Mortgage companies and Banks have taken some hard hits so far this month.
Novastar Financial Inc., which provides mortgages to people with weak credit temporarily suspended funding on some of its loans on August 3rd through August 7th. The mortgages that were affected are wholesale loans that have not been locked in. After a re-evaluation, the company resumed funding wholesale mortgages on August 7th.
American Home Mortgage closed its doors on Friday, August 4th resulting in the lay off of more than 6,250 workers, including almost all of its 1,460-person Melville staff. The company's stock, which was above $36 as recently as December, was trading at 76 cents in mid-afternoon. Unfortunately, the market conditions in both the secondary mortgage market as well as the national real estate market have deteriorated to the point that we have no realistic alternative," chief executive Michael Strauss said in a statement. Numerous shareholder lawsuits have already been filed against American Home and its executives. The mortgage-lending company recently filed for bankruptcy.
National City Corp.,a large U.S. Midwest regional bank, said on August 6th that its National City Home Equity unit has temporarily suspended offering new home equity loans and lines of credit, citing tighter mortgage market conditions.
Countrywide Financial, the top U.S. home mortgage lender drew on their $11.5 billion emergency Line of Credit to stay afloat, and the stock took a 30% hit before institutions stepped in and propped it back up today, August 16th.
All these mortgage woes are affecting the stock market and not in a positive way. Stocks continued to slide this morning due to the U.S. subprime mortgage mess. U.S. Treasury Secretary, Henry Paulson said that the current turmoil in the market "will extract a penalty" on U.S. growth, but said the economy was strong enough to avoid a recession.
-- L. Morse
Labels: home equity, maket conditions, mortgages, stock market
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