And if Subprime… not so bad?

June 27, 2008

208

I think I see a little good news in here,… By Seeking Alpha Editor, Judy Weil.

And If Subprime Ends Up Not So Bad? [Housing Tracker]

Subprime Fallout

Excerpt: "Countrywide’s Pressures Mount. “Three states [have] filed separate legal actions against Countrywide Financial Corp. (CFC). The actions, by the attorneys general of California and Illinois, and the Washington State Department of Financial Institutions, came on the same day that Countrywide shareholders voted to approve the sale of the company to Bank of America Corp. (BAC). The all-stock transaction was valued at $4 billion when BofA agreed to buy Countrywide in January. But BofA shares have since slipped, and the value has fallen to about $2.8 billion. The transaction is scheduled to close on July 1.” (Wall St. Journal, June 26^th)

May Subprime Data Likely to Show Continued Improvement. “We’ve argued for months that the leading indicators of changes in subprime mortgage credit quality are showing signs of improvement… If said improvement continues, many estimates of cumulative subprime losses… will prove to be much too high… Loan servicer reports for April and May both showed improvement… a sign that something more than just seasonality is going on… A credit surveillance company that regularly monitors a huge portion—like, 40%—of outstanding subprime mortgage loans that have been securitized: Clayton Holdings Inc data shows that the early-year improvement has continued well past the point it can be chalked up just to seasonality.” (Tom Brown in Seeking Alpha, June 25^th)

Buffett Sees Opportunities In Subprime Business. “Warren Buffett, CEO of Berkshire Hathaway (BRK.A), sees some opportunities for investing in the subprime mortgage business. Buffett said Berkshire Hathaway had already made some subprime investments through its Clayton Homes manufactured housing unit. “We have bought some subprime paper in the open market, as people have wanted to sell portfolios.” Other investments are possible, he said. Buffett started up a municipal bond insurer earlier this year. He said that unit might indirectly invest in some distressed areas, including subprime. "Some of that may be a factor in what we are doing in bond insurance.” (Reuters UK, June 25^th)…. Read more here.