SAN FRANCISCO (MarketWatch) — Units of Cerberus Capital Management LP and National City Corp. stopped taking home loan applications on Monday, becoming the latest to be hit by turmoil in the mortgage market.
Aegis Mortgage Corp., a mortgage lender that’s part-owned by private-equity firm Cerberus, suspended all loan originations on Monday. Aegis also is unable to fund home loans that are already in its pipeline, spokeswoman Pat Wente said.
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Bill Gross | August 2007
"The rich are different from you and me," wrote Fitzgerald and I suppose they are, but the differences – they wax and wane with the economic tides. Gilded ages come, go, and are reborn on the monsoon cloudbursts of seemingly intangible forces such as globalization, innovation, and favorable tax policy. For the rich to be truly rich and multiply their numbers, they need help. Adept surfers they may be, but like all riders, the wealthy need a seventh wave that allows them to preen their skills and declare themselves masters of their own universe, if only for a moment in time. That the golden glazed surfboards of the 21st century seem unique with their decals of "private equity" and "hedge finance" is mostly a mirage. Wealth has always gravitated towards those that take risk with other people’s money but especially so when taxes are low. The rich are different – but they are not necessarily society’s paragons. It is in fact society’s wind and its current willingness to nurture the rich that fills their sails.
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"Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years." ~ Warren Buffett
As we all know (or at least should know), the United States economy became imbalanced in the late-1990s as too much speculative capital surged into the Internet and Telecom sectors of the economy. As this speculative boom expanded, rising asset prices allowed the boom to move into the broader economy. Throughout the late-’90s, speculative funds and increased leverage played a primary role in the expansion of credit throughout the economy. If someone wanted cash and had a semi-viable story as to how he would pay it back, he could procure a loan or venture funds quite easily. This process played out throughout the economy, as consumers, businesses and every level of government piled into debt in order to finance projects for current consumption, with little or no concern given to having to pay it off. Our fiat monetary system, with limitless fractional reserve banking made possible by low reserve requirements and a general lack of prudence by our questionable Federal Reserve establishment, played a significant role in creating the initial imbalance.
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Filed under Housing Market, Mortgage News, Finance, Economy, Real Estate, Credit, Secondary Mortgage Market, FED, Loans, bubbles, Mortgage Blog, Bond Market, Housing Crash, subprime meltdown, Lending guidelines, credit crunch by Godfather
Even now, the ads on television, radio and the internet continue: "Is your credit bad? Don’t worry, we’ll provide the loan for the home of your dreams …" What those commercials should, but do not, add is: go through the small print with a toothcomb. Or else you, too, could be swept up in America’s subprime mortgage crisis.
Just as in Britain, homeownership is a traditional goal of American society. But as interest rates have climbed and the housing market has slumped, the number of what are politely called "delinquent" loans has soared. And as home repossessions grow, civil rights groups and presidential contenders alike are stepping into the row over the high risk, or subprime, mortgage market.
In the most sweeping call yet, a coalition of civil rights organisations have demanded a six-month moratorium on foreclosures. They want lenders - whose reckless and sometimes predatory policies are largely blamed for the crisis - to help victims refinance their mortgages, or face law suits.
"We know that there are safe and affordable loans that meet the needs of our communities," said Janet Murguia, the president of the National Council of La Raza, the biggest Hispanic civil rights group in the US, noting that minority groups were especially hard hit by the crisis. Lenders should "match families to the sustainable loans that they should have had in the first place", she added.
The subprime crisis has erupted over the past few months as borrowing rates have turned upwards while house prices have fallen steeply in many parts of the country. All sectors of the mortgage market have been affected but none more so than subprime loans, extended to borrowers with shaky credit histories.
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