‘Most Of Our Markets Are Challenging’: CEO
Some housing bubble reports from Wall Street and Washington. “U.S. Home builder M/I Homes Inc. on Tuesday said total contracts for new homes fell 35 percent and a whopping 47 percent in the-once sizzling Florida market, reflecting a deteriorating U.S. housing market.”
“‘New contracts for the quarter were negatively impacted by a combination of factors, including reduced traffic, softening demand, increased cancellation rates and higher unsold inventory levels,’ M/I Homes CEO Robert Schottenstein said. ‘As evidenced by these factors, housing conditions in most of our markets are challenging,’ he added.”
“M/I, the No. 21 U.S. home builder, was one of the first builders who report on the calendar quarter to release orders. ‘Here’s your first piece of data from the companies that report on the quarter and it doesn’t look good. It looks pretty bad,’ analyst Barbara Allen said.”
“National City Corp, the No. 8. U.S. bank, said on Monday it may sell two mortgage lending units to reduce its exposure to subprime lending as demand for home loans declines. National City also said it is mulling the sale of NationPoint, an affiliate that engages in direct-to-consumer mortgage lending.”
“‘This is a strategic review to possibly reduce National City’s presence in nonprime mortgage lending,’ spokesman Chris Kemper said.”
“The subprime unit has struggled in recent quarters, dragging down the parent company’s consumer-finance profits. By the end of last year, First Franklin’s profit margins had tumbled to their lowest level since National City bought the business. In its annual report, National City warned that the mortgage business ‘will be under margin and volume pressures’ in 2006.”
The Washington Post. “A potential financial disaster that could have shaken the housing market was averted because regulators discovered accounting failures at Fannie Mae and Freddie Mac, the new head of the agency that oversees the mortgage giants said. ‘The housing market is so important to this country,’ said Lockhart. ‘And to have it built on what turned out to be a shaky foundation could have caused significant financial problems.’”
“‘The risk has certainly been reduced by the remedial actions that the two management teams have put in place at our direction,’ Lockhart said. But it will take a number of years; two, three or more, for the two companies to get their financial houses fully in order, he cautioned.”
The Motley Fool. “How the once-mighty have fallen! These events illustrate the way in which even a seemingly impregnable competitive position can deteriorate. Fannie and Freddie enjoyed a government-sanctioned quasi-duopoly; they were able to borrow at lower cost, thanks to the market’s perception that its mortgage securities had the implicit backing of the federal government.”
“That’s not as good as actually owning a license to print money, but it’s the next best thing. However, when a private-sector organization is thought to be ‘too big to fail,’ it creates a moral hazard by skewing the relationship between business risk and reward.”
“As regulators examined the accounting violations, they found evidence of greed, mismanagement, and excessive risk-taking. They concluded that the size and leverage of the GSEs mortgage portfolios must be reduced in order to mitigate any systemic risk (a fancy way of saying that in the hypothetical event of Fannie Mae’s failure, widespread disruption in the financial markets or the economy could ensue).”
“I can’t find any competitive advantage, aside from favorable borrowing costs based on the perception of implicit government backing. There is no evidence that it has developed specific expertise that doesn’t exist elsewhere. So when the government signals that it is uncomfortable with a guarantee that it never gave, and wants to reduce the influence of the GSEs, investors must take a hard look at these companies’ business models.”
And from a press release. “A delegation from the National Association of Responsible Loan Officers (NARLO), the trade association of mortgage loan originators, visited with lawmakers in Washington, D.C., to discuss loan officer issues on June 28.”
“‘The members of the NARLO are fed up with mortgage loan fraud and the low barriers to entry into the mortgage industry,’ said Robert Skrob. ‘For NARLO members, minimum licensing standards are not acceptable. We must clean up our industry.’”
“‘The members of the NARLO are fed up with mortgage loan fraud and the low barriers to entry into the mortgage industry,’ said Robert Skrob. ‘For NARLO members, minimum licensing standards are not acceptable. We must clean up our industry.’”
Can’t help but wonder if this is an attempt to limit entry into the mortgage field to preserve their specialty…..remember the fat and lazy US tech workers on the steps of the Capitol in 2002 protesting H1-B visas?
When the going gets tough, the scared start whining.
Or they are starting the process of CYA, knowing the backlash is coming.
Considering the source, skepticism about NARLO’s motives is perfectly understandable. Not only that, it completely misses the point. The current mess has far more to do with non-existent LENDING standards and Fed/GSE-created funny money that broker licensing standards. Without that flood of cheap money to lend and “too big to fail” GSE-MBS risk underwriting, there would be little need to crack down on crooked brokers.
-that broker licensing standards
+than broker licensing standards
It’s all true but lets not forget real guys and gals whose only mission is to do the right thing. when I refied in 03 my mort guy was real clear, “this is great, please don’t even think about that” ect. And at the end of the day, they did not know they had to be good (I put it out to bid) we had a subprime on a fire damaged forclosure. I don’t think we lived there a week without bpo guys comming around (being as thats how I got the thing I offered coffee–they looked scared–pu—ies.)
Good points.
They had good reason to protest the H-1B visa program. The backlash kept Congress from renewing it @200,000+ per year. Instead, it was put back below the 100,000 per year.
Let me assure you, there are no more than 10,000 Extra Special Super Foreigners in Existence, so any more than that is just the globalist banksters trying to crush the middle class of the United States.
If a foreigner (or anyone else) will do the same job as you for less money, then by definition he deserves the job.
I work with many people who were originally here on H1-B visas (Indian tech workers). Sure there are a few who are merely taking away jobs but most of them are brilliant, hard working, and much more pleasurable to work with than some fat-ass 45 year old man or woman who believes they deserve to make $90,000 a year because they read a book, has managed to avoid getting fired for 15 years, spends half the day in the cafeteria gossiping, and has to leave at 3 PM everyday to take little Johnny to soccer.
In short the extra competition motivates me to do a better job. Either swim with the fishes or get eaten by sharks. Too many people want to be lazy, ignorant, or plain uneducated and be given a pass to the front of the line, and the sheer amount of stupidity in the real estate market is a microism of corporate America.
The majical stock faery did her thing at 2 p.m. right on schedule. Nothing to see here, move along.
http://www.marketwatch.com/tools/marketsummary/default.asp?siteid=mktw
What do you know? I have a theory. I just don’t understand who has the power to keep the Dow above 11K.
Sure you do.
http://www.truthout.org/docs_2005/090705D.shtml
Don’t you wish some Washington investigative reporter would get to the bottom of this story, so we bloggers would no longer have to wear the “tinfoil hat” label? Of course, once the truth comes out, we will have the mother of all stock market crashes; maybe it is better to let sleeping dogs sleep.
But, but, but what happened to the prime selling season and no bubble? Damn Ben the articles are coming now as fast as an approaching blizzard.
Oh what a tangled web we weave, when at first we practice to deceive.
From NARLO’s site:
“FREE Tele-seminar
Listen Now To The Tele-seminar “Newly Discovered Secret Weapon that Builds Trust and Credibility with Your Prospects and Turns Shoppers into Closed Deals for Less than the Cost of a Grande Latte.Guaranteed.””
Is NARLO in way related to NAMBLA?
(Sorry, couldn’t resist)
or perhaps
Seasonal Housing Industry’s Temporal Caretakers (of) Regional Earmarked Earnings Keepers
loving that
Where have the boys from NARLO been for the past 4 years or so??
That’s a good question.
rakin it ($) in!
Curt,
As opposed to NAILO? Nat’l Assoc. of Irresponsible Loan Officers?
For at least 4 years these clowns have paraded around passing themselves off as “financial planners” with NO accountability! If there is an org. out there that’s willing to say “most” mortgage brokers don’t even meet min. standards and the industry needs to be cleaned up, well than I’m ALL for that. The truth is that the damage has been done. Closing the barn door now isn’t going to help MILLIONS of FB’s. But, uh good luck with that.
Not to put lipstick on a pig,but we all keep laughing at selling the Brooklyn Bridge. Kinda makes me want to read Upton Sinclair again (The Jungle, anyone.) Ignorance is not funny and poverty is not charming to anyone (strike that apparenty it has a base in Washington.)
‘when the government signals that it is uncomfortable with a guarantee that it never gave’
IMO it is a huge step forward that this issue is being discussed so often these days.
yeah but the govt has covered GSE failures twice (at least) already… the guarantee doesn’t look implicit to me, unfortunately.
sorry, misleading… it looks like a guarantee, unambiguous, plain & simple, overt, whatever the antonym for implicit is… explicit according to word.
This is where the size of the portfolios comes in. Those previous actions took place when FnF were much smaller, there were no scandals (that I can remember), and there is the matter of the biggest credit bubble ever. If/when congress starts to discuss a bailout, lets just remind them that there is no guarantee and the management fudged numbers for personal profit.
amen
If the government would buy my house for 1 x 10^19 $US I would promise to pay their debt off for them. They make money out of thin air anyway, so what’s the dif?
i’ was interested to see first franklin mentioned as being in trouble,i still get their flyers and they seem to have the lowest standards and the riskiest produccts of any of the subprime lenders.if anyone wants some history on fannie mae’s leadership,google “victor ashe” and “leola mcconnell”…he is the ex cfo of fannie and current ambassador to poland.
“A delegation from the National Association of Responsible Loan Officers (NARLO), the trade association of mortgage loan originators, visited with lawmakers in Washington, D.C., to discuss loan officer issues on June 28.”
“‘The members of the NARLO are fed up with mortgage loan fraud and the low barriers to entry into the mortgage industry,’ said Robert Skrob. ‘For NARLO members, minimum licensing standards are not acceptable. We must clean up our industry.’”
LMFAO…Hey Rob boy, join the unemployed honest and ethical appraisers club.
Unfortunately, you’re 5 years too late to the f*ckin’ party.
The damage has been done.
-The money’s been lent, the market equilibrium of residential housing distorted, and people are in now hock up the wazoo on what will be a rapidly depreciating.
And the profiteering sleazebags mortgage pimps got their Swiss bank accounts all set up are heading for some obscure offshore retreat, so they don’t end up as government meat like Skillings and Lay.
Enron will seem a ripple, to the tidal wave that’s coming.
‘WLS William Lyon Homes reports JunQ new home orders were down 52% y/y (147.15 ) New home orders for JunQ were 550, a decrease of 52% as compared to 1,154 for the three months ended June 30, 2005. New home orders for the six months ended June 30, 2006 were 1,197, a decrease of 41% y/y. Co’s number of new home orders per average sales location decreased to 11.2 for JunQ as compared to 27.5 for previous year period. Co’s cancellation rate for the three months ended June 30, 2006 was 32%, compared to 13% for the three months ended June 30, 2005; rate for the six months ended June 30, 2006 was 30%, compared to 13% for the six months ended June 30, 2005. Co’s backlog of homes sold but not closed was 1,139 at June 30, 2006, a decrease of 46% as compared to 2,115 at June 30, 2005.’
Was just going to post that, actually. 52% looks like a nice soft landing, wouldn’t you say? You see those CA numbers — off 59% despite the fact they had 3 more sales locations than a year earlier. And don’t miss Nevada. They boosted locations to 12 from 8, but sales FELL a whopping 67%. Oops.
It looks like a lot of bones are going to be broken in those soft landings.
“Must be a bottom!”
wall street Wizzzzzzz kid!
Cancellation rate is up 146% (13% rose to 32%). The good news is that the backlog of spec homes is 46% less than last year.
Another bad news is that they have 20% more sales office. So how many people have they pink slipped (or will in the future)?
But: where are the average price per home numbers? [Or even the margin!!!] Let’s see some positive cash flow, shall we?
Wow. Those numbers are like opening a bag of really moldy bread. No matter which slice you look at, back or front… it’s just nasty.
The major corporate builders are generally posting news of a collapse in sales and new orders. Why are their share prices so sticky at this stage? It sure seems as though we have enough bad news in the bag at this point to conclude the direction of the future homebuilder profit trend (and it is not up). At what point will they capitulate (a la Nasdaq circa 2000)?
“The subprime unit has struggled in recent quarters, dragging down the parent company’s consumer-finance profits.”
THERE SHOULD NOT BE SUBPRIME UNITS IN ANY FINANCIAL INSTITUTION. Sorry subprime people…..
I agree completely. The whole idea of NO CREDIT OK, BANKRUPTCY OK makes no sense whatsoever other than as a trap when it works or a sure way to lose money when it does not.
But they cover the risk by requiring a greater down payment, and getting appraisers to appraise collateral (property) conservatively, right?
Right?
It all made sense when housing prices were skyrocketing. They just happened to be playing “chicken” a little too long.
As someone earlier posted, ‘it’s all fun and games until someone loses an eye’.
Wonder what happened at the June 28th meeting in Wash.DC with the suddenly concerned lenders. Anybody know?
Was that by any chance when Barney Franks , D MASS and the Republican from Ohio jointly spoke jointly in favor of whacky loans for people who can’t afford them?
Anybody know anything about that? I heard a little blip about it . They’re going to co-sponsor a bill that sounded like it was a way to keep the bad loan party going. Under the auspices of seeming “concerned for the little guy”.