This entry was posted on Thursday, August 9th, 2007 at 4:44 pm and is filed under Subprime Meltdown. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
Subprime Troubles Spread to Europe
From CBS Market Watch this morning…
LONDON (MarketWatch) — BNP Paribas, one of the largest banks in France, said Thursday that it will stop valuing three of its funds and is suspending investor withdrawals after U.S. sub-prime-mortgage woes led to the “complete evaporation of liquidity,” the latest sign of housing market troubles in the world’s biggest economy rippling across the globe.
So the mess has now spread beyond the sub-prime, beyond the prime mortgage arena, beyond the U.S. economy, and into the international economy, causing a complete evaporation of liquidity.
BNP Paribas was joined by Germany’s Union Investment who suspended redemption on one of it’s funds, U.S.-German JV WestLB Mellon Asset Management who suspended redemptions on an ABS fund Tuesday, and Dutch bank NIBC who wrote of a $137m loss on its U.S. ABS fund. All of this from exposure to the U.S. sub-prime mortgage defaults.
What does it mean to you as an agent or borrower?
Virtually all loans other than government loans or the conforming loans that are sold to Fannie Mae and Freddie Mac have been frozen or the rates raised to ridiculous levels. The markets are repricing risk. Until investors can quantify risk in this new environment and make sense of the complex credit derivatives created by Wall Street, they have headed for the sidelines. Mom and dad have confiscated the mortgage industries credit card.
What to Do?
For now, be careful about removing your loan contingency until the loan funds. Lenders who belly-up because they run out of money to lend don’t care that you or clients will be sleeping in the Bekins van while you try to find another loan.
Got a question? Send me an email.
Got a Comment? Please chime in below.
August 12th, 2007 at 8:45 am
I jsut went into contract to buy a home, and I have two weeks to remove all my contingencies. Are you saying I don’t have to remove my loan contingency or theirs a way not to do this.
I am worried about my financing after all the talk last week and I don’t want to lose my deposit.
August 12th, 2007 at 8:51 am
William,
In light of the events of the last two week’s, I am recommending to all my agents and our mutual clients that they avoid removing the loan contingency until the loan actually funds.
There have been too many cases lately–American Home Mortgage being just the most recent–where a lender has gone belly-up after the loan was approved. American Home Mortgage left $800 million of loans unfunded, and I’m sure some people lost their deposits.
Sellers will have to be a little more flexible right now or risk have their buyer walk away rather than risk the loss of a deposit through no fault of their own.