{"id":1555,"date":"2007-06-20T06:20:48","date_gmt":"2007-06-20T13:20:48","guid":{"rendered":"http:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/?p=1555"},"modified":"2007-06-20T06:25:44","modified_gmt":"2007-06-20T13:25:44","slug":"subprime-lending-fallout-goes-upstream-to-take-down-two-major-hedge-funds-what-does-this-mean-to-real-estate-investors","status":"publish","type":"post","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1555\/subprime-lending-fallout-goes-upstream-to-take-down-two-major-hedge-funds-what-does-this-mean-to-real-estate-investors\/","title":{"rendered":"Subprime Lending Fallout Goes Upstream to Take Down Two Major Hedge Funds: What does this Mean To Real Estate Investors?"},"content":{"rendered":"

Two major Bear Stearns Hedge Funds face foreclosure<\/a> due to their significant exposure to the subprime lending market. While this does not fall under the category of real estate investor, I spent last summer working for Bear Stearns and interacting with many of their hedge funds. Based on the very limited details of the stories out now, I cannot be certain if I have worked with these two particular funds. I can be certain; however, that it would not be a good time to be in the mortgage space at Bear Stearns.<\/p>\n

In my three months at Bear Stearns, I met some of the smartest people in the businiess. While this is not an advertisement to work at Bear Stearns, I think they are a very well run organization with smart people. This of course begs the question, how could something like this happen to such smart people? Furthermore, with all of the subprime lending issues out there, what does this mean for borrowers who are less creditworthy?<\/p>\n

Simply put, in my humble opinion, the subprime market will be doomed for some years (at least five or more). Since I know this site is filled with a ton of very smart mortgage brokers, I will outline my reasoning.<\/p>\n

Consider the following information:<\/p>\n

1) Many subprime lenders have filed for bankruptcy<\/p>\n

2) Major buyers of Mortgage Backed Securities (like Bear Stearns) are having issues with subprime mortgages<\/p>\n

3) Despite what the National Association of Realtors says, the housing market seems to be taking a slow and steady turn for the worse<\/p>\n

4) Major Banks have tightened their lending policies<\/p>\n

Lets take an example of a typical transaction before the subprime fallout. A low creditworthy borrower applies for a subprime loan. Some intermediary or mortgage broker, supplies them with the best loan for them from either a bank or a conduit lender. The bank\/conduit lender then sells the loan to an investment bank (like a Bear Stearns or Goldman Sachs) to free up more money to lend and to remove the risk off their books. Finally, the investment bank packages this loan in the form of bonds that investors looking Read more<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Two major Bear Stearns Hedge Funds face foreclosure due to their significant exposure to the subprime lending market. While this does not fall under the category of real estate investor, I spent last summer working for Bear Stearns and interacting with many of their hedge funds. Based on the very limited details of the stories […]<\/p>\n","protected":false},"author":16,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_crdt_document":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,8,26,5],"tags":[],"class_list":{"0":"post-1555","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"hentry","6":"category-blogging","7":"category-investment","8":"category-lending","9":"category-real-estate","11":"no-featured-image"},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":2792,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/2792\/stealing-bear-stearns-joe-lewis-aint-pulling-punches\/","url_meta":{"origin":1555,"position":0},"title":"Stealing Bear Stearns: Joe Lewis Ain’t Pulling Punches","author":"Brian Brady","date":"March 17, 2008","format":false,"excerpt":"Joe Lewis taught us all what the word \"derisory\" meant today when he described the Bear Stearns sale to JP Morgan Chase. 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From The New York Times via Yahoo News: JPMorgan Chase & Co (JPM.N) is in talks to increase its offer for Bear Stearns CosBear Stearns, (BSC.N) to\u2026","rel":"","context":"In "Investment"","block_context":{"text":"Investment","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/investment\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":2787,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/2787\/bear-stearns-employees-wake-up-to-tenuous-employment-prospects\/","url_meta":{"origin":1555,"position":3},"title":"Bear Stearns Employees Wake Up To Tenuous Employment Prospects","author":"Brian Brady","date":"March 16, 2008","format":false,"excerpt":"Bear Stearns employees will wake up on St. Patrick's Day and wonder about their future. JP Morgan Chase bought Bear Stearns, a venerable Wall Street institution, for about 2.5% of the firm's stated book value. The sales price was just 20% of the value of the Manhattan headquarters alone. 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