Low rates lure refinancers, boost mortgage demand

October 31 2007 USATODAY.com A refinancing wave pushed total mortgage applications higher last week on the lowest 30-year mortgage rates since early May despite a small drop in demand for loans to buy homes, an industry trade group said Wednesday. The Mortgage Bankers Association's mortgage applications index rose a seasonally adjusted 3.8% to 681.7 in the week ended Oct. 26. Borrowing costs on 30-year fixed-rate mortgages, excluding fees, fell to an average of 6.15% from 6.21% the prior week. This loan rate was the lowest since 6.13% in the May 11 week, helping propel the MBA's refinance index to its highest level since the week of March 9.

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America's Big, Fat Housing Inventory

October 30 2007 BusinessWeek.com The supply of homes for sale is at a nine-year high, and housing inventories across the U.S. are swelling dangerously. Houston, you have a problem—with housing inventory. And as the number of homes for sale in the country continues to creep upward thanks to waning demand, many other major U.S. cities are dealing with the same issue. At the current existing-home sales rate of 5.04 million units a year, it would take a full 10.5 months to sell the 4.4 million existing homes now on the market, according to data released by the National Association of Realtors (NAR) on Oct. 24. The supply of existing single-family homes was at 10.2 months in September—the highest since February, 1988. Compare that with the height of the housing boom in January, 2005, when it reached a record low 3.6 months.

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Fed to cut rates to manage risks, analysts say

October 30 2007 MarketWatch.coom Many economists believe theFederal Reserve will cut its policy interest-rate target by a quarter-percentage point to 4.5% on Wednesday to contain the risks that financial market turmoil could continue, possibly leading to a recession "The risk of a financial-market disruption spilling over into real economic activity is too serious for the Fed to ignore," said Kevin Logan, U.S. economist at Dresdner Kleinwort, in a note to clients. "Not easing at this juncture runs the risk of a financial market catastrophe and a possible recession." Simply put, economists said the debt crisis is not over, and the danger exists that banks won't be able to make loans and mortgages, even to buyers with good credit history and high income.

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Foreclosure counseling for homeowners

October 25 2007 Bankrate.com With the soaring number of U.S. homes in some stage of the foreclosure process, many individuals and families are wondering just what the process of foreclosure entails. At the same time, few homeowners would welcome the prospect of discussing their situation with their banker or lender. "Especially if they're in foreclosure, talking with a lender can be intimidating," says Julie Gugin, executive director with the Minnesota Home Ownership Center, a St. Paul-based nonprofit organization that provides education and counseling on homeownership to Minnesotans with low and moderate incomes. Fortunately, a number of organizations around the country provide free counseling and education to individuals who are having trouble making their mortgage payments. Many organizations around the country provide information on foreclosure, as well as counseling for homeowners who may be facing foreclosure. Here are descriptions of several such agencies: HomeLoanLearningCenter.com HousingHelpNow.org

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Countrywide reports $1.2 billion loss

October 26 2007 MarketWatch.com Beleaguered mortgage lender Countrywide Financial Corporation reported Friday Oct 26 2007 its first quarterly loss in 25 years, a reflection of the turmoil in the credit markets that's roiled financial-services companies in the U.S. and elsewhere. However, Countrywide's shares surged more than 20% in premarket trading. The company maintained its dividend payout and said it has also negotiated $18 billion in additional liquidity that it characterized as "highly reliable." Countrywide also said it expects to turn a profit in the fourth quarter and in 2008.

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American International Group may take $9.8 bln subprime hit, analyst says

October 26 2007 MarketWatch.com American International Group could take a $9.8 billion hit from its exposure to subprime mortgages, Friedman, Billings, Ramsey analyst Bijan Moazami estimated on Thursday Oct 25 2007. The write-downs will be big, but manageable for one of the world's largest insurers with $104 billion in shareholders equity and the ability to generate third-quarter earnings of $4.4 billion, the analyst wrote in a note to clients. AIG has the largest subprime exposure of any insurers he covers, Moazami noted. Shares of the company fell 3.2% to $61.79 on Thursday amid speculation it could be hit by big write-downs. Spokesman Chris Winans said the company doesn't comment on market rumors.

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Subprime Woes May Linger for Up to 2 Years, says billionnaire Buffett

October 25 2007 CNBC.com American billionaire investor Warren Buffett said Thursday he remains negative on prospects for the U.S. dollar and that problems in the U.S. subprime mortgage sector may continue to cause problems for some time. Buffett said he is still "negative on the dollar relative to most major currencies." He said subprime problems could weigh on consumers for anywhere from another six months to two years. He made the comments during a press conference during his first visit to South Korea. The dollar has fallen against the yen, euro, British pound, India rupee and many other Asian and European currencies this year. The euro Euro , for example, has gained 8% against the dollar this year.

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Countrywide wins over critics

October 24 2007 Money.CNN.com The company extends foreclosure-preventive assistance for almost all its hybrid ARM borrowers. Some of Countrywide's harshest critics changed their tune this week after the mortgage lender rolled out new rescue programs. Conrad Egan, President of the National Housing Conference, said the program "presents a strong model for how to preserve home ownership for at-risk families." Gail Cunningham, a spokeswoman for the National Foundation for Credit Counseling, said, "Any move that helps struggling consumers is a positive. If you're one of these people, it's significant. It can be a life-changing event." Bruce Marks of the Neighborhood Assistance Corporation of America, which has been one of Countrywide's most vocal critics, has now actually joined forces with the company. Marks sounds positively ecstatic about the joint-effort. "Countrywide is going to restructure loans for people with unaffordable loans to rates that people can afford to pay," Marks said.

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The future of subprime lending

October 19 2007 MarketWatch.com It will be back, but mortgages to riskier borrowers will look much different. Although "subprime" has become a four-letter word in the country's collective lexicon and no one is sure when the credit crisis that was spawned by a meltdown in the risky lending sector will ease, mortgage bankers say you can count on this: Subprime shall return. The next generation of subprime mortgages, however, will look much different than the loans issued during the height of the housing boom in the first half of the decade that are now causing so much trouble, mortgage professionals say. "So long as we have a policy position in this country of maintaining or further increasing homeownership rates there is going to be subprime lending," said Mark Fleming, chief economist with First American CoreLogic, a provider of mortgage-risk management and fraud-protection technology. "We have been very successful in increasing homeownership rates. One of the ways we've done that is by creating liquidity and offering credit to people who we traditionally wouldn't have 20 years ago -- the subprime borrowers."

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U.S. economy is heading for a doozy of a recession.

October 22 2007 CNBC.com Hedge fund legend Julian Robertson said Friday he expects the U.S. is going to have a "doozy of a recession". He said the credit situation was worse than anybody realizes, and that we're getting little inklings of that. He added that none of the normal indicators you would look at in the economy are really very strong. As a matter of fact, they are weak, and not really getting any better. He also expressed some concerns about the devaluation of the dollar. "I think the Federal Reserve will trash the dollar until such times that there is some turn around in the economy, or until such time that they see that as self defeating," he said.

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Commercial real estate market slows

October 21 2007 BusinessWeek.com The excesses that led to a bust in the housing boom haven't spread to the commercial real estate market, where the outlook is cautious but decidedly upbeat. Led by strong growth in the office and retail segments, commercial property sales hit $401 billion through Oct. 18, outpacing last year's $359 billion total, according to Real Capital Analytics, a New York based real-estate research firm. Construction spending on office buildings, shopping centers and other private, nonresidential projects jumped 15.2 percent in August, the Commerce Department said last month. There are some signs of slowing growth, analysts say, but nothing compared to the residential real estate market, where foreclosures and mortgage defaults are still rising rapidly, mainly from subprime mortgages extended to risky borrowers. Most economists forecast further declines in home sales and prices, making it "the most significant current risk to our economy," Treasury Secretary Henry Paulson said last week.

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Mortgage delinquency risk rising

October 19 2007 Money.CNN.com As housing markets deteriorated over the summer, and a liquidity squeeze buffeted credit markets, delinquencies and defaults jumped. And now one forecast predicts that these numbers will climb even higher over the next six months. The Core Mortgage Risk Monitor , an index of foreclosure risk compiled by First American CoreLogic, increased by 1.6 percent compared with the three months ended June 30. The index predicts the chances that future mortgage loan delinquencies will occur and is based on such factors as fraud propensity and collateral risk (the accuracy and sustainability of home prices paid), house price dynamics and the health of local market economies. High risk markets also have job issues such as high unemployment of low wages and wage growth, all indications of economic stress. By contrast, the lowest risk markets have low unemployment, high-paying jobs and solid job growth, moderate house price appreciation, low foreclosure rates, and minimal fraud and collateral risk.

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Wachovia earnings hurt by credit market

October 19 2007 Money.CNN.com Wachovia, the nation's fourth-largest bank, said Friday its profit fell 10 percent in the third quarter, hurt by writedowns related to difficult credit market conditions. The Charlotte-based company said net income fell to $1.69 billion, or 89 cents per share, in the July-September period compared with $1.88 billion, or $1.17, in the year-ago period. Revenue grew 4 percent to $7.35 billion from $7.04 billion in the third quarter of 2006. Wall Street expected earnings of $1.03 per share on $8.02 billion of revenue, according to analysts polled by Thomson Financial. The earnings estimates typically exclude one-time items.

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Cooperation is key in responding to credit woes

October 19 2007 MarketWatch.com Policymakers must redouble efforts to smooth global imbalances or risk major economic disruptions as world financial markets continue to digest the subprime credit crisis, the European Union's top economic official warned Thursday. Global financial markets have entered "a period of uneasy calm. But it would be premature to rule out further problems emerging in the weeks or even months ahead," said Joaquin Almunia, the European Union's commissioner for economic and monetary affairs, in a speech delivered at Johns Hopkins University. He said the way in which the current credit crisis began in the U.S. mortgage market and quickly spread to international credit markets underscores the need for improved international coordination between policymakers around the globe.

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E*Trade Financial Corp. reports its first quartrly loss

October 18 2007 Bloomberg.com The online brokerage reported its first quarterly loss in five years and slashed its forecasts for 2007 earnings after surging U.S. mortgage defaults led to higher costs for bad debt at its online bank. E*Trade shares declined 23 cents, or 1.8 percent, to $12.47 yesterday.

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Bank of America Corp.' shares declined $1.78, or 3.6 percent, to $48.25.

October 18 2007 Bloomberg.com The second-largest U.S. bank said profit declined 32 percent in the third quarter after credit-market writedowns and loan losses. Profit excluding some items was 82 cents a share, falling short of the $1.06-a-share average estimate of 16 analysts surveyed by Bloomberg.

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Mortgage resets: a rude awakening

October 17 2007 Money.CNN.com Ignorance may be bliss, but it could mean a lot of pain for all the players in the subprime crisis when a record number of adjustable rate mortgages reset. About $50 billion in adjustable rate mortgages reset this month, driving interest rates up for many borderline borrowers. And despite efforts to raise awareness, it doesn't look like anyone is really prepared for what's to come. "I don't know if there's anything much [borrowers] can do," said Keith Gumbinger of HSH Associates, a publisher of mortgage related information. "Hopefully, they've been prudent about preparing for it, building a nest egg or refinancing the loan." But most borrowers are likely to just scramble to pay the higher expenses - some of which will jump by 50 percent and come as a big surprise.

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Securities and Exchange Commission probe stock sales by Countrywide CEO

October 18 2007 BusinessWeek.com The man who nearly 40 years ago co-founded what is now the nation's largest mortgage lender is being scrutinized by federal securities regulators as they examine his sales of the struggling company's stock. The Securities and Exchange Commission's informal inquiry into Countrywide Financial Corp.. Chief Executive Angelo R. Mozilo has been under way for a while, a person familiar with the matter said Wednesday. The person spoke on condition of anonymity because the probe has not been made public. Mozilo sold some $130 million in Countrywide stock in the first half of the year through a prearranged 10b5-1 trading plan. The plans, popular among corporate executives, allow a company insider to set up a program in advance for such transactions and proceed with them even if he or she comes into possession of significant nonpublic information. The SEC has been casting a wide net in its scrutiny of Wall Street banks, investors, credit-rating agencies and others and the role they played in the subprime mortgage crisis.

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Credit crisis: The blame, the bailout and the ball

October 18 2007 MarketWatch.com Today's credit crisis has the feel of kids playing football in the house. Everyone is having a good time until the ball goes through the window. It almost doesn't matter who threw the ball -- Citigroup Inc., subprime mortgage borrowers or lenders, big banks, the leveraged-buyout guys, ratings agencies -- everyone was doing something they shouldn't have. What's interesting is how all of the players are reacting. Some, such as Northern Trust Corp. and other banks, who don't have these bad debts on the books, are pretending they don't need to clean it up. These are the kids who say, "I wasn't there and I didn't do it." Others, such as Citigroup , Bank of America Corp. and Treasury Secretary Henry Paulson, who may have left Goldman Sachs but still seems to live on Wall Street, are hell-bent on fixing the window. These are the kids who think they can cover up the damage.

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Federal Reserve policy maker Thomas Hoenig says "Wait and See" on Interest Rates

October 18 2007 CNBC.com Federal Reserve policy maker Thomas Hoenig said on Wednesday he was open minded about the future direction of U.S. interest rates but was on alert for fallout from financial market woes. Investors are split on whether the Fed will lower its key interest rate when it next reviews policy on Oct. 30-31 after a hefty half a percentage point cut last month aimed at shielding the U.S. economy from a housing slump. "The question that one asks is what are the implications for policy and the answer to that is obvious and is wait and see. Because it depends on how all these factors play out," Hoenig, president of Federal Reserve Bank of Kansas City, told a dinner audience.

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Feds cut down-payment assistance programs

October 16 Best-Mortgage-Companies.com For a decade, credit-challenged homebuyers have used a regulatory loophole that lets them get Federal Housing Administration mortgages without putting their own money down, while at the same time avoiding costly subprime loans. About 7,000 buyers per month were exploiting the loophole, and now the feds are squeezing it shut. The new policy means that prospective homebuyers with marginal credit will have to act quickly if they want to buy houses without putting any money down. Otherwise, they will have to save for down payments or wait for the FHA to roll out its own zero-down program. At issue is a controversial method of scraping together the down payment for a house. Many subprime lenders require down payments of at least 5 percent. That's a high hurdle for people who already have credit problems; luckily for those borrowers, loans insured by the Federal Housing Administration require smaller down payments -- as little as 3 percent.

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Goodbye subprime, hello FHA

October 15 2007 Money.CNN.com At mortgage conference, lenders push back-to-basics theme for industry in coming years. If your credit is weak or your savings anemic, here are two phrases you're likely to hear from mortgage loan officers in the next few years: FHA and mortgage insurance. They're part of a back-to-basics theme that was emphasized Monday at the annual conference of the Mortgage Bankers Association in Boston. For those who entered the business in the past five years, they've only known the good times and will need to be re-educated, said Paul Bibb, CEO of National City Mortgage, who was on a panel of leading mortgage industry executives. "You probably have a lot of loan officers who can't spell FHA," said Bibb. Bibb and David Lowman, CEO of Chase's Global Mortgage, which is a top 10 originator and servicer, said that during the go-go days of the housing boom, loan officers would steer home buyers with weak credit to subprime loans. And they would advise them to finance part of their down payment with a home equity loan.

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Junk mortgages under the microscope

October 16 2007 Money.CNN.com It's getting hard to wrap your brain around subprime mortgages, Wall Street's fancy name for junk home loans. There's so much subprime stuff floating around - more than $1.5 trillion of loans, maybe $200 billion of losses, thousands of families facing foreclosure, umpteen politicians yapping - that it's like the federal budget: It's just too big to be understandable. So let's reduce this macro story to human scale. Meet GSAMP Trust 2006-S3, a $494 million drop in the junk-mortgage bucket, part of the more than half-a-trillion dollars of mortgage-backed securities issued last year. We found this issue by asking mortgage mavens to pick the worst deal they knew of that had been floated by a top-tier firm - and this one's pretty bad. It was sold by Goldman Sachs - GSAMP originally stood for Goldman Sachs Alternative Mortgage Products but now has become a name itself, like AT&T and 3M. This issue, which is backed by ultra-risky second-mortgage loans, contains all the elements that facilitated the housing bubble and bust. It's got speculators searching for quick gains in hot housing markets; it's got loans that seem to have been made with little or no serious analysis by lenders; and finally, it's got Wall Street, which churned out mortgage "product" because buyers wanted it. As they say on the Street, "When the ducks quack, feed them."

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Wells Fargo 3Q earnings rise 4 percent

October 16 2007 BusinessWeek.com National bank Wells Fargo & Co. said Tuesday third-quarter earnings increased 4 percent on loan and deposit growth, even as it took nearly $500 million in writedowns for mortgages that have lost value. Net income rose to $2.28 billion, or 68 cents per share, from $2.19 billion, or 64 cents per share during the same quarter in 2006. Analysts polled by Thomson Financial, on average, forecast earnings of 70 cents per share for the quarter. Average loans at Wells Fargo rose 14 percent to $350.7 billion in the quarter. Part of the increase was related to the acquisitions of Placer Sierra Bancshares and CIT Construction. Average deposits also grew. Wells Fargo's average core deposits increased 13 percent year-over-year to $306.1 billion.

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Federal Trade Commission warns some mortgage ads still deceiving consumers

October 11 2007 MarketWatch.com Some of the mortgage advertisements currently appearing in Web sites, newspapers, magazines, direct mail and unsolicited email and faxes may be violating federal law, and on Tuesday the Federal Trade Commission said it was sending warning letters to more than 200 advertisers and media outlets informing them of the possible violations. "Many mortgage advertisers are making potentially deceptive claims about incredibly low rates and payments, without telling consumers the whole story -- for example, that these low rates and payments apply for a short period only and can go up substantially after the loan's introductory period," said Lydia Parnes, director of the FTC's Bureau of Consumer Protection, in the release. "Homeownership is the American dream, but it can become a nightmare for consumers who don't have the information they need to understand the terms of their mortgage."

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Countrywide's efforts to help homeowners avoid foreclosure are insufficient, critics say.

October 11 2007 Money.CNN.com As the nation's largest home lender and subprime debt collector, Countrywide has been the No. 1 whipping post of the mortgage crisis. Many consumer advocates say that Countrywide's "loan workouts" with troubled subprime borrowers are insufficient in number and substance. Countrywide, in a detailed response to CNNMoney.com, disagrees. In Countrywide's capacity as a mortgage servicer, it collects mortgage payments, handles defaults and foreclosures, and works out deals with delinquent borrowers. Such workouts can include lowering the interest rate on a loan or spreading out past-due loan payments over the life of the loan. Countrywide recently reported that it has completed 35,000 workouts this year, a number that George Goehl, executive director of The National Training Information Center (NTIC) called "a drop in the bucket" when compared with the hundreds of thousands of borrowers who are delinquent.

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Mortgage company faces federal investigations over lending violations

October 11 2007 BusinessWeek.com Beazer Homes USA Inc., which faces federal investigations of its business practices, will restate financial statements for a three-year period after an internal probe found its mortgage origination unit violated federal lending rules, the company said Thursday. But the Atlanta-based company said the cumulative impact of its restatements will likely be an increase in profit, though it can't say exactly how much at this time. It also said the restatement will not cause an adjustment to the company's current cash position. Beazer also released selected financial data for its fiscal fourth-quarter of this year, showing that for the period ending Sept. 30 home closings fell 39 percent from a year ago and net new home orders dropped 52 percent. It said it had more than $400 million in cash on hand at the end of the quarter.

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FDIC to mortgage servicers: Freeze ARM rates

October 9 2007 Money.CNN.com The heat on U.S. mortgage lenders and servicers was turned up a few degrees this week when the country's chief bank regulator publicly proposed that they permanently freeze interest rateson subprime adjustable-rate mortgages (ARMs) for many homeowners. "Keep it at the starter rate. Convert it into a fixed rate. Make it permanent. And get on with it," Federal Deposit Insurance Corp. Chairman Sheila Bair said in prepared remarks at an investor's conference. ARMs often have a low introductory interest rate for two or three years and then reset to much higher levels. Roughly 1.3 million subprime ARMs are due for a rate reset between now and the end of 2008, according to data from First American Loan Performance.

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Subprime Crisis Will Not Peak Until 2009:

October 9 2007 CNBC.com The U.S. subprime housing crisis will not peak until 2009 and total defaults could reach $150 billion, rating agency Standard and Poor's said on Tuesday, but robust emerging markets would help keep global growth strong. "World growth remains strong despite the weaknesses seen in the U.S. economy -- especially in emerging markets because of healthy domestic demand conditions and export strength to non-U.S. market," S&P said in a report released in Mumbai. "The fact that the U.S. slowdown is concentrated in housing, which has relatively low import content, helps," it said. Emerging markets were far less vulnerable to credit market turmoil than during previous crises because of the capital flows attracted by high economic growth coupled with improved corporate governance standards, S&P said.

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Mortgage Tax Relief

October 4 2007 CNBC.com House lawmakers are due to vote Thursday on a bill that would allow homeowners to avoid paying taxes on mortgage debt which gets forgiven as part of a foreclosure or a modified loan. The bill by Rep. Charles Rangel, D-N.Y., is expected to receive bipartisan support as a way to assist borrowers caught up in a surge of foreclosures nationwide. Currently, if a lender forgives a portion of a mortgage, taxpayers are still required to report that amount as income and pay taxes on it. Rangel has said that families coping with a foreclosure "should not have the double whammy of a large tax bill for terminating their mortgage". President Bush in August called on lawmakers to pass similar legislation. While the White House supports the bill, it says the change should be temporary, not permanent as the House bill mandates. The cost of the bill, estimated at $2 billion over 10 years, is offset by tightening restrictions on tax breaks for the sale of second homes.

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Democrats to unveil foreclosure plan

October 3 2007 BusinessWeek.com Top congressional Democrats will call Wednesday for the Bush Administration to appoint an adviser to coordinate the federal government's response to mounting foreclosures around the country. The effort by Senate Majority Leader Harry Reid, House Speaker Nancy Pelosi and others is an attempt by Democrats to step up pressure on the White House to respond to the troubles in the housing market. Democrats have been critical of the Bush administration's response to the mortgage market problems, which started among loans made to borrowers with weak credit and has spread to other loans.

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Fed Fails to Restore Creditor Confidence

October 2 2007 Bloomberg.com As far as the world's biggest bond investors are concerned, the Federal Reserve is failing to restore confidence in the U.S. credit markets. The central bank's decision to lower the overnight lending rate between banks by half a percentage point last month won't prevent the economy from slowing or corporate defaults from increasing. Last month's rally in high-yield corporate bonds, the biggest since 2003, may fizzle by year-end. While indexes of derivatives that measure the risk of default show increasing investor confidence, the difference between the interest that banks and the U.S. government pay for three-month loans is wider now than a month ago. That's a sign the Fed's Sept. 18 rate decision has yet to persuade bondholders that lower borrowing costs will stop "disruptions in financial markets'' from hurting the economy.

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Manhattan housing boom continues

October 2 2007 Money.CNN.com Despite a housing slump across the rest of the nation, home sellers in New York City are selling houses faster with the number of listings reaching a two-year low, according to data released Tuesday. Prudential Douglas Elliman reported that inventory in Manhattan fell 31.7 percent to 5,204 units in the third-quarter from a year-ago total of 7,623 units, while units stayed on the market for 123 days, faster than the 150 days seen in the same period last year. The broker reported that the number of sales increased 65.6 percent this quarter to 3,499 units as compared to the 2,113 units sold a year ago. In similar quarterly reports from Brown Harris Stevens, Halstead Property and the Corcoran Group, all three brokers also reported shrinking inventory. A Manhattan apartment market wide sold for between a median price of $815,000 and $895,000 during the three months ended September 30. The low estimate was reported by Halstead and Brown Harris Stevens, while Prudential Douglas Elliman pegged it at $864,000. Corcoran recorded the high figure among the group.

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Fate of World Economy Lies with U.S. Housing: Greenspan

October 1 2007 CNBC.com The fate of the world economy hinges on what happens to house prices in America and that may not be a good thing, former Federal Reserve chairman Alan Greenspan said on Monday. Speaking at the Reuters headquarters in London, the former Fed chair delivered a gloomy prognosis on the state of the global economy -- U.S. house prices are likely to fall further and they could drag the rest of the world with them. "A weakened U.S. economy, especially weakened consumer markets, still has the capacity to impact on our trading partners," Greenspan said. "To date the financial and economic spill-over is most visible in Europe... But only marginally so in developing Asia." He added that Japan had taken a hit in the form of sales of its equities as sub-prime investors needed to raise cash.

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Citigroup Sees Earnings Falling 60% from Last Year

October 1 2007 BusinessWeek.com Citigroup Inc., the nation's largest financial institution, warned Monday its third-quarter earnings are likely to decline 60 percent, as it takes more than $3 billion in writedowns for securities backed by underperforming mortgages and loans tied to corporate buyouts. The announcement from Citigroup came as the Swiss bank UBS AG said it will post a loss of up to $690 million in the third quarter partly due to losses linked to U.S. subprime mortgages. Subprime mortgages -- loans given to customers with poor credit history -- have gone delinquent or defaulted at rising rates in recent months, causing banks to lower the value of the loans as investors shy away from buying them.

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