A Wall Street Journal study released today says Washington Mutual Inc. was the #1 U.S. lender to investors and second-home buyers -- which are considered riskier loans than loans to primary occupants. 15% of WaMu's loans were non-primary residence, vs. 13% for Countrywide, 11% at Wells Fargo, 9% at JP Morgan Chase, and 5% at Citigroup. Citigroup and WaMu had the highest concentrations of high interest-rate loans, generally associated with subprime borrowers. High interest-rate loans (over 7.72%) were 32% for Citigroup, 29% at WaMu, 25% at Countrywide and 19% at Chase and Wells Fargo. While it is not clear how many of the high-risk loans remain on lenders books instead of sold to investors, a lender can sometimes be forced to repurchase bad loans, and risks lower bids on future loan packages it wants to sell if earlier loans were fraught with defaults. WaMu reports Q1 earnings after the close.
Sources: Wall Street Journal
Commentary: Why I'm Underweight the Financial Sector: Sometimes Bad Gets Worse • Subprime Fiasco: A Bargain Hunt For Value Players? • Washington Mutual Challenged By Inverted Yield Curve • Washington Mutual: Good, Bad and Ugly On Quarterly Earnings
Stocks/ETFs to watch: Washington Mutual Inc. (WM), Citigroup Inc. (C), Countrywide Financial Corp. (CFC), Wells Fargo & Company (WFC), JPMorgan & Chase Co. (JPM). ETFs: PowerShares Dynamic Banking (PJB), streetTRACKS KBW Bank (KBE)
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