JPM's Dimon: Prime Loan Losses Could Triple [Housing Tracker]

Quotes Of The Day 

“Our current expectation is those losses could triple from here… Prime looks terrible.” JP Morgan CEO James Dimon, speaking to analysts on JPMs recent Q2’08 earnings call. Dimon said prime mortgages loss provisions rose from 48 basis points to 91, and could rise to 270 basis points in coming quarters. (Seeking Alpha Conference Call Transcripts, July 17^th) 

To get a mortgage now, "you'd better walk on water.” - San Diego mortgage broker Victoria Johnson. Lenders are returning to previous ‘normal’ lending standards, last seen in about 2000. (Kiplinger.com, Aug. 2008)

Mortgage Trends

S&P May Cut $26 Bln Of Cdos Backed By Mortgages. “Standard & Poor's on Monday said it may cut its ratings on 200 classes of 57 collateralized debt obligations backed by residential mortgage-backed debt, due to continuing deterioration in the securities underlying the deals. The CDOs represented around $26 billion in debt at the time of their issuance, S&P said. The deals span the full ratings spectrum, from the top "AAA" to "CCC-minus," nine steps below investment grade.”  (Reuters, July 21^st) 

Ex-Cons Rip Off $85M In State Mortgages. “Florida CFO Alex Sink wants answers as to why countless Floridians were swindled with their mortgages by criminal lenders. Sink is calling for an extensive probe, and the resignation of the state's top mortgage regulator, Commissioner Don Saxon. A Miami Herald investigation found more than 10,000 ex-cons have been allowed to work in the industry, and over seven years took consumers for an $85 million ride.” (Central Florida News, July 21^st) 

Wachovia Exits Wholesale Mortgage Lending Business. “Wachovia Corporation (WB), the nation's fourth largest-bank, said Monday that it is leaving the wholesale mortgage lending business. Beginning July 25, the company will no longer offer mortgages through brokers, joining other lenders making similar moves to exit the troubled sector. Rival Bank of America (BAC) got out of the business several months ago. Wachovia didn't disclose how many jobs will be cut as a result of the change. More details are expected Tuesday when the Charlotte, N.C.-based bank releases its second-quarter earnings.” (Yahoo! Finance, July 21^st) 

Fitch Rates Baltimore County, Maryland's $36.7MM COPs 'AA+'; Outlook Stable. “Fitch Ratings has assigned an 'AA+' rating to Baltimore County, Maryland's estimated $36.7 million certificates of participation [COPs]… Equipment Acquisition Program, Series 2008. The COPs are scheduled to price via competitive sale on July 29, 2008. The COPs will finance the acquisition of heavy equipment for use in the county's parks and public safety units as well as information technology hardware for various departments… The Rating Outlook is Stable.”  (MarketWatch, July 21^st) 

Mortgage Market Weathers Storms.  “The tribulations of Fannie Mae, Freddie Mac and IndyMac Bank have dominated headlines for more than a week, but… home loan applications are up, interest rates are down and financing continues to be approved, according to national data and local mortgage brokers. "On the ground level here, it's not having any impact," said Ed Crain, VP, California Association of Mortgage Brokers. "People are coming in and applying for loans and buying, and the loans are getting approved and funded." Mortgage Bankers Association: Home loan applications increased 1.7% in the week that ended July 11, the same day Fannie and Freddie shed half their stock value.”  (SF Gate, July 20^th)

Seeking Alpha's Housing Tracker is a collection of housing-related excerpts from various sources, grouped by topic. Feel free to post any interesting links on the subject in the comments section below.

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Comments

[Ames Tiedeman:]

If this is true then one must be long the short financial ETF, SKF.

2008 Jul 22 06:39 AM

[bold4gold:]

Some think that just because the banks were absolutely crushed this quarter the crisis is over. Think again. This credit crunch won't be done until freddie and fannie are properly priced at zero [$0]!

2008 Jul 22 07:26 AM

[Pent up demand:]

Wait. I thought it was only subprime? And then it was only subprime and alt-a? So now we're hearing that prime is going to take a beating too? It can't be.

2008 Jul 22 08:24 AM

[old news:]

This is no surprise to anyone who has been paying attention. too bad, but there's more pain to come. this guy is biased but still runs an informational blog on the housing bubble: thehousingbubbleblog.c...

2008 Jul 22 08:27 AM

[Kunst:]

A lot of prime borrowers took equity out via refis that substantially increased their payments. Let someone in the family lose a job or get sick and those loans are at risk.

2008 Jul 22 12:41 PM

[madeconomist:]

Well actually it's still sub prime for rest of the market, but it's everything for Dimon and JPM because they bought that additional risk by purchasing Bear and knowing fully and with complete information that this was going to come back and haunt them. So what if it hurts shareholder values in the process? Dimon doesn't think that deep or doesn't care.

2008 Jul 22 02:17 PM