Mortgage Lenders Change Their Ways
Mortgage lenders are changing the way they do business right now, avoiding investments in packaged loans. Indeed, thanks to risky bank debt, many mortgage lenders are set to report rather dramatic fourth quarter 2007 losses in the very near future. This has mortgage lenders reconsidering how they do some things, reports Businessweek:
With defaults piling up, lenders have turned away from mortgages packaged and sold to investors and back to loans held on their books and those sold to Fannie Mae and Freddie Mac, the government-sponsored mortgage companies.
Doug Duncan, the trade group’s chief economist, said in a statement that banks are strong enough to keep making mortgage loans. A recovery “may take longer this time than it has in past financial crises, but a turn for the better still appears to be a good bet later in the year,” he said.
It’s good news that the losses won’t completely wipe out the Wall Street banks, since at some point someone still needs to be making home loans. However, the recovery may mean that lending standards remain in their tightened state for longer. And it could also mean that fewer borrowers will qualify for home mortgage loans in the future.
But for investors, it could present opportunities. The big Wall Street banks will likely recover, so it might be a good time to get stock at bargain prices. Just be careful. No one really knows what the stock market will do, and you want to choose a bank stock that will recover, not one that tanks even after the current crisis comes to an end.
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