Will it be harder to get credit?
The problems of subprime loans hint at broader risks in financial markets.
from the July 13, 2007 edition
Page 2 of 4
Losses for investors
But the process can be stressful.
•This week Standard & Poor's and Moody's, two leading New York credit-rating agencies, said they were putting vast swaths of residential mortgage debt under review. It could portend downgraded ratings and, ultimately, losses for the firms and investors who hold those loans.
•Already the declining value of subprime loans has been causing losses for investors that include many hedge funds. Bear Stearns has recently moved toward a $3.2 billion rescue of a hedge fund it owns, where mortgage derivatives – investments derived from home loans – went bad.
•Banks, facing pressure from now-wary investors in mortgage derivatives, have been tightening their lending standards for riskier borrowers.
All these events are focused on the housing market, and particularly on the debt of home buyers whose own credit quality was less than "prime."
But some observers worry that this hints at worse things to come.
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