Countrywide and HSBC Make Investors Nervous
U.S. stocks took a beating yesterday largely because poor earnings from Countrywide. one of the nation’s largest mortgage lenders. There are renewed concerns about whether the housing downturn could damage the broader economy. At Household - HSBC Watch we say it will, as higher fuel prices and less cash flow is not hard to predict.
Countrywide’s profit plummeted 33 percent, to $485 million (81 cents a share), in the quarter ended June 30, compared with $722 million ($1.15) in the comparable quarter a year ago. The highest number of delinquencies occurred among subprime borrowers, typically people with bad credit. Countrywide has more than 1,000 branches.
HSBC has over 1300 branches, issues second mortgages and subprime loans, and has been buying subordinated positions and subprime loans from other companies. If news from Countrywide shocked investors, news from HSBC will be much worse according to sources that study the matter. “The focus and blame has been on subprime borrowers - those hit hardest - but the fact of the matter is that those with good credit and bad or risky mortgages are also in trouble” said Household - HSBC Watch.
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Mortgage defaults in California’s San Francisco Bay Area soared in the second quarter to the highest level in 20 years, according to numbers from a mortgage research firm that also show actual foreclosures are the highest in the state.
Default notices went out to nearly 7,700 Bay Area homeowners last quarter, according to DataQuick Information Systems. That’s up over 164 percent from the same time last year. The notices serve as an early indicator of possible foreclosures.
Statewide, foreclosures soared nearly 800% in the second quarter forcing more people from their homes. The problem is driven by adjustable rate mortgages and subprime mortgages. The median California homeowner facing foreclosure is five months behind on payments, and owed an average of just over $11,000 on a $342,000 loan, according to DataQuick’s report.
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