Filed under: Bad news, Citigroup Inc. (C), Bank of America (BAC), CIT Group (CIT), Countrywide Financial (CFC), Washington Mutual (WM), Wells Fargo (WFC), Housing, Cramer on BloggingStocks

TheStreet.com’s Jim Cramer explains why “purchased HELOC” is the next phrase to fear.

Purchased HELOC.

Get that term into your head. Home equity loans that were purchased from other originators are the scourge of the system. Any piece of paper backed by these second liens that were issued by pure mortgage originators is just a goner.

This is the paper that was generated by Fremont General (NYSE: FMT) (Cramer’s Take) and NovaStar (NYSE: NFI) (Cramer’s Take) and New Century Financial and American Home Mortgage and so many of the other bankrupt and walking-dead companies. It was mostly no-documentation loans paper and served as another way to tap money that was meant to be paid back when you flipped a home. It was predicated on the continued increase in value of your home.

Continue reading Cramer on BloggingStocks: Banks can’t shoulder home equity burden

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This entry was posted on Wednesday, November 28th, 2007 at 3:25 pm and is filed under Stocks Money News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.