Banks in trouble

It seems that the New Year has started with some shaky news for the finance sector. If you look at the list of banks and mortgage companies on page 12 of this PDF report "Assessing your Mortgage Banking Strategy in a changing environment" (that page is on subprime lenders) many of the mortgage companies have closed or aren't doing well:

4. Countrywide Financial Corp. [apparently looking for buyer(s)]
6. Option One Mortgage Corp. [looking for a buyer]
7. Ameriquest Mortgage Corp. [closed almost all offices and laid off 3,800]
17. Ownit [gone]
18. Aegis [just closed two subprime operations centers]
19. MLN [stopped accepting new loans]
24. Encore [being acquired by Bear, Stearn's]
25. Fieldstone [closing 7 of 16 ops centers, debt covenants modified thru 1/31/2007]

Other mortgage companies not on the list: Secured Funding Corporation (just announced their stop of funding as of January 12), Sebring (closed in December), Saxon Capital Inc. (acquired by Morgan Stanley). [Thanks to commentors at thehousingbubbleblog for some of the info.]

With such a trend, it won't be long before banks waver and fall (HSBC, no. 2 on the list, is hurting due to fines being levied on the former Household Intl). Which means if you have money in the banks on the list, you may want to come up with backup plan(s) to deal with bank closures and bank runs. (For that matter, you should keep a sharp eye on your own bank and see how solid the financials are.) If you think this is mere wishful thinking, take a look at report by Center for Responsible Lending (CRL):

"As this year ends, 2.2 million households in the subprime market either have lost their homes to foreclosure, or hold subprime mortgages that will fail over the next several years."

Things will not be well for the US (and world) economy for the short term future....

Copyright 2007, DannyHSDad, All Rights Reserved.