August 20, 2007

Credit Crunch Widens

Some bigger names in the credit industry are having real problems, the WaPo reports Capital One will close it's mortgage subsidiary GreenPoint Mortgage eliminating 1,900 jobs with an after tax cost of $860 million. Thornburg Mortgage whose business specialty is jumbo mortgages, in excess of $417,000 for wealthy clients with stellar credit ratings, has sold $20.5 billion in assets to cover debts. Friedman, Billings, Ramsey Group has sold $4.9 billion in mortgage backed securities at a $75 million loss to cover its problems. Luminent Mortgage Capital and KKR Financial Holdings are all scrambling to cover themselves.

Consumers will have fewer and narrower choices in home loans than in the recent past. What that finally means is higher cost loans. This will not help the housing downturn to recover and sadly, the biggest prop for this BushCo economy has been the cheap available credit in the housing market, either purchase or refinance. Bernanke is going to have to scramble to keep this from getting bad.

To a certain extent an unnecessary panic mentality has hit, anyone who has planned to stay in their home for five or more years need pay little attention to this downturn as far as selling their home. Housing pressure will continue, over the long term, people will buy their first homes or move up - it is simply a matter of time. As housing stocks decrease pressure will again force prices back up. If you happen to have very good credit the next 6 months may be a very good buying opportunity. If you see payment problems coming your way, don't wait around to try to get something straightened around. Markets that have not seen a bubble probably have little to fear in lost valuation. The first step is to keep your head and make sure you actually understand what is happening where you are.

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