“Some Will Succeed And Most Will Not”: CEO
Some housing bubble reports from Wall Street and Washington. Origination News, “Countrywide CEO Angelo Mozilo estimates that 40 to 50 subprime firms are going out of business each day, a trend that likely will continue all year. During a conference call discussing Countrywide’s earnings, Mr. Mozilo, in response to a question, said analysts are seeing reports of two to three firms failing each day, but that the number is much larger.”
“Addressing the carnage in the subprime sector, Mr. Mozilo said, ‘I think we have a way to go on that.’”
The LA Times. “Bottom-fishing in especially turbulent waters, several Wall Street firms have purchased specialists in ’sub-prime’ loans to risky borrowers — a business that Mozilo said Countrywide has backed away from as loan delinquencies have shot up.”
“‘In terms of the Wall Street houses, some will succeed and most will not,’ Mozilo said, citing as an example of the latter Merrill Lynch & Co.’s loss of a $100-million investment in Agoura Hills-based sub-prime lender Ownit Mortgage Solutions Inc.”
“When Merrill cut off funding in December, Ownit filed for bankruptcy protection. The filing showed that Merrill also held $93 million in soured loans it had purchased from Ownit.”
“JPMorgan Chase & Co. is cutting its exposure to subprime mortgages amid deteriorating industry conditions that are proving troublesome to a growing group of lenders.”
“JPMorgan CEO James Dimon said in an investor presentation Tuesday that the company has sold off most of the mortgage loans it made last year to people with weak credit histories. He said mortgages are the one area of subprime lending where ‘we really see something taking place that looks like a recession.’”
“JPMorgan said in the presentation that ‘loss severities’ in subprime mortgages have started increasing, and that delinquencies of subprime loans originated last year are higher than the 2005 and 2004 vintages were at a comparable age. In the fourth quarter, JPMorgan saw net charge-off rates on subprime mortgage loans leap to 0.6 percent from 0.1 percent a year earlier.”
“When it released its fourth-quarter earnings earlier this month, JPMorgan boosted its retail bank’s provision for loan losses to $262 million from $158 million a year earlier, due in part to what the bank described as ’some deterioration in subprime mortgage.’”
From Reuters. “Tighter mortgage underwriting to the riskiest homebuyers has helped improve loan quality but has far to go before defaults are reduced to acceptable levels, according to some of the biggest subprime issuers.”
“Lenders including New Century Financial Corp. and Accredited Home Lenders Holding Co are scrambling to reduce the number of early defaults on their loans that surged at rapid rates in 2006. Investors are increasingly forcing lenders to buy back the loans, hurting profits and prompting originators to improve quality at the expense of volume.”
“‘We haven’t seen the turnaround yet,’ Brad Morrice, CEO of Irvine, California-based New Century, told investors. New Century has a rate of ‘first payment defaults’ of about 2-1/4 percent, up about a percentage point from two years ago.”
“At Accredited, bonds supported by loans to borrowers who stated, rather than proved, their incomes dropped to 23 percent from 37 percent over the course of 2006, Stuart Marvin, Accredited’s executive vice president of finance, told investors. Sacrificing volume to tighter underwriting has become a necessary choice, he said.”
“Other Wall Street analysts expect efforts by lenders will have only a small impact since too many loans are still being made to people who can’t afford them. Lenders changing their underwriting criteria is ‘like moving the deck chairs on the Titanic,’ (said) Chris Flanagan, head of asset-backed securities research at JPMorgan.”
“‘It’s incredible to me that there’s a notion of a significant tightening’ in underwriting, he said.”
“Morrice at New Century said the company hasn’t completed changes to underwriting standards to reverse the rapid rise in defaults from low rates in 2003-2005. ‘We suspect things are going to get somewhat worse before they get better, and we are planning accordingly,’ he said.”
The Baltimore Sun. “Black & Decker Corp. reported yesterday that the housing slump continued to cut into sales and earnings and said more restructuring could be on the way.”
“Nolan D. Archibald, Black and Decker’s CEO, told analysts during a conference call that the housing slowdown resulted in fewer orders from key retailers, which forced the company to scale back production to keep inventories in check.”
“‘As we had announced in December, we faced a very difficult market environment in the quarter, resulting in a significant decrease in sales and earnings,’ he said.”
From MarketWatch. “3M Co. said Tuesday that downturns in the housing and automotive markets chilled fourth-quarter earnings growth, and shares of the blue-chip conglomerate lost more than 5% as its outlook disappointed investors.”
“‘The dramatic slowdown in the U.S. housing and automotive markets had a significant negative impact on sales and gross margins in a handful of our divisions,’ CFO Patrick Campbell said.”
“U.S. Treasury Secretary Henry Paulson said on Wednesday that he is working to create a strong regulator for mortgage finance companies Fannie Mae and Freddie Mac.”
“‘I was encouraged by some of the progress late last year we made,’ Paulson said. ‘We’ve got a lot further to go.’”
“When Merrill cut off funding in December, Ownit filed for bankruptcy protection. The filing showed that Merrill also held $93 million in soured loans it had purchased from Ownit.”
How will the little subprime dealers survive when the kingpins cut them off?
About as long as the dotcoms did after the VCs took the punchbowl away.
The VCs only took the punchbowl away after the high flying internet stocks finally fell in public markets under their own weighty valuations.
If values were still going up, you can bet that underwriting standards would not change. They are only changing standards because value increases are no longer bailing them out of poor loans (either through a sale or refinance).
So let me get this strait.
1. Countrywide funds loans that in the old days would have been considered illegal
2. Countrywide buys their way out of predatory lending lawsuits
3. Countrywide used to be called Long Beach Savings and Loan
4. Long Beach savings and loan was a major contributor to the S&L junk bond crisis. (They were bailed out at taxpayer expense)
5. Countrywide is outsourcing all their workforce to another country.
I have an idea…
For how great they’ve been to Amearica lets appoint the companies owner as an ambassador to the Netherlands.
I think you are mixing Ameriquest up with CFC. It was Ameriquest that paid the big fine and whose executive became ambassador, if I recall correctly.
You are correct Ben
The government was the only contributor the S&L crisis. Congress created a moral hazard and then was required by law to bail out the S&Ls.
As far as I know, there is no such requirement to bail out companies like Countrywide.
bingo, S&L was a failed gov deposit insurance program
BTW all govs proigrams fail, and reward failure as a function
“Bottom-fishing in especially turbulent waters, several Wall Street firms have purchased specialists in ’sub-prime’ loans to risky borrowers — a business that Mozilo said Countrywide has backed away from as loan delinquencies have shot up.”
Backed away! Bullshit! These Countrywide whores are still out there writing loans for any cretin stupid enough to sign up.
CFC’s marketing department hasn’t got the memo about backing away from subprime based on an internet ad I stumbled across on Yahoo! over the weekend:
“4 out of 5 Approved!”
“Credit Problems? Call Today”
“Refinance or Tap into Your Home’s Equity”
CFC also had the “Oblo Espanol” button just in case.
Mozilo says 2008 will be a return to the good ole days of appreciation and gains so just hold on.
What is this guy smoking and is he sharing it with DL? In 2008 we’ll see a return of the RTC and, if too many people listen to him, the meltdown will take the country by surprise.
I think he’s playing the PUMP-N-DUMP game with BofA.
Could be.
Mozilo has sold US$132 million of shares via options exercises since the beginning of December alone.
Does anyone have a link to the web site that has a countdown of the number of mortage companies that have gone out of business since December?
Found it: http://www.ml-implode.com/
http://ml-implode.com/
And I’m a little confused. The wonderful implode-o-meter website (link given above) shows 16 subprime firms kaput since December, but Mozilo says 40 to 50 subprime firms per DAY are going out of business, and that he thinks it will continue all year. Does that mean 18000 companies out of business (360×50) ? I wouldn’t have guessed there were that number of different lending operations out there.
I think he’s counting independent brokers that fed these monsters the failure-prone loans..
I think Aaron and Crispy are just slacking. I want to see at least ten updates a day from here on out or I will take my implosion monitoring business elsewhere.
2FF. ROTFLMAO
“U.S. Treasury Secretary Henry Paulson said on Wednesday that he is working to create a strong regulator for mortgage finance companies Fannie Mae and Freddie Mac.”
strong regulator: he probably means even more power for the PPT to support Fannie en Freddie (and Homebuilder) share prices.
WTF? I want my $125k/mo retirement, and don’t forget that lifetime health plan with dental and vision too!
You need to move to France.
with people like Paulson and Bernanke in control that $125K/mo retirement is almost certain; the only question is if it will be enough to stay above the poverty line.
Yes poverty can be redefined to “a person in good health has riches beyond compare”. And anyone rich can’t be in povery.
1984 was written for the wrong century, we now have institutions that are too big to fail.
Can any mortgage brokers out there comment on lending criteria? Any real tightening?
just a little tighter on appraisals - not much else
If you hang around the Broker’s Outpost you can see postings for help with subprime scenarios. Low FICOs, high LTV, no doc, stated income, the whole gamut of business-as-usual low standards we have been hearing about.
And no one answers their posts.
It took me a while to realize they dont bother posting “cant do that anymore”, they just dont answer.
Seems to me they are having a harder time doing these loans.
And there are numerous discussions on ethics [!] and if brokers are responsible if they know the stated income is inflated and just how much are they supposed to overlook to close the deal.
Interesting, thanks.
Here is one about overstating income:
http://forum.brokeroutpost.com/loans/forum/2/90346.htm
I take comfort in the final sentence of Nico’s 11:39 post:
“you guys are gonna see a LOT of changes this year especially right around the end of 2nd quarter. those changes in the market will be due to people overstating income on applications.”
The guy Tsnyder really has his stuff together there. There is some interesting back and forth between he and this guy DustinStout (Palidin, if he’s using his real name, you should look him up, I bet he leaves a trail of breadcrumbs right to massive fraud).
Dustin’s argument is “everyone knows the incomes are overstated, so it’s not fraud”. LOL. Yeah, that’ll fly in court.
This broker’s blog uses “AE” quite a bit. Is this an Account Executive, and what exactly is an AE in the lending realm, in this context? Thanx…
Here is an ad for a wholesale Account Executive:
http://tinyurl.com/242b4p
I don’t know the specifics, but it looks like the W/S AE tries to get the originators to offer their products.
What’s scary is these companies are still hiring AEs, and mentioning how aggressive their pricing and products are. Much talk about automated underwriting, etc.
Looks like things have NOT tightened up very much…yet.
Tighter on the appraisals? Hm. The house I’m buying in San Mateo Co (CA) was appraised yesterday. I was a bit flabbergasted that the appraiser spent half an hour at the house gathering information about it, put a bunch of numbers into a computer, and came up with the exact same number my gut had prompted me to bid.
“‘We haven’t seen the turnaround yet,’ Brad Morrice, CEO of Irvine, California-based New Century, told investors. New Century has a rate of ‘first payment defaults’ of about 2-1/4 percent, up about a percentage point from two years ago.”
Ok, am I the only one that would consider a 1.25% first payment default rate an indication of moronic lending practices?!?
No wonder Countrywide is moving people to Chandler as fast as they can; not to mention looking at the California head count reductions on their way…
This doesn’t even really get going until May either…
Got popcorn?
Neil
Black & Decker Corp. reported yesterday that the housing slump continued to cut into sales and earnings and said more restructuring could be on the way.”
Ouch… more layoffs.
“40 to 50 subprime firms are going out of business each day, a trend that likely will continue all year.”
That’s upwards of 15000 subprime firms. Are there really that many??
And I’m going to quote — AGAIN — to that excellent Buisnessweek toxic mortgage article: “The minimum monthly payment for the first year is $899, which he can afford. The interest-only payment is $1,329, which he can’t. The fully amortized payment is $1,454, which his lender, Washington Mutual (WM ), gets to count on its books.”
AFAIC, that says it all. 15000 little subprimes booking phantom profit mark-to-market a ‘la Enron, and a secondary market that willingly turned a blind eye to the phantom part of the equation. The job market is going to be even worse two years from now.
oop, I mean 10000 if they only go down during weekdays. (and I didn’t mean to reply here specifially. oops)
It’s not “phantom profit”. It’s accounts receivable and totally legimate.
Of course, whether the borrower can pay the bill is a different story.
It was 1.25%, now up to 2.25%. Moronic lending practices? Absolutely. It also looks like a lot of fraud. I mean, come on, how is it possible that you miss your first mortgage payment? It seems that it has to be fraud. And since the lenders are going to have to buy back these loans, you would think that they would have a pretty good incentive to try to eliminate this type of fraud. But, I guess they are too busy trying to keep up their volume to actually address their lending standards in a meaningful and timely manner. This will change, but it is hard to remain patient. (I will remain patient - looks like I’ll be waiting another 18 months, I’m guessing, before I will start looking to buy - but I wish it would happen faster).
Agree completely. Of some three-digit number of mortgages I initiated with MOM (my own money), only two showed any problem in the first YEAR. One borrower got caught DWI and went to jail at month #4, the other was a case in which I stupidly allowed a borrower to sell to someone who assumed the repayment obligation. I should’ve enforced the “due on sale” clause. In this second case, the trouble started maybe around month #8. Most borrowers know how much they can pay, and they do pay it.
“Other Wall Street analysts expect efforts by lenders will have only a small impact since too many loans are still being made to people who can’t afford them. Lenders changing their underwriting criteria is ‘like moving the deck chairs on the Titanic,’ (said) Chris Flanagan, head of asset-backed securities research at JPMorgan.”
Refrences to the Titanic, tightening lending criteria… good to see the Main Stream Media is printing everything that was posted on this blog a year ago.
It seems the crucut haircut will be the new fashion of the day in 2008.
My brother is a sub prime loan broker based in Irvine - I speak with him every weekend to get the update on the market. He reports that underwriters have tightened qualifying but that refi business is still strong. They are targeting folks with loans around 400k and up.
Flanagan is basically calling BS on the reports that the industry is tightening up. We’ll see if more say the emperor has no clothes.
Has the industry tightened standards per historical norms? nyet.
We’re heading that way. It will take a year or two… but we’re headed that way.
Oh, everyone will be given the option of refinancing to a fully amortized loan. The fact that people are not ready to handle that… is scary.
Got popcorn?
Neil
I just saw da prez on television claiming our economy is booming, and everything is fabulous, based on government figures, but I suspect what he meant was that consumer spending (translation consumer debt) was up, which in political terms represents a booming economy.
Here in Tampa, the world’s most hideous city, speculators bought so many condos, all for sale in the millions, there is nothing available any anything remotely representing a logical price, and the prices are not falling, except in development tracts. However, Trump’s promised tower remains a thought form, and the balyhooed Newport (or something like that) on Gandy overlooking a ship repair yard, a bunch of dirt.
Across Gandy, in St. Pete, a new highrise condo called the “Mangroves” has finally gone up, but it looks like Section 8 housing, or a bunker up-ended. This, however, doesn’t mean the builders are embarrassed to put a sign out stating “…from the low 500s….” After all, who wouldn’t want to live across from the greyhound race course and gambling emporium, in a swamp with snakes, for a mere half a million (and up), with minimum property taxes of 12 thousand a year, and insurance premiums probably somewhere in the same range?
Sounds like a deal to me. Can I walk to the titty bar?
These reports are much bigger news than it first appears. The reason? These companies DO NOT bail out if they see a light at the end of the tunnel. They get out because all they see is black up ahead with not a pinpoint of light.
This only goes to confirm what I have thought since this craziness began and we have a looooong way to go before this mess reaches a conclusion. Once again, the key is when prices reach the level of “affordability”, then we are close to a bottom but NOT there yet. Why? Because these booms are driven by momentum and NOTHING ELSE. The momentum goes either way (bull and bear if you like). The bull is over and the bear momentum is in the early stages. We might see a hiccup (might) in the spring but it makes no difference to the eventual outcome as the downward momentum resumes at some point because:
#1Too many properties on the market (overbuilding).
#2 Too many overvalued properties. Extremely overvalued in some places.
#3 Incomes way, way below property affordability valuations.
Even with the so-called “goldilocks economy”, according to GW Bush the White House Idiot who only a fool listens to these days, it will take many years for wages to grow to a point where anyone buying a house has a safety margin that would protect them from the financial hazards, big and small, life can throw at them.
One more thing. ARIZONA SLIM posted on Bits and Buckets for January 30th (yesterday) about top realtors. The link was to a newspaper in Arizona. I noticed something very interesting on the newspapers website and on the page listing realtors. On the right hand side, at the bottom, was a column listing help wanted. Here’s what they were:
#1 Security Guards
#2 Lunch servers
#3 Litigation attorney (for fb cases probably)
#4 Tea room servers
#5 Security guards (again)
#6 Care center assistant
Yes, GW’s “goldilocks economy” is great. Especially for the Exxon guy who walked off with $400 million and looks like a perfect poster boy physically for a portrait of a capitalist greedy pig. Just put him in an Uncle Sam outfit and stick a cigar in his mouth. GW’s “goldilocks economy” is also okay for crooks like Cheney. It almost worked for crooks like Kenny Boy, killing and Fastow. However, it doesn’t look very “goldilocks” for everyone and I’m VERY suspect about the quality of the GW Bush job growth numbers considering the Federal employee numbers are in a bubble of their own. More to the point, I doubt if tea room servers, lunch servers, care center assistants and security guards, can afford $350,000 homes (plus the taxes) unless they can sign onto sub-prime toxic loans - and they look like they are dead or dying.
And here’s Arizona Slim, checking in with the Tucson Jobs Report. (Thanks for the motivation to post this, Mike.)
You’ve hit on a large truth about our local economy. In fact, it’s much bigger than the proverbial Elephant In The Room.
The plain and awful truth about our economy is that low-paying jobs are over-represented. There are many reasons for this — low educational attainment of many our citizens, proximity to the Mexican border, the “sunshine tax” paid by people who are willing to live here and accept lower pay for doing so, and the fact that, for many years, our city fathers promoted Tucson as a low labor cost haven. In short, it’s a problem, and it’s one that won’t be easy to fix.
Meanwhile, our local real estate market has all but ground to a halt. I’m seeing properties sit, sit, and sit some more.
Yes, houses south of Tucson down the I-19 corridor are sitting too, but it hasn’t slowed the building . i mentiond last summer on this blog how a “for sale” went up along the interstate advertising 239 improved lots for sale. Since then whatever work being done has been at a crawl. I ran into a custom builder acquaintance (has maybe 3 houses going any one time), and is still doing quite well. He did tell me that those 239 lots had been flipped sevral times with the last guy buying at the top in summer 05. This flipper is asking $90K per lot on which you can maybe set an 1800 sq foot house to the line. We are talking desert along the interstate ,complete with car and truck exhaust and those tractor trailers make a lot of noise rolling by. The view is your neighbor across the street or their backyard such as it will be. I can see why he has no takers. I do wonder if he is just dreaming or that could possibly be near break even from what he paid.
Then there is Meritage, a big presence in Green Valley, particularly Canoa Ranch, where the other half thinks they need to live in GV. To me it looks a lot like base housing, 1800-2200sq ft homes pretty much identical for which folks paid in range of $375K-$500K,miminal set backs. Mertiage is still building balls to hte wall including two three story condo/resort affair. With there 48% cancellation and -91% reduction in revenues last quarter from 05, I use how long they can still keep pounding nails.
‘all we could do was to / Sit! / Sit! / Sit! / Sit! /
And we did not like it. / Not one little bit.’
Apologies to Dr. Suess
Uh, we get. Bush is an idiot. Bush is evil. Bush planned this.
Bush forced people to borrow, he forced the Fed to lower rates (knowing millions would buy multiple properties with no doc, no downpayment loans).
Of course, its hard to logically reconcile “Bush is an idiot” with “Bush is an evil genius who planned every bad outcome” but since its being repeated in virtually every thread it must make some sense….since its repeated endlessly.
Please, don’t stop repeating “he’s an idiot”…”he’s an evil genius”. I’m sure, at some point, it will become apparent how this works….like in “Chinatown”……”She’s may sister” (slap) “She’s my daughter”.
Yeah, it must have that kind of mysterious logic.
The logic is simple. Bush is the king, and personally manipulates each market with absolute control over results. Iago-like, he does so out of pure cussedness, success lying in rendering miserable the maximum number of people possible.
Although Congress controls budgets and allocations, not the president, Congress is absolved of all responsibility, as it dances to the hypnotic tune of the white house puppet master, whose power is such that Mr Burns can only dream of.
Veto what now?
Hey everybody, you act as if Bush is in control of the situation. This is a cycle. WE all contributed to this problem. Some obviously more then others. I did by purchasing the highest yielding CD’s…which are probably from more speculative lenders.
In 2002-3 Greenspan was staring deflation in the face. What would you have done? He bought time and put the problem off by lowering rates, alllowing low standards and the govt cutting taxes.
These guys are not in the level of control many of you think exists. Many of these people think of themselves as good people and even love their country.
Men do not make events. Events make men. We have been at the stage in the cycle where the masses want and will only listen to “yes men” and people that have easy painless answers. The truth is the debt structure is going to implode. It is just a question of when. This makes me far more bearish then most of you.
The only thing this economy has going for it is the four year election cycle. After 2008 we are probably toast. This year could also be an early candidate.
You will never hear me say, “Bush is an evil genius”. Bush was never a genius and was always an idiot who, without Daddie Bush’s pals, would now be wearing a little brown uniform with a UPS badge, scurrying from door to door, office to office, all sweaty, delivering packages. After work he would be spending a lot of his wages at the local bar seeing as he’s a confirmed drunk.
Chances are, because he’s such a loser, he probably would have been caught for DUI as he left the bar one night (he was once) and banned from driving for a few years which means the only job open to him would be at a place where he would wear another uniform and was in tune with his talents and brain. McDonalds. Nice to have a rich daddy isn’t it. One that can get you out of risking your life in Vietnam with other young American men and women. Many who lost their lives while GW Bush was having fun without risk. Just like his military age daughters are doing now. Of course, getting pushed into lucrative deals by daddie’s pals is also nice. That’s what happens when you are part of the Bush Crime Family.
On the other hand, there is an evil genius by the name of Dick Cheney. So evil in fact, that I’m concerned his daughter might be bearing the anti-christ.
If you’ve ever been in the military, you might have seen that in some cases there is always a jerk who the other guys make fun of by pulling tricks. It’s a sign that nobody has any respect for the jerk. When Bush was in the military (when he was actually THERE as opposed to being AWOL) it’s pretty well known that the other guys used to play jokes on him because he was such a jerk. Great to know the USA has a jerk for a President. Even if a lot of Americans don’t know it - the rest of the world does.
So are you saying Bush is an idiot ?
Ummmm. Yup.
he has been weak and complicit, like his dad
a pander bear
where’s the spending vetoes?
greenspin showed him the doomsday book
and a house in every pot is the new “new deal”
And pot and meth in every house, if they don’t get prices and inventory down.
jag,
I only saw the words Bush and genius together in your thread.
a little advice
leave out the politics, it makes your entire post look ridiculous
Repeat after me: Goldilock’s.
The Fed says housing has stabilized. The DOW roars. Bush syas the economy is firing on all cylinders. Many fat years ahead (sarcasm off).
and because the EU economy is booming along and the EU housing bubble is stronger than ever, the dollar doesn’t even have to fall that much to make all this possible
Just west of Orlando along the north side of Interstate 4 there is a huge property of perhaps 40 acres where they auction off heavy equipment. I have been watching it for a year.
There is a sea of yellow robotic machinery as far as the horizon. Every type of earth mover imaginable and many versions of same.
I have seen that auction in years past and thought the same thing you do - Keep watching: all of a sudden the machines will just be gone one day. I guess this is normal.
I passed by that place yesterday. Seemed like a lot more equipment on hand than in previous pass-bys — I go by every 6 weeks or so — though I don’t know whether it’s a lack of demand or an expanding operation.
Hey, that is Ritchie Brothers auctioneers. Make no mistake, they are huge. Some time ago I was looking for a generator set to keep my nerd toys online during power outages and got added to their mailing list. I get their ads up in Virginia Beach, and saw the facility when I was down in Orlando over the holidays. They are very large, possibly worldwide including middle eastern countries. Might be a good place to watch to see what inventory looks like… hmmm maybe I should watch. 60kw diesel generator set for $1500!?! Could it finally happen!?
You know I think they could make some money by setting up a play yard so desk jockeys like me can relive our childhood dreams of using a really big yellow tractor to push dirt around. Only instead of Tonka it’d be Caterpillar.
Tol is up as is the rest of the market on the news that the FED will not hike rates and that they see INFLATION moderating.
Is the fox guarding the hen house?
Tol is up
Might have something to do with the Fed’s view that housing is stabilizing. Do they know something we don’t?
Major rally in all the builders.
From the “Origination News” link at the top:
Countrywide Financial … has reported slightly lower fourth-quarter earnings than in the fourth quarter of last year, but also revealed a huge jump in accumulated negative amortization on its payment-option ARM portfolio. According to the lender’s earnings statement, it holds $32.7 billion in option adjustable-rate mortgages on the balance sheet of its bank, a 23% gain from last year. But its option ARMs have accumulated negative amortization of $653 million — a stunning increase of 782% over 12 months.
Wow, thanks Chip, I missed that.
Double wow! Thanks for the heads up, I missed that too.
Interesting. What about Mozillo’s earlier claims that they were doing a great job of getting their borrowers to refinance out of option ARMs? Apparently, they still have a ton of them on the books (and growing), and those FBs are making only the minimum payment (no shock there, that’s all they can afford). 2007 will be interesting with the resets coming.
So Countrywide has $32.7 billion in loans where 2% ($663 million)of the oustanding balance is added back to the principal each year! And they book that as income in the year it is accrued. Something is very goofy about that. Next year they will have $33.4 billion of troubled loans, even if they don’t originate another new one. Wait until they have to start writing them off. The SWHTF for their earnings in just the opposite way as it boosts them today. Neil, I need some popcorn.
Does anyone know anything about Downey Savings and Loan, symbol DSL? Much appreciated.
I don’t have anything recent but Downey is BIG into negative amortization loans.
more “no spillover ” effects
make a good topic
where won’t housing slump spillover ?
News today from Washington D.C. exurb:
http://tinyurl.com/272vv7
Largely because of the slumping real estate market, Fauquier County government this year faces a $3.7 million revenue shortfall.
…
In December, Fauquier’s revenue committee anticipated a $1.6 million revenue shortfall.
The staff and the supervisors believed they could satisfy revenue needs without taking extraordinary steps. But the picture later worsened partly because of further declines in real estate-related revenue Fauquier expected to collect.
“Around January of this year we started to note a significant drop in the residential building activity,” Commissioner of Revenue Ross D’Urso said.
…
From July through November 2006, the county’s community development department received 376 fewer construction permits than it had for the same period during the previous year, he said. That takes a big toll on Fauquier’s taxable real estate value, D’Urso said.
“They call me Dr. Gloom and Doom’because I’m telling them the rate of (revenue) growth is not going to be as high as it used to be for the next few years, he said.
Despite the downturn in new residential construction, D’Urso thinks the commercial real estate market is healthy. ‘”If there’s any good news in this we don’t see a similar decline in commercial revenue,” he said. “So while it’s bad financial news, it could be worse.”
…
The revenue shortfall experience offers at least two lessons, Atherton said. “What goes up, must come down,” he said of the once red-hot new home market. “Nobody’s building houses.”