Banking & Finance

What Subprime Mess?

Sometimes it is quite amazing how fast the tide can turn.  Just two days ago everyone was still looking for subprime mortgage and any lender or financial institution that had exposure to those with less than perfect credit.  If you saw the recovery in the growth stocks and junkier stocks late yesterday compared to “value and defensive” stocks, it was more than amazing.  It is as though the risk parameters instantly went back to risk tolerance instead of risk averse.  Keep in mind now that New Century has all but failed and been booted to the Pink Sheets that there will probably be more implosions, as these are rarely isolated to just one of the public companies in the sector.

There is also a mortgage and business lending deal that hit the tape this morning.  PHH Corporation (PHH) announced that it is being acquired by GE Capital Solutions a GE unit) in an all cash transaction valued at approximately $1.8 billion.  In conjunction with this transaction, GE has entered into an agreement to sell the mortgage operations of PHH Corporation, a prime mortgage originator and servicer, to a private equity affiliate of The Blackstone Group.

This morning after Indymac Bancorp (NDE) basically said all is well and after the street has figured out that not all lenders and not all subprime mortgages are going to implode.  Take a look at the pre-market gains in these this morning, and this is after the PPI data as well.  These are only some of the stocks in the sector, but these are a cookie cutter of the main names in the group:

INDYMAC BNCP INC (NDE) $30.51 Up $1.57 (5.43%)
ACCREDITED HOME LENDERS (LEND) $7.01 Up $0.97 (16.06%)
NOVASTAR FINANCIAL INC (NFI) $4.31 Up $0.13 (3.11%)
COUNTRYWIDE FINANCIAL (CFC) $35.00 Up $0.61 (1.77%)
THORNBURG MTG INC (TMA) $24.77 Up $0.25 (1.02%)
IMPAC MTG HLDGS INC (IMH) $5.24 Up $0.21 (4.17%)
AMERICAN HOME MTG (AHM) $24.35 Up $0.07 (0.29%)
HOMEBANC CORP (HMB) $2.95 Up $0.25 (9.26%)

Jon C. Ogg
March 15, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.