The U.S. Subprime, Alt-A, and Entire Housing Market Disintegration Worsens

April 22--Goldman Sachs issued a report which states that California's subprime and other mortgages are in very big trouble. Of the top 12 metroplitan areas for subprime mortgage lending in 2006, 10 were in California, with Stockton leading the list. 40% of home loans in that town last year were subprime. Recall, that during the first quarter of 2007, home foreclosures in California were nine times greater than the comparable period of 2006. Home prices will fall further in California, Goldman predicted. Simultaneously, Goldman Sachs projected that Countrywide Financial, America's largest independent mortgage lender, may have real trouble, because of its heavy lending in California: nearly half of its $72 billion mortgage loan portfolio outstanding is from California.

In the ten day period since April 12, 7 more mortgage lending institutions have collapsed: Homefield Financial, Alt-A lender; Home 123 Mortgage, subprime lender; Home Capital, Inc., online mortgage lender; Innovative Mortgage Capital, subprime lender; Home Equity of America, second lien mortgage lender; Opteum, Alt-A lender; and Mortgage Investment Lending Associates, online lender. This raises to 62, the number of major U.S. mortgage lenders that have collapsed since late 2006.

Max.com reported that the rupture of the subprime mortgage market will cause "mutual fund portfolios [to] take a hit when home prices fall." It singled out, as most exposed, the real estate divisions of some of the largest mutual funds in the nation: Fidelity Real Estate Investors; Third Avenue Real Estate Value; T. Rowe Price Real Estate Fund; American Century Real Estate Inv; and Vanguard REIT Index.