Stocks fall on US housing data

Stocks for financial groups and builders got hit pretty hard today with a round of bad news from the US housing slump and mortgage defaults from overextended borrowers. HSBC announced that their bad debt charge from last year is $1.8 billion more than expected due to US mortgage lending. Hey, a billion here, a billion there, pretty soon you’re talking about real money!

Subprime lender New Century Financial saw their stock drop by an astounding 36% today as a wave of rising defaults and late payments is making itself apparent across the US. Many smaller subprime lenders have closed down over the last few months and there are concerns that the combination of dropping home equity, higher mortgage rates and record low levels of personal saving could lead to more trouble for the US economy as a whole.

Meanwhile in Vancouver scientists have announced the discovery of a tiny hole in the Bozone layer that insulates our economy from the US. The CMHC says that this should not be a concern as it is a very tiny hole that at the very worst it may cause a “soft feathery plateau” in our once hot housing market, and “hey, who doesn’t like soft feathery plateaus?”

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patiently waiting
patiently waiting
13 years ago

As much as I complain about our banks, their stability is impressive. Must be all the service fees we pay (not all of us but Canadians in general). Even the CIBC gong-show seems fairly solid.

patriotz
patriotz
13 years ago

Where will the big banks sit, the credit unions, the independent mortgage companies?In the 1980's there were 3 bank failures, the Bank of BC and Northland and CCIB in Alberta. The latter two failed because of irresponsible business lending, mostly in the US. The Alberta banks were liquidated and BofBC was taken over by HSBC.Vancity came through in good shape despite the housing crash. Some smaller credit unions got into trouble and were taken over by larger ones.As for mortgage lenders, well they tend to fail in good times as well as bad (e.g. Eron Mortgage).

solipsist
solipsist
13 years ago

must have a bigger eggWell, you know what they say – 'big shoes = big feet'. It's not so huge at all. It was just an example of how loose credit is. I think that ego gets a boost with the thought of having access to a half a million bucks, or whatever. I have seen so many jump into situations too big for them, and then brag about how much they have in assets. But they owe it – as opposed to own it. A lot crash and burn.People wear goofy clothing, and decorate their lives in weird ways – according to fashion. Glossy paper and plasma light – the new opiates of the masses.We live in a dream fed to us by media. It's interesting to watch movies and pay attention to the homes and apartments that waitresses… Read more »

mohican
mohican
13 years ago

It will be interesting to see what happens to the different lenders after the dust settles in a few years. Where will the big banks sit, the credit unions, the independent mortgage companies? I think the smaller ones will be the worst off, namely the 'sub-primes' like Capital Direct. I can't see the smaller credit unions faring too well either. The big banks don't take on that much risk from what I can tell. They don't lend to people with low credit scores or without collateral. Certainly, they could be hurt but nowhere near catastrophic levels.

bakakuse
bakakuse
13 years ago

Holy crap! 600K! Slopilist, you must have a bigger egg than mine, because they only offered me 350. Of course, I was working part time at 40K a year (pre-tax).I don't think Canadian banks were as aggresive as the sub-prime lenders in the Us digi, but I think the consumer is just as fragile in Vancouver.

solipsist
solipsist
13 years ago

"hey, who doesn't like soft feathery plateaus?"Is that like a pillow? You know – where we have dreams. I slept on a soft, feathery plateau last night, and dreamed that I was the King of Spain. When I woke up…oh never mind.bakakuse and digi – RBC offered to lend me 600K in summer '05. At 4.2% for 5 years no less. I could not believe it. This was after telling them that I only wanted about 200K.Frankly, I have had concerns about having my nut in the bank ever since..

digi
digi
13 years ago

I'm going to stock up on "itcanthappenhereium" to protect myself from all this bad news.Bakakuse: I was looking at what a bank would lend me and what the monthly payment would be and thinking "thats too much". Maybe I'm just too cautious, but paying more than half my income to service a mortgage (not including taxes, utilities, etc) just doesn't make sense to me.I know that Canada doesnt have the same problem with 'subprime' loans that the US has, but I think lenders have been willing to go pretty far lately, particularly in Vancouver

bakakuse
bakakuse
13 years ago

I wonder if any of our big lenders (RBC, TD, the other three) will suffer such loan losses. Apparently the last few years have been benign in this regard, but one bank was willing to lend me more than I could repay……..

the pope
the pope
13 years ago

Would have been a good time to short sub-prime lenders eh?