dapperdan19

'The Worst Is Over for Financials' - Really?

Whether the "worst" is over for housing and the credit markets is not all that important, imo. It implies a 'V' bottom for the crisis, which is what I believe the stock market is currently assuming. The question isn't whether the "worst" is over, but how long the "worst" stays with us.

One example, the way the Fannie Mae Automated Underwriting engines are set up, there is very little doubt that the maximum tightening in that Underwriting engine will occur during Q3 of this year, through September. So, if you're looking for the mortgage markets to ease up before then in the conforming market, I think you're dreaming.

On the positive side, we are seeing spreads tighten between the 10 year treasury and 30 year FNMA. Also, we're seeing Jumbos being priced much more attractively. The credit markets are improving, incrementally.

Also, as far as bank stocks are concerned, they've all become commoditized. Compare the rate sheets today versus, say, 15 to 18 months ago. 15-18 months ago, a typical mortgage lender (I'm looking at an old MortgageIT rate sheet) was 9 pages. Today, it is 4 pages, and page 1 is a directory of the entire company. There is no value-added remaining in bank stocks. When every bank pushes to become a Hudson, there are no margins left. The value of Hudson was that it was Hudson when most of the other banks were trying to be a WAMU, Countrywide,Indymac.