Bloomberg's garden of verses

"Without much thought, you'd say people wouldn't want to lose their home so they'd first make the house payment,'' Risi said. ``But with a lot of the borrowers struggling to make their house payments, to get any cash, they have to get to work. And that's what they need their car for.''

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Here, in Bloomberg's cold facts and figures is a little poem of suffering. DS

Subprime Defaults May Spread to Auto Bonds, S&P Says - Bloomberg Abstract: Bonds backed by automobile loans may be hurt by rising subprime mortgage defaults as people with poor credit struggle with their household debt, according to Standard & Poor's. Capital One Financial Corp., Wachovia Corp., Wells Fargo & Co., and other lenders have lent more funds to people with bad credit scores in the past few years to sustain growth, S&P said today in a report by analysts led by Mark Risi. The loans are also for longer terms, increasing the probability of default, the analysts said. About 68 percent of 2006 subprime auto loans were due in five years or more, Risi said. ``There could be some fallout from subprime in auto loans,'' Risi said in an interview. ``We don't have much data yet. We're still in collection mode. It's probably going to be hard to say for a while.'' The worst housing slump in 10 years is pushing down home prices, hampering owners from refinancing. Borrowers with weak or incomplete credit are also vulnerable to the resetting of mortgages at more than the teaser rates they initially paid.(...) Subprime auto borrowers who are also homeowners may have ``exposure to affordability products and the related payment shock,'' said Risi. ``But the good news is, initial data indicates that the majority of subprime auto borrowers are renters, and are therefore not subject to the vagaries of the mortgage market.'' Subprime auto bonds are showing a wide disparity in performance depending on the issuer, the analyst said. With some subprime issuers moving further down the credit spectrum and some resisting that trend, ``we are seeing some interesting results from this divergence,'' Risi said. Bondholders cannot tell which subprime auto borrowers are also homeowners, Risi said. Cumulative losses over 10 months for DaimlerChrysler AG's most recent loans is at 0.58 percent, its highest since at least 2000, S&P said. Securities originated by General Motors Acceptance Corp., that automaker's former finance arm, are showing losses of 0.18 percent, the lowest rate since 0.15 percent in 2002, according to S&P. Ford Motor Credit Co.'s loss rate is 0.25 percent, the same as in 2005. Given a choice between making a car payment or paying the mortgage, consumers react in different ways, Risi said. ``Without much thought, you'd say people wouldn't want to lose their home so they'd first make the house payment,'' Risi said. ``But with a lot of the borrowers struggling to make their house payments, to get any cash, they have to get to work. And that's what they need their car for.'' READ IT ALL