Housing Market Tracker - Subprime Review

Here's our summary of articles and data points on the housing market. It's part of Seeking Alpha's coverage of the real estate market and homebuilder stocks. Like all other topics and stock coverage from Seeking Alpha, you can have this sent to your Blackberry or desktop email by signing up for our no-spam free emailsubscription service.

Quote of the Day

"We have to look how the situation got so far into a loss. It's our job.'' - Swiss Federal Banking Commission spokesman Alain Bichsel said Swiss regulators would investigate how UBS could rack up $10 billion in losses from the U.S. subprime mortgage market. (Bloomberg, Dec. 24th)

Subprime Fallout

• KeyCorp's Rating Unaffected By Announced Q4 Charges - S&P (CNN Money, Dec. 24th): "KeyCorp's (KEY) fourth-quarter provision will exceed losses by $250-270 million as nonperforming assets are projected to increase 34% from Sept 2007 levels. KeyCorp said it will record net loan charge-offs in the range of $110-120M associated with deterioration in its commercial real estate [CRE] construction portfolio, principally in Florida and California. It expects fixed-income losses of $55-65M associated with declining asset valuations in various CRE investments and restructuring expenses of $26M associated with the elimination of 870 positions. S&P: KeyCorp has largely avoided sizable investments in the asset and investment types generating the outsized charges recorded by many in the industry."

• This Holiday, the Naughty Get the Gifts (Barron's, Dec. 24th): "Washington Mutual (WM) holds about a $20 billion subprime-mortgage portfolio and $43B in second-lien home-equity loans... [It's also] the subject of an SEC inquiry [for] inflating home appraisals... WaMu still hasn't written down the value of those two large loan portfolios... Bears [see] a whopping $7B-$8B in loan losses next year... [Bulls:] Home loans... accounted for less than 15% of WaMu's total revenue last year... its large retail banking presence would be attractive to many banks... [and] bank insiders have been buying shares of late... [But] until WaMu puts a number on its subprime exposure, buying its shares is a gamble, not an investment."

• Subprime Suits Rapidly Rising (Paul Kedrosky in Seeking Alpha, Dec. 23rd): "Subprime lawsuits are rising rapidly... the first subprime suit was February 8, 2007, and the number of such suits quadrupled in the second half of the year versus the first half. I have to believe it will grow by at least the same amount over the next six months, making this one of the largest legal adventures in recent memory."

• Soft Market Is Good News For Home Buyers (St. Cloud Times, Dec. 23rd) Minnesota: "Local banks — such as Bremer, Liberty Savings Bank and ING Direct —said they haven't been hit hard by the crisis because they did not make subprime loans... Brian Myres, head of Midwest operations for ING: Of 60,000 loans originated since 2002, 11 have gone into foreclosure... In November, Wells Fargo (WFC) announced... a $1.4 billion provision in loan losses for Q4. Other major lenders nationwide wrote down tens of billions in mortgage losses... in Q3 and Q4. Liberty Savings Bank president Mark Bragelman: Customers want to use a local lender... The bank will do more than $100 million in mortgage business this year."

• Remember The Y2K Overreaction (MarketWatch, Dec. 23rd): "When the Federal Reserve flooded the banking system with liquidity [to] assuage Y2K fears [it] ignited a bear market. Borrowers [then] pursued "easy" profits in the high-tech/internet. When Y2K became a non-crisis, the Fed decided not to roll over the repurchase agreements, banks called in the loans, and demand for dot.com and other technology stocks was undermined... [Now] the Fed, along with some European central banks, are doing repurchase agreements, trading subprime mortgages for cash. This will window-dress the strongest banks' balance sheets at year end... helping the rating agencies to put a positive light on the banks."

• Banks Drop Treasury-Backed Plan to Bail Out SIVs (Bloomberg, Dec. 21st): "Citigroup Inc. (C), Bank of America Corp. (BAC), and JPMorgan Chase & Co. (JPM) abandoned a U.S. Treasury- sponsored plan to buy assets from cash-strapped structured investment vehicles. The "SuperSiv'' fund brokered by Treasury Secretary Henry Paulson, [was] slated to be about $80 billion when it was announced in October. The need for a bailout has diminished as HSBC Holdings Plc, bond insurer MBIA Inc., Citigroup and other companies that manage SIVs arranged their own rescues. The steps lessened the threat that SIVs will dump their holdings and further roil credit markets contaminated by losses in securities tied to subprime mortgages."

• Boston Fed, Banks in $125 Mln Subprime Aid Plan (Reuters, Dec. 21st): "The Boston Federal Reserve Bank and five U.S. banks unveiled details on Thursday of a $125 million program to help New England homeowners refinance into fixed-interest-rate home loans if they are facing increases in monthly mortgage payments that they cannot afford... The five banks are Citizens Financial Group, a unit of Royal Bank of Scotland Group Plc.; Sovereign Bancorp Inc.; TD Banknorth, a unit of Canada's Toronto-Dominion Bank, Bank of America Corp (BAC) and Webster Financial Corp (WBS)."

• SEC Probes Wall Street on Mortgage-Related Asset Pricing (Joan Wickham in Seeking Alpha, Dec. 21st): "Regulatory investigations into mortgage-securities pricing are examining whether financial firms should have disclosed earlier the declining value of such securities and how they priced them on their books.. Among the firms being examined regarding their valuation methods are Morgan Stanley (MS), Merrill Lynch (MER), Bear Stearns (BSC) and UBS (UBS). The SEC is [investigating] whether financial firms were valuing mortgage-related securities differently on their own books compared to the valuations they applied to the holdings of customers and whether any firm changed its valuation methodology to one that was more favorable in order to avoid or forestall taking big losses."

Tracking the Housing Market and Homebuilder Stocks You can track developments in the housing market, homebuilder/housing stocks and review subprime news by bookmarking our Housing coverage or subscribing to our free email service. If you have a blog or website of your own, you can track developments in the sector and provide great content for your readers with our Housing Market widget (left). It's simple to add -- just select "Housing Market" from the drop-down menu here.