Summary
This is not common practice in Canada, but surprisingly, lenders in the U.S. eager to make a few extra points of interest were making these loans like there was no tomorrow. What did they have to lose? Rising U.S. housing prices would compensate them for the additional risk. If they had to repossess a house it would probably be worth substantially more than the remaining mortgage balance.
According to Eric Bushell, manager of CI Investments Signature group of funds -- and one of the few managers who profited during the last major market correction -- recent demand for securities to put into income products for yield-hungry investors has put a high demand on corporate and high-yield bonds, which has consequently caused their valuations to be excessive.Another area affected is leveraged buyout activity, which has hinged upon easy access to credit. That's now drying up, Bushell says, and so companies that were expected to be leveraged buyout targets have seen their valuations normalized and the cost of borrowing money to finance the takeover has made them much less attractive.See the full content of this document
Extract
A Primer On the U.S. Subprime Mortgage Crisis
Randy Reynolds - On Mutual Funds
WITH all of the hysteria surrounding the subprime mortgage crisis and the collateral damage being inflicted upon stock markets around the world, now may be a good ...See the full content of this document
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