The Mortgage Dude

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Mon Dec 3rd 22:13 PM | Rating: 0 0
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E*Trade, Wells Fargo and Downey: 'Subprime' Problems With Prime Loans

I like a lot of what you wrote there. One thing I don't see taken into analysis is that Wells Fargo's write downs were on Helocs where they are most likely in 2nd position. DSL is usually in 1st position. So if there is a 20 percent loss at foreclosure Wells is taking a 100% loss most likely and DSL would only be taking a 20% loss.

That being said I see DSL's loan portfolio is almost entirely in Arizona and California. Right in ground zero of the housing bust. Wells is spread throughout the country. So in this way DSL is worse. I see a lot of pain in DSL's future. I can't see how they make it without raising additional capital. And this isn't a real good time to raise capital. FASB 157 is going to make life real interesting for a lot of companies. I don't think it will affect the balance sheet here very much but at C and others it will make a big difference and problems there will drive the price of all financials down. Good luck to the financial longs - they're going to need it.
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