“Subprime Was The Tip Of The Iceberg”.... “Prime Will Be Far Bigger In Its Impact.”

Nothing really new but sometimes it is always good to get an update on the ongoing residential housing bust..... Scary that there are still some bottom callers out there..... I really hope that they have always put their money where their mouth was during their perma-bottom-calls.....

Das nachfolgende Posting liefert nicht wirklich bahnbrechend Neues und soll in erster Linie ein Update in Sachen US Wohnimmobilienmarkt geben. Denke hier werden all diejenigen die schon fast penetrant den Boden ausrufen als Phantasten entlarvt. Wenn man jetzt bedenkt das der Verfall im gewerblichen Sektor gerade erst Fahrt aufnimmt erscheinen einige bullische Kommentare in einem noch fragwürdigerem Licht...... Kein noch so großer Bailout kann die dringend notwendige Bereinigung verhindern.... Bin sogar der Meinung das je länger die Korrektur durch die "Eingriffe" verlängert wird desto größer wird der volkswirtschaftliche Gesamtschaden letztendlich sein. Da aber in der Realität immer irgendwelche Wahlen anstehen muß man wie die aktuellen Beispiele zeigen mit dem Schlimmsten rechnen.....

Housing Lenders Fear Bigger Wave of Loan Defaults NYT
The first wave of Americans to default on their home mortgages appears to be cresting, but a second, far larger one is quickly building

The percentage of mortgages in arrears in the category of loans one rung above subprime, so-called alternative-A mortgages, quadrupled to 12 percent in April from a year earlier. Delinquencies among prime loans, which account for most of the $12 trillion market, doubled to 2.7 percent in that time.

Delinquencies on mortgages tend to peak three to five years after loans are made....

Prime and alt-A borrowers typically had a five- or seven-year grace period before payments toward principal were required. By contrast, subprime loans had a two-to-three-year introductory period. That difference partly explains the lag in delinquencies between the two types of loans, said David Watts, an analyst with CreditSights

> You don´t need to be a genius to figure out will happen during the next few years..... The following quotes from Calculated Risk sums it up

> Denke hier braucht man nun wirklich kein Genie zu sein um zuerkennen das die nächsten Jahre brutal werden. Der nachfolgende Kommentar von Calculated Risk dürfte zutreffen.....

I think the second wave of foreclosures will be smaller in numbers, as compared to the largely subprime first wave, but the price of each home will be much higher. And the second wave will impact prices in the mid-to-high end areas, as opposed to the subprime foreclosures impacting prices in the low end areas.

Barry Ritholtz on "perma-bottom-callers"

Wishful thinking is never a substitute for reviewing the actual data;
thoughtful analysis is better than cheerleading

UPDATE: Click trough pages 61 & 62 from the HSBC Earnings Release to get an up to date picture of their US mortgages, consumer lending, credit card and vehicles credit book.... I also want to highlight page 12 & 13. They are showing the credit trends worldwide ( personal & commercial ) ...... Watch Latin America ( mainly related to Mexico ) ......

UPDATE: Passendweise hat gerade HSBC berichtet. In diesem Report findest man auf den Seiten 61 & 62 Daten nette Charts zu der US Kreditqualität quer durch alle Sektoren ( Kreditkarten , PKW Finanzierungen usw ). Darüberhinaus sollte man einen Blick auf die Seiten 12 & 13 werfen. Hier werden die weltweiten Rsikovorsorgen für den privaten und den gewerblichen Sektor aufgeschlüsselt. Hier sticht besonders und für mich etwas überracshend der starke Anstieg in Süd Amerika hervor ( Lt. Telefonkonferenz überwiegend Mexico )...... Die 200% Aufstockung der Risikovorsorge im gewerblichen US Bereich dürfte erst der Anfang sein.....

Details/Trends HSBC US Business

Besides the fact that they have written down billions i i think the most interesting part are the details on the US part of their business (especially on loan modifications ). Their acquisition of Household five years ago was probably one of their worst investments ever.... At least they can easily weather the storm without diluting shareholders (thanks to their Asian exposure ) . The following presentation gives a nice overview of Details HSBC US Business and is hinting there is much more pain to come......

Abgesehen von den erneueten Mrdabschreibungen an die man sich inzwischen gewöhnt hat ist es hilfreich einen Blick auf die Details des problembeladenen US Geschäfts von HSBC zu werfen ( besonder interesaant das Tempo der Kreditmodifikation ).... Kein schöner Anblick...... Der Kauf von Household in den USA vor 5 Jahren war rückblickend wohl der schlechteste Kauf in der ruhmreichen Geschichte von HSBC. Nichtsdestotrotz wird HSBC auch dank der starken asiatischen Wurzeln diesen Sturm wohl ohne eine größere Verwässerung der Aktionäre überbrücken können. Die nachfolgende Präsentation gibt einen schönen Überblick über das Details HSBC US Business und verdeutlicht das hier sicher noch mehr an Abschreibungen kommen wird.....

HSBC Statement
Our pre-tax profits in North America declined significantly against the same period last year, adversely affected by higher loan impairment charges in the US consumer finance business and further write-downs in Global Banking and Markets. These losses were partly offset by gains reported on HSBC's own debt held at fair value.

Loan impairment charges in the US consumer finance business were US$3.2 billion, significantly higher than the US$1.6 billion recorded in the first quarter of 2007 but notably less than the US$4.6 billion recorded in the fourth quarter of 2007, in part reflecting seasonal trends.

It seems likely that the deterioration in the US housing market will extend into 2009; it is also clear that US economic growth has slowed and there is an increased likelihood of a recession this year. Against this economic backdrop, we continued to experience higher delinquencies across our major lending portfolios, though these were broadly in line with our expectations at the end of 2007.

The vast majority of our mortgage customers continue to meet their commitments. At 31 March 2008, 5.0 per cent of mortgages in our US branch-based consumer lending business were two months or more overdue, compared with 4.2 per cent at 31 December 2007. The equivalent figures for our mortgage services business were 12.5 per cent and 11.2 per cent, respectively. This trend of rising delinquency ratios will continue as balances continue to be run off.

Reported delinquency percentages in our credit and private label card products were also affected by the weakening US economy, as well as by a shift in product mix, portfolio seasoning and lower origination balances. The latter was the result of action taken to curtail lending growth. At the end of the quarter, the two months or more delinquency rate for credit cards was 5.9 per cent and 3.6 per cent for private label cards, compared with 5.8 per cent and 3.4 per cent, respectively, at the end of 2007.

We have continued to take positive action to mitigate, where appropriate, the effects of the housing market decline on our customers. In the first quarter of 2008, we modified about 1,500 loans with an aggregate balance of approximately US$270 million ahead of their adjustable-rate mortgage ('ARM') resets; this brings the total number of loans modified to around 11,900 and the aggregate balance to some US$1.9 billion.

> At the end of 2007 they had $35.4 billion in residential mortgages outstanding.

> Ende 2007 hatte HSBC 35,4 Mrd $ an Hypotheken in den Büchern.

As market conditions pointed to an extended housing market decline, we began to offer, selectively, some longer term modifications, generally providing assistance for either two or five years.