“Lenders Are Starting To Get Very Concerned”
Some housing bubble news from Wall Street. “Accredited Home Lenders Holding Co., a mortgage company for people with bad credit, needs to raise cash after paying more than $190 million demanded by backers this year. The stock lost almost half its value. ‘It’s clear now that liquidity is an issue’ for Accredited, said analyst Bose George. The wave of margin calls from backers ’shows that lenders are starting to get very concerned.’”
“Accredited said the company has violated terms of lending agreements that require specified ‘levels of net income.’ Accredited, which earlier this year persuaded creditors to waive the requirement, is now seeking extensions.”
From MarketWatch. ” Accredited was considered one of the more solid subprime mortgage specialists because it took a more conservative approach to underwriting its loans and accounting for them. About two-thirds of its margin calls have come since Feb. 15. Accredited also said it is pursuing savings, including more job cuts.”
From Reuters. “Subprime lender Novastar Financial Inc. said on its Web site Monday that its nonconforming loan production volume in February fell 26 percent from the year-ago period. But even those results were stronger than many investors had expected.”
“‘The fact that they made loans in February is good,’ said an investment analyst who asked not to be identified.”
“ECC Capital Corporation today announced that on March 12, 2007 it was notified by NYSE Regulation, Inc. that trading in ECC Capital common stock will be suspended, and the NYSE will take action to delist ECC Capital’s common stock, prior to market opening on Thursday, March 15, 2007. ECC Capital is currently structured to qualify as a REIT by managing a portfolio of nonconforming loans.”
“Subprime mortgage lender New Century Financial Corp.’s problems deepened Tuesday as the New York Stock Exchange took steps to delist its shares.”
“New Century said on Tuesday it underestimated its debt to Credit Suisse by $500 million, the latest snafu for a company under investigation by U.S. securities regulators and facing delisting from the New York Stock Exchange.”
“New Century said in a regulatory filing that it has received a grand jury subpoena requesting documents. The subpoena is part of a previously announced criminal probe into trading in its securities and accounting losses by the federal prosecutor in Los Angeles.”
“The probes are the latest sign that regulators and prosecutors are taking an interest in the widening crisis in a once-booming industry built around providing mortgages to borrowers with weak credit.”
“Also in the filing, Irvine, California-based New Century said the Pacific Regional Office of the Securities and Exchange Commission notified the company by letter that it was conducting a preliminary investigation and seeking some documents.”
The New York Post. “Bear Stearns is being blasted by a leading independent research shop that says the Wall Street titan’s robust purchase of subprime mortgages has helped fuel the sector’s meltdown.”
“Describing the firm’s buying activity as an example of ‘the fee foxes guarding the mortgage hen house,’ CreditSights, an independent firm specializing in corporate cash flow and balance sheet analysis, slammed Bear for having subprime loans that have experienced extensive payment troubles and defaults, and ’stood out in terms of weaker performance.’”
“‘Bear, and a lot of other dealers - including Lehman Brothers and Morgan Stanley - really aided and abetted this [subprime] industry collapse,’ said David Hendler, the lead CreditSights analyst on the study. ‘They did nothing to ensure that the loans they were buying were kosher. There was no ‘good guy’ here, no voice of reason or advocate for conservative standards.’”
From Bloomberg. “Bond investors rattled by mounting losses in subprime U.S. mortgages say trouble is brewing in collateralized debt obligations.”
“‘When you talk about no documentation loans, you can’t have any less of a standard than that,’ said Martin Fridson, CEO of research firm FridsonVision LLC. The lenders lower their standards and say ‘Well, we can put them into CDOs.’ Like that’s somehow burying that it’s toxic waste.’”
“Investors ‘need to worry a good bit’ about subprime delinquencies spilling over into the CDO market, said Mark Adelson, head of structured finance research at Nomura Securities Inc.. ‘The scenario where the BBBs all blow up is a reasonably possible scenario,’ Adelson said.”
The Wall Street Journal. “Ruthie Hillery was struggling to make the $952 monthly mortgage payment for her three-bedroom home in Pittsburg, Calif., last summer when a mortgage broker called. The broker persuaded Ms. Hillery to refinance into a ’senior citizen’s’ loan from New Century that she thought would eliminate the need to make any payments for several years, according to her lawyer.”
“Instead, the $336,000 adjustable-rate loan started out with payments of $2,200 a month, more than double her income. In December, Ms. Hillery received notice that New Century intended to foreclose on the property. Then, earlier this month, after a formal demand by the lawyer, New Century agreed to refund all its fees and cancel the loan once Ms. Hillery gets refinancing elsewhere.”
“The lawyer, Alan Ramos, says the loan never should have been made. ‘You have a loan application where the income section is blank,’ Mr. Ramos says. ‘How does it even get past the first person who looks at it?’”
“Delinquencies among subprime mortgage borrowers hit a four-year high in the fourth quarter, while home buyers who got loans with low down payments and government backing fell behind at the highest rate ever.”
“The Mortgage Bankers Association said 13.33 percent of subprime borrowers, with poor or limited credit histories, were behind on payments in the quarter, the highest rate since the third quarter of 2002.”
“‘Although the U.S. economy and the job market remain solid, the housing market continued to decelerate in the fourth quarter,’ Doug Duncan, the association’s chief economist, said in the statement.”
“‘The delinquencies and defaults have started to soar,’ said Nicolas Retsinas, director of Housing Studies at Harvard University in Cambridge, Massachusetts. ‘A lot of these lenders started to make loans and lost track of some of the fundamentals.’”
“‘The delinquencies are going up, and the rate of the increase doesn’t appear to have slowed down,’ said Grant Bailey, an analyst at Fitch Ratings. Delinquencies on subprime loans have doubled in the past 12 months, he said. ‘So if you graph that, it’s a pretty steep line.’”
National Mortgage News. “The Federal Bureau of Investigation’s estimate that mortgage fraud costs the lending business $1.2 billion a year is off the mark by more than $3 billion, according to a fraud analyst speaking at the Midwinter Conference in Park City, Utah.”
“HSBC Holdings soon will begin unloading some of its on-balance-sheet subprime holdings. Scratch-and-dent investors tell us billions may come to auction.”
“Meanwhile, one veteran subprime executive told us he is moving into hard-money ‘equity lending,’ giving up on subprime for now. He said one secondary market buyer (a Wall Street firm) asked his shop to buy back a loan he sold to them 18 months ago. The executive, requesting anonymity, said, ‘Right now there is no bid in the market place’ for subprime.”
From Origination News. “Mortgage companies scaled back their payrolls by 5,900 full-time employees in January, as the decline in subprime originations and rising defaults took a toll on wholesalers and mortgage brokers.Since October, employment in the mortgage industry has declined for three consecutive months, and 15,500 employees have lost their jobs.”
From CNN Money. “Foreclosed properties will add supply to a housing market that already has too much.’[National] inventory is 20 percent higher than last year, vacancy rates have soared and prices are down about 3 percent,’ says says economist Dean Baker. ‘Now, with the tightening of credit, I don’t see how prices don’t fall another 5, 6 or 7 percent.’”
“The tightening of credit could take as many as one million buyers out of the market, says Baker, citing Bear Stearns research. ‘Even if you cut that in half, say to 400,000 or 500,000, that’s huge.’”
“Economist Mark Zandiis also concerned. ‘I think the subprime problems will take housing activity to a whole other level,’ he says. Zandi is projecting a doubling of subprime defaults this year to 800,000. ‘Those homes will go on the market at a discount and will weigh on the market,’ he says.”
“‘Banks have become much more cautious. Lenders are tightening, not just subprimes, but Alt-As (not quite prime) loans and primes as well,’ says Ellen Bitton, founder of the Park Avenue Mortgage Group.”
“A recovery in the nation’s housing market is ‘likely’ this year, though problems in the subprime lending marketplace and unusual weather have posed challenges in assessing conditions, according to a Tuesday forecast from the National Association of Realtors.”
“Total sales this year will be ‘fairly close’ to the prior year because ‘last year started high and ended low,’ said David Lereah, NAR’s chief economist, in a statement.”
“‘Although existing-home sales will be marginally reduced due to subprime lending restrictions, they should be gradually rising this year and next,’ Lereah said. ‘Even so, these problems are likely to be contained and not spill over into the prime mortgage market.’”
The Denver Post. “Low home-price appreciation and tighter credit standards could make it harder for consumers to pull equity out of their homes, said Lou Barnes, a Boulder mortgage banker who keeps a close tab on the credit markets.”
“New Century’s demise is likely to spill over into tougher restrictions for homebuyers with less than stellar credit, big losses for investors in mortgage- backed securities, and fewer options for consumers accustomed to spending down their home equity. ‘The spillover may be underway. We may already be soaking wet,’ said Barnes.”
‘The Federal Bureau of Investigation’s estimate that mortgage fraud costs the lending business $1.2 billion a year is off the mark by more than $3 billion, according to a fraud analyst speaking at the Midwinter Conference in Park City, Utah.’
Considering that one single group in California has reportedly commited close to a billion alone, IMO these numbers are way low.
Also, I don’t recall hearing this before (from one of the NEW links):
‘Last month, New Century said it lost track of how frequently these borrowers missed payments on their mortgages. Because New Century’s books didn’t reflect how often borrowers defaulted and how likely borrowers were to default in the future, the value of the company’s loan portfolio was overstated.’
I was wondering on Friday how Morgan Stanley valued the REIT collateral they were planning to lend against. That would have been interesting to know, given how you apparently can’t trust a thing you see on the company’s books and financials.
Wonder who their auditing firm is. Crispy?
lol
Go long the E&O Insurance companies. I think they will be able to raise premiums…and deny claims for “fraud”.
E&O insurance is great stuff… often countercyclical.
Good hedge play.
Chuck Ponzi
http://www.socalbubble.com
Hey Crispy, do you have a short list of E & O longs?
Thx
Sorry, but what does a E&O insurance company?
Errors and Omissions/ coverage for malfeasance of corporate execs
Tx,
I remember about 10 years ago there were a series of “Prime Rate Trust” funds by various mutual fund companies that were sold as stable high yielding money market alternatives. The brochures touted the stable NAV’s and double the current cd rates..
One of them Pilgrim, converted to a closed end fund and immediatley lost about 20% in value. The manager of the Van Kampen fund left and they did a mark to market and , low and behold, the fund lost 10% of its value.
Then I remember back about 15 years or so Painewebber totuted this CMO style Cd alternative fund that blew up so bad they had to inject/refund 400 MILLION to customers because the fund managers were buying strips and I/O’s when rates went against them.
Bottom line is that these clowns on Wall Street are experts at marketing and little else. the game is rigged and the only ones making the big $$$ are the insiders, specialists, and Investment bankers. The public has been and always will be the sucker holding the bag.
The public has been and always will be the sucker holding the bag.
I’m afraid that’s us, whether as investors or taxpayers. Bummer.
TXChick, any interest in starting an investment club here? Not sure what kind of cash everyone else is sitting on here, but I’m sure there’s several like me that have money, but not quite enough to invest in Put Options and whatnot. If we had some sort of fund all together we could all make out fairly well. Plus, I don’t have enough time to really dig in all the time and constantly research stocks. It’s was obvious that the subprimes were going to implode, but actually getting a position is a different story.
Anyone else interested in some sort of investment club here. There’s awesome info here that shouldn’t go to waste. All of the money should be made by sleazy investment bankers and hedge fund dirtbags.
“Considering that one single group in California has reportedly commited close to a billion alone, IMO these numbers are way low.”
The FBI is too busy illegally tapping phones to worry about the trillions of dollars of mortgage fraud…
Wish they would have “illegally” tapped some phones in the days and weeks before 9-11.
bingo!
http://chicagobubbleblog.blogspot.com/
I wish they would have tapped (legally or illegally) the phones at NEW, LEND, NFI, CFC, or anyother lender in the last few years. Millions of homeowners would not have been screwed over!
“I wish they would have tapped (legally or illegally) the phones at NEW, LEND, NFI, CFC, or anyother lender in the last few years.”……………
How about the FBI monitoring Ben’s Blog over the last year? This fraud was so far out in the open, it was so clear to right-minded thinkers who were willing to do some research, and had a grasp of history. Not spooky enough for these and didn’t cost a ton of money. Of course, Main Street Media, was in bed with the NAR $40 million ad budget, so it was along for the ride, Ben’s Blog should be required reading for the Fraud Units of the FBI.
I wish they had tapped phones at the Carlyle group…:-) while GW was on the phone talking about Neil…:-)
Maybe they could have just killed every Saudi in the USA before 911. That would have worked too.
Every Wahabi might not be such a terrible idea. Well, maybe just deport them.
Oh, “oops!”
Today is one of the days that long time readers of Ben’s blog have been waiting for. The stock market smelled the coffee today. Or maybe it would be more accurate to say that they smelled the stench of David Lereah’s b.s.
CaliNative, I was thinking the same thing when I glanced at the LA Times this morning and saw the front page story on subprimes. Funny thing is, if you’ve been follwing this blog it’s like watching a movie you saw many times before, only the TV went off each time before the movie got to the end. Now, it will play out to the end and I’m getting nervous.
On CNBC, not ten minutes go by without the word “subprime” coming up.
I agree, everyone on this blog knew this day would come. Just wait until folks really start to connect the dots…inventory way up due to flippers and foreclosures, lending getting tighter, housing ATM shut down, AltA and Prime weakening as well.
Comment by 4thGenCaliNative
2007-03-13 12:29:54
Today is one of the days that long time readers of Ben’s blog have been waiting for. The stock market smelled the coffee today. Or maybe it would be more accurate to say that they smelled the stench of David Lereah’s b.s.
So true 4thGen…And a lot of us are still waiting for the dat that Lereah is no longer quoted by the MSM.
Comment by 4thGenCaliNative
2007-03-13 12:29:54
Today is one of the days that long time readers of Ben’s blog have been waiting for. The stock market smelled the coffee today. Or maybe it would be more accurate to say that they smelled the stench of David Lereah’s b.s.
So true 4thGen…And a lot of us are still waiting for the day that Lereah is no longer quoted by the MSM.
Down the crapper they go…more to follow.
http://quote.bloomberg.com/apps/news?pid=20670001&refer=&sid=aY3mu1qdRq94
“A recovery in the nation’s housing market is ‘likely’ this year, though problems in the subprime lending marketplace and unusual weather have posed challenges in assessing conditions, according to a Tuesday forecast from the National Association of Realtors.”
alternate translation: “Don’t worry folks, plenty of room here on the good ship Housing Market Titanic. Look, we still have chairs for you, it will just be a moment while we rearrange the deck chairs. Look, no reason to panic, the band is still playing.”
From the IE and owning a home in AZ. This is crazy talk. I cannot believe it. Family lives on Nor Cal. Problems, for sale, foreclosure, everywhere. I think I need my violin. “I just wanna dance” when the rents come down.
Why is weather (good or bad) always the excuse for poor financial performance? Even retailers of non-seasonal goods use this one. Do people not buy groceries if its warm out?
Don’t forget Merrill as a short candidate. Remember they bought all that stuff a few months ago.
how are all these private equity deals financed with debt going to play out? Now the economy slows, I think the debt fefault we see in housing will spill over to the entire economy. You are about to see an equity bubble just pop right before our eyes… literally.
Yeah, well my play on that is a short on TXU with a stop at the current buyout price. Up nicely on it so far.
Pulte Homes (PHM) just broke thru 52 week low at 25.96.
This is the dot.com crash of the Home Builders. Overpriced hosueses and no financing to tap out buyers. BooYah!!! Crammer.
Funny thing, when you go to the Somersett developments website (Reno) and pull up the homes tour, it lists all of the national builders, with a link to their models. Last time I was there, I tried to click on Pulte, and it was a dead link. I re-checked it days later, and the same thing. Something tells me all is not well.
Got a sales e-mail from Pulte today. Said they had my name from an interest list. Maybe put our names on their list one or two years ago.
They are getting desperate…
“Don’t forget Merrill…”
The suspense is killing me. I’m dying to know if these guys can really walk on water, if they are bulletproof, will they make Houdini like escapes? Is anyone else on the edge of their seats?
Naw, I’m leaned back in my lazy boy with a glass of 2-buck-chuck thinking about a future rabbit ear tv dilemma and what happens if I consume as much popcorn as Neil…
http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2007/03/13/MNGRHOK7S01.DTL
Looks like the regular 2:00 liquidity injection failed to materialize. I have the qqqq ticker up while I’m trying to work.
Really? damn I need to check something - opps
So much news, so little time.
I wonder when the mortgage consolidators (GS, BS, ML, LB, etc) are going to get hit ? I think its pretty darn convenient that they owned originators that fed them loans and as soon as the originators get hit with buying back loans, they go bankrupt, yet the consolidators remain untouched. Hmmm….
And weren’t all these loans insured ? When do the insurers start taking a hit ?
The consolidators offloaded the exposure to their unwitting clients, mostly pension and mutual funds. (Think back to Orange County). I’m guessing only a few of them have any substantial exposure. However, wait until a major pension fund loses a lot of money for the litigation talk to begin.
I agree they were only the middle men. But surely when some of these companies put their name on an asset, that means something ? Its pretty darn obvious that these instruments were total crap. They had to have known. They had to have seen it coming. Surely they have some responsibility, especially since they owned parts of the mortgage originator.
The consolidators have deep pockets. Sooner or later the creditors will go after them.
I’ll be the disclosures on these instruments are extensive. The “Risk Factors” section probably represents a significant section of the document, including statements to the effect that “We do no research into the creditworthiness of the borrowers in this loan and it is highly likely that you will lose all your money.”
The lawyers will make out like bandits as these suits get underway, but if the disclosures are as extensive as I expect them to be, the buyers of these instruments will be facing a major uphill battle.
Think about the “Trump” brand. Putting his name on something surely means something for some people. Hope he bones all of them.
“Hope he bones all of them.”
I share the sentiment, even though I find Trump as repulsive as a cockroach in a corner.
That’s an insult to cockroaches.
That’s an insult to cockroaches.
You got that one right. When I see Trump I regret we did away with the tarring and feathering thing.
http://money.cnn.com/2007/03/13/news/companies/subprime_massachusetts.reut/index.htm?source=yahoo_quote
Massachusetts subpoenas investment firms
Subpoenas seek all documents created by subprime lending analysts at UBS and Bear Stearns.
March 13 2007: 5:24 PM EDT
BOSTON (Reuters) — Massachusetts said Tuesday it subpoenaed documents from two securities firms on issues over their quality of research on subprime lenders.
Secretary of the Commonwealth William Galvin said in a statement that the securities division of his office subpoenaed UBS AG (Charts) of Switzerland’s UBS Securities LLC and Bear Stearns Cos. Inc. (Charts) concerning research analysis of subprime lenders, including New Century Financial Corp (Charts).
The subprime mortgage market is heading for a meltdown with some major lenders defaulting on current financial agreements. CNN’s Gerri Willis reports. (March 10)
“A global settlement of conflicts by research analysts at investment houses in 2003 set rules for independent analysis. Recent revelations that research analysts issued positive reports on mortgage lenders to those with less than solid credit ratings even as those companies faced more and more defaults suggests that the commitment of 2003 has not been met,” Galvin said.
The consolidators offloaded the exposure to their unwitting clients
The biggest unwitting clients will be the US taxpayers.
I couldn’t even begin to imagine the absolute number of depreciated POS garbage properties which have been backed by HUD/FHA, VA, and the scads of independant state housing authority mortgage guarantees.
The whole point of partially owning these mortgage brokers and providing wholesale finance is to create a captive source of MBS material while holding the obligations at arms length. The nexus for the CDO’s at ML is First Franklin. Read a prospectus. They’ve got a mindblowing level of misleading advertising that’s technically true.
Lereah said. ‘Even so, these problems are likely to be contained and not spill over into the prime mortgage market.’”
Really? Care to put your money where your mouth is DL? I’m willing to bet it all that Alt-A is next, followed by a mess in A-paper as well.
David, before he was a cheerleader for the NAR, was pimping out tech stocks back in 2000. When that went bellyup, the NAR said, we’ll hire you to pump for us and now that is exactly what he does.
Wonder where he’ll go next. Will he become a spokesman for a bubblebath company?
Maybe not A paper - these people (like me) are conservative with their finances and tend to only want what they can truly afford. But Alt-A - now that is where the next action will be. There are a lot of real estate investors and property flippers whom use these products. If the real estate market does not see rapid appreciation, then these people will have to fold their cards and send the keys back to the bank.
The problem is not with fiscally conservative borrowers, but it’s how you define “A” paper. Is it FICO score alone? Or FICO score, and income/debt ratio, and type of interest rate (adjustable vs. fixed).
If “A” paper meant 700+ FICO and no more than 30% of your income as your payment, and fixed rate financing, I’d agree with you…but I’m not sure that’s what “A” means anymore.
Anyone care to clue us in on that? Can a 690 FICO with an option arm be considered “A” paper?
Here’s the deal. A-paper ain’t what it used to be. When I first got into the biz a full doc A-paper deal was debt-to-income ratios of 32% or less and 4 to 6 months reserves in the bank. About two years ago we started getting full doc A-paper automated approvals, especially through Fannie, with debt ratios as high as 58% with, in many cases, no reserve requirements. It was unbelievable. It was as if our supposedly most cautious lending institutions just suddenly said “screw it, we want in on the party too!” I’m just giving you a tip-of-the-iceberg example here. it would take all day to explain what I’ve seen.
nnvmtgbrkr-
That’s what I suspected. Standards being changed is a bad idea–what was prime is no longer prime.
Simple hypothetical question: A renter, generally conservative, saves a small down payment (say, 5%), has a FICO of 720, pays credit cards on time–gets drunk on the Kool-Aid and buys in June 2005–afraid that he’s missing out on all the gains that his friends are getting. The only way he can stretch to get into the house he wants is to borrow 95% using an Option Arm and second DOT. He figures the worst thing that happens is he sells the house if he can’t handle the adjustment. The mortgage broker does what it takes to get him the loan (ie. goes stated, lies about income).
Is the first DOT considered a “prime” loan because of the 720 FICO score and 80% LTC? Or is it automatically considered “sub-prime” or “Alt-A” because it’s an option ARM?
In other words, can an Option Arm be “prime”?
“Here’s the deal. A-paper ain’t what it used to be.”
Bingo. Anyone who bought before the boom remembers… 6 months cash in the bank, 20% down, no credit card debt, steady employment history, purchase at no more than 3x gross income. It was very difficult to get a mortgage.
I think the Alt A crowd is also the first time buyer with a piggy back loan stretching every penny to get into a house.Little or no downpayment. Will they want to stick around for the next 10 years paying their mortgage on a place that is 10%, 15%, 20% less than what they paid?
My guess is they’ll be leaving the keys on the granite countertops as well.
call to broker…sell A paper.
“A recovery in the nation’s housing market is likely this year… according to a Tuesday forecast from the National Association of Realtors.”
The NAR reminds me of Hitler in his bunker, giving orders to long ago destroyed armies and hosting dinner parties with Eva.
David Lereah is mentally ill. I mean it. Look at the facts, look at what he is saying and it’s obvious the man has a problem.
Someone on this blog said that Lereah will be gone by September. David is having a psychotic breakdown before our eyes. I think he will be gone in less than a month.
with his head so far up his a$$ that his butt is where his mouth is, how in the world would he ever get money in there? Besides, isn’t he going to be underwater soon?… and therefore his house ATM may not be functioning enough for him to withdraw any money anyway.
sorry… previous comment in response to: Comment by nnvmtgbrkr
2007-03-13 09:53:31
Lereah said. ‘Even so, these problems are likely to be contained and not spill over into the prime mortgage market.’”
Really? Care to put your money where your mouth is DL? I’m willing to bet it all that Alt-A is next, followed by a mess in A-paper as well.
Now that Liar-eah said it won’t spread into prime, I’m more convinced than ever that it will.
anyone look at Goldman Sach’s numbers, i only listened to parts of the call because of work.
amazingly all these problems started after their stellar quarter was finalized and the numbers written in stone
Mentioned in the bits bucket. GS quarter ended one day before the sp market “suddenly” went bad.
That means short them for next quarter because it’s going to look like sh*t. No wall street bonuses this year.
I’ve read that they are heavy in the commodities markets (ag and others) though. Who knows how that will play out.
Hindsight is 20/20 so if they had any ethics they would take the hits on the Feb 27 financials rather than waiting. The true value of whatever they are holding should be clearly evident to them now.
True but whatever they had on Feb. 27th is probably worth a whole lot less now!
The permabulls are saying housing related activity is just one spoke in the wheel. If removed, they’ll still roll.
‘Right now there is no bid in the market place’ for subprime.”
What does that mean?
“No bid” means no offers, no buyers. Effectively, it means subprime paper is viewed as completely worthless. No value. Zip. Zero.
Come to think of it, we should all be bidding. I will bid ten cents on the dollar. I won’t get paid, of course, but I will get the house that collatorilizes the mortgage for ten cents on the dollar. That works. I’m calling my broker…..
Not if they’re seconds of if there is a tax lien. Also the borrower may be able to get out of the deal due to fraud & misrepresentation on the lender’s part.
It means there is no “realistic bid” in the seller’s opinion. There are always the 10% of value bids. The hard part is to determine the risk in purchasing. For example not all subprime borrowers are going to default, if 20% default what is the value of the bond, ditto at 25% etc. The models are just not good enough to determine the future value. If the government has some plan to save these borrowers then the bonds are going to be worth a lot more. At some point these bonds will be a buy.
“Meanwhile, one veteran subprime executive told us he is moving into hard-money ‘equity lending,’ giving up on subprime for now…”
What a snake. These fools just don’t get it.
MrktMaven, the executive was referring to “his” subprime loans, not subprime in general. And you know what? He’s right…there’s no market for Subprime - 100LTV - Stated Income loans….and there shouldn’t be a market for these loans.
Bwaa haa haa!
What amuses me is that since the brokerages will have to carry the March loans on their books… that cuts into their credit lines and will hamper April loans.
The impacts of this have only just begun.
Hmmm… Now let’s see… IIRC 11% of the sub-prime ARMs reset in 2Q 2007. Hmmm… Why this could make April and May very interesting… Hmmm…
Got popcorn?
Neil
I just got done arguing with someone on a message board who is long subprime. He then tried to wow me with his numbers analysis. It was like talking to a brick wall. The whole sector is in the toilet. You might have a few turds float to the top but they are still turds and this whole thing stinks.
Forgot to add, the turds are floating in Kool-Aid.
“Turds floating in Kool Aid” *laughs That is quite the explicit visual !
Better get a patent for that one b/4 it’s too late. You know that’s what DL is serving to his minions — turd bobbing kool-aid.
That is some spiked Fool-Aid!
Reminds me of the Eddie Murphy routine where he talked about flushing a toilet and having a turd pop back up. “What do that sh*t want?”
LEND update at 12:55 EDT: price 4.08 down 7.32, 64%.
Ouch!
The small fry are toast. Start fitting the big boys for a necktie!
It looks like the big firms are going to push buybacks to put all the small firms out of business. A drastically smaller playing field is the only way their own subprime bets can come out looking bad rather than awful.
This will work out well as regulators bring new lending standards online. The Boyz can enjoy the tightening noose.
u can buy here for a little bounce…short term play
‘They did nothing to ensure that the loans they were buying were kosher. There was no ‘good guy’ here, no voice of reason or advocate for conservative standards.’”
There were the bloggers…
You mean us wackos and ‘bitter renters’ that had no idea what we were talking about?
Bunch of coupon clipping toothless tinfoil-hatters if you ask me. What would they know?
Getting busy clipping coupons for aluminum foil and SeaBond…
lol bitter renting, coupon clipping, tin foil hat wearing loons
were right and predicted this mess
go figure?
Ben deserves a Presidential Medal of Freedom … after the current occupant leaves office.
I second that.
I’d say all bubble bloggers that have been around for 1 year +.
Also, I think this group should be put in charge of drafting the new lending legislation (Ben leading it) as they seem to have more forethought and clairvoyance than… well… anyone!
“Economist Mark Zandiis also concerned. ‘I think the subprime problems will take housing activity to a whole other level,’ he says.
I guess the earlier study he published did not account for this factor. Does anyone have a link to that report? It was published within the last 3 months, I believe.
I’m not sure if it did or not but the CNN article did go on to say he is altering his projections…
“All that has led Zandi to alter his projection of a 3 percent decline in housing prices this year to a mid-single digit decline.”
http://chicagobubbleblog.blogspot.com/
“Economist Mark Zandiis also concerned. ‘I think the subprime problems will take housing activity to a whole other level,’ he says.”
That “level” is known as the basement.
“Economist Mark Zandiis” ….Where in the world is Leslie Appleton-Young? Awfully quiet form the mouthpiece of the Cal Realtors. Maybe MSM can get a quote that can spin this meltdown
I’m hoping she’s having sex with Ann Coulter…saw a “do not disturb” sign on the door handle awhile ago
Thanks a lot hwy50! Now I need to go bleach my brain!
“leach my brain!”…on the floor…can’t breathe…stop it…O.K.,…you win…UNCLE!
‘The fact that they made loans in February is good,’ said an investment analyst who asked not to be identified.”
Amazingly bold statement. I can see why he’d want to remain anonymous — so no one can laugh at him.
The funniest part of that quote (which is the one that instantly stuck out to me) is that it seems out of context.
Quick Story, on the Cover of Home Alone 3 it has a “quote” from Roger Ebert: “…Better than the first two”. I laughed so hard at this as it seemed so odd to be on something as an actual promotion. So I went and looked up the review. If you go look up what he said about Home Alone 3 it was something like, call me old- call me cranky but don’t call me again if they make home alone 3. But actually it was better than the first two, which were miserable…
LOL.
This is basically the same thing. The reporter asked/stated to the “anonymous” source: Well there is nothing but Bad news-
Response: “The fact that they made loans in february is good”.
LOL. Okay, yea, as opposed to….
That is the funniest comment I’ve read by an analyst. They could have at least named his company. I don’t know about you, but I think there’s a lot of sarcasm in that comment.
“‘Although existing-home sales will be marginally reduced due to subprime lending restrictions, they should be gradually rising this year and next,’ Lereah said. ‘Even so, these problems are likely to be contained and not spill over into the prime mortgage market.’”
He does not have a clue, does he?
Bagdad Bob has nothing on Lereah!
LMAO…Bagdad Bob, Joe Isuzu & Lierah would make great celebrity squares contestants
Who had that picture of Kevin Bacon from the final scene in Animal House?
47 doom-filled articles, and one rosy one from David Lereah. Gotta give him credit, he’s doing what he’s paid to do, no matter how silly he looks.
Tenacious D? He’s playing defense for sure.
He’s honing his skills for his next career move. Stand up comedy.
Seeing as stand up can involve heckling and rotten tomatoes I’d say he’s got that career ‘in the bag’!
Mystery: what’d Ruthie do with all the extra money? Going from $983/month (about $150K mortage, right?) to $2,200 ($336K mortage) a month must involve a massive cash-out.
And, yes, it looks like New Century and its broker messed up. But we’re not getting the whole story.
she paid the lawyer with the cash out… and pocketted the rest.
I tell ya, the smart crooks got away robbing the bank, its the late comer naive FB’s how are stuck holding the bag with no chair to sit on.
got cash?
Of course they left that part out. Over a 150k cash out refi kinda messes up the poor Ruthie factor, doesn’t it?
Mystery #2 How did 89 year old Gertrude Robertson wind up with a $414,000 loan?
Stated age, stated assets, stated income, stated value loan.
“‘It’s clear now that liquidity is an issue’ for Accredited, said analyst Bose George. The wave of margin calls from backers ’shows that lenders are starting to get very concerned.’”
Today’s lender liquidity issue will morph into tomorrow’s buyer liquidity issue.
From reading posts on broker’s outpost, it already *has* impacted buyers’ liquidity: loans in process being canceled because of new, tighter guidelines, 0% down sub-prime borrowers being told that they now need to have a down payment, etc.
Is Lereah really as clueless about what is going down behind the scenes on the demand side as his public statements make it appear?
Hmmm… Judging from his book release dates, I’d have to give him the benefit of the doubt. He is not a shill. He just plays one on TV.
All he’s got to do is keep things propped up until 2009. Isn’t that how long his book said things would last?
At least people are catching on….look at the reviews of his book. And of the reviews that are 5 stars, look at the number of people who think that review was useful.
http://tinyurl.com/2mmcjb
Geez, guys, Liareah isn’t clueless, or stupid or any of that. He’s basically nothing more than an infuriating turd in a suit. He knows exactly what’s going on. At first, it was just cheerleading that was believable to the masses who wanted to drink the koolaid. Now, even though he knows the jig is up, he’s just getting his jollies by waving a red flag in front of bears rather than bulls. He knows his schtick is maddening to rational people, so he does it on purpose.
Bear Stearns downgraded Accredited to “peer perform.” I guess that means Accredited is about to get margin calls and subpoenas just like all their peers.
I think it was actually “pier perform.” As in, they’re about to get dropped off a pier. In cement shoes.
“‘Although existing-home sales will be marginally reduced due to subprime lending restrictions, they should be gradually rising this year and next,’ Lereah said. ‘Even so, these problems are likely to be contained and not spill over into the prime mortgage market.’”
Can he tell us WHY it will increase? Is this a self fulfilling prophecy? If he predicts it, it will happen? This guy is an idiot. Can I get a job at NAR pumping out numbers? I can make things up. Does that qualify me? Am I hired?
Are you a “team player?”
“Can he tell us WHY it will increase?”
Because “the economy is doing well”, “population is increasing and everyone needs a place to live”, “people need to buy during this price ‘dip’ or risk being priced out”, blah blah blah. The standard stuff.
Don’t forget “They’re not making any more land”!
David L’s has a job app in for Head of FEMA. “‘Your’e doing a great job, Brownie”
No, no –it’s “you’re doing a heckuva job, Davey”
“A recovery in the nation’s housing market is ‘likely’ this year, though problems in the subprime lending marketplace and unusual weather have posed challenges in assessing conditions, according to a Tuesday forecast from the National Association of Realtors.”
The problems in subprime make this year’s outlook fundamentally more gloomy than last. Is Lereah really too dense to grasp this basic fact?
“Total sales this year will be ‘fairly close’ to the prior year because ‘last year started high and ended low,’ said David Lereah, NAR’s chief economist, in a statement.”
Somebody please explain what “starting high and ending low” last year has to do with this year’s total sales turning out ‘fairly close’ to last year’s especially given that subprime loans with 0% downpayment requirement were readily available until maybe one week ago?
“A recovery in the nation’s housing market is ‘likely’ this year, though problems in the subprime lending marketplace and unusual weather have posed challenges in assessing conditions, according to a Tuesday forecast from the National Association of Realtors.”
When does someone do something about this idiot ? When does someone with some power say “Enough !” and censor him or at least audit his information sources and then charge him with fraud ? Surely he has outright lied enough times that it wouldn’t be hard to put a case together against him ?
This, IMO, is exactly why most people haven’t seen the light. Most homeowners want to know their home’s value is fine.
All they need is the most important guy in real estate to tell them one positive thing about the market. That carries more weight than the negative stories combined.
His words justify their apathy toward information that contradicts their net worth.
LOL. I’ve stopped talking about real estate with most of my acquaintances. The usual reaction the I got was something akin to a person with fingers shoved firmly in ears whilst yelling, “LA LA LA LA I can’t hear you LA LA LA LA LA!”
Ditto.
Especially my generation. All we’ve known is relatively good times. Bad news is just ignored as being irrelevant.
Ditto for me as well. I’ve been talking about the problems for awhile now and get the same response from most of my aquaintances. Now that’s it’s finally coming to fruition I have mixed feelings about it. I see much larger social implications as this thing begins to unwind (job losses, social unrest, increased violence, …………….). Moving to a quaint small town is still high on my agenda.
“Moving to a quaint small town is still high on my agenda.”
Not a bad idea, but research the town VERY carefully. For example, you want to be real sure that “quaint, small town” isn’t in the middle of an agricultural area that hosts a large “guest worker” population. You also want to be sure the locals aren’t a bunch of gossipy moral hypocrites looking to screw newcomers to the wall. Also check the stupidity level of your neighbors. I briefly moved to a “quaint small town” in Florida and when I got back, I told all my friends to get a gun and shoot me if I ever talked about moving to a “quaint small town” in Florida again.
That is a Lereahism. Look in Websters, it exists.
Lereahism noun, verb, -Le·rea-hism
interjection Slang: Vulgar.
–noun 1. nonsense, lies, or exaggeration.
–verb (used with object) 2. to lie or exaggerate to.
–verb (used without object) 3. to speak lies or nonsense.
–interjection 4. (used esp. to express disagreement.)
Foolish, deceitful, or boastful language.
Something worthless, deceptive, or insincere.
Insolent talk or behavior.
To speak foolishly or insolently.
To engage in idle conversation.
To attempt to mislead or deceive by talking nonsense.
Very angry; incensed.
Used to express extreme displeasure or exasperation.
Ok based on the last one, I think this whole housing market is lereah.
It might have to do with the “unusual weather” we’ve been experiencing. It’s been like winter out there. Oh wait, it was winter.
He’s just a little ahead of the ‘Global Warming’ times…
Does Carl Icahn know something we don’t know? All home builders and subprime is getting crushed and WCI takes off.
Icahn bids for chunk of home builder WCI
Billionaire activist investor launches a $22-per-share offer, a 16 percent premium over the stock’s closing price on Monday.
The news pushed up shares of WCI (up $3.23 to $22.20, Charts) by 17 percent. The stock was the leading percentage gainer in morning trading on the New York Stock Exchange.
http://money.cnn.com/2007/03/13/news/newsmakers/icahn.reut/index.htm?source=yahoo_quote
uranium ?
“Does Carl Icahn know something we don’t know?”
Perhaps. He knows that whatever he buys will create an instant Keynesian beauty contest runup in the price, as the media reports his every move. Same thing happened w/Kerkorian’s purchase of GM shares last year. Last I checked, he had cashed out.
4shzl on Calculated Risk said a billionaires ego can be an expensive pet.
Help me understand something. If tightening up on sub-prime is removing buyers from a market that they have no business being in, why is that a bad thing? Whatever happened to being able to handle a house over the long run?
“… why is that a bad thing?”
It seems like it is only bad from the standpoint of REIC players who made out like bandits on the subprime lending scam.
It’s a bad thing for realtors.
Slim, why do you hate America? I suppose you also think buying expensive items you can’t afford using a credit card that you can’t pay off is bad. Where have you been for the lat 6 years? Everyone knows that Debt = Wealth.
If buyers are removed from the market, house prices must fall. If house prices fall, real estate and mortgage broker commissions fall. If commissions fall, Hummer payments are missed. If Hummer payments are missed, Hummers are reposessed. If Hummers are reposessed, realtor and mortgage agents egos are destroyed.
But it’s not the prices that the realtors care about, it’s the volume. They don’t care if your house sells for $400k, or $350k. That marginal $50k only represents $3k, and after house cut, cooperation with other broker, their marginal take is smaller yet.
They DO care whether they are selling 3 houses in a given month, or 4, or 5.
The game is all about confidence. If you make people believe that the worst thing that happens is that prices are flat, you at least keep the game going. If it is widely believed that home prices can fall (and are falling). People will wait until prices are more in line with rents.
Every consecutive month that any market experiences falling home prices, volume will drop further, as more and more people are convinced that the fall in values is a trend and not an anomoly. We’re on this slippery slope in many markets right now, but just beginning to pick up speed.
Quote: If Hummers are reposessed, realtor and mortgage agents egos are destroyed.
——-
Yes, but more importantly, they can’t afford to buy bigger hooters for their girlfriends. Oh my!
If you think foreclosures were high in the fourth quarter, just wait until the afteraffects of subprime subsidence kick prices squarely in the teeth…
——————————————————————————-
New foreclosures at record high
Mortgage delinquencies rise across the board in fourth quarter
By MarketWatch
Last Update: 12:07 PM ET Mar 13, 2007
CHICAGO (MarketWatch) — Many more U.S. homeowners were unable to keep up with their mortgage payments in the fourth quarter, the Mortgage Bankers Association said Tuesday, with the rate of homes entering the foreclosure process hitting a record 0.54% and the delinquency rate on U.S. home loans leaping to 4.95% from 4.67% three months earlier.
“Although the U.S. economy and job market remain solid, the housing market continued to decelerate in the fourth quarter of 2006. Nationally, house prices increased at a slower rate and the pace of sales and construction activity continued to slow,” said Doug Duncan, MBA’s chief economist.
http://www.marketwatch.com/news/story/rate-new-foreclosures-us-record/story.aspx?guid=%7B9BDB33B1%2D819E%2D4297%2DA096%2DCCDFB0FB8982%7D
This subprime implosion is happening way too fast.. i might get a whiplash.
just seems like yesterday that us bloggers were the only ones singing the doom and gloom predictions of the meltdown, but now its seems like every major msm is carrying a story about the sub-primes licking the dust.
so what’s next.. when do we - who’ve been patiently waiting on the sidelines getting rediculed for missing the new paradigm - jump into the market and gobble up some cash-flow positive properties.
Is it time to wake up.. or should i hit the snooze ?
got cash?
Hit snooze ! The actual bubble bursting hasn’t even started yet. The liquidity is just starting to be removed. Wait until things get tight.
Not sure what kind of “assistance” to subprime borrowers Senator Dodd is considering, but I think it’s fair to say that the political significance of more than 1 million foreclosures is starting to dawn on the politicians.
http://www.bloomberg.com/apps/news?pid=20601087&sid=afYyXxov1Xxs&refer=home
He’s out of his mind. The last thing this country needs is more government bail-outs of stupid people. Instead, these noble senators should spend more time regulating the issuance of debt to people could never repay (not that many of them had any intention of repaying).
Any bail-outs of people like Casey would–I hope–spark a political firestorm. There is no way that the vast majority of voters would approve a mortgage bail-out to fraudsters and speculators that have ruined families and communities.
This truly makes me sick. Somedays I do hope we have a massive civil war.
I hear you, but if 70% of Americans own the home they live in, I doubt this would cause a firestorm. What percentage of that 70% wants to see home values challenged? I’m guessing 0%.
1 million foreclosures challenge home values. Thus, the politically justified thing to do is bailouts.
It probably depends on how many of the 1 million foreclosures are people who “pulled a Casey” and how many are “we just wanted the American Dream.”
Yeah, you have a point. Anything to prop up home values across the board would likely have tremendous support. It will only be younger wannabe first-time home buyers like myself that would protest. Sigh.
However, I still maintain that requiring a sizable down payment is the type of legislation is needed. It is only through preventing bubbles to form that we, as a country, create a sustainable and lasting sense of fairness, community, and prosperity.
No argument from me. Regardless if you were a Casey or completely leveraging the rest of your life for the American Dream, I can only hope a political firestorm would ensue if there are bailouts. I just doubt it.
Still, I stick to my point that requiring a sizable down payment, for example, is the kind of legislation that will foster a sustainable economy and lasting sense of fairness and community. Bailing out people after a bubble pops only rewards volatility and risk-taking. Where are the adults that care about our future America? While some risk-taking is necessary for growth, perhaps, it should not be the defining characteristic of our lives.
I’m 29, a Harvard PhD, and I have no one except anonymous posters on blogs to look up to. Something is wrong if I can’t believe that people in positions of power are interested in maintaining opportunity and a sustainable way of life.
What percentage of the 70% want values challenged if they own their own home?
Wouldn’t the answer be 70%, because they’re paying excessive property taxes…
Wouldn’t the answer be 70%, because they’re paying excessive property taxes…
Not if 90% of the 70% want values to stay up there in order to keep tapping into their bubble-inflated equity so as to keep up their ego-inflated lifestyles. What a sad irony…
They should spend the money explaining to people what happened. As if (they could?).
“There is a difference between a subprime lender and a predator, and I don’t want to lose the subprime lender,”
I think the difference is the subprime lender contributed to his campaign.
I wouldn’t want to be the political party that raised taxes or cut other spending to bail out homeowners and financiers, and a “few billion” won’t go very far.
The only thing I can think of is some kind of accounting deal to allow lenders to write off loans gradually, instead of all at once, if they allow former owner-occupants to rent their homes at 30% of their incomes until the properties can sell for something like the value of the loan (the year 2020 perhaps?). In other words, lose the different between the mortgage payment and the rent every month, instead of marking the whole thing to market right away. I guess people get to keep the toys. Investors, and second homeowers, would be left to sink.
at 30% of income would mean a bagger at Safeway is living large in a cool 1/2mil house… till they can’t make the HOA pmt., electricity is shut-down and there is alien from the revenue dept. nah..
the best option , in my opinion, is the bandaid option - yank that sucker off in 1 move. painful as h3ll but its over in a blink.
got cash?
I have to agree Zee that a government bailout would be a disaster. It punishes the persons who having been waiting and saving for the day they can comfortably afford a house. But haven’t the conservative savers always been screwed over in the end by the redistribution of wealth crowd?
And how are the fraudsters (like the woman from the LA Times article who seemed like she was preyed upon by the mortgage bankers and we come to find out she owned three houses, two through a straw buyer) differentiated?
I mostly agree, but not about the rent. If there was some way to calculate a fair rent for a house, the FB’s probably can’t afford to live in what they overbought. I say, make them sell some toys, and allow them to declare Chapter 7. Then they can go back to being bitter renters, with NO credit for seven years except a secure credit card and possibly a car loan — sort of like the way bankruptcy used to be. Then they can lay low while they repair their credit and learn how to read a mortgage contract. And that’s just for primary owners.
Flippers…let the market work them over the way they worked it over.
We’re all pretty good at running our mouths on this forum. When are we going to act as one voice and acquaint our legislators with the facts of “bailout refusenik” life?
Is it time for us to start indoctrinating them? (In my case, Senators Casey and Specter)
Regarding this comment from sleepless_near_seattle: I hear you, but if 70% of Americans own the home they live in, I doubt this would cause a firestorm. What percentage of that 70% wants to see home values challenged? I’m guessing 0%. 1 million foreclosures challenge home values. Thus, the politically justified thing to do is bailouts.
From the article: Federal aid “would come at a cost,” said Douglas Duncan, chief economist at the Mortgage Bankers Association. “It has to be paid for and the question is would the 34 percent of homeowners who have no mortgage be willing to pay taxes to support the bailout of people who traditionally have not managed credit well?”
I’ll take that even futher…how about those who have mortgages, but are managing them just fine. Or, better yet, those who have mortgages, struggle a bit to make ends meet, but are not “subprime” so wouldn’t get the assistance. Would any of these people be willing to pay taxes to “support the bailout of people who traditionally have not managed credit well?” Doubt it.
Values be damned - I see a lot of opposition to this.
Home values be damned, that is.
Good points, I didn’t consider how that 70% breaks out.
Can’t prop up home values with a bail out. Perhaps slow down the unwinding for a while. But, one has to SELL a house to someone. Only if the FED is giving money to people to buy houses with can values be “propped up”.
No problem here, the fed. gov’t can just borrow the money to save the FB’s, same way they pay for everything else. The ultimate heloc.
Amazing. Ben excerpts 16 separate articles in this post.
1. Subprime is going to hell
2. Subprime is going to hell
3. Subprime is going to hell
4. Subprime is going to hell
5. Subprime is going to hell
6. Subprime is going to hell
7. Subprime is going to hell
8. Subprime is going to hell
9. Subprime is going to hell
10. Subprime is going to hell
11. Subprime is going to hell
12. Subprime is going to hell
13. Subprime is going to hell
14. Subprime is going to hell
15. A recovery in the nation’s housing market is ‘likely’ this year.
16. Subprime is going to hell
I think David Learah’s been eating too many poppy seeds.
LOL. That’s a good one.
UH oh, piss test time at the NAR.
“It depends on what the meaning of the word ‘is’ is…”
Bill Clinton - 1998
“It depends on what the meaning of the word ‘likely’ is…”
David Learah - 2008
The pain has only begun.
We still have $1.0 trillion to reset this year and $1.5 trillion next year. With no place to refinance
“With no place to refinance.”
Wow. How can the MSM experts miss this brick wall looming dead ahead in the road?
They have their backs turned the wrong way…
We will see stories in 6-12 months “These resets are killing people”, “We never saw this coming”, “DL the soft landing is coming in day”, ….
They are out picking daisies.
Maybe the gov’t. bailout will consist of something like vulture funds who buy the subprime waste at pennies on the dollar getting hugh tax breaks for loans they successfully restructure.
I just did a cash equivalency adjustment to a sale based upon current market conditions. This model equates value with a 20% downstroke on the purchase at todays rates.
It discounts approximately 13% with no other factors, so hypothetically the market could blow off 13% right on top of every property in the US once the market goes back to normal underwriting.
This 13% coupled with excess inventory and waning demand could well prove a deathnell for anyone who purchased a home in the last 3 years, and that is no small number. A refi with an ARM is an effective purchase.
Factor in the probability that a very small part of the purchasing poplution has 20% to put down and whammo.
I think Lowes is going to be very busy in 2-3 years as we are all pretty much stuck home. Learn to love it and learn how to cook.
“The Federal Bureau of Investigation’s estimate that mortgage fraud costs the lending business $1.2 billion a year is off the mark by more than $3 billion,”
———————————————————-
And they haven’t even begun to uncover the fraud by the Bada Bing crowd. It’s not likely the Sopranos and Corleones let this opportunity pass them by.
Right; I am guessing organized crime has been using ever-appreciating high-end homes as a money laundering vehicle for the duration of the bubble. Can anyone provide evidence?
I could but then I would have to kill you.
Anybody who could provide evidence won’t for fear of getting whacked.
But I’d be shocked if they didn’t benefit from this.
Good point.
In all the books and movies they are heavily into crooked banks. Oops. Hmmm, maybe theirs will be the only loans eventually paid off (one way or the other) or bought back. Or they are planning to increase their stake after the price drop. It’s nice to have cash.
If you think we see the mess that is coming check out what this guy has to say. Of course, it would have sounded much more credible if he did start to promote his book at the end.
http://www.europac.net/Schiff-CNBC-3-12-07_lg.asp
Rejoice and prepare for a big party. The prodigal son is coming home at last and the least you guys can do is spare him a room until the market recovers in 2015. Come on, lets have some milk of human kindness.
“lets have some milk of human kindness”
the subprime teet has run dry.
Got Milk?
” tougher restrictions for homebuyers with less than stellar credit, big losses for investors in mortgage- backed securities, and fewer options for consumers accustomed to spending down their home equity.”
“Options” for consumers “accustomed” to spending down equity?
As if consumers have a god-given right to double-digit appreciation and the annual cash-out.
How does one spend down negative equity gains?
Home Equity? We ain’t got no stinkin’ home equity
How does the subprime mess get managed behind the scenes? My hunch:
1) Kingpins keep the local players running full bore until the day they decide to drop them, at which point they are fitted with concrete shoes and dropped into a vat of acid (a la New Century just yesterday).
2) The “rightsized” remaining sector is primed to keep chugging along in business-as-usual fashion, using quarantine procedures to inocculate them against spillover effects from those who recently succumbed to the Black Death.
Not sure how the quarantine services work — who provides them by what mechanism, etc. — but the extreme confidence exuding from industry insiders suggests they must have a plan in play…
the confidence of the insiders is analogous to the classic Titanic announcement… go back to your warm bed folks, nothing to worry about, just a minor bump. In the meantime the smart money is loading the life-boats.
As an individual, looking out for # 1, and close family/friends, i’m more interested in the mutual funds, reit etc that have exposure to this toxic waste.. how does one go about finding their exposure?
Would sure like to hear about insulating onesself -as much as possible without resorting to montana and a bunker - any advice from the seasoned bloggers here would be appreciated..
got cash?
“montana and a bunker”
Not that there’s anything wrong with that.
PPT just showed up……-170 and whammo right back to -150….2:01 pm edst
-190 now. There’s no saving this pig today…
Whoh, MSNBC says WaMu is down 5%.
But Dollar General went UP! Kinda says it all…
Wamu owns Long Beach Mortgage, a big subprime lender, an AE was by our office today, first time I’ve seen that company around in two years. I asked him if his company was going to stay in business. He kind of looked at me funny, then said they were owned by Wamu and there were no problems, other than no more 100% financing, for any kind of documentation, full doc, stated, no ratio, etc. We’ll see if Long Beach is spun off.
HousingTracker.net has shows a HUGE SPIKE in inventory in the last 7 days and it’s about to get worse.
I hate the realtors who say, “The sellers aren’t just going to give their houses away.”
That is probably the first honest thing out of a realtors mouth. The sellers can’t give them away and they won’t. Their houses will be taken away by the bank.
“I hate the realtors who say, “The sellers aren’t just going to give their houses away.”
Homeowners say this too, like anything less thank peak pricing is “giving the house away.”
It will take time, but this sense of entitlement will wear off. We’ll hear more & more stories about people making NO money off their house sale or actually losing money (oh horror!). This boom has been incredibly powerful and lots of Kool-Aid was drunk, so just wait. Attitudes will change. Housing will be seen as the incredibly illiquid asset it really is.
2002-2007 Housing Bubble and Crash Wikipedia Entry
“Critical mass was achieved March 12, 2007 with the delisting of New Century and a score of front page articles about the implosion and crash of the sub-prime market.”
I vote for March 5, 2007. That was the day subprime collectively tanked big time.
When is FNM going to come clean and tell us how much we owe?
How many insider shares are left to dump?
“The tightening of credit could take as many as one million buyers out of the market, says Baker, citing Bear Stearns research. ‘Even if you cut that in half, say to 400,000 or 500,000, that’s huge.’”
this line just cracked me up.
Sub primes cause a sell off ! DJIA down 180 points right now. Nearly 1.5%.
Data I’ve been tracking since last fall:
Company 9/29/06 Today Decline
NEW 39.50 0 * 100%
NFI 29.65 3.32 89%
NCC 36.96 36.07 3.5%
LEND 32.00 4.33 87%
CFC 34.89 33.56 4%
FMT 14.26 6.30 56%
NDE 41.57 27.16 35%
* delisted, last trades premarket 3/12 @ $1.90 = 95-100% decline
Waiting for the other shoe to drop. Yes, Neil, I have popcorn!
Make no mistake: Inflation is the answer the Federal Reserve will ultimately run to in order to save the lives of banks. There is literally no other way to save a bank with bad debt than to make new debt more attractive to businesses and consumers. Subprime will of course become a dirty word. But debt is far from over.
We’re staring into the abyss of deflation right now and there is no way in hell Bernanke will go there. He, and all other central bankers, live (and must live) in mortal fear of the big “D” word. So he’ll do what he’s programmed to do: claim to defend a “strong dollar” policy, and flood the market with more cheap dollars.
There is no other way.
Got gold? Got Silver? Massive inflation (like none of us have ever seen before) is coming our way.
I agree. The Fed will panic and slash rates. The fed is a one-trick pony that has one solution to every problem: Print money!
I’m just a week or 2 away from lighting up a substantial doobie, with a crisp $100.00 Bill.
Never was a country so woefully unprepared for what is about to hit it~
Welcome to the brave new world of hyperinflation…
“I’m just a week or 2 away from lighting up a substantial doobie, with a crisp $100.00 Bill.”
ROTFLAMO! Spoken like a true boomer!
Our currency versus a bunch of FB’s and subslime lenders? I think he’ll choose the currency. But I’m not selling my silver/palladium, either.
“I’m just a week or 2 away from lighting up a substantial doobie, with a crisp $100.00 Bill”
Ahahaha..that should be the quote of the week.
Read Shiff’s book. He’s spot on.
Why would Japanese go along with that? They had to endure deflating assets while they they were preached to by USA.
Inflation is the answer the Federal Reserve will ultimately run to in order to save the lives of banks
Baloney. Banks borrow short term and lend long term. That means that inflation hurts them and deflation helps them. Besides protecting banks, the Fed’s other job is to maintain the reserve status of the US$, which would be destroyed by inflation.
Saving Joe Homedebtor’s behind is not part of the Fed’s mission statement.
Wow — still an hour and a half of trading time, and the US stock markets have already hit their 200 pt. plunge protection limit! I guess not everyone is buying the official reassurances that the subprime implosion will be effectively quarantined?
http://www.marketwatch.com/
Clarification: The DJIA appears to have a 200pt daily correction limit…
ARGH!!! It’s automated trading programs! Computers! There is no plunge protection team. Once stocks drop below a certain percentage the computer programs pick them up both counting on and causing a retracement. They then dump more. Geez!
Oh really? What is so magic about 200 pt drops that the DJIA never drops by more than that? I remain unconvinced; go right ahead and call me a tinfoil hat lunatic if you please. It is a badge of honor these days on this blog, anyway.
That’s right! I going to start wearing mine in public.
Agreed about the automated progams KIA. Some still don’t get it.
But you are wrong about the Working Group, or “PPT” - they exist, and indeed they get down…..just not that often….cetainly not to stave off a 200 point (or even 500pt) drop Comical
jdog — Thanks for chiming in here, bro! We have been missing your abusive remarks…
Oh, and never mind that the data support what I said. If thejdog says you wear a tinfoil hat, then so be it.
Covered at the close and looking to get long tomorrow for several weeks to a month.
Downside been berry berry good to me
GETSTUCCO SAID : “Oh really? What is so magic about 200 pt drops that the DJIA never drops by more than that? ”
you may need to re-work your data chief….looks like a close above your magic 200 pt mark…
btw txchick….I think we drop another 75 points tomorow to form a double bottom and then right off to the races again….too much liquidity and it’s got to go someplace….especially staring at a rate cut.
“you may need to re-work your data chief….looks like a close above your magic 200 pt mark…”
Thanks again for your (not so) brilliant insights, jdog.
My point is not so much about whether the stock market ever corrects to the downside by over 200 pts (today was a rare exception), but more about the statistical distribution of downticks and upticks, which is highly skewed to the inflationary end of the spectrum. I bet you could count the number of days since Oct. 19, 1987 when the DJIA dropped by more than 2% in one day on fewer than the digits on your hands and feet. The Greenspan put is alive and well in his retirement, and will survive until the ability of U.S. stock valuations to diverge to the upside from fundamentals is well past the breaking point.
P.S. I am anticipating a tell-all book about the role of high-level manipulation of the U.S. stock market to appear within the next decade…
did you get a chance to catch the transcripts of Rep. Ron Paul questioning Bernanke about the PPT? Fascinating.
http://www.lewrockwell.com/paul/paul340.html
would be shocked to see a tell all book. some secrets are just too deep to ever be allowed out in detail
yes the market is maniupulated byt the gov’t…but on a daily or weekly basis? I don’t believe so, but it certainly is plausible.
“…would be shocked to see a tell all book.”
Someone could make a ton of dough by writing a book on this fascinating subject. Stephanopoulis is one insider who spilled the beans on it already several years ago…
http://www.economicpolicyreview.com/labels/PPT.html
Here is more on the PPT…
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2006/10/30/ccview30.xml
A lot more data to come out this week: (CPI,PPI,Empire,Philly,etc.)
Should be an interesting week.
I like the “Countdown to the Close” feature on the top of the marketwatch.com front page. It makes it sound like they are hoping the stock market will somehow come out alive…
HousingTracker.net has exploded! Has anyone see the inventory increases? Looks like it’s about to get another pop as subprime is belly up and so are foreclosures.
Eyeballing those numbers, I’d guess the real explosion is still a couple of weeks away (with the possible exception of Miami). In NOVA, most jursidictions send their personal property tax bills in mid- to late-April. Also, yards haven’t started greening yet, so the real selling season hasn’t started yet. Finally, I wonder about HousingTraker.net. They show 0.0% increase in listings for Las Vegas while a 11% increase in Chicago. That seems odd, doesn’t it?
Chicago numbers by week:
Week Chicago Chicagoland
03/12/2007 19094 71718
03/05/2007 15822 60893
02/26/2007 15302 58682
02/19/2007 15048 57675
02/12/2007 14777 56711
02/05/2007 14350 55138
01/29/2007 14276 55055
01/22/2007 14094 54115
01/15/2007 13812 53132
01/08/2007 13468 51703
01/01/2007 13209 50447
12/25/2006 14060 53194
12/18/2006 14462 54536
12/11/2006 14688 55650
12/04/2006 14878 56542
11/27/2006 15219 58191
11/20/2006 15271 58498
11/13/2006 15684 59931
11/06/2006 15803 60334
10/30/2006 16058 61477
That ain’t nothing. Wait until April 1 (appropriate date)…
all the listings that got yanked over the winter months will pop back up like daffodils.
Do you like daffodils : )?
Wow, whats going on in Chicago? +11% in a week? And it’s already got one of the highest amounts of inventory.
Look out down below….!!!
All you’ve got is a (so far) successful retest of the lows from a couple of weeks ago and a double bottom. Be interesting to see if that can break.
Beware The Ides Of March…
You mean beware the idiots of March?
The likes of Robert Toll, Jim Cramer, David Lereah, Ben Bernanke etc…
Was just driving home and heard an ad for a Mortgage company promoting a quarter point interest rate fixed for 5 years on $320,000 loans. $300000 loan for $104 dollars a month for 5 years. No fees, no closing costs. Both equity loans and new house purchases. Scary, scary, scary…
Bidding to cover index shorts again. The COT thing that came out last Friday is spooky.
“COT thang is spooky”
Please explain?
From last Friday’s SentimentTrader:
“Just a quick note on the just-released Commitments of Traders report. Large commercial hedgers in the major equity index futures (S&P 500, Nasdaq 100 and DJIA), both full contract and e-mimi, went from a large $33 billion net short position to a $14 billion net short.
That nearly $20 billion weekly swing is the largest in history, nearly double the previous record reduction in net shorts. We’d have to see something closer to a $10 billion or less net short position before I’d consider it an overall positive for stocks, but this is a huge change and something to keep on our radar next week when the next report comes out.”
LOL
http://adamsoptions.blogspot.com/2007/03/lend-me-body-part.html
Credit to Exurban Nation for the find:
http://exurbannation.blogspot.com/2007/03/twofer-another-blog-onote.html#comments
A take off on Mr. Bill with, you guessed it, Mr. Dave (NAR)
ROFLMAO
Uh oh, watch out. Jim Cramer predicts the FED will cut rates to save subprime.
http://www.thestreet.com/_yahoo/funds/realmoneyradiowrap/10344134.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA
“The bottom line is things are falling into place for the rate cut,” due to the subprime lending crisis, Jim Cramer said on TheStreet.com TV’s Wall Street Confidential Web video Tuesday.
“If this is the pain we need to have … you are talking about 1% of the loan market bringing down the whole market … then that’s an opportunity,” he told Gregg Greenberg, the host of Wall St. Confidential.
Cramer said he believes Accredited Home Lenders (LEND - Cramer’s Take - Stockpickr - Rating) will get its loans called in first, followed by IndyMac (NDE - Cramer’s Take - Stockpickr - Rating), Novastar (NFI - Cramer’s Take - Stockpickr - Rating) and Fremont General (FMT - Cramer’s Take - Stockpickr - Rating).
That, in turn, should make the Fed realize it can’t have so many companies unable to issue mortgages, he said.
Feh. What a clown. Wonder how his “investment” properties he supposedly bought in Dec with his own money. Of course, he’s a zillionaire, what does he care.
“Uh oh, watch out. Jim Cramer predicts the FED will cut rates to save subprime.”
I guess that means we can look for a hike.
If the Fed (hopefully) doesn’t cut rates maybe schmucks like this calling for it will keep their faithful flocks from buying this spring with the thought “If Cramer thinks they have to cut the rates I’m not buying until they do” and it will further hurt sales until they realize it isn’t going to happen.
I remembered listening to Cramer’s idiotic show not to long ago when he whispered into the camera that “now is the time to buy financials”…
Now is the time to buy pharmaceutical stocks. Especially ones with psychiatric drugs to treat Mr. Cramer himself.
REIC to Earth…Message as Follows:
“What do you MEAN that ALL the FUNNY Money we have been PLAYING with ….IS REAL MONEY ???!!!”
End of Transmission
An old Marine saying, ” when ya got em’ by the balls their hearts and minds will follow.”
So goes subprime.
It looks like the SEC was questinging New Century’s loan loss provisions in 2006:
1. We note the following trends during 2005:
*The company had $80.2 million of mortgage loans held for sale on non accrual status versus $23.4 million on non accrual status at December 31, 2004, an increase of 243%. Refer to page F-24.
*The company had $666.6 million of mortgage loans held for investment on non accrual status versus $179.2 million at December 31, 2004, an increase of 272%. Refer to page F-26.
* The company uses a qualifying interest rate that is equal to the initial interest rate on the loan to determine the applicant`s ability to repay an adjustable-rate loan.
* For interest-only adjustable rate mortgage loans the company generally uses the initial interest-only payment for determining the borrower`s repayment ability. Refer to page 9.
* Originations of interest-only loans were 31% of total loan originations during 2005 versus 19% of originations in 2004, a considerable increase as noted by the company. Refer to page 58.
* In the fourth quarter of 2005 the company changed its product design to provide for an interest-only payment period for at least the first five years following origination. Previously under most of these interest-only mortgage loans the interest-only period extended for only the first two or three years. Refer to page F-26.
* While the allowance for losses for mortgage loans held for investment increased during 2005 by approximately $108 million or 120%, the charge offs during the period increased $26 million or 415%. Refer to pages F-26 and F-27.
Given the above as well as the increasing interest rate environment, please clarify to us what consideration you gave to discussing in Management`s Discussion and Analysis the unfavorable trends and effect on future operating results including expected increases in the loan loss provision. Refer to Item 303(a) (3) (ii) of Regulation S-K. In addition, please clarify to us how these trends were considered in the assessment of the adequacy of the loan loss provision.
http://www.sec.gov/Archives/edgar/data/1287286/000000000006031979/filename1.txt
CNBC reporting MA issues subpoenas to Bear Stearns and UBS related to subprime meltdown: http://www.cnbc.com/id/17596255
What happens when New Century can’t pay the rent? HAHAHAHAHAHA…big oops. I didn’t know they were about to move into new office space.
http://blogs.ocregister.com/mortgage/archives/2007/03/new_century_could_cost_landlor_1.html
New Century could cost landlord millions
Maguire Properties of Los Angeles today outlined its financial exposure to embattled subprime lender New Century Financial, which leases 267,000 square feet from Maguire in Irvine and is scheduled to occupy an additional 190,000 square feet at an office tower under construction in the city. In the event New Century stops paying its rent, Maguire could be out of pocket say $6.5 million, assuming it takes a year to find another tenant. Maguire downplayed the risk of having to find another tenant for the tower it’s building.
Maguire said, “Should New Century not take occupancy at our new 3161 Michelson property, we believe an opportunity exists to lease all of their space, which includes the top four floors of the 20-story office tower, at significantly higher rates than are payable by New Century. Their space includes the most desirable floors in what is quickly becoming the trophy office tower in Irvine, with outstanding views of the surrounding areas. Their lease also gives New Century building exterior signage opportunities which are extraordinarily valuable given the building’s highly visible location at the 405 (San Diego) Freeway and Jamboree Road.”
That’s assuming New Century is a “blip” on the radar.
I guess I won’t have to wonder any longer about why the New Century office lights at I-15 and SR56 are always turned off in the early evening…
How weird, it seems like just yesterday we were all on this board b!tching and moaning about how no one could afford a house, how the MSM was ignoring the bubble, and the prices just kept getting higher and higher. Now, the kinds of comments that have been on this board since day one are dominating the news. Hopefully, we have all been stashing cash away to take advantage of some of these sorry fools they’ve been interviewing at the kitchen table in their soon to be foreclosed “homes”. Thanks Ben!
What I’m ROFL about is all the whining from the REIC in 2006 about how the MSM was on their case with unfair stories. The “All this bubble talk is just media sweeps stuff” defense. Wonder how they feel about approaching a real shooting war now that the media is firing a few warning shots over their head before closing reports with the good news blanks. it probably feels like a firing squad to them now, but this is just the howitzers tuning up to clear the wire.
LQQKS like the Fed’s are about to wipe that “blip” on the Radar that was once High Flying New Century 13 OFF the SCREEN like a dirty dead Bug !
Isn’t it amazing that virtually everthing that was predicted on this blog for the last few years has come true! No wonder so many are foresaking the traditional news media for these alternative sources. I get more intelligent, usable business news on this blog everyday than I do reading just about all the major news outlets.
+++++
Front page of the L.A. Times this morning (print edition) with the following headline, “Home Price Worry Rises As Mortgage Woes Grow”
http://tinyurl.com/2pa4rk
Says Anthony Sanders, Finance professor of Ohio State University, “I wouldn’t be at all surprised” if we got a crash in California’s housing market.
from Marketwatch “US new foreclosures” Doug Duncan, MBA’s Chief Economist said: “Even in the arena of subprime loans, there is evidence that a preponderance of borrowers graduate into the prime marketplace, or out of adjustable-rate products and into fixed-rate products, he said.”
I really have a hard time believing this to be the case. Perhaps our Mortgage Mavens on here can shed some light on this. How can these people refi out of a subprime when we know that: 1. they have no savings, 2. The value of the property has fallen and 3. The penalties for early refi. I am sure I’m missing something here…
Someone help a renter out here!
Operation: from a renter, to a renter - it’s simple.
RE only goes up. Equity builds faster than you can possibly negatively amortize. Use an equity loan to pay off your unsecured debts. Improve your credit rating. Penalty, shmenalty. You roll *that*, too, into your new refi with the low, LOW monthly payment.
There’s plenty of solid, recent historical evidence to support this. You can’t trust old, stale, expired historical evidence, you know.
Ya know…. I think I’m ready to call it. We are about to leave the ‘Denial’ phase and enter ‘Fear’ this spring.
I’m with you but add a little loathing to all the fear.
The “Fear” should be measurable by the inventories.
An interesting read …
http://www.321gold.com/editorials/orlandini/orlandini031207.html
Hey! I’m already long SWP.CN!
As for the “oil bull market” I’d disagree. We’re below the 1-year moving average of $65. While a long-term bull, I think we can see a pullback to $40 or so in the next year. (recession will see to that). At that point, you fill your boots with oil stocks again. But not at $59 per barrel.
Consider that with a falling dollar, it will take more to purchase the oil.