Mortgage lenders have sinking stock prices
Article by Gregory Inoue
Builders aren’t the only ones seeing stock prices slump from the weakening real estate market, mortgage lenders are seeing shares begin to sink as well.
Countrywide Finanical has seen stock prices fall 20.9% since May 2006. Accredited Home Lenders, a subprime lender, stock has fallen by half. Thornburg Mortgage, an adjustable rate specialist, has seen stock fall by almost 20%.
Lenders are starting to see a gloomy outlook as the real estate market continues to weaken. Borrowers are seeing higher prices to both purchase and build combined with higher borrowing costs. Sales of both new and existing homes were down 4% in July, according to the National Association of Realtors, while the inventory of unsold homes is hitting high levels.
With fewer people taking out mortgages, overall applications are down 25% for the year.
“The volume of loans is declining,” said Bose George, an analysist for Keefe Bruyette & Woods. “The market expects declines for the next few years. And that is obviously a drag on revenue and earnings, because lenders will have to compete more aggressively.”
The market is also beginning to see fallout from the high usage of exotic mortgages over the past few years. An increasing number of borrowers have chosen adjustable-rate mortgages over the past few years. With these products beginning to reset to higher interest rates, delinquency rates are beginning to see slight increases. Delinquencies for the first quarter of 2006 were up 0.1% when compared to the first quarter of 2005, according to the Mortgage Bankers Association.
“Borrowers are missing more of their payments than before,” said Matthew Howlett, an analyst at Fox-Pitt Kelton.
H&R Block reportedly has set aside .3 million to offset potential losses from its subsidiary, Option One Mortgage, due to delinquent mortgage payments.
The fear of a worsening, even steep, housing slump will continue to result in investors continue to sell mortgage lender stock.
About the Author
Gregory Inoue represents RateTake.com Refinance Rate mortgage marketplace. RateTake.com matches consumers with multiple lenders offering low Refinance Rates from our network of accredited lenders.