Global Subprime Update [Housing Tracker]

by: Judy Weil

Global Subprime 

Dutch Investment Funds Hit By Financial Turbulence. “De Nederlandsche Bank: The net worth of Dutch investment funds fell by 6% (€5.1B) in Q2’08. It is the fourth consecutive quarter that has seen a fall in worth, which began during the birth of the subprime mortgage crisis and ensuing credit crunch last summer. The decline in value is due to an increase in withdrawals, and also losses incurred on portfolio investments. Total net worth has slumped by over a fifth in the last four quarters, and now stands at around €78.5B. Q2’08 also saw Dutch firms write down their investments, with bond portfolios most affected with a 2.6% drop in value.” (Banking Times, Aug. 19)

ICICI Sells $275-Million Risky Papers Overseas. “India’s second-largest bank, ICICI… has sold about $275 million from its credit derivative portfolio in its foreign branches. The transaction, closed a few weeks ago, will enable ICICI Bank to cut its mark-to-market losses… However, the bank has decided to retain the credit derivatives where the underlying loans are to Indian companies… According to ICICI Bank's balance sheet for last year, it had a total credit derivative exposure of $1.6 billion.” (India Economic Times, Aug. 19)

Britain's A&L Raises 400 Mln Pounds In RMBS Sale. “Alliance & Leicester raised £400 million ($744M) from bonds backed by prime residential mortgages on Monday, only the second such deal from a UK issuer this year, a lead manager on the deal said. The residential mortgage-backed securities transaction, which orginated in response to interest from investors, is A&L's first such bond sale in more than a year, said Royal Bank of Scotland.”

Zell's Equity Int'l Eyes Brazil Home Builders. “Billionaire real estate mogul Sam Zell, who built a fortune investing in distressed property, sees opportunity in the beaten-down shares of Brazilian home builders and plans further investments in Brazil. Zell's international private equity arm, Equity International, is betting that a consolidation of Brazil's overcrowded publicly traded real estate sector will unfold by mid-2009 or early 2010.” (Reuters, Aug. 19)

Investors Bet $1.6 Billion on U.K. Homebuilder Drop. “Research company Data Explorers: Investors are betting about £865 million ($1.61 billion) that U.K. homebuilders such as Barratt Developments Plc will continue to slide this year, with some of the steepest drops hitting companies that have fallen the most. Stock equal to about 19% of the market value of the seven U.K. publicly traded homebuilders is on loan… That's about 45% higher than at the start of May.” (Bloomberg, Aug. 19)

U.K. Landlord Mortgages May Shrink by Two-Thirds, Says Skandia. “Money management firm Skandia U.K.: U.K. landlords may sell about two thirds of their rental property in coming years as house prices decline and mortgage costs rise. The value of so-called buy-to-let mortgages outstanding may drop to £44 billion ($82B) from £120B at the end of 2007… The sale of houses and flats would release about £18B of cash, assuming buy-to-let landlords have a maximum loan-to-value ratio of about 80% over the past decade, said Skandia. The buy-to-let market accounts for 10% of total mortgages compared with 1% in 1998.” (Bloomberg, Aug. 18)

Spanish Bad Debts Jump Further In June. “Bad loans held by Spanish banks jumped more than 10% in June, taking the rise to 164% over 12 months following an economic slowdown and the bursting of a property bubbles. Bad loans totalled €28.4 billion ($42.34B) in June, or 1.6% of total loans, up €2.96B from May when the bad loan ratio was 1.45%, showed the data which covered both commercial banks and regional savings banks controlled by regional governments. The data still does not include the effects of June's insolvency of property company Martinsa Fadesa, which filed for administration with debts of more than €6B.” (Reuters, Aug. 18)

18-08-2008: Subprime Woes Engulf Global Economies, M’sia. Only now the Asian economies, including Malaysia, are feeling the brunt of the subprime crisis… Aseambankers economist Suhaimi Illias: “It has taken a year to impact us. GDP numbers in Malaysia as well as the region point to slower growth. We are facing a confluence of inflationary pressure, prolonged domestic uncertainties and slowing US and global economy.” The subprime crisis has been an indirect catalyst for the woes in the Asian markets. Some Asian economies have been affected directly via their holdings of US mortgage-backed securities and others indirectly through changes in investment and consumption patterns.” (The Edge Daily, Aug. 18)

Fannie, Freddie Fall on Likely Need for a Bailout. “Fannie paid a record high yield in a $3.5 billion sale of three-year benchmark notes last week that drew less demand from Asia, the second-biggest buyer of Fannie's debt and mortgage- backed securities. Asian investors bought 22% of the issue, almost half the demand of three months ago and about two- thirds of Asia's usual buying. Treasury data show that private and government investors in Japan slowed purchases of their debt to $770 million in June, from $4.5B a month earlier. China bought $9.6B in Fannie Mae and Freddie Mac debt, down from $14.9B in May.” (Bloomberg, Aug. 18)

Subprime Crisis To Hit Charities. “Hundreds of charities, churches and local councils around Australia have been burnt by the subprime crisis, facing a potential loss of up to $2 billion… Metropolitan Ambulance Service and the Victoria Teachers Credit Union are among the groups that own collateralized debt obligations, which Lehman Brothers marketed… The St Vincent de Paul Society ([has] $8.9 million in funds with Lehman - the bulk in CDOs)]… The Victoria Teachers Credit Union has $17M in CDO-laden assets with Lehman, hospitals agency Western Health ($8M), Benalla and District Memorial Hospital ($1.5M), Baptist Union of Victoria ($2M), East Gippsland Council ($9M), and East Gippsland TAFE ($4M).” (The Australian Age, Aug. 16)


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