Monday, March 12, 2007
With echoes of the Internet boom and bust and the savings and loan debacle, the home mortgage market is imploding. A stock analyst just wrote a glowing report on a sub-prime lender that had already seen its share price drop 50%. His downside risk was a price of $10 from $15 in a "fire-sale". Two weeks later the lender revealed it was near bankruptcy and the price fell to $3.21.
There are many indications most lenders have not correctly evaluated the risks of their home mortgages and are carrying them on their books at inflated values. Knowledgeable Wall Street insiders are holding their breath and seeing what this Spring shows is happening in the housing market.