Mortgage REIT ‘Substantially Exits Subprime Business’
Another subprime lender disappoints Wall Street. “MortgageIT Holdings, Inc., a residential mortgage company organized as a real estate investment trust, today announced operating and financial results for the fourth quarter and year ended December 31, 2005.’
“Doug Naidus, Chairman and CEO, commented, ‘MortgageIT generated substantial growth in 2005, building its high credit quality portfolio to approximately $4.7 billion and producing well over 100% growth in loan origination volume, to $29.2 billion. During the second half of 2005, an increasingly challenging market environment developed, including a disruption in the value of sub-prime mortgage loans, intensifying competition for prime mortgage loans, and a yield curve that inverted, which had the effect of increasing borrowing costs for both our portfolio and our mortgage bank.’”
“‘During the fourth quarter of 2005, gain on sale margins for loans sold to third parties declined to 71 basis points, a level we have not seen for the past couple of years. We expect this environment to persist over the near term.’”
“Mr. Naidus continued, ‘Our portfolio has continued to perform well and prepayment speeds have slowed dramatically during the first quarter of 2006. We are actively managing our product mix and have substantially exited the wholesale sub-prime business, which drove losses at our mortgage bank in the fourth quarter of 2005 and is expected to contribute to a consolidated net loss in the first quarter of 2006.’”
“The Company now expects to fund approximately $150 million to $200 million of sub-prime loan volume during the first quarter of 2006. Also, the Company expects future sub-prime loan volume not to be a material component of its total originations as the Company will have substantially exited the wholesale sub-prime business by the end of the first quarter of 2006.”
“During the first quarter of 2006, the Company continues to reduce its sub-prime staff and operations. These further reductions, along with the disposition of the remaining sub-prime loans, will negatively impact first quarter 2006 earnings.”
“The company originates and sells self-originated single-family residential mortgage loans that comprise of adjustable rate mortgage (ARM) loans and hybrid ARM loans. It also involves in prime and subprime loan origination, underwriting, funding, brokering, and secondary marketing.”
A reader posted this report. “New York Mortgage Trust, Inc., a self-advised residential mortgage finance company organized as a real estate investment trust, today reported results for the three months and twelve months ended December 31, 2005.”
“Comments from Management: ‘2005, particularly the latter part, presented some significant challenges for us and the mortgage industry as a whole. In our mortgage banking subsidiary we experienced record loan origination volume for the year, an 86% increase over 2004, yet our operating results were less favorable than expected.”
“Steven B. Schnall, Chairman, President and Co-CEO, commented. ‘With the flattening of the yield curve and the corresponding increase in our portfolio financing costs, we have also experienced earnings pressure in our mortgage portfolio management segment. In response, during the first quarter, we are contemplating and are likely to dispose of a portion of our lower yielding acquired mortgage backed securities portfolio, thus realizing losses already recognized on our balance sheet.’”
To Ben Jones,
Saw this article this am and thought you might enjoy taking a look. It’s on realtytimes.com/rtcpages/20060307_discounts.htm and entitled “Speculator Risk Soars With Builder Discounts.”
Have a great day and keep up the good work.
from the inside: most of the reps are running scared right now. they’re hearing talk of improving “quality” and straightening out the porfolio, both of which would require staff cuts. the fannie/fredddie customer is done, long term rates are well above 6% now, the subprime purchase borrower is having a difficult time getting approved and the subprime refi customer is and will have difficulty having enough equity to get out of their converting arm. the mortgage business is in for a very rough year this year.
If the big guys cant make a profit, how are the local mom and pops going to survive?
New Century (NEW) DOWN 1.59% TODAY
Look out below!
Perfect storm for the mortgage business. Tightening downstream demand, inverted yield curve, rising rates and declining RE prices and rising default rates.
In a corner 1000 ways.
So I’m not well versed on his particular brand of “newspeak” but what I think he is saying something like:
“We lost money on every loan, but we made it up in volume”
Kelli Yates citing market conditions for Auburn wrote the following: “The market right now is typical for this time of year. Despite what the media may be reporting, the bubble has not burst! Sellers (and Agents!) got spoiled by the quick sales of properties in the past couple of years - the market is back to where it is normally. The only reason prices of existing listings have dropped is because Sellers are panicing that their properties are not selling within a week! Hang in there! Spring is coming and that is the typical time for more homes to come on the market and more Buyers to buy!
I think she is breathing rarified air on the buy side.
New York Mortgage Trust shares top NYSE % decliners list
Print | | Disable live quotes By Michael Baron
Last Update: 11:03 AM ET Mar 7, 2006
NEW YORK (MarketWatch) — Shares of New York Mortgage Trust Inc. (NTR : new york mtg tr inc com
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Last: 4.76-0.89-15.75%
10:45am 03/07/2006
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NTR4.76, -0.89, -15.8%) fell almost 15% to $4.81 on Tuesday, putting the issue at the top of the percentage decliners list for the New York Stock Exchange. After Monday’s closing bell, the company posted a loss of $8.7 million, or 48 cents a share, for the fourth quarter, down from a year-ago profit of $2 million, or 12 cents a share. The latest results include a loss of 41 cents a share related to the company’s planned future sale of certain lower-yielding securities. New York Mortgage Trust said the planned sale stems from the flattening of the yield curve and a corresponding increase in its portfolio financing costs.
What are they smokin in Auburn?
“I’m forever blowing bubbles,
Pretty bubbles in the air,
They fly so high,
Nearly touch the sky,
Then like my dreams
They fade and die.”
This subprime deal is over. No more money in it. Everyone is closing up shop, selling and taking profits. I am sure it was good while it lasted.
The easy money is drying up very quickly, we all knew it would come. And when it did, this would be the catalyst for the “correction” that needs to happen.
Now we just wait and see if we truly can weather a storm like this in the banking industry. Supposedly we are much “smarter” then we were in the Roaring 20s right ?
Who are they selling to? Why would anyone want to purchase the subprime loans? What are the terms of those deals?
Well, if you are a hedge fund manager who can retire on a year’s bonus, if you make your performance nut and the yield is 14% does the bet sound a bit more appealing?
I’m sure a big chunk of it ends up with pension funds and the like (where the managers are investing OPM).
In the Netherlands we have pension fund ABP (one of the biggest ones worldwide) that has always been very enthousiastic about Fanny & Freddy stuff; no doubt they are snapping up some subprime ‘bargains’.
The party can’t be over already!!!! Where’s the punch bowl?????
I think the Realtors and Mortgage brokers drank it all. They just can’t get enough.
yeah, like Jim Jones Kool-Aid gang…
OT but fascinating…This was posted by a realtor at PrudentBear.com:
I feel I do need to preface this comment with the following. I do give all my clients the spill about my bearish position on the market before they even start to look. I currently have a couple who are looking to move-up from their current house to a larger one. I have explained that even waiting a few months in this market might mean huge price savings for them. They are determined to buy and try to do concurrent closings with the house they’re selling and a new one. The best I can do for them is return 1% of my commission to them, try to find them the best deal possible, and feel comfortable that at least they got less scroomed by using me as an agent.
As I was looking with clients this weekend for a move-up home, they found one they loved. It was a 2100 sf home for $530k with a large .25 acre lot and lots of cosmetic upgrades. At the end of a long day looking, I suggested we drop into a new home subdivision where we’d seen many vacant homes with “available” in the window. Upon arriving, we were given a list of quick-move in homes, or homes close to completion. Two 2200 sf homes were priced about $545k each. Three 2300 sf homes were priced between $560k and $572k. After touring the model (One of which we’d already seen in a home that day being “flipped” by an investor listed at $550k) we walked back in the office. We were inquiring about incentives, when the Realtor in the office told us that their “special” of the weekend was the 2300 sf home priced at $572k. They were currently offering it at $472k and were entertaining “all reasonable” offers on the other 5. My clients and I looked at each other, and asked if she was sure she’d spoken right. “You’re sure, $472k?” I asked her. Yes, she assured me, $100k off the home was the weekend special. This was on Sunday (Which meant the special had been running all weekend with no takers).
Today I pulled the following comps on the same floor plans through the county records which have closed in the last few months.
$517k closed 5/18/2005
$590k closed 9/7/2005
$510k closed 9/22/2005
$539k closed 10/12/2005
$517k closed 11/4/2005
To put this in perspective.. There isn’t a model in this community that’s EVER sold under $490k since they opened in 2004! That’s nearly two years of equity gains wiped away in one fell swoop. Those buyers are all underwater to the tune of 7.5%-20%. As I called around to additional new home communities today, I was told by three communities to check back at the end of the week because “they expected more cancellations this week”. If anyone knows ANYONE who is in a contract for a new house right now, they should have someone else contact the community and ask for their ’specials’ or ‘incentive’ packages. I feel so sorry for the people in this community who are unaware that they are walking in immediately underwater. I don’t know what my clients are going to do. They smell blood.
http://www.prudentbear.com/bearschat/bbs_read.asp?mid=373216&tid=373216&fid=1&start=1&sr=1&sb=1&snsa=A#M373216
omg, that was reaaally interesting!
what a view into the total scene, with the heart-warming addition of the rare character, the honest-seeming realtor!
I just find the psychology fascinating, the sucker price and the non-sucker price, the public face and the private panic. Blood to go around indeed…
So looking at numbers from an appraisal viewpoint, just what the f*ck is the real value of this stuff? There’s virtually no rhyme or reason to the numbers.
I do know, the guy @ $590k is one “FB”…The appraiser of this deal, if there was one, should be shot, er sued…
And this all played out in Sacramento, CA where housing used to be extremely affordable….once upon a time. Multiply this scenario times X and you have a LOT of upcoming upside-down homeowners. I feel for them all.
BayQT~
Now if you were feeling truly evil (:twisted:), you would take the special and throw a barbecue for the other people in the community with the same floor plan.
“So you could find out neat ideas for your new home.”
Then casually mention at the barbecue that you got it for 472K.
interesting story, but what happens to these underwater mortgages? I guess the owners of the mortgage know what is going on in the market (and maybe they are aware that it could be a trend change and things get worse)?
In my area in the Netherlands there is a high-end subdivision where (unofficially) more than half of the homes is for sale because the mortgages are underwater; many homes have been for sale for more than 2 years now. There are no buyers, because demand for this kind of expensive homes has dried up in recent years.
The bank who owns most of the mortgages knows they will loose a lot of money of they force their clients to sell, so they just wait and hope that the problem will magically disappear.
The bank could be right because the housing bubble in the Netherlands is still growing, so who knows? Probably they are accepting the risk because most owners are well-educated people with a good job, so they have a fair chance of getting their money back anyway if they are patient.
Beautiful chart:
http://finance.yahoo.com/q/bc?s=SOLD&t=3m&l=on&z=m&q=l&c=
That was a nice little short play.
What? There should be no worry. David Bach was on the Early SHow plugging his Automatic Millionaire Home Buyer book. He said that the subprime mortgage industry would help everyone with buying and no money down, help you pay off the credit cards, they want you to buy a home and will loan the money. What a crock of $HIT. Oh, he also said that bubbles and markets were localized. No national to worry about. Will cover the bubble tomorrow.
I saw an add for David Bach’s book yesterday in the mall. Did I read it right - it isn’t released July this year? If so, this book is a solid nominee to take the place of “Dow 30,000″, published in 1999 if I recall correctly.
Hi,
I am trader on wall street and I am short NEW, FED, HOV, TOL, KBH, CFC and have been so for a long time. I just saw two muppets on CNBC talking about the housing market…. Bla bla Housing will not go down. One of the analysts actually said that every 3% points increase in mortgage rates will only bring down house prices with 1% point. Seriously… at the same time he is saying this TOL is down 5% intra-day. These guys puts Baghdad Bob to shame…. The Americans are committing suicide at the walls of Baghdad right now…
We have been looking for houses in NJ in the 1.3M range and let me tell you NOTHING is being sold. Agents are calling me with more and more panick in their voices telling me I NEED to buy NOW! No Chance! We will wait this thing out.
Hold on to your hats folks… this will get ugly!
Nick
Isn’t it funny when they do that? My agent told me I better move quick on homes in lil’ Ann Arbor, before I get priced out once interest rates move up in the summer and fall. And that there are lots of feet on the pavement now…it really ends up making a buyer feel like they’re not telling the truth somehow, but they must just be really concerned for us missing out before things really get out of control price-wise
cheers!
Interesting. Would I be correct in guessing that your firm has been working to pare its exposure to MBSes for a while as well?