US loan default problems widen
US loan default problems widen
By Ben White in New York
Published: October 21 2007 19:21 | Last updated: October 21 2007 19:21
Poor quarterly results from banks across the US over the past two weeks suggest credit problems once confined to high-risk mortgage borrowers are spreading across the consumer landscape, posing new risks to the economy and weighing heavily on the markets.
US banks have raised reserves for loan losses by at least $6bn over the second quarter and by even larger amounts from last year, indicating financial executives believe consumers will be increasingly unable to make payments on a variety of loans.
Banks are adding to reserves not just for defaults on mortgages, but also on home equity loans, car loans and credit cards.
"What started out merely as a subprime problem has expanded more broadly in the mortgage space and problems are getting worse at a faster pace than many had expected," said Michael Mayo, Deutsche Bank analyst.
"On top of this, there is an uptick in auto loan problems, which may or may not be seasonal, and there is more body language from the banks that the state of the consumer was somewhat less strong [than thought]."
Dick Bove, analyst at Punk Ziegel, said bank earnings indicated "there are problems with consumer debt that extend beyond the well-known issues in the real estate markets. Auto loans are clearly a new area of concern". At Wachovia, the fourth largest US bank by assets, credit loss provisions more than doubled from the second quarter to $408m.
Troubled loans that could turn into losses also more than doubled. Ken Thompson, chief executive, said the housing market could remain weak through next year. Wachovia's poor earnings fuelled a stock market rout on Friday.
Problems can be seen at banks across the US. At KeyCorp, in Cleveland, non-performing assets rose $241m from last year and loan-loss provisions doubled. In Dallas, Comerica's loan loss provisions tripled from last year to $45m. Net credit losses jumped from $663m last year to $892 at Wells Fargo, in San Francisco, due to home equity and car loan losses. Loans more than 90 days past due and still accruing increased to $5.53bn from $3.66bn last year.
"There has been a fast sea-change in thinking," said Rick Klingman, interest rate trader at BNP Paribas. "Stocks are showing some real concern about bank earnings and there are worries about credit in general."
Additional reporting by Michael Mackenzie in New York
The Financial Times Limited 2007
http://www.ft.com/cms/s/0/7c453090-7ff7-11dc-b075-0000779fd2ac.html?nclick_check=1
By Ben White in New York
Published: October 21 2007 19:21 | Last updated: October 21 2007 19:21
Poor quarterly results from banks across the US over the past two weeks suggest credit problems once confined to high-risk mortgage borrowers are spreading across the consumer landscape, posing new risks to the economy and weighing heavily on the markets.
US banks have raised reserves for loan losses by at least $6bn over the second quarter and by even larger amounts from last year, indicating financial executives believe consumers will be increasingly unable to make payments on a variety of loans.
Banks are adding to reserves not just for defaults on mortgages, but also on home equity loans, car loans and credit cards.
"What started out merely as a subprime problem has expanded more broadly in the mortgage space and problems are getting worse at a faster pace than many had expected," said Michael Mayo, Deutsche Bank analyst.
"On top of this, there is an uptick in auto loan problems, which may or may not be seasonal, and there is more body language from the banks that the state of the consumer was somewhat less strong [than thought]."
Dick Bove, analyst at Punk Ziegel, said bank earnings indicated "there are problems with consumer debt that extend beyond the well-known issues in the real estate markets. Auto loans are clearly a new area of concern". At Wachovia, the fourth largest US bank by assets, credit loss provisions more than doubled from the second quarter to $408m.
Troubled loans that could turn into losses also more than doubled. Ken Thompson, chief executive, said the housing market could remain weak through next year. Wachovia's poor earnings fuelled a stock market rout on Friday.
Problems can be seen at banks across the US. At KeyCorp, in Cleveland, non-performing assets rose $241m from last year and loan-loss provisions doubled. In Dallas, Comerica's loan loss provisions tripled from last year to $45m. Net credit losses jumped from $663m last year to $892 at Wells Fargo, in San Francisco, due to home equity and car loan losses. Loans more than 90 days past due and still accruing increased to $5.53bn from $3.66bn last year.
"There has been a fast sea-change in thinking," said Rick Klingman, interest rate trader at BNP Paribas. "Stocks are showing some real concern about bank earnings and there are worries about credit in general."
Additional reporting by Michael Mackenzie in New York
The Financial Times Limited 2007
http://www.ft.com/cms/s/0/7c453090-7ff7-11dc-b075-0000779fd2ac.html?nclick_check=1
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How did the US extend the Federal Deficit from $9 to $10 Trillion?
No other country will loan the US money...I read a story that said they are borrowing $900 Billion from Social Security to keep the Govt going but can't find the story now.
Anyone else know where the US got the extra money?0 -
I read an article in the local paper about some credit card companies starting to call in their loans, also banks, and mortgage companies.. This means something is up and they are trying to recoup all they can as fast as they can..In the article it said in the fine print of your contract it says they can call in full payment at any time... 0 -
It's all part of the natural cycle, folks! Why, it has nothing to do with the fact that the Bush Administration has been spending like there's no tomorrow and printing money like it was going out of style! And let's not forget the open borders depressing wages at home and sending jobs overseas!
Stay the course![}:)]0 -
"spending like there's no tomorrow and printing money like it was going out of style!"
-EMM
Do you mind if I write those two gems down in order to perhaps use them at some future date ??
I KNOW you can do better than that.
For shame!!
Doug0 -
Somebody else besides the a Monkey will be along presently with soothing words about how you don't understand econonomics..that this situation is, in fact, VERY healthy..and money does, indeed, grow on trees.
Provided you, of course, went to the right schools, and hold the government in proper reverence.
Somehow, I sense a tongue-in-cheek from the Monkey..so am inclined to doubt HIS reply..but await breathlessly the nearest government/big banking globalist to allay my angst over this.0 -
Only thing I see wrong with Monkey's statement is the use of worn out similies. Me thinks that's what Doug meant too..[:D] 0 -
The worst is yet to come.
The number of Adjustable Rate Mortgages (ARM) resetting to higher levels will more than double in the second half of 2007 over the first six months of 07 and the first six months of 2008 will have more reset than all of 2007 combined.
It is not even close to being over so hang on to your hats and hopefully your homes as the rough ride ain't going to be pretty.
Wulfmann0 -
I laugh and I laugh and I laugh and then laugh some more... Especially at all those very smart people in CA who bought in 2005 and on. 0 -
Do you know there are graphs and history that show that what we are going through is a cyclical thing. Every so many years housing market goes up followed by so many years of decline. Same with stocks, employment, etc. Each has its own cycle which varries by a year of two but not three or four. Just like clock work. The graphs go back 200 years. Sorry I am being vauge about what so many years mean. But the cycle is there if one wants to do the research and find the graphs. The big money boys sell before the market hits the top and buy before it hits the bottom. It is enough to make one think it is all manipulation. But we all know that is illegal. Do some research and find the graphs. A real eye opener. 0 -
Selling when the market is hot is no solution if you just turn around & buy another house. I had to explain that to my wife when she kept saying we should have sold before the 1990 bust.
This is at least the third bust since I have been married & each time so far the prices have eventially roared back even higher. The time to get worried is when the buying panic sets in & people start offering to pay more than the listed price.
Right now I see this as a buying opportunity. I wanted a second home in Nevada or Arizona along the Colorado River but had been priced out. I still think it may be a year too early but I am keeping a close look at prices on the inter-net & when I visit Laughlin.0 -
Had a buddy lose his house in OryGun when Jimmuh Carter brought us the 20 percent plus interest rates.
Doug0 -
I can remember when the rates got almost that high but why would that cause anyone to lose their home? They didn't have these nutty loans then. It was only after the bank & savings & loans had the problem of having to pay interest rates higher than they were getting on their outstanding loans that they came up with the adjustable rate loans.
I'm not certain of the timing but I believe it was after Reagan bailed out the banks & savings & loans.
The only reason to lose your home with a 20% loan would be if you were crazy enough to sign up for one in the first place.0
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