Housing Slump Hits Lenders of High-Risk Loans

The mortgage business could be heading for trouble as the housing market slumps, especially lenders who dealt in high-risk loans. One big bank, HSBC, announced that its losses from bad loans would probably grow this quarter.

Copyright © 2006 NPR. For personal, noncommercial use only. See Terms of Use. For other uses, prior permission required.

STEVE INSKEEP, host:

Some other news, there's new concern about the health of the mortgage business, especially the so-called sub-prime lenders. One of the world's biggest banks, HSBC, said yesterday that its losses from bad loans would probably grow this quarter. Other lenders are worried as well.

Here is NPR's Jim Zarroli.

JIM ZARROLI: HSBC's finance director told analysts that mortgage data was beginning to come in for the fourth quarter, and he said there is a weakening. The housing market has slowed dramatically in recent months, and the number of foreclosures has begun to increase. Karen Shaw Petrou is managing director of Federal Financial Analytics.

Ms. KAREN SHAW PETROU: The bulk of this is all in the sub-prime arena and sub-prime mortgages. We've seen a lot of products in the mortgage market in the last couple of years, and they've grown enormously.

ZARROLI: Petrou says that in recent years, a lot of lenders issued loans to barrowers with poor credit histories. They included no-interest mortgages or loans that require little or no documentation. And many of these loans have been the first to go bad now that the market has slowed. HSBC, which acquired Household International, is a major sub-prime lender in the United States. Some other lenders have also reported trouble, and many companies like H&R Block and National City Corporation are trying to sell off their sub-prime units.

Petrou says conventional lenders appear to be less vulnerable to the downturn. She says they made fewer bad loans, and also tended to unload their mortgages into the private securities market. She also says the downturn is not yet as worrisome as some previous real estates slumps, like the early 1990s.

Jim Zarroli, NPR News, New York.

Copyright © 2006 NPR. All rights reserved. No quotes from the materials contained herein may be used in any media without attribution to NPR. This transcript is provided for personal, noncommercial use only, pursuant to our Terms of Use. Any other use requires NPR's prior permission. Visit our permissions page for further information.

NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR's programming is the audio.

Comments

 

Please keep your community civil. All comments must follow the NPR.org Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.