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Thread: More Subprime Fallout

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    Default More Subprime Fallout

    HSBC mortgage losses rise in US
    By JANE WARDELL, AP Business WriterWed Nov 14, 2:13 PM ET


    HSBC Holdings PLC, Europe's biggest bank, reported another big hit from exposure to the U.S. mortgage crisis Wednesday and warned that bad debts could increase if the U.S. housing market weakens further.

    However, the bank's shares rose 3 percent as it reassured investors that third-quarter profits for its global business were ahead of last year, despite the $3.4 billion (2.3 billion euros) impairment charge at its U.S. consumer finance division, HSBC Finance Corp.

    The charge was higher than anticipated by analysts and significantly above the $1.9 billion and $2.2 billion booked in the first and second quarter respectively. The division also added $3.4 billion to its credit loss reserves.

    HSBC said it would close or consolidate up to 260 more HSBC Finance Corp. branches, adding to 100 branches it had announced previously and taking the number of remaining branches to around 1,000.

    "If the housing market continues to weaken and if it has a broader impact on the underlying real economy then charges will stay elevated and could increase," said HSBC Finance Director Douglas Flint.

    Reserves against bad debt in HSBC Finance's consumer lending division, including mortgages it originates, more than doubled between the end of June and Sept. 30, to $1.01 billion (690 million euros) from $492 million. Loss reserves in mortgage services, which handle mortgages written by other lenders, rose to $2.42 billion (1.66 billion euros) from $2.15 billion.

    Analysts have been keeping a close eye on impairment charges and loss reserves at HSBC Finance Corp. because it is one of the largest lenders to U.S. consumers with weak credit. It was among the first to signal problems in subprime mortgages a year ago.

    The bank reported bad debt exposure of $10.6 billion last year, leading to its first ever profit warning.
    The global credit crisis was sparked by rising defaults on those mortgages. The mortgages were repackaged with other less risky debt and sold to investors across the globe. Banks worried about exposure to the expanding crisis have balked at taking on new debt, creating a severe scarcity of credit.

    Because of the impairments and lower revenue, HSBC Finance swung to a loss in the third quarter of $1.1 billion (750 million euros), from a net profit of $551 million a year ago.

    While acknowledging that the outlook was "genuinely uncertain," HSBC sought to reassure investors that revenue growth across its global operations, supported by a broad spread of other products, had offset the impact of bad debts.
    HSBC said that pretax profit in the third quarter of 2007 was ahead of the same period a year ago. It added that its performance over nine months was also ahead of 2006, without releasing specific figures. HSBC shares gained 3.1 percent to 868.5 pence ($17.88 ).

    The bank does not report quarterly results for its entire group operations and is not due to announce annual results until March.
    "In Asia-Pacific and the Middle East, the excellent operating and financial performance delivered in the first half of the year continued during the third quarter," it said. "Europe, driven by the U.K., was strongly ahead of the prior year quarter, though Latin America was lower as a result of higher loan impairment charges in Mexico."

    http://news.yahoo.com/s/ap/20071114/...britain_hsbc_4
    Last edited by Vamp; 11-14-2007 at 06:38 PM.
    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Featured Member Vamp's Avatar
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    Default Re: More Subprime Fallout

    Mortgage Woes Damage a GE Bond Fund
    By ANDREW BARY

    A SHORT-TERM INSTITUTIONAL BOND RUN MANAGED by General Electric Asset Management apparently has suffered losses in mortgage and asset-backed securities and is offering investors the option to redeem their holdings at 96 cents on the dollar.

    The setback at GE Asset Management's GEAM Trust Enhanced Cash Trust is the latest in a series of problems encountered by money-market and short-term bond funds from the turmoil in the mortgage and asset-securities markets.

    Legg Mason, Wachovia and Bank of America have had to provide financial support to their money-market funds to prevent their funds from "breaking the buck," or falling below the $1 asset value that money funds seek to preserve.

    The GE fund, totaling $5 billion, is an "enhanced" cash fund, meaning it seeks to provide a slightly higher yield than a money-market fund while preserving principal and maintaining an asset value of $1 per share.

    The fund has been willing to take more risk than a money-market fund by purchasing floating-rate mortgage and asset securities with high credit ratings. The bulk of the money in the fund comes from GE's pension trust and other GE employee benefit plans.

    In a Nov. 8 e-mail to institutional holders of the fund, GE Asset Management cited "extreme conditions in the credit markets" and told investors that "it will soon begin to sell certain securities held in the Fund which will result in realized losses and likely bring the Fund's yield to zero."

    In the e-mail, GE Asset Management said the fund has "sufficient liquidity to redeem all non-GE subscribers at the current net asset value (.96) but there can be no assurance that this will continue to be the case at any point in the future as the difficulties in this market persist." Outside institutional investors therefore face a 4% loss on their holdings. GE said it plans to soon redeem $250 million from the fund and may liquidate additional holdings in the future.

    Based on information on GE Asset Management's Website, the enhanced cash fund has about 27% of its assets in home-equity asset-backed securities, 23% in residential mortgage securities and the rest in a mix of securities, including credit-card securities and corporate bonds. This information is as of June 30.

    The 4% loss suffered by outside investors is sizable relative to the added returns that the fund generated relative to short-term investments. The one-year return on the fund through June 30 was 5.49%, versus one-month Libor of 5.39%.

    In response to the Barron's inquiry, GE Asset Management said in an e-mail statement that it has "ceased taking new investments" in the fund "based on our belief that recent extreme conditions in the credit markets, including liquidity concerns and value dislocations, will continue in the foreseeable future."

    GE's pension and benefit plans could suffer additional losses in the fund as more securities are liquidated. It's unclear whether GE Asset Management plans to wind down the fund.


    --------------------------------------------------------------------------------
    http://online.barrons.com/article/SB...clusives_right
    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Featured Member Vamp's Avatar
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    Default Re: More Subprime Fallout

    An interesting turn of events in ohio. This hasn't hit the main stream news yet but is being picked up on alot of financial blogs .....


    Deutsche Bank Foreclosures Tossed Out of Ohio Federal Court - "They Own Nothing!"
    2007-11-12

    by Moe Bedard and Aaron Krowne

    Judge Christopher A. Boyko of the Eastern Ohio United States District Court, on October 31, 2007 dismissed 14 Deutsche Bank-filed foreclosures in a ruling based on lack of standing for not owning/holding the mortgage loan at the time the lawsuits were filed.

    Judge Boyko issued an order requiring the Plaintiffs in a number of pending foreclosure cases to file a copy of the executed Assignment demonstrating Plaintiff (Deutsche Bank) was the holder and owner of the Note and Mortgage as of the date the Complaint was filed, or the court would enter a dismissal.

    The Court's amended General Order No. 2006-16 requires Plaintiff (Deutsche Bank) to submit an affidavit along with the complaint, which identifies Plaintiff as the original mortgage holder, or as an assignee, trustee or successor-interest.

    Apparently Deutsche bank submitted several affidavits that claim that Deutsche was in fact the owner of the mortgage note, but none of these affidavits mention assignment or trust or successor interest.

    Thus, the Judge ruled that in every instance, these submissions create a "conflict" and they "do not satisfy" the burden of demonstrating at the time of filing the complaint, that Deutsche Bank was in fact the "legal" note holder.

    While the decision is great for homeowners in distress (due to providing a new escape hatch out of foreclosure), it is a big blow to the cause of sorting out the high-finance side of the mortgage mess.

    Jacksonville Area Legal Aid Attorney, April Charney, broke this news to us via email and made these comments in regards to the Ohio Federal Court ruling (emphasis ours):

    This court order is what I have been saying in my cases. This is rampant fraud on every court in America or nonjudicial foreclosure fraud where the securitized trusts are filing foreclosures when they never own/hold the mortgage loan at the commencement of the foreclosure.

    That means that the loans are clearly in default at the time of any eventual transfer of the ownership of the mortgage loans to the trusts. This means that the loans are being held by the originating lenders after the alleged "sale" to the trust despite what it says per the pooling and servicing agreements and despite what the securities laws require.

    This also means that many securitized trusts don't really, legally own these bad loans.

    In my cases, many of the trusts try to argue equitable assignment that predates the filing of the foreclosure, but a securitized trust cannot take an equitable assignment of a mortgage loan. It also means that the securitized trusts own nothing.

    So with this decision, it appears confirmed that investors in the mortgage debacle may in fact own nothing---not even the bad loans they funded! It seems their right to the cash flow from the underlying properties does not extend to ownership of the properties themselves; thus clouding the recovery picture considerably.

    Charney further remarked to us:

    This opinion, once circulated and adopted by state and Federal courts across the country, will stop the progress of foreclosures, at first in judicial foreclosure states, across America, dead in their tracks.

    We agree with additional remarks Charney made pointing out that this decision has major adverse implications for the prospects of an amicable financial workout for the various investor contingents in mortgage-backed securities (MBSes). Doubt is cast on where the full write-downs will eventually land, and this uncertainty can only be expected to further harm the market value of MBS and MBS-based synthetic securities, already in shambles purely due to rising underlying delinquencies. Investors in these securities might have assumed---wrongly, it turns out---that they actually owned some "real estate" in these deals.

    To paraphrase Jim Cramer, "They own nothing!"
    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Default Re: More Subprime Fallout

    ^^^

    In short, with all the packaging, over seas sales, re-packaging, write offs -- no one has a clue who the hell owns what.

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    Default Re: More Subprime Fallout

    ^^^ yup ... however, unlike NY Attorney General Andrew Cuomo's subpoenas to Fannie Mae and Freddie Mac attempting to uncover and expose 'fraudulently obtained' mortgages they are holding, this Judge's ruling can't be made to go away with a phone call !!!

    The domestic and global fallout from all of these sliced and diced 'fraudulent' US mortgages is FAR from over ! If this judge's ruling becomes a sustainable precedent, and makes foreclosure more expensive or impossible, this will seriously increase losses to whichever banks and hedge funds that actually now owns (or thinks that they own) toxic US mortgage debt.

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