Following today’s terrible stock market, more mortgage-backed news:
Bear Sterns seizes assets of its High-Grade hedge fund,
Bear Stearns Cos. said late Thursday that it seized assets from its High-Grade Structured Credit Strategies Fund after the hedge fund suffered huge losses in mortgage-backed securities and structured-finance markets.
Wells Fargo & Co., the second-largest U.S. mortgage lender, said on Thursday it will close its subprime wholesale lending business, which processes and funds loans for third-party brokers, citing turmoil in the market for riskier home loans.
The company will shut operations in Baton Rouge, Louisiana, causing a loss of 170 jobs, and in Des Moines, Iowa, where it will seek other jobs for 67 workers. Wells Fargo also cut 444 subprime jobs last winter.
The already poor performance of many mortgage loans will worsen substantially through the rest of the year, according to an analysis released Thursday by Moody’s Economy.com.
The company predicts that 2.5 million first mortgages will default this year, with little chance for improvement soon – Economy.com expects delinquencies to peak in the summer of 2008 at 3.6 percent of all outstanding mortgage debt, up from 2.9 percent during the first three months of 2007.
The next and biggest wave of problem loans could come as monthly payments soar for both prime and subprime borrowers who took out adjustable-rate loans with little or no documentation, or who used so-called piggyback loans on top of their first mortgages to make up for small down payments, analysts said.