Nobody in the market wants to buy the Alt-A Liar's Loan crap anymore, at least not for face value, knowing these loans won't be getting paid back either, just like the subprime cancer. "No doc"? "State your own income"? Come on, who were we trying to kid. Alt-A, which I'll now call the "Casey Serin loan portfolio", is crap.
IndyMac, the nation's #1 "Alt-A" or "Liar's Loan" issuer, will be in a heap of trouble as they're stuck now holding the hot potato, and their business model goes kaput as the credit wheel tightens. Now if the CEO would come out and come clean, versus cheerleading his stock, he might still have a chance to avoid jailtime. Might.
His peer, American Home Mortgage, came clean yesterday, wiping 18% off their stock. It's NDE's time in the sun soon. It's only a question of when. (note, I'm happily short NDE, and might be doubling up today)
Mortgage Market Dries Up For American Home
The turmoil that has plagued the U.S. mortgage market so far this year got a little worse on Monday, when lender American Home Mortgage said it was having trouble selling loans on the secondary market, forcing it to slash its earnings estimates for the first quarter and for the year.
American Home Mortgage shares tumbled $4.64, or 18.0%, to $21.20.
Chief Executive Michael Strauss blamed problems in the secondary securitization market. Lenders like AHM bundle their loans into securities that are then sold to investors.
"During March, conditions in the secondary mortgage and mortgage securities markets changed sharply" said Strauss. "In particular, these markets were characterized by far few buyers offering materially lower prices."
James Ackor, an analyst at RBC Capital Markets, said the AHM developments were disappointing and that the difficulty with sales on the secondary market will probably linger.
"We are now expecting adverse market conditions to persist indefinitely" wrote Ackor in a client note.
"We are now expecting adverse market conditions to persist indefinitely" wrote Ackor in a client note.
About one-tenth of AHM originated loans are Alt-A's, which are made to borrowers with decent credit but with limited documentation. About 8.6% of the loans AHM holds for investment are Alt-A's.
