Tuesday, July 22, 2008

Amex Superprime Problem; Wachovia Exits Wholesale Mortgage

Calculated Risk reports on AmEx's Conference Call:

“Over the past month or so, we have seen clear signs that the US economy is weakening. Unemployment rates, as we know, took the largest jump in over 20 years. Home prices declined at the fastest rate in decades, and consumer confidence is at one of its all-time low points. Card member spending particularly among consumers slowed sharply during the latter part of the quarter....[b]y almost any measure the US economy and business environment are much weaker....Now this fallout was evident across all consumer segments, even our longer-term super prime card members.

"...more and more consumers who are falling behind in their payments are remaining delinquent. This causes us to assume that a greater percentage of past-due loans will not be repaid. In light of the magnitude of the negative economic trends and our experience, we now believe the economic weakness in the US will likely worsen throughout the remainder of the year and negatively impact credit and business trend ...we now expect that our lending write-off rate in the third and fourth quarter will be higher than June levels.”

Calculated Risk concludes, "We're all Subprime now!"

And in more regional news, Wachovia will no longer offer mortgages through brokers. The change takes effect Friday, July 25.

In a prepared statement late Monday afternoon, a Wachovia spokesman said: “Wachovia Mortgage has evaluated our business model in the context of the current market and recognized some opportunities to reposition our business. We believe it is important to focus on serving the needs of customers who have relationships with the bank, and who are located in geographies where Wachovia franchises are located.

Of course, when a bank has a "relationship" with a customer, it makes it easier to verify information on a mortgage application. Right? And when a house is located in a "geography" where Wachovia has franchises, in the event of a foreclosure it's that much easier, and less costly, to repo the house. Back to the Good 'Ole Days when bankers were bankers. Read the entire story here.

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