Wall Street firms can't agree on what will happen next in the subprime mortgage market.
Of the three brokerage firms that reported second-quarter earnings this week, Lehman Bros. (LEH) and Bear Stearns (BSC) -- the two with the largest exposure to the mortgage market -- seem to be encouraged by signs of improvement in the sector.
Bear even said it plans to keep growing its mortgage operation, which was hit hard in the latest quarter. The company cited signs that business picked up this past spring.
As credit standards tightened on loans, "the beginning of the quarter was quite difficult and as we got into the quarter, April was better than March and May was better than April," said Sam Molinaro Jr., Bear Stearns' CFO. "What we're seeing are transactions are getting done. New vintage collateral is being well received in the market, spreads are tightening -- business is slowly improving."Goldman Sachs (GS - Get Report), on the other hand, wasn't as optimistic. David Viniar, Goldman Sachs' CFO, said the market for loans made to homebuyers with subpar credit histories is likely to get worse before it gets better, according to the Associated Press. "The subprime business continues to be weak," Viniar said during a conference call for reporters. "We have not seen the bottom in the market. There will be more pain felt by people as it works its way through system."