Adding a new position to my short portfolio

O

otcstockfund

Current short portfolio is:

1000 RYL
500 LEN
500 KBH

gonna add 1000 DSL

key factors:

-almost all loans are in Southern California
-82% of their loan portfolio is Neg-Am
-80% are stated income verified asset
-9% stated income/stated assets
-net interest income for 2006 was 518 mil with 27% of it neg am up from 16% in 05 and 4% in 04

FICO origination:
620 or below 5%
621 to 659 25%
660 to 719 39%
720 & above 30%

1.03% of loans are deliquent as of dec 2006 compared to .36% dec 2005

58% of loan portfolio is classified as subprime


opinions anyone?
 
Lennar is a great short. heavy, heavy exposure to the Florida single-family new home market.

KBH is heavily exposed in weakening areas such as AZ and NV, as well, in addition to Florida.

Can't speak to DSL. Countrywide announced that 22.7% of their subprime loans they service for other lenders are now delinquent.

No, I did not make that number up. It is mind blowing.
 
Yes - delinquencies are on the rise, yet far from a problem. .36% last year is a crazy low number. In fact, one might say that 36% may represent the fact that you are not shouldering enough risk and are leaving loans on the table that you should be making.

Truthfully - if you have a delinquency ratio under 2.50% you are not taking enough risk and should be making more loans that you are likely denying.

Moreover, thank god for the minimum payment. That's what keeps borrowers in the home that they would likely not be able to afford in difficult times.

I really believe that those who are poopooing the neg am loan are simply sorry that they don't have a portfolio full of them. A portfolio that that keeps up with your cost of doing business. It is a beautiful thing you must agree.
 
whoa this is def good news :)
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