GM's results may be hit by sub-prime mortgages

[Pontiacwheels]

GM's results may be hit by sub-prime mortgages
Analysts fret that GMAC unit ResCap may have loan problems

By Leslie Wines, MarketWatch
Last Update: 3:17 PM ET Feb 15, 2007

NEW YORK (MarketWatch) - General Motors Corp's delayed fourth-quarter results could take a substantial hit from souring sub-prime mortgages at Residential Capital that could cost the auto maker up to $950 million in the first half of this year, analysts said.


http://www.marketwatch.com/news/stor...D308CFA9D22%7D

[GM-10]

I'm surprised that its not way worse. I have witnessed three major subprime mortgage companies that have had to close their doors over the last month.

GMAC's Homecomings division was making some crazy loans last year.

Word on the street is that more are coming.

[FStephenMasek]

The lenders who pushed and made such crazy loans deserve whatever happens to them!

[GM-10]

Originally Posted by FStephenMasek

The lenders who pushed and made such crazy loans deserve whatever happens to them!

That seems a little harsh.

[goblue1999]

Originally Posted by GM-10

That seems a little harsh.

Welcome to the real world, it's not harsh, it's reality. The execs at GMAC are grown men that know full well what the risks of lending are. My only concern is, if the problem gets big enough, like the S&L crisis of the early 90s, WE will pay the bill.

[FStephenMasek]

Unfortunately, It seems more and more obvious that we are headed for a dramatic drop in housing prices and a dramatic rise in foreclosures. In fact, both have started. The drop in prices is already more than is often reported, as most reports are based on median home prices. What is not reported is all of the incentives the sellers are offering buyers. For example, we sold a house earlier this year for $295,000 and that is the amount which made its way into the various databases as being the sales price. However, we covered all of the closing costs and gave the buyer much of the down payment, so the real transaction price was far less. Likewise, new home sellers are offering many incentives and "free" upgrades. The upshot is that transaction prices are 5% to 10% lower than what is being reported.

I was in a Citibank branch yesterday, and noticed all of the ad posters and banners pushing people to take equity out of their houses and spend it. That is just wrong!

[GM-10]

Originally Posted by FStephenMasek

Unfortunately, It seems more and more obvious that we are headed for a dramatic drop in housing prices and a dramatic rise in foreclosures. In fact, both have started. The drop in prices is already more than is often reported, as most reports are based on median home prices. What is not reported is all of the incentives the sellers are offering buyers. For example, we sold a house earlier this year for $295,000 and that is the amount which made its way into the various databases as being the sales price. However, we covered all of the closing costs and gave the buyer much of the down payment, so the real transaction price was far less. Likewise, new home sellers are offering many incentives and "free" upgrades. The upshot is that transaction prices are 5% to 10% lower than what is being reported.

I was in a Citibank branch yesterday, and noticed all of the ad posters and banners pushing people to take equity out of their houses and spend it. That is just wrong!

Other than some areas of
California and Las Vegas...a lot of economists are saying that a deep or sustained drop in housing prices is unlikely. Foreclosures, on the other hand, will go up.

Incidentally, here in the southeast seller incentives of 4-5% have been fairly common for awhile.

[yoblues]

The main problem with house price fluctuations in this day and age is people have been using their homes like credit cards. They are using home equity loans to finance the new boat and the Hummer. That is what has been driving the economy for the last few years but it's an insane way to live.