Mr Mortgage

Is E*Trade a Bargain?

what nobody seems to care about is that 50% or $12.5 BILLION of their $25 BILLION in loan assets are in 2nd mortgage product. HELOCs and HELOANs. The very same 2nd mortgage product that firms like CFC have had to write down months ago by 20% of the face value. However, CFC wrote down Prime AAA rated 2nds to 80 cents and ETFC was buying the worst of the worst for many years. Firms like National City who specialized in 2nds sold as much as they could to ETFC because of their endless appetite for this product. They loved the 100% 2nd mortgage because of the yield. Many projections from the ratings agencies are looking at an overall 13-15% default rate for these loans. ETFC also never checked if these mortgages were behind negatively amortizing first mortgages or pay option arm, which is the next group of loans to go and will make the subprime implosion look like a walk in the park for all of 2008-2010. What would happen to ETFC is they had to write down $12.5 billion in 2nd mortgage products by 25-50%? Even 15-20%?

Your recommendation to buy ETFC now is catching the proverbial falling knife that is still many feet from the floor.