“Significant Volatility And Instability”
Some housing bubble news from Wall Street and Washington. CNN Money, “Embattled mortgage lender New Century Financial Corp. announced early Monday that all of its lenders are cutting off its financing, that it has been found in default of many of its financial agreements, and that it does not have the funds necessary to meet its obligations under current circumstances.”
“The company’s filings said that several of its lenders were now demanding New Century and its subsidiaries repurchase all outstanding mortgage loans, and that its other lenders now all have the right to make that demand. It said if each of the company’s lenders make that demand, the aggregate repayment obligations would be approximately $8.4 billion.”
“‘The company and its subsidiaries do not have sufficient liquidity to satisfy their outstanding repurchase obligations under the company’s existing financing arrangements,’ said the company’s filing.”
“‘We know they didn’t get their $8 billion by holding a bake sale. We knew it would touch other financial institutions; now we’ll see how,’ said Art Hogan, chief market analyst at Jefferies & Co.”
From MarketWatch. ” New Century said it’s been informed by Morgan Stanley of problems with a $265 million financing agreement. ‘The company received a letter from Morgan Stanley notifying the company of certain purported defaults, accelerating certain obligations under the Morgan Stanley Agreement and stating that Morgan Stanley was discontinuing financing,’ New Century said in a filing.”
“The company also disclosed letters on financing agreements with Citigroup, Credit Suisse, Bank of America, Barclays, Goldman Sachs, and IXIS Real Estate Capital.”
“New Century also said it doesn’t expect to file its annual report prior to March 16 and that it could face delisting procedures under New York Stock Exchange rules, which allow an extension of up to six months for filing its financial report.”
“‘We think bankruptcy is likely,’ UBS said in a note to clients Monday. ‘If New Century gets temporary relief through a capital infusion, we believe it is only likely to delay, rather than solve its liquidity issues.’”
“Countrywide, one of the nation’s largest mortgage lenders, said Monday that the volume of subprime loans it made in February fell as the company tightens lending standards in response to rising defaults.”
“It said subprime loan fundings in February fell to $2.6 billion from $2.8 billion a year ago.”
From Reuters. “Countrywide said it has low exposure to nonprime mortgages, but may still experience fluctuating earnings in the near term due to turmoil in the U.S. subprime market.”
“Countrywide on Friday told its brokers to stop offering borrowers the option of taking out a mortgage without a down payment, according to a document obtained by Reuters.”
“Countrywide said tighter lending policies lowered the percentage of nonprime loans it originated in February. ‘In response to market factors, management has implemented changes to our origination policies to mitigate future exposure including further tightening of underwriting guideline,’ the company said in a statement.”
From theStreet.com. “‘The nonprime lending industry is currently experiencing significant volatility and instability,’ says David Sambol, Countrywide’s president and COO. ‘As a result, many nonprime competitors have recently exited the market and other lenders have suggested their continued viability is in question.’”
“‘As a result of investor concerns about nonprime loan performance, yield requirements have increased and secondary market liquidity has been reduced,’ Sambol says. ‘These factors will adversely impact residual valuations and gains on sale of nonprime loans until market conditions improve.’”
“Countrywide’s monthly purchase volume fell 7% to $13 billion in February. New home equity loans fell 13% to $3 billion.”
The Orange County Register. “Is it too late for the federal government to fix the subprime problem? The crisis leads some experts to wonder why the government didn’t act sooner.”
“‘That horse has left the barn,’ said Jim Svinth, chief economist in the Irvine office of LendingTree. The Federal Reserve should have acted three years ago, he said.”
“Indeed, last year, lenders issued about $600 billion in subprime loans, and many of those are going sour amid flat or falling home prices. At this point, Svinth said, it’s doubtful new regulation is needed, although a discussion on the need for tighter loan underwriting is welcome.”
“‘I think the market is relatively self-regulating,’ he said. ‘You can see it right now. The subprime market is punishing itself.’”
“Freddie Mac, the No. 2 buyer of mortgages and a government-chartered company, said it would stop buying subprime loans fixed for just two or three years.”
“Scott Simon, who heads the mortgage unit of Newport Beach’s Pimco, said the move by Freddie has had little effect on the market for mortgage securities. Simon’s also a believer that regulation would be superfluous: ‘Most of the things people are talking about the market is already doing itself.’”
From Bloomberg. “More than a year after he stepped down as chairman of the Federal Reserve, Alan Greenspan is very much with us, handicapping recession risks (a one-third probability) for anyone willing to cough up a reported $150,000.”
“No one seems to have appreciated the irony in his recent comments that ‘imbalances’ can build up after six years of expansion. The numero uno imbalance, a housing bubble that is rapidly deflating, went unmentioned by the maestro, which is interesting since his easy money policies were primarily to blame.”
“Hold on to your assets. The deepest housing decline in 16 years is about to get worse.”
“As many as 1.5 million more Americans may lose their homes, another 100,000 people in housing-related industries could be fired, and an estimated 100 additional subprime mortgage companies that lend money to people with bad or limited credit may go under, according to realtors, economists, analysts and a Federal Reserve governor.”
“The spring buying season, when more than half of all U.S. home sales are made, has been so disappointing that the National Association of Home Builders in Washington now expects purchases to fall for the sixth consecutive quarter after it predicted a gain just last month.”
“‘The correction will last another year,’ said economist Mark Zandi.”
“Doug Duncan, chief economist of the Washington-based Mortgage Bankers Association, predicted in January that more than 100 home lenders may fail this year.”
“The subprime crisis ‘has taken the fuel out of the real estate market,’ said Edward Leamer, director of the UCLA Anderson Forecast. ‘The market needs new money in order to appreciate, and all of that money is gone for a very long time. The regulators are not going to allow it to happen again.’”
“Housing and related industries, which account for about 23 percent of the U.S. economy, fired about 100,000 workers last year. The total will be higher this year, according to Amal Bendimerad of Harvard University.”
“‘There has been an increase in unscrupulous individuals in the market,’ said Arthur Prieston, chairman of a San Francisco-based company that investigates mortgage fraud. ‘There’s an unfair assumption of a connection between subprime failure and fraud. But there is a connection between early default and fraud.’”
“Some of that fraud involved speculators. They drove up prices during the boom by ordering new homes with the intent of selling them immediately after taking possession. That ‘flipping’ inflated demand and put the speculators in competition with the homebuilders, propelling the median U.S. home price to $276,000 last June from $177,000 in February 2001.”
“‘A lot of the housing bubble was speculation,’ said Mike Inselmann of the research firm Metrostudy.”
NEW is smoked.
The new rumor is LEND. Keep your eyes on this company…
Reading the WSJ article this morning. The excess sounds just like Enron…
Despite disappointment over the share price, former New Century employees say the company was a fun and rewarding place to work. One former executive says the company made a priority of promoting from within. A former secretary to Mr. Cole took charge of investor relations.
Partying and heavy drinking were common on company outings, former employees say. David Pace, a former New Century account executive who dealt with loans in southeast Michigan, says the theme of one cruise in the Bahamas was “The Best Damn Mortgage Company. Period.”
The company also sent top-producing employees to a Porsche-driving school, says James Fuller, a former project manager in New Century’s information-technology department. “It was a culture of excess,” says Mr. Fuller, who left in 2005.
Racing is a passion for one former top executive, Patrick J. Flanagan. While he was at New Century, a division under his control sponsored a Nascar race car. In late 2005, the company granted Mr. Flanagan a six-month leave of absence with pay of $76,445 a month (he had made nearly $4 million the year before), while he looked for new horizons. He then left the company and says he has spent part of his time competing in car races. He declined to comment on New Century.
Company executives made a splash with charitable giving. Mr. Flanagan last year pledged $500,000 to a private school attended by four of his children in Aliso Viejo, Calif. Co-founder Mr. Gotschall and his wife, Susan, gave $3 million to a hospital in Mission Viejo, Calif. In the 2006 election cycle, New Century’s political action committee contributed $202,634 to political campaigns, according to the Center for Responsive Politics.
Since when does donating to political campaigns qualify as “charitable giving”?
I would not be so calm if i were these guys. some ambitious attorneys in the goverment, eyeing for higher political offices in the same vein as Elliot Spitzer, are surely snooping around for frauds and indictments. and the people will cheer for it. these guys will be made to pay back ill-gotten gains. there is no questions that frauds were perpetrated by these guys during the last few years.
i was in florida two weeks ago and i could sense that the people is ready for a public lynching. who would be better than these guys.
Oh I could think of a few people better to lynch. Let’s say, the guys behind the Fed?
This guy:
http://www.quiggleme.com/
lays out the skinny on the company. According to his story, there was most likely some quid-pro-quo going on wrt that secretary’s advancement.
Hey, I want to get paid while searching for “new horizons”. How do I get that gig??
The company also sent top-producing employees to a Porsche-driving school…“It was a culture of excess,’’ says Mr. Fuller, who left in 2005.
Nah, it was just a New Paradigm Enterprise!
Mr. Fuller = party poop.
i wish i was a subprime mortgage broker
i’d have a paid off house, paid off car and plenty of cash in the bank to go back to school for an MBA and wait for the next bubble to make money on
The downside is, you lose your soul and suffer eternal damnation. When I see what these scuzzbags have done and how they’ve profited, I wish I believed in hell.
You think that, but I doubt it. That kind of easy money is corrupting.
Here is this guys profile…40 yrs old. Wow the $$ these execs were making was insane.
http://tinyurl.com/2m4u2s
Yep, shades of Enron all over again.
Enron again. Exactly what I thought when I read the article. Except this time, there are lots of Enrons…
I got my first of several ‘inside’ looks at the subprime mortgage industry. Complete with photos of rate sheets, flyers, and other marketing material.
You want to see New Century rate sheets? …on there now.
Stay tuned…
SoCalMtgGuy
http://www.housingbubblecasualty.com
Anyone still think this industry doesn’t need more regulation?
LMAO!!!!!!!!!!!
It ain’t bad… What’s a little 20% drop in the share price between friends?
http://www.marketwatch.com/quotes/lend
`Unscrupulous Individuals’
No way……… in RE?
Can one of the brokers here explain this to me? A FL lender only offers YSPs (broker kickbacks) on it’s most toxic of loans. The only reason that I can come up with is massive fraud. Why push the most toxic loans during an implosion of this type of lending? Is there some other explanation? Do most lenders pay large YSPs on the toxic paper?
Loan Type *** YSP ***
Non-owner occupied, over 70% LTV *** 1.00 ***
Non-owner occupied, under 70% LTV *** 0.50 ***
NINA *** 0.75 ***
No Ratio *** 0.50 ***
The YSP could be a negative (buy down price from the borrower).
You answered your own question . . .YSPs are broker kickbacks that are easy to camouflage on the HUD form. I found out what they were when I was researching “mortgage accelerator” loan products from one of the pioneer firms. For some reason they have most of their broker section open to the public, and they were touting how great their “YSP”s were.
1.) under 70% non-owner occ is not a toxic loan. Those “YSP’s” you are showing are not brutal actually they are tame and inline. You’re chasing shadows there.
I realize that, I left that in so you could see that they are offering an extra $2500 kickback to the broker to put them in a higher LTV. Not the type of incentive you would expect right now. My question is, are other lenders also pushing the NINA and high LTV stuff too?
I still think what you are seeing are fees charged to the broker for these loans. YSP is paid on interest rate.
Fifth Third Bank rate sheets (click on your state) rates open as pdf
http://tinyurl.com/gbgtj
Hoz-
You’re probably right now that I look at that again. It’s really hard to tell without seeing the entire sheet. But my money is on you.
Toxie loans….. Big money is paid by the all of the lenders. That is why [most not all] mortgage brokers go for the big “gust all” blast in the higher commissions/fees these loans have and due a loan with a “pre-payment clasue” a lender received even higher commissions/bonus for that being “added” to the loans. The money was just to easy and tempting, enticeing for most lenders/brokers to resist.
Did you guys see the OC article 1 in 5 mortgages are sub prime?
Good luck keeping that sinking ship floating. Lending job losses and sub prime resets…
I wonder what the percentage is here in Florida?
No need to worry about Florida per this:
“South Florida,” he said, ”is working off of a totally new economic model than any of us have ever experienced in the past” according to a realtor who predicted that a land shortage will support higher prices indefinitely.”
- New York Times, Trading Places: Real Estate Instead of Dot-Coms, 3/25/05
I live in what is considered a large community here in Florida and it seems that all of my neighbors are either realtors, loan officers or in some other way related to real estate. This is going to be ugly before it is over.
OC Register subprime chart
There are some shocking numbers in that table of subprime market share; e.g.
San Diego = 18%
St. Louis = 20%
Have you heard the one about the realtor who sold a house? Neither have I…
bwhaha…
Crispy -
We need to give credit where credit is due.
It’s Ron Shuffield’s line:
“Ron Shuffield, president of Esslinger-Wooten-Maxwell Realtors says that ‘South Florida is working off of a totally new economic model than any of us have ever experienced in the past.’ He predicts that a limited supply of land coupled with demand from baby boomers and foreigners will prolong the boom indefinitely.”
New York Times, Trading Places: Real Estate Instead of Dot-Coms, 3/25/05
Plus this from the same NYT article:
“I just don’t think we have what it takes to prick the bubble,” said Diane C. Swonk, chief economist at Mesirow Financial in Chicago, who was an optimist during the 90’s. “I don’t think prices are going to fall, and I don’t think they’re even going to be flat.”
This joker is still in business. Anybody care to drop him a line and as him about this new paradigm?
Ron Shuffield
shuffield@ewm.com
correction… “ask”
Mo -
While you’re at it, how about checking in with Diane Swonk as well?
*******
“I just don’t think we have what it takes to prick the bubble… I don’t think prices are going to fall, and I don’t think they’re even going to be flat. ”
Diane C. Swonk, chief economist at Mesirow Financial in Chicago
New York Times, “Trading Places: Real Estate Instead of Dot-Coms”, 3/25/05
My guess is the subprime loans number in the 50% range as many foreign investors got on board by going through the subprime market. No doc, no verification, no citizenship.
Subprime was always living on borrowed time, a dead man walking. Foreclosure baked in the cake and the timer just dinged. Add your own favorite cliche.
I think the real surprise is going to be the number of ARM-I/O, including all the ARM equity extraction. People who were otherwise prime, but they bought more house or HELOC’d themselves with an ARM-I/O which will explode in 3 years. Even the fixed-rate folks are susceptible to job loss.
Watching former symbiotic relationships turn ugly, is fun to watch…
From a distance.
“‘A lot of the housing bubble was speculation,’ said Mike Inselmann of the research firm Metrostudy.”
A lot? How about MOST.
The housing bust is mostly speculation as well - how bad will it get? Nobody knows for sure.
Uh, actually we do know how bad it will get…BAD! Housing bust is speculation? Tell that to bagholders at: NEW, NFI, LEND, shall I keep going?
“The housing bust is mostly speculation as well - how bad will it get? Nobody knows for sure”
Wrong! - We have a pretty good idea based on a concept called history repeating itself. Everyone somehow seems to overlook this one…
Both your comments sound like speculation to me. I’m definitely bearish on housing and am waiting out the correction. Like I said, nobody knows how long this take to play out or how deep the correction wil be in any given area. Anyone that claims to know this is a fool or a liar, not much different than DL.
I think the big problem won’t be for the current subprime, Alt-A, etc. mortgage holders but it will be for the housing market going forward from this point. I think (almost) everyone will agree that mortgage credit is going to dry up. Absent some new wonderous government program, subprime borrowers are basically out of the mortgage business for the forseeable future. And it will be harder (and more expensive) for everyone else to get loans going up the food chain. Tighter credit means slower housing market which means more lenders get in trouble which means tighter credit and so on and so on. The virtuous cycle turns into a vicious cycle. I don’t think that scenario is mere speculation since it has been played out historically time and time again.
Yep, and how many people do you know who have been tapping into their home equity not simply to buy cars or make home improvements, but to pay their day-to-day bills? I know a LOT of people like this.
As you get older, the amount of debt you carry should decrease and your assets should increase. Unfortunately, most people that I know have had increasing debt loads for the past few years and they have no hope of ever paying it down now. Their only alternative (other than defaulting) was to add to their debt by using the only real asset they had - their home equity. The escape hatch was always sell the house and pay off the mortgages. That hatch has now been sealed from the outside.
My best friend just did a refi with Countrywide because he heard they were honest. They “forgot” to disclose a few things and they now have a 5 yr hard prepayment penalty and now they are pissed. They did the refi so his girlfriend could go to England for 2 weeks.
Another close friend did a refi INTO an ARM so he could pull out money pay off his CC debt since he’d been living off them to be able to afford the house he bought in 2003. Saw him last week and he had new teeth (12k worth of cosmetic dentistry) and had taken his new girlfriend to Hawaii. It was all back on the cards.
I hate watching this happen to people care about but they can’t say I didn’t try to warn them. They all told me I was nuts.
gwyn -
I don’t know your friends, but I would be willing to bet these are not uneducated rubes you’re are talking about here. But probably some people with decent incomes and generally thought to be intelligent. Right?
There are going to be more and more disasters told just like these, right here in the land of milk and honey and the home of “all is well” in our real estate market.
Wow, gwyn, that “…5 year hard prepayment penalty…” has the potential to cause some “discomfort”.
Please, please, don’t tell us they left without reading the papers they signed. These are uneducated people, right? They’re part of the I don’t understand English folks, right?
I bet they’ll think about it every day.
In both cases, people with advanced degrees and both ex-boyfriends. They always thought I was nuts for buying a $100 pair of pants and then they do this. Men!
You are nuts. My jeans are $24.95.
“‘A lot of the housing bubble was speculation,’
Ya think?
In other news, water is still wet.
lmao 85249-cmon im at work
The correction will last another year,’ said economist Mark Zandi.”
Hey, Mark, what were predicting last March 12, 2006 about the year ahead in housing. Yep, Mark missed that call, and now he is predicting 12 months out for the correction to end. Hang up your degree, Mark, and join Ben’s Blog and learn your craft. You are an educated, degreed, FOOL.
Updates are now online. Wisconsin market is falling to pieces. . .
http://madisonhousingbubble.blogspot.com/
“She was shocked, she said, to get a wave of new foreclosure cases this year from borrowers whose loan payments had not gone up”
Shock, I tell you, shocked! Well, looks like we don’t have to wait for the wave of resets to make the carnage happen.
I don’t know why, but I’m having fits of laughter reading a lot of this stuff today.
We finally had some nice weather so I took the car for an afternoon spin around Jefferson & Waukesha counties yesterday. The number of for sale signs is staggering. Is it just me or is 1/2 of Lac La Belle (occonomowoc) for sale? I asked a rep from Woodbury homes and she said they (Lac La Belle) reval’d the prop tax in that area and that’s part of the reason for the massive increase.
Wisconsin FBer’s ARE definitely in some serious trouble too. Suzanne and the “It’s different here” gang really got around.
I want to follow the Fate of those existing Mt. Horeb McMansions as well as the ones still being completed. The Milwaukee and Madison area condos are IN for a definite WACKING.
Exactly Mikey - I personally know of one builder who is sitting on like 8 specs in that area. Unbelievable!!!
“Mt. Horeb McMansions”
You mean to say them trolls are in on this too?
I grew up in Wisconsin. I didn’t participate in the bubble here in California because I was too conservative to commit financial suicide. I always thought it was my Mid-Western upbringing and conservative, rural roots that served me. It really distresses me to read that Wisconsin participated in this bubble as well. Very sad.
Everywhere got caught up in the bubble. Because it lasted too long. If they’d stoppped the madness before ‘03/ ‘04, it would not have reached every nook and cranny.
But they didn’t . So it did. The sticks of Maine, the dilapidated cores of old abandoned NE cities, small dumpy towns 2 and 3 hours away from jobs in WA., everywhere.
Have we ever heard from anybody who lives in North Dakota here? That’s the only place in the US that I could believe possibly did not get bubble struck. But then again, if a ND local told me it *did* get bubble struck, I’d believe them.
WI. actually got caught up in the bubble pretty early on. I know because I know people who sold property there a few years back- at an insane price- outside Milwaukee.
That’s why it’s dangerous to buy anywhere in the US right now. Unless of course you can stand to lose some money, in which case buy RE to your hearts content.
So, North Dakota, are you out there? I want a report!
Can’t report directly, but I have a lot of friends and family members in North Dakota and Minnesota. As a generalization I’d say most of the folks up there are good people - better than most in the US - but astonishingly naive and uninformed. Perfect marks for RE sharpies, in other words. So I’m not surprised to see bubbles in those places. North Dakota, by the way, is experiencing a net loss of population, especially among young people.
‘The market needs new money in order to appreciate, and all of that money is gone for a very long time. The regulators are not going to allow it to happen again.’”
I read this and wondered if this is the prediction for massive drops in price. If regulators won’t allow this crap anymore, if downpayments and cash reserves and documented income, etc. will once more become the norm, then prices will need to be in line with income in order to truly “afford” a house. And we know what that means….
Have been waiting for a long time for this insanity to end. Can someone predict when this “tightening” finally gets reflected in listing (wishing) prices. Here in Valencia, CA, decent houses still list for $700K or more. That’s for ~2,000 sq ft with no yard.
Fall of ‘07. By then enough of these listings will swamp the ranks of the REOs to the point that their owners will have a good understanding of the winter ‘07 swamping they will get of even more REOs.
We’ve got a LONG way to go here in LA, I listen to these bubble popping stories around the country and it still feels like we’re in another universe over here.
People in LA and the OC still think it is 05′ by the prices listed on realtor.com. Unbelievable it will take a huge number of bankruptcy for California to finally see declines. No more funny money loans to be approved, a good start is New Century going under.
Amen to that. I’m curious if anyone has tried super lowball offers lately. The wife and I are looking to buy as soon as sanity returns and I have been thinking of tossing out some 400K offers on 600K wishing prices for condos on the West side.
R.E.O.’s will set the prices in L.A. and surrounding. Not enough on the market yet. Agents who deal with SFR’s out here collectively don’t have the balls to tell a seller their house is worth 5% less then it was last year.
To CVG:
I wish someone out here had the nerve to start pusing out real low ball offers on the retail stuff that would be interesting.
R.E.O.’s will set the prices in L.A. and surrounding. Not enough on the market yet. Agents who deal with SFR’s out here collectively don’t have the balls to tell a seller their house is worth 5% less then it was last year.
To CVG:
I wish someone out here had the nerve to start pushing out real low ball offers on the retail stuff that would be interesting.
I tried lowballing around Ventura, and e-mailed interest at lowball terms to some LA brokers. The responses I got were very huffy, with all the usual “we won’t even bother to counter such a low insulting price” blah blah.
Perfect! And when they come crawling back to you in 3 months knock another 10% off and follow THAT offer up with, “That’s for being stupid.”
I dunno lainvestorgirl ran into a broker buddy this evening, He says he’s trying to slam what little he’s getting irregardless. Says it real slow out there. I couldn’t imagine any broker turning anything down.
“And we know what that means…”
It means you have to be patient. It will take at least a few years to find out how this affects a given area. One thing is for sure, last year was a bad time to become a first time buyer or flipper.
They said regulators would never allow it to happen again after the S&L disaster. Regulators get ignored and politicians become complicit when there is easy money to be made.
The regulators have little to nothing to do with this credit contraction. It was investor’s rapidly decreasing appetite for MBSs and borrowers inability to repay their loans. On the way up, the shills are whining about regulations and figuring out how to get around them. On the way down, all the losers are screaming “Why didn’t you protect me?”
I have been thinking along these lines for a year and a half now.I believe RE agents out of fear of the seller and getting that listing are still favoring higher prices. They do not want to deal with adversity. Most to these agents are unskilled in their profession and do not know how to handle sales when they are not dropped in their lap. Bottom line both the seller and the agent will have to fight for that qualfied buyer and they will be few to close the deal. OUCH!!!!!!
Wait, first you say that they have to FIND buyers. Then you say that they have to figure out whether those buyer might qualify for a loan? Are you implying that they’re going to have work for their commisions?
Yes Lisa, that’s exactly what that means. Which is why it’s stupid to buy now. Without the funny money, these prices have a long way to fall.
If there’s a part of the US where median is still 2 or 3 X income, that’s the “safe” place to buy. Theoretically at least. Is there a place llike that left?
Realtwhores in my neighborhood are in a double panic…First they are not making money like they used to, one of them told me six months ago that his colleagues were having trouble driving clients around because of high gas prices.
Second they being greedy realtwhores they are they bought an extra home or two and the HELOC money is rapidly running out
That’s going to get worse, as gas prices are predicted to spike yet again this summer. Heck they’re already going up every day this month.
if your budget is blown by $3 gas you have bigger problems imo
will the savers ever be rewarded?
Realtywhores are just going to have to carpool their victims, I mean clients to show their venus flytraps, I mean houses.
Yep, and friends of mine have noticed that the Realtors don’t seem very happy about needing to show multiple houses before getting a sale, either. They’re much slower to return calls, and grumble about long show trips. They’re also apparently very unhappy about being forced to present lowball offers, and some are just letting their contracts expire without any attempt to renew them.
I guess it’s terrible to need to work for a living, eh?
Showing multiple houses is soooo 2002.
My yoga teacher at the gym is looking for a new house in the Seattle area. She and her husband are very picky about what they want. She told me that in the past few weeks that she has looked at 110 homes. Last weekend she was driving around with her realtor and her five month old son threw up in the realtor’s car. He’s really going to earn his 3% with her …
Grant, that’s beautiful. I have cleaned enough of my own kid’s vomit in my time, you get used to it. But someone else’s kid’s vomit? Wow, that’s what I call working for your money.
Wouldn’t it just be rotten for her and her son to ride around with many different realtors?
Lights! camera! Spew!
Yep, our realtor is certainly getting slower and slower, asks us to drive, and does the bare minimum of research. We were interested in potentially low-balling a house this weekend, and our realtor didn’t even bother to tell us that a virtually identical house RIGHT NEXT DOOR (but completely renovated) sold last August for 10% less than asking price on the house we were looking at. Are we paying this guy 3% for lockbox access? Seems to me that we could hire a high school dropout for $10/hour to provide the same service.
Yep, our realtor is certainly getting slower and slower, asks us to drive, and does the bare minimum of research. We were interested in potentially low-balling a house this weekend, and our realtor didn’t even bother to tell us that a virtually identical house RIGHT NEXT DOOR (but completely renovated) sold last August for 10% less than asking price on the house we were looking at. Are we paying this guy 3% for lockbox access? Seems to me that we could hire a high school dropout for $10/hour to provide the same service.
Lordy, you need to drop that realtor immediately. She’s leaving out very pertinent information.
Kick that one to the curb and do your own research ( on ziprealty/tax records /zillow/etc. whatever ) for a few months before jumping back in.
Sounds like somebody needs to be better informed on what’s happening in the market! The information is all there on the internet.
What part of Florida?
Volusia County
“Embattled mortgage lender New Century Financial Corp. announced early Monday that all of its lenders are cutting off its financing, that it has been found in default of many of its financial agreements, and that it does not have the funds necessary to meet its obligations under current circumstances.”
That’s impossible, why an analyst at Bear Stearns just issued an upbeat report on March 1st! Don’t you know anything?
See if you can read this without laughing:
http://www.kunstler.com/mags_diary20.html
Regarding the upbeat analyst report issued on March 1st: It’s amusing that Bear Sterns’ initials are B.S.
He needed to unload some shares before the crash and gave the stock one last pump.
“‘The correction will last another year,’ said economist Mark Zandi.”
OTAY! But tell us, Brothah, how long will the CRASH last?
I found that statement interesting too. Notice he implied it would end after another year, but never actually said it. He might as well say it will end tomorrow as tomorrow never comes.
“The company also disclosed letters on financing agreements with Citigroup, Credit Suisse, Bank of America, Barclays, Goldman Sachs, and IXIS Real Estate Capital.”
Citigroup again. Latin American loans, Enron, telecom, you name it. if 1994 is any guide, it will probably be a nice buy for another of King Saud’s kids
It must be a tough job for the blogger sorting through all the zillion stories for this post. Unbelievable.
“The spring buying season, when more than half of all U.S. home sales are made, has been so disappointing that the National Association of Home Builders in Washington now expects purchases to fall for the sixth consecutive quarter after it predicted a gain just last month.”
That’s the first admission of this I have heard. And spring doesn’t start for another two weeks.
I can imagine a cascade of lost sales. A sale of an entry level house falls through because New Century, of whoever goes first, can’t deliver a mortgage. The seller than has to back out of the purchase of a move-up house. And the seller of that house can no longer downsize to a condo downtown. And some of those taking out a bridge loan expecting to sell go under, putting both housing units back on the market. Plankton indeed.
“I can imagine a cascade of lost sales.”
Indeed. It’s why the subprime mess won’t be confined to subprime. Without first time buyers, the whole chain “above” freezes up. No one trades up, trades over or trades down without new buyers in the market.
And not just the elimination of subprime…but the return to requiring downpayments and income documentation…the pool of first timers will shrink even more.
LOL. What with all the subprime excitement, I’d forgotten about all those bridge loans taken out last year. Thanks for the reminder.
“‘The correction will last another year,’ said economist Mark Zandi.”
********
Ah… right.
The continued optimism, especially from people who should know better, is starting to get annoying.
Yes,…but if you cross your fingers and toes…
Even the San Francisco Chronicle runs a piece on how it is better to be renting now.
“It appears that we may be in that perilous kind of housing market right now…”
From:
“Rent or buy — timing is everything”
Arthur M. Louis - San Francisco Chronicle - Sunday, March 11, 2007
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/03/11/BUG08OI8UT1.DTL
“If you have to sell the house when it commands a price of only
$750,000, your initial equity of $160,000 will dwindle further, to
around $60,000, after broker commissions and other expenses. No doubt that would make you wish that you had rented instead. It appears that we may be in that perilous kind of housing market right now, which is why I have been warning prospective home buyers lately to consider protecting themselves by making lowball offers.”
Was Mark Zandi from Moody not skeptical of the housing market for quite a while now? Predicting further decreasing prices for 2007 seems actually a good thing to me, to help breaking up the ruthless optimism in real estate. 2008 can take of itself.
Zandi’s earlier views validates “he should know better.”
By saying “the correction will last one more year” he gives the impression that this will be short and quick, relatively.
A potential buyer gets confidence and patience by hearing that the market will improve for buyers for another year, so far so good. You are right, too, however, because a seller might conclude from Mark Zandi’s statement that it would be better to wait another year (if the seller can) than to adjust the wishing price to the current market, extending the housing bust.
Token damage control, a delaying action - like an errant shot from an army in full retreat.
Well a year from now he can get all Clinton-y: “Well that depends on what one means by last” He could argue that he meant that the correction will still be going on in a year’s time.
Another ‘New Economy’ pipe dream blown out of the water. It’s going to get even uglier.
I feel like I’m reading fortune cookie predictions from 2003 for some reason.
“No one seems to have appreciated the irony in his recent comments that ‘imbalances’ can build up after six years of expansion. The numero uno imbalance, a housing bubble that is rapidly deflating, went unmentioned by the maestro, which is interesting since his easy money policies were primarily to blame.”
Listening to the radio on the way in this morning, guy on the program stated the biggest threat to our economy is……..terrorism.
No mention of housing AT ALL. In fact, rates are where they should be, corporations are spending, blah, blah, blech…..
doh dee doh dee doh….
The economic terrorists are members of the REIC, government and Wall St
Ha Ha. I almost laughed when I read ” doh dee doh dee doh”
Reminds me of Bloaty’s Pizza Hog.
Is that the right reference?
Chuck Ponzi
http://www.socalbubble.com
Sorry Ponzi, I’m not up on my Bloaty’s Pizza. I’m just thinking of some apathetic sloth meandering through his day without a clue as to what’s goin’ on.
Saying the economy’s biggest threat is terrorism is like saying “Yer Mama” when you’re getting roasted by friends. It carries no real meaning.
Is there an economy who’s worst threat ISN’T terrorism? How can they be that lazy and not see the real, everyday risks?
Implode-O-Meter was just featured on CNBC as a credible source! Nice to get some f-ing credibility for a change when liars like DL were getting it for so long.
LOL.
Morgan Stanley, Citigroup, Credit Suisse, Bank of America, Barclays, Goldman Sachs, and IXIS Real Estate Capital = subprime kingpins, helping to trick grandma to get into a loan with payments at 2X her fixed income, with a guaranteed foreclosure in the near term. I hope the newly elected Democrat congress is paying close attention.
Like the line in Amos and Andrew, “In an election year?”
” I hope the newly elected Democrat congress is paying close attention.”
I hope they keep their attention on Iraq. Let the market sort out the housing mess.
“another 100,000 people in housing-related industries could be fired”
It’s gonna get ugly. Foreclosures, dropping prices, and so many people’s “new careers” in real estate, over.
Hats off to Ben and all you bloggers for telling us for years what it took Wall Street until today to figure out.
I am going to go out on alimb here and say many on WS knew this sh!t would happen. However, they turned the other way because it allowed clowns like the guy in Ben’s story to make 75K a month while looking for new horizons. What a bunch of BS. If this crash doesn’t wake up the middle class of sheeple in the country than nothing will and we are already past the doomed point as a country. If the middle class doesn’t see what is being done to them then we are already a dead man walking.
Yes, I realize many of these people did it to themselves. However, if we can’t learn from this crash about to happen, then we can’t learn from anything.
I would also like to say, how convenient that the one guy in Ben’s piece walks with 3 mil, but doesn’t want to comment now and that other Piece o’ crap saying the feds should have done something 3 years ago. Yeah, I am sure he was really pushing hard then for fed intervention.
All these guys pi$$ me off and the one poster is right. Many are going to burn for this one in this life and in the after life. I guess when you are cashing 75K checks every month you really don’t look in the mirror too often to do some real soul searching.
Man, we have some serious ro in this country!
Rant over!
Quick report from the Home and Garden Show in DC:
Last year was a mob scene. This year I went at noon on Saturday when it usually should be packed. There was nobody in line to buy tickets. I said to the cashier “looks pretty slow.” She gave me a dirty look and said “but it’s steady.”
No congestion, few strollers. The Garden section, which sells smaller stuff like plants, was busier than the Home section. The show gardens/hardscaping, usually mobbed, were slow. There was a lot of empty space in the exhibit hall — lots of the companies that make small stuff (artists, or candles/fountains and so forth) weren’t there. There were only 3-4 people (including me) gawking at the Viking stuff. The granite countertop people looked slow, but there was a lot of competition for the buyers. I saw at least two half-price sales. Doors and windows people, not much. jacuzzi: no buyers. Bed and furniture, slow. I overheard the person selling furniture saying it was dead on Thursday and Friday, but starting to pick up by ~1:30 pm Saturday. A little more interest in the storage pod and shed section. Sauna/shower companies slow — all interested parties were flocking to Bathfitter, which covers existing tubs. Nobody slamming doors on the washer-dryers. Even the carnival hawker types who sold veggie peelers and such had only small audiences. The mop lady was offering 2-for-1 at ~2:00 because it was a slow day. The one exhibit that was doing well was the Eco guy who sold things like Solatube skylights and tankless water heaters and non-fume paint. Poor guy was relatively swamped.
My anecdotal conclusion: stick a fork in HELOC, it’s done.
” stick a fork in HELOC, it’s done.”
Sing it! Testify!
Okay, kids, let’s have fun at the Home and Garden Shows! The Tucson edition is coming up soon:
http://www.sahbahomeshow.com/
Any fellow Tucsonans want to join me in creating a reality-based report, similar to Oxide’s?
I’m not sure if I’m exaggerating for dramatic effect, but to me it looked comparitively slow compared to last year. DC is a metro area of 4 million people, I was expecting more.
Overall, I would say that the little stuff (especially garden) was selling, the big stuff was not, which makes sense. It DID start to pick up when I left at about 2:30, but I was expecting more of a mob scene. I only saw two loan companies btw, and they were pretty quiet. I was pretty happy to see that the fine homebuilder and the architect were getting steady interest. There is still some money out there, and they don’t want to spend it on a McMansion.
I mourn the lost business of the little guys like the artists.
The spring show in Tucson will be bad enough. The one in October will be dead.
I think I’ll increase the size of my garden to an acre this year.
Yeah, like anone with half a brain, NOW, is going to lend some joker 75K against his house to finance the CCs, a jacuzzi, pool, Escalade, hummer, and vacations, as well as granite countertops.
You are right, HELOCs are a thing of the past, at least for another 25 years, until the next RE bear cycle.
She gave me a dirty look and said “but it’s steady.”
dag…and I thought the customer “service” in Philly was hardcore.
Jim Svinth (of LendingTree), where were you three years ago? I don’t recall hearing from you (or LendingTree) three years ago of problems in the mortage business. Did you do anything to stop irresponsible lending, or did you take financial advantage of it?
I think we know the answer.
“‘We know they didn’t get their $8 billion by holding a bake sale. We knew it would touch other financial institutions; now we’ll see how,’ said Art Hogan, chief market analyst at Jefferies & Co.”
And, the saga continues….
Here it is again for little Artie Hogan and all the othe deaf-mutes in corporate America who just “knew” what was going to happen;
“All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.”
Arthur Schopenhauer
(1788 - 1860)
Schopenhauer rules. His worldview is quite dismal, yet realistic. When I started explaining his philosophy to my wife, it was one of those “oh gawd” sighs.
“Doug Duncan, chief economist of the Washington-based Mortgage Bankers Association, predicted in January that more than 100 home lenders may fail this year.”
Is he still renting a home? Don’t buy until Doug Duncan buys…
Let’s call it the “Duncan Index”.
For example, in the DC area, one might say sometime in 2012:
“I’m Duncan +0.5 at least, since there are still empty places in the neighborhood I want.”
Isn’t this the guy who is in David Lereah’s old gig? I don’t think he’s going to be sent up to the majors for a replacement throwing this kind of pitch.
Is Countrywide really as “clean” as they say they are? I have a relative who works for them who handles mortgages/loans for a “lot of Russians” in the Sacramento area. The way she said it seemed a little fishy. I didn’t want to pry too much, but I kept wondering if she was just turning a blind eye to some type of fraud. BTW, this is a young female about two years out of state college who made $170,000 in 2005 and bought a 3,800 sq ft. house in Sacto area at the end of 2005. No idea what kind of loan, but how much equity can you have built up two years out of college?
Didn’t you read their press release? They’ve “cut subprime lending” from $2.8 bn to $2.6 bn. See? They’re plenty responsible.
Yeah, Countrywide’s “cut” in subprime lending (a whopping 8%) ought to keep the bank nice and safe. $2.6 Billion. Unbelievable.
Whoah. Rumor mill says Countrywide just closed a division and laid off a bunch of folks. You know what that means…
Stock prices soar!
(Actually, think first cracks in the wall)
Hmmm. You may find her house listed here:
Countrywide Foreclosures
Countrywide is the nation’s largest lender and if they start tumbling - I’d bet the whole market goes.
Gotta love that Cali has the second most homes on the list is tops in total price column. I think I’ll take 2 of those homes for $100K, Alex.
Hmmm. You may find her house listed here:
http://countrywide-foreclosures.blogspot.com/
Countrywide is the nation’s largest lender and if they start tumbling - I’d bet the whole market goes.
The interesting thing about the narrowing field is this: the more lenders go bust, the more credit lines and financing are available for the remaining lenders. Caveat: unless the main warehouse lenders decide the risks are too high. If that decision is made, and the credit lines are cut, all of the subprime lenders will fail immediately and the housing market will take a gigantic hit because financing will cease for a time while the biggest lenders regroup. Stay tuned…
Went by one of the houses the other day…it has a Countrywide Realty sign out front. Never saw one of those before.
Sorry about the double post. I thought it didn’t go through the first time because I used the href tag. It didn’t post right away for some reason.
I got a bunch of CFC and WM Jan 08’s!
hey cool aid man!
if russians were invloved im sure all those deals are full doc and on the up and up.. notTTTTTTTTTTTTTTTTTTTTT
will she make 170k or better this year? i doubt it
I have something to add on Russian mentaility:
Used to work with a Russian programmer in the Bay Area, he had a steady job with a big company. Didn’t make enough to really “afford” a place. But, using creative products probably could’ve made it work. He was on the brink of buying when I left town, this was back in ‘04. I was already a bubble head and rented. We had numerous discussions; me: gonna crash whole financial system whacked, him: but in Russia the only people left with any worth when the economy collapsed were people who owned their homes, ie inflation. He didn’t see housing crashing unless it was accompanied by deval of USD.
I don’t know enough Russian history to put his experience in context ( he did live in a rural area where a higher % of people ended up owning their homes after perestroika).
So, anyways, an interesting anecdote? could be something which plays into Russians stretching to “own”.
In Soviet Russia, you own home. In America, home owns you.
In the USSR since ‘the state’ generally owned property, it was eventually
donated to the residents. (since it makes no money).
If you can buy a home for cash then it might make sense, but today people are buying loans, not houses.
“lot of Russians”
Just a thought — Check any Sacramento-area Realtors, appraisers, mortgage brokers, etc. who die untimely deaths for polonium-210.
Is countrywide clean? Heh. The execs sold about $600M of insider stock in the last few months. What do they know?
After reading the articles in this post, is there now ANY doubt, in ANYBODY’S mind, that the housing market for 2007, and for the foreseeable future, is absolute toast?
“After reading the articles in this post”
That’s the problem…most people are blissfully ignorant about what is going on (eg the sub-prime mess), or know a bit of what is going on but don’t connect the dots to *their* housing market (”we don’t care about sub-prime, we are the next Santa Barbara”).
Right now, everyone is in the “whew, glad that’s over” mindset.
All while inventory continues to creep up.
Don’t worry — news will continue to trickle down from this blog to the MSM for the foreseeable future, until the point when Main Street America fully “gets it.”
Doesn’t it seem though, as if things have taken a sharp turn for the worse in only the past few weeks? The numbers we’re reading now seem so much worse than those from just last fall. And since NEW went the MSM coverage seems to be increasingly exponentially - at the worst possible time for RE too. Every week seems to bring a new development now.
I totally agree. Last week was the beginning to the housing bubble equivalent of the tech stock crash.
As a side note - the ironic thing about the tech crash - it was triggered by Microsoft - the anti-trust ruling on Apr 3, 2000. However Microsoft itself only lost about 50% of its share price, compared with 80-100% for the bulk of other tech companies. So sometimes the triggering company (or companies) aren’t the worst to fare.
This time of course that doesn’t seem to be the case - being that most or all of the subprime companies are pretty much toast already.
However I’m thinking that this might not end up being the *real* trigger, since it’s still small potatoes compared with the housing industry as a whole. The real trigger may be a large homebuilder or say Countrywide or Washington Mutual making some bad announcement, e.g. something that makes them look like they may go under.
The tech crash wasn’t triggered by MSFT. It was triggered by the complete collapse of sales following the runup in sales for y2k. Seems that they were selling extra, since everyone had to upgrade to get around the y2k bugs anyway.
The MSFT anti-trust sell off was quite modest. Comp manufacturers reporting a cratering of sales was far more severe.
GS-
You think, I’m not quite seeing that, even from the people in the industry. There seems like there is a collective chant that’s it’s not going to happen here or too me. I just recently sent a guy 10 different articles showing him that subprime was belly-up and that prices in about 6 mo’s to a year will be dramatically different and he still wants to flip houses just sent me a fax this morning of something he wants to buy. I don’t get it.
Doesn’t it seem though, as if things have taken a sharp turn for the worse in only the past few weeks?
Edgewater, I agree. I think it’s because the spring bounce has not materialized. Faced with that, even true believers have to change the spin.
“Doesn’t it seem though, as if things have taken a sharp turn for the worse in only the past few weeks?”
Yes, it does a sharp and ugly turn. enough it would seem to give folks at least some pause. I’m not seeing that at all.
It’s not so much the inevitability of a crash which bothers. It’s the combination of market stickiness, the corrupting influence of the perma-bulls, and the general thick-headedness of the consumer which places the real questions of “when” and “how long” into play.
“when” and “how long” are always the tough questions. If we knew “when” and “how long” we’d all be rich….
WaMu’s problems go beyond the mortgage market:
http://blog-omotives.blogspot.com/2007/03/wamu-i-see-frustration-and-stupid.html
And the hits just keep on comin’.
Whew, I’m out of breath from just sitting here reading this stuff.
At least someone (Bloomberg) is starting to acknowledge Greenspan’s part in this. Surely a guy as smart as him would have seen where years of floor-level fed funds rates would leave us. Unlike the dot-com bust, this bust will have been enabled by Fed–the very organization that is charged with averting such scenarios…
“Surely a guy as smart as him would have seen where years of floor-level fed funds rates would leave us.”
Sometimes I’m not so sure how smart he really was, or if it was all just PR and image, like Henry Kissinger. Maybe he was senile or at the first stages of dementia. Or maybe he was just downright evil.
With friends like these…
Well like the oracles at Delphi, he managed to be vague enough in his predictions that events could be matched to them retroactively.
like Rubin they ride out of town just before the sht hits the fan
AP
Group Calls for Foreclosure Help
Monday March 12, 12:22 pm ET
By Alan Zibel, AP Business Writer
Liberal Think Tank Calls for Aid to Low-Income Homeowners Amid Fears of Foreclosure Boom
WASHINGTON (AP) — With concern building over troubles in the mortgage industry, a liberal think tank on Monday said the federal government should take new steps to protect low-income homeowners at risk of foreclosing.
The Center for American Progress said the government should consider grants to expand mortgage aid and foreclosure prevention programs for families falling behind on their monthly payments. Up to 2.2 million families around the country could lose their homes to foreclosure in the coming years, according to a 2006 report by the Durham, N.C-based Center for Responsible Lending.
“Congress can’t wait for that many families to foreclose,” said Almas Sayeed, who wrote the report for the Center for American Progress. “The economic impacts for communities and for the country could be devastating.”
Last year, more than 1.2 million foreclosure filings were reported, up 42 percent from 2005, according to RealtyTrac, which publishes a database of foreclosure properties.
The Center for American Progress’ report said low-income and middle-class homeowners have been hurt by the growth of adjustable rate mortgages with low introductory “teaser” rates that expire within two or three years.
During the housing boom that ended in the second half of 2005, lenders relaxed standards, extending credit to “subprime” buyers with poor credit histories, or to people who could not document their income.
The report also highlighted homeowners’ assistance programs in Pennsylvania, Massachusetts, North Carolina, Minneapolis and Brooklyn, NY., as models of ways to aid people in danger of losing their homes. The report said the federal government should provide a $25 million grant to expand these kinds of programs in parts of the country dealing with high foreclosure rates — such as place in Ohio, Iowa and the Atlanta area.
The troubles for subprime lenders continued Monday on Wall Street as New Century Financial Corp. warned in a filing with the Securities and Exchange Commission that all its lenders had cut off short-term funding or announced plans to do so after the subprime mortgage lender wasn’t able to make payments. Trading in New Century shares remained halted.
Other subprime lenders fell sharply. Fremont General fell 89 cents, or 11 percent, to $7.15, while Novastar Financial Inc. fell 70 cents, or 13.4 percent, to $4.54 in midday trading on the New York Stock Exchange.
Investors have grown uneasy about the subprime market amid fresh concerns about the ability of some homeowners with spotty credit to continue to make mortgage payments. Many of the mortgages came with low teaser rates and a cooling housing market has made it more difficult for people to extract cash from equity in their homes by refinancing.
Of course, lower prices would help poor people even better than giving them a payment or two, but then they woudn’t still be in debt. This group wants to buy votes but keep these folks neck deep in debt so they’re beholden to them in the future.
Funny thing, during 2004 and 2005 I checked my mailbox everyday for a check from all these “homeowners” sharing in their sudden wealth but those checks never came. Why didn’t they just share with me? But now I’m suppose to help bail them out? No thanks.
As everyone here has said numerous times, there’s a reason these folks are considered subprime. They have no business “buying” homes. I have no problems letting them rot on the vine.
Sure there will be the isolated cases here and there where someone was duped, but for the majority of these folks, the fraud went up and down the ladder.
As a liberal leaning registered republican, I’m not surprised. The current Democratic Party is absolutely hamstrung by indebtedness to the very rich (contributions being the lifeblood on right and left alike) as well as an unwavering commitment to Stupid Actions That Really Only Further Hurt The Poor. I’m a (nominal) Republican because the Republicans at least know enough to block suicidal bread-and-circus initiatives from the left.
Repeal the 2006 bankruptcy laws, and then loosen them just a bit further so that those holding the bag for the no-doc and the suicide loans can’t collect. This will be hell for investors, including pensions and 401Ks, but hell there is already coming no matter what. The message has to go out that lenders/businesses making faustian deals that can’t pass the sniff test (or buying the deals as investments) are not going to be bailed out by a return of debtors’ prison. I don’t care if the FBers were stupid or a little willfully stupid from a combination of greed/fear of being priced out forever - prosecute if there is fraud but don’t “socialize the losses” on behalf of business.
There should be no more bailout for an honest FBer other than being able to walk away, just like the owners/execs of a large company that fails, can.
And keep in mind that a lot of the same may repeat with the stock market, unless it’s somehow Different This Time. The gub’ment is sure wasting a hell of a lot of time trying to redistribute current pain, rather than put a cork in the next scam leading to future debacle.
Psst! Hate to mention this, but the bail-out is already in place. It’s called “investment loss deduction” from income taxes. All you need is to be big enough to survive the hit, and you write off all the losses on your taxes. Each and every taxpayer is already subsidizing all those bad loans. If you’re thinking a bigger bail-out is needed, I’m heading for Vanuatu.
A much bigger bail out is needed. I am inclined to opine New Zealand or Estonia.
Redistributing pain is what gets votes.
Yep, here it comes, folks! Get out the vaseline! The FB and GF bailout. Looks like the Center for American Progress wants to get ahead of the curve, by getting any available money before it dries up. Election coming, and all that.
“Congress can’t wait for that many families to foreclose,” said Almas Sayeed, who wrote the report for the Center for American Progress. “The economic impacts for communities and for the country could be devastating.”
Ah, throw a little fear into the mix. Well, I have some good ideas for housing programs:
1) Basic literacy programs in English, so that people can actually READ their mortgage documents.
2) Basic budgeting and math skills, with simple concepts like don’t spend more on housing than you earn (after taxes)
3) Intro to Section 8 Housing Course
4) And that’s if you are an American citizen. If you’re an illegal, a one way ticket back to your country of origin. Paid by your employer.
On the money, again.
palmetto, want to run for president? If you do, you’d at least get my vote.
Aw, shucks, guys, don’t be giving me a swelled head, now.
Although, after the flaming I took yesterday in the Florida thread, a little pat on the shoulder feels good.
‘The Center for American Progress’ report said low-income and middle-class homeowners have been hurt by the growth of adjustable rate mortgages with low introductory “teaser” rates that expire within two or three years.’
Don’t you just hate these liberal NGOs? Where was the Center for American Progress three years back, when many of their constituents were happily purchasing homes with suicide loans?
I have a theory that some of these NGOs are actually fronted by big lenders looking for an indirect bailout. Who better to fund alternate solutions to foreclosure.
Tinfoil hat off!
NOOOOOOOOOOO!!!!!
This news is bad enough to make this hard-core libertarian switch to the Republicans.
The fact that this organization thinks a 25 million dollar grant is going to do the trick is a clue that they are, in fact, clueless about the problem. Sounds like the guy from MA. who was suggesting a , what was it? one/ten million dollars? to help the FB’s in MA. The sum was so low as to be ridiculous so I’ve forgotten it.
Also interesting is that they think this helping hand doesn’t need to go beyond low- income. Although they do sneak in “middle class” at one point.
Those prime borrowers who HELOCed to the hilt will be just thrilled to lose their home while the gov. is is helping the low income family retain theirs.
I’m sure my friends who bought their 1 million dollar POS in LA at the height of the bubble will just love knowing that while they’re beating their brains out paying for that POS over the next couple of decades, the gov. swooped in and solved somebody elses mortgage problem.
Here’s a question - how come Radian (RDN) hasn’t gotten hit hard? Their primary business is mortgage insurance. That seems like it would be getting slammed hard right now, due to the rapidly-rising foreclosure rates. Yet the stock has been relatively flat (it’s down about 15-20% over the last couple of weeks, but only after going up about the same amount before that).
Same with other similar companies - PMI, etc.
What am I missing in the equation? Might these be the next meltdown?
PMI might actually be a winner of the current changes in the housing market. With PMI payments now tax deductable and the piggy back mortgages showing their bad sides (see HSBC), I would expect PMI being used more again. The PMI companies will make some losses, too, but they would gain market share. I would welcome the development - PMI could play the part of the risk expert at the closing table, a function that seems to have been neglected for quite a while.
Very true - I would expect that they’d do well long term. But much like homeowners insurance companies after a hurricane I would think they’d get hit really hard in the short term. The difference here being that it’s a long drawn-out hurricane.
Guess it just hasn’t gotten bad enough for them to be hit (yet).
I’ve never had PMI so I wouldn’t know - what are the conditions for payout? Presumably inability to pay mortgage due to financial difficulty would meet the criteria, wouldn’t it? How does PMI (the principle not the company) figure into a foreclosure? Is it invoked?
It may be that none of these deals has Mortgage insurance.
With the prevalance of 100% financing (80/20’s etc) less people got PMI.
Much of the PMI stuff was prebubble, so those houses are still relatively well insulated. In fact, most people who had PMI get rid of it as soon as they hit 20% equity.
I’m not sure what RDN does, but if they’re only PMI, they may hold out well. If they secure other types of mortgage products then the dots just havent been connected to them yet.
I wonder if mortgage insurance companies are required to pay anything if the loan used to buy the house was obtained fraudulently…
It’d be pretty smart to be set up that way. If that’s the way it works, I imagine the PMI companies will be just fine…
Don’t you wish there was some audio accompanying some of Ben’s posts?
Here is one: http://www.youtube.com/watch?v=rMTjK47pH9s
Everytime I read a NEW article over the past week, I hear “Boom!” by POD…
Hyperrealism, Some Things Don’t Seem to Change
http://wallstreetexaminer.com/blogs/winter/?p=499
Alan Greenspan, what a fraud.
According to Bloomberg, Greenspan is predicting a 1/3 possibility that there will be a recession in 2007 in a report he published and charges $150,000 a copy for.
Just last month he predicted “the worst is behind us” when reporting on the housing market.
So, according to Greenspan, the housing market will improve in the middle of a recession.
Fraud. Scam artist. Liar. Add your own description of “Uncle Al” here.
“Greenspan is predicting a 1/3 possibility that there will be a recession in 2007 in a report he published and charges $150,000 a copy for.”
Is this like the weather guy who predicts a 1/3 chance of rain, a 1/3 chance of being cloudy and a 1/3 chance of sunshine and then claims he is a weather expert. Though at least the weather guy does not charge $150,000 for his daily weather report.
My name is Alan. I am an fully owned asset of the Corporation that owns the Earth. If you are foolish enough to follow my advice that’s your fault.
What do Rubin, Greenspan, Milliken, Boskey, Kissinger, the present head of the FED and the discraced former head of the NYSE have in common?
“‘I think the market is relatively self-regulating,’ he said. ‘You can see it right now. The subprime market is punishing itself.’”
Read: be happy this is good news…the gears of the labyrinth economic systems are still working as designed.
http://en.wikipedia.org/wiki/Labyrinth
“Daedalus had made the Labyrinth so cunningly that he himself could barely escape it after he built it”
Kaas has a great new post up. I like the way he deals with actual facts rather than wishful thinking:
http://www.thestreet.com/_yahoo/newsanalysis/investing/10343814.html
Perhaps we could use a good “full-fledged waterfall slide”!
Very good analysis from Kass at that link.
******
“With financial intermediaries turning off the mortgage loan spigot, first-time homebuyers and trade-up buyers — who already are pressed by the lack of affordability (home prices divided by household incomes) — will have markedly reduced access to the residential real estate markets. As a result, the cyclical decline in housing will be forced into another down leg, just at a time when inventories of unsold homes remain elevated and the volume of ARM resets peaks (in third-quarter 2007). As a consequence, the gradual decline in home prices seen over the last 12 months runs the risk of becoming a full-fledged waterfall slide.”
What about the ratings on these garbage loans from sub-prime that were sold to investors ? The problem that I have had all along with this sub-prime lending is that I have never believed that the ratings on this cr-p in the secondary market has been correct . Those loans are total high risk junk . I just can’t get over the fact that these junk loans were made based on real estate going up rather than the buyer really qualifying along with a no downpayments. How many investors would really invest in “F” loan paper . Was it ok to mix this junk paper with better paper and give it a better rating ? Would investors really want to invest in loan paper that was based on real estate going up ? I don’t think so ,but maybe I am wrong .
The ratings agencies have a HUGE conflict of interest. It is a MUCh larger problem than the dotcom stock analyst scandals (Grubman, Blodgett, Meeker, Cohen…). The amount of money dependent on the ratings of bonds of all sorts is staggeringly large. Moody’s, S&P and Fitch in particular are in the eye of this gathering storm because so many institutional investors depend on their ratings. As soon as the ratings downgrades happen, there will HAVE to be a MASSIVE wave of selling.
Sounds like the inexorable ratings downgrades represent a future boot to drop on this debacle.
Couln’t have said it better myself: http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/NextTheRealEstateMarketFreeze.aspx
Bingo! Fleck shoots straight from the hip! It must really svck to be a bull faced with the task of spinning against such straight shots…
“Next: The real estate market freeze
As a result of the collapse of the subprime mortgage market, lenders will — gasp! — once again require down payments, filling the market with unsold homes and driving down prices.
By Bill Fleckenstein
The unraveling of the housing market, the magic bullet that “fixed” our unraveled equity bubble, is the news. Slowly, the popular press is waking up to what I’ve been discussing for many months now.
Dropping like subprime flies
Essentially, the subprime mortgage industry — which lends to consumers with credit issues — is gone. Alt A lenders, those one rung up the ladder creditwise, will be next. Together, they comprise approximately 40% of the market. If you were to go down the list of what were once the top 25 subprime lenders, you’d see that only a handful are still standing at this point. The Office of the Comptroller of the Currency recently enacted rules that, in essence, require lenders who provide mortgages using federally guaranteed depositor funds to behave in a somewhat intelligent fashion. Subprime lender Fremont General (FMT, news, msgs), by its own admission, owes its demise in part to that rule change.”
Now is the time to invest in a pair of rubber hipboots and a shovel as the REIC/Gov’t BS spin artists in the blame game begin spin their NEW Spring Manure.
On second thought, forget the boots and shovels, we’ll need a Heavy Duty front-end loader to short through all this CRAP!
Oh…and WILL someone TURN OFF that Darned FAN !
It seems to me that a lot of symantecs are being used to avoid the truth. Banks make loans, and Subprime lenders make loans. If a major bank such as Chase was in the shape of New Century the world would shake and especially wall street as they know how far the tentacles reach in any lending debacle. The first to show is far from the worst to come.
It is just a matter of time before a major lender gets hammered along with the big houses on WS with this pending crisis. Then the blood will run.
I imagine there are a lot of people considering turning states evidence before the Feds come aknockin.
Subprime worries overshadow US open
By Alex Barker
Published: March 12 2007 13:01 | Last updated: March 12 2007 13:01
Wall Street stocks were slightly lower on Monday as a burst of merger and acquisition activity failed to offset fears about the spill-over from the likely collapse of a big subprime mortgage lender.
Modest gains by the yen also subdued sentiment by reviving concerns about the global carry trade unwinding.
By mid-morning the S&P 500 Index was 0.2 per cent lower at 1,399.72. The Dow Jones Industrial Average fell 0.1 per cent to 12,266.79. The technology-led Nasdaq Composite was flat at 2,386.88.
Trading in New Century Financial stock was suspended on the New York Stock Exchange after the troubled subprime lender said it could not meet its creditors demands to repurchase defaulting mortgages.
Its shares fell 41.7 per cent to $1.87 in pre-market trading and were no longer quoted when the market opened. New Century stock was trading at more than $30 a month ago before its problems surfaced.
Fears about the implications of New Century’s slide towards bankruptcy dragged down the subprime sector and other financial groups that are active in the mortgage market.
Shares in subprime lender NovaStar Financial were 10.7 per cent down at $7.17.
Bear Stearns stock eased 1.8 per cent to $149.15.
Meanwhile, analysts at Wachovia Securities cut their rating on Countrywide Financial, arguing that problems with loans to people with patchy credit will put pressure on the mortgage lenders profits.
http://www.ft.com/cms/s/63f1ea52-d097-11db-836a-000b5df10621.html
“Patchy” credit eh? I like that one. It’s amazing what Thesaurus.com will do for you.
“This market is fittin’ to get naxty.” -Robert Toll Toll Bros. CEO
“…As a result, many nonprime competitors have recently exited the market …”
The roach scattering is well under way!
Ha ha - in the same way a drunk “exits” the bar with a rather large bootprint on his butt.
From Bloomberg: “Mortgage defaults over the next two years may climb to $225 billion, probably not enough to be a drag on the U.S. economy, according to debt strategists at Lehman Brothers Holdings Inc. The forecast, based on an assumption of flat home prices, compares with about $40 billion annually in 2005 and 2006.”
BASED ON THE ASSUMPTION OF FLAT PRICES!
Debt what?
Oh, a “debt strategist.”
*******
Defaults in 2007 and 2008 respectively, apparently, are only going to be 5x the number in each of 2005 and 2006?
And housing is going to remain flat?
Perhaps not where most of the home lending occurs in this country…
“No one seems to have appreciated the irony in his recent comments that ‘imbalances’ can build up after six years of expansion. The numero uno imbalance, a housing bubble that is rapidly deflating, went unmentioned by the maestro, which is interesting since his easy money policies were primarily to blame.”
Again I repeat, Alan Greespan will be the most reviled man of this decade.
Nice goin’ Al…………a**hole!!!!
Option One (#6 subprime lender) seems like it has changed it’s guidelines to at most 90% loan to value (a lot of others had only pulled back to 95%):
Broker Outpost loan officer forums:
http://forum.brokeroutpost.com/loans/forum/2/102315.htm
aaston:
“Option One Guideline Changes
Throughout our 14 year history, Option One…
Therefore, OOMC is making the following changes effective 3/11/07:
• Elimination of all loans > 90% LTV/CLTV
…”
It’s actually kind of funny how badly this will end…it was hard enough to save a down payment 5 years ago when prices were 1/2 to 1/3 what they are now. With prices how there are now, WOW. How is Joe California going to save up $60,000 (10%) to put down on a house, now that he has a negative savings rate?
Imagine if 20% down is ever required again, with current prices…
Seriously - people are getting loans from two lenders - one for 10% and one for 90%. If they do it quickly enough it doesn’t show up in their credit reports
Money quote from Broker Outpost:
“Now the borrowers have to come up with 10% down huh? This is ridiculous.”
Borrowers? What borrowers?
Saw an Option One deal where the borrower got 80% +10% from Option One. The seller provided the down payment in cash back! Not a lot of difference on zero down and Option One still gets to be the bagholder. I predict in 30 days, we are back to 20% down payments and proof of funds in the bank 90 days prior to closing the deal. Way to many people are still gaming the lenders and the fraud scams are still going on everywhere. Wall Street, are you listening? The funny business is harder to do, but you are still getting scammed on many loans.
Can’t be done with current prices…
Of course I put down 44k on my first house in ‘99, though ~35k of that was a loan from my 401k. Since that wasn’t secured by the home, it only counted against my DTI, and not the LTV. Never paid a day of PMI in my life.
Arroyogrande, the point is that with 20% dp’s, these prices will come back down to earth. Right where they should be.
The 20% DP is your friend. And the 10% DP is not a bad start.
Peter Schiff was on CNBC Squawk Box this morning. His comments re: housing, sub-prime lenders and the economy in general seemed to shake up the morning goon. His response was incoherent babble.
Also, just like with the New Century crash, escrows that were on the way to being funded are now getting kicked back due to the new guidelines:
jriva: “FYI, I just was informed that my loan which was clear to close and scheduled for Wed closing, would NOT close with Option 1″
With people no longer qualifying under the new guidelines, and some current escrows getting kicked back due to lack of funding, look for sales figures to be revised and inventory numbers to go up some time soon.
HCM (Hanover Capital Mortgage Holdings) just took a nosedive a few minutes ago - down about 10-12% in a matter of minutes. Anyone know what’s up with them? Not that they’re a huge company, but public nonetheless.
One last one…the mindset of some of the brokers:
themortgageartis: “Now the borrowers have to come up with 10% down huh? This is ridiculous.”
Ridiculous…
Man this just keeps getting better and better.
I am giddy!!!
Even better is if the economy muddles along without any new bubbles and housing enters a secular depression/deflation.
Although, I think that is a pipedream.
One of the triggers that I think a lot of the renters on this board are waiting for before buying is the day that people say that housing is the WORST investment out there.
On WSJ online, the most popular article is titled “Your Home Isn’t the Investment You Think It Is”. The article talks extensively about what it really costs to own, the truth of the mortgage deduction, etc.
A quote:
“For the grasshoppers, there’s nothing quite as stupid as paying off your 2002 trip to Orlando in 2032, when you finally settle up your refinanced “cash out” 30-year mortgage. And for the ants, economic studies have demonstrated over and over that houses (1) cost more than most people make when they sell and (2) rarely match the long-term returns of stocks or other investments.
And that’s doubly true today, with much of the U.S. well into a real-estate recession. It’s unlikely that homeowners in once-booming areas will see a return of skyrocketing prices anytime soon.”
Housing is not yet “the worst investment”, but the shine is finally coming off in the MSM.
> a lot of the renters on this board are waiting for before buying is the day that people say that housing is the WORST investment out there.
I don’t want to be controlled in what I do by strangers’ opinion. Instead, we might buy when the housing market has become a truthful market again, with sustainable lending. One year after the reintroduction of traditional lending standards might do the trick.
I agree that once lending standards have gone back to sane for a while and at least a portion of the fraud has been cleaned out of the market, it will start feeling “safer” out there.