[getsmart-l] Booming Economy: US mortgage loan woes 'near-perfect storm'

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Via NY Transfer News Collective  *  All the News that Doesn't Fit 

BBC - Sep 11, 2007 
http://news.bbc.co.uk/2/hi/business/6988769.stm 


US home woes 'near-perfect storm' 


The downturn in the US housing and mortgage sectors now represents "a 
near-perfect storm", one of the country's leading lenders has warned. 


Washington Mutual chief executive Kerry Killinger said the result would 
likely be falling house prices across many parts of America into 2008. 


Centred on the sub-prime sector, the crisis in the US mortgage market 
has been sparked by record loan defaults. 


Washington Mutual may put aside an extra $500m (B#247m) to cover bad 
loans. 


This would come on top of the $1.5bn to $1.7bn of exposure the company 
- now America's sixth largest mortgage lender - had forecast in July. 


"Most housing markets appear to be weakening, to us," said Mr Killinger. 


Global issue 


In recent weeks, US house price figures have been mixed. 


Last month, the Commerce Department said new homes sales held up in 
July, while further figures from the National Association of Realtors 
showed sales of existing properties fell to a near five-year low in the 
same month. 


The crisis in the US sub-prime mortgage sector has been sparked by 
American mortgage rates rising sharply over the past year. 


As a result more than 50,000 jobs have been lost in the US mortgage 
industry so far this year, including 12,000 announced last week by the 
largest lender Countrywide. 


The crisis has spread overseas, and to the wider global financial 
sector, because US sub-prime debt is often resold as part of a wider 
debt package. 


As a consequence, banks and investors are, as yet, unsure about how far 
the sub-prime downturn could spread. 


In turn, global banks have become far more cautious about whom they 
lend to, and are stockpiling funds to cover any potential liabilities 
of their own. 


The result has been a sharp downturn in available credit, and higher 
lending rates, both for companies wishing to borrow, and individuals 
trying to get a mortgage. 


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