“The Submarining Of Subprime”
The Journal Sentinel reports from Wisconsin. “An ugly surprise reported Tuesday by the Mortgage Bankers Association was that Wisconsin, long known for superior bill-paying performance, had a foreclosure rate worse than the nation’s - 1.42% of all loans in the fourth quarter.”
“It was all too easy for Jason St. Martin of Franklin to get a $600,000 loan in the summer of 2005. ‘I’m a teacher. There’s no way that I could have afforded a $600,000 loan for two years,’ St. Martin said.”
“He used the loan to commission two ’spec homes,’ houses that, once built, he intended to sell at a profit. But things went wrong, and he wound up with two half-built houses in a market flooded with inventory - and $535,000 still due.”
“His foreclosure process started last week.”
“Critics here said that only a sea change in lending practices will stanch the flow of defaulting borrowers.”
“‘This is the result of aggressive and predatory lending. It happened because lenders lowered their standards and lent money to people who never had the ability to pay it back,’ said Todd Esser, a consumer bankruptcy attorney in Milwaukee. Years ago, he said, ‘you couldn’t imagine a loan being made where the banker didn’t actually see the collateral. Now they’re throwing money at people - no collateral, no security. You don’t even need proof of income.’”
“Subprime lender Jim Howe in Racine, said most defaulting borrowers he sees are people who bought and borrowed beyond their means. ‘It’s not the lenders. They’re just going by their (regulatory) guidelines and doing what they can do,’ Howe said. ‘Now you’ve got the people who got the loans not living up to their obligations.’”
The Herald News from Illinois. “Foreclosures and late mortgage payments are hitting high marks in Will County and across the country. In Will County, foreclosures in 2006 reached 3,226, the highest in at least four years and a 30 percent jump from the number of foreclosures in 2005, according to the Recorder of Deeds office.”
“Will County had the highest foreclosure rate in the Chicago area for most of 2006 and again in January. The rising foreclosure rates have been fueled by ’subprime’ loans that pumped up the real estate market in recent years, making mortgages available to borrowers with high credit risks.”
“‘A lot of these programs, quite honestly, instead of helping people have really hurt them,’ said Tom Mulvey, VP at Dow Mortgage, a Joliet company that does not deal in subprime loans.”
“All Chicago-area counties had higher foreclosure rates than the national average, according to RealtyTrac.”
The Press & Argus from Michigan. “The home of recently divorced state Rep. Chris Ward is in the process of bank foreclosure. According to a legal notice, Ward and his ex-wife owe $158,292 on their home in Brighton Township. County records put the value of the property at less than $100,000.”
“The Wards are not alone in Livingston County. In the first two months of this year, 138 foreclosures have been filed with the Register of Deeds. During the same period in 2006, 72 were filed. And in the same two months in 2005, only 31 were filed.”
From Action News 24 in Pennsylvania. “It appears Erie County has an increasingly high rate of home foreclosures and sheriff sales. In 1996, the annual number of foreclosure and sheriff sales went from 113 to 268 in 2000… and then up to 636 in 2006, according to the Erie County Sheriff`s Department.”
“‘It appears to be the affordability of housing has changed and I`m not so sure its the pricing of the house. I think its the income levels of the individuals and that is a concern.’ said John Stolar, Senior VP of National Bank of Pennsylvania.”
“The county has processed 376 Sheriff`s sales already this year. This could mean good news for home buyers looking for a bargain, as high foreclosure rates tend to drive down housing prices.”
From WCCO 4 in Minnesota. “The number of people who are behind on their mortgage payments is at nearly 5 percent and the number of foreclosures is also at a record high.”
“Homeowner Tom McClaughlin is familiar with foreclosures. McClaughlin refinanced his mortgage but with bad credit, his only option was a high interest loan with payments higher than his first mortgage that he couldn’t afford. ‘Ended up making the worst mistake of my life,’ said McClaughlin.”
“McClaughlin said it was something he couldn’t afford but the broker falsified his income so he’d qualify. ‘They did that just so I could get the loan,’ he said.”
“Minnesota Attorney General Lori Swanson said falsifying income is a common practice. ‘In some cases brokers will make up jobs that people don’t have or extra income that they really don’t have,’ said Swanson.”
“She said some brokers don’t care if homeowners default since they will sell the mortgage anyway. ‘Putting people from product to product, refinancing them in order to make a commission and not really caring about what’s in the best interest of the consumer,’ said Swanson.”
The Star Tribune from Minnesota. “The subprime mortgage crisis, which already has shaved billions of dollars off the value of U.S. stocks, is starting to hit home for some Minnesota workers and borrowers.”
“Bloomington-based Residential Capital, one of the country’s biggest mortgage lenders, said Tuesday that it lost $651 million in the fourth quarter because of bad subprime loans and that it might need to cut some of its 1,900 jobs in the state.”
“Edina-based Maribella Mortgage, which once employed 125 workers, will shut its doors today.”
“In the fourth quarter last year, delinquent subprime mortgages in Minnesota jumped to 14.1 percent of the total, from 10.9 percent during the same period of 2005, according to the Mortgage Bankers Association.”
“The most obvious effect from the submarining of subprime has been in the stock market, where some subprime lenders have fallen like dominoes, triggering fears of a broader financial crisis.”
“Doug Winter, senior VP for Countrywide Home Mortgage in Plymouth, said that it’s getting more difficult to find mortgages for people who are good credit risks, but who have complex tax situations or other complicating issues.”
“‘Those loans have really come under scrutiny, and the availability of these products have pretty much gone away,’ Winter said.”
“ResCap executives also said the company will stop selling some of the riskiest subprime products, such as loans that require little or no documentation of the borrower’s income. It will also reduce its subprime mortgage investments by nearly half, to $28 billion by the end of the year.”
“ResCap also left the door open to layoffs. ‘We continually monitor our staffing levels in light of our business needs,’ it said in a prepared statement.”
“While the number of borrowers defaulting on their mortgages is rising, the situation is being exacerbated by Wall Street lenders, who are pulling their backing from subprime lenders, said Amy Crews Cutts, deputy chief economist for Freddie Mac.”
“‘I’ve never seen this situation before,’ she said. ‘There’s no way to model it.’”
“Crews Cutts said that, during credit cycles such as the one we’re in now, it’s not unusual for default rates to be in the 10 to 15 percent range. ‘It’s a very interesting situation that we’re in right now,’ she said. ‘How bad are subprime delinquencies going to get? It’s unknowable at this moment.’”
“Crews Cutts
deputy to the HNIC at freddie mac
it’s interesting = I’ll still get paid
I know his brother Buzz.
You can’t make these names up, people!
I liked the guy named Hooker in the article earlier. WTF! Does everyone have a feckless name?
Future Freddie Mac press release title: Crews Cut
“‘I’ve never seen this situation before,’ she said. ‘There’s no way to model it.’”
That is an extremely scary statement, considering that this whole credit market is underpinned by derivatives that were built on models. I sense we are going to see a whole new layer of failures very shortly. The hedge funds are up next.
Houston we have a problem.
… If only we had cool headed professionals running this crisis too.
I’m afraid this is more like “Houston, everything is fine, air is getting a bit stale, but we’re not worried”.
To continue the analogy, that’s what’s being said by the head astronaut, as he’s inching toward the escape pod which only has room for one.
‘Don’t panic! But if you’re going to panic, be the first to panic.’
Credit goes to some poster on this board.
Flight, FiDO: RSO reports subprime has exploded
There’s no way to model it because this has never happened before. Model results are based on historical performance.
I agree. Take a look at these charts in this editorial and it’ll prove we are in uncharted waters. No way to compare it to any time in history:
http://financialsense.com/editorials/hodges/2007/0315.html
Bah! She can model it. She just doesn’t want to. Nobody wants to be the bearer of bad news.
Model? try S and L crisis times 1,000,000
“‘I’ve never seen this situation before,’ she said. ‘There’s no way to model it.’”
Those of us who have been reading this blog for the past two years, haven’t been the least bit surprised by the way this is playing out. Model? We don’t need no stinkin’ model.
Here is a model: for SubPrime mortgages:
a) 98% of all borrowers can pay while real estate values rise 20% annually, through REFI’s of the original notes when the cash runs out.
b) 75% of all subprime loans written were making minimum interest payments. Earned interest was booked and added to the prior mortgage balance. This went on for more than 2 years.
c) Assume less than 5% can actually pay down the increasing principal without refinancing, after the equity = $0, or 24 months runs out..{when the principal payments are accelerated}
d) 25% of 2006 Subprime borrowers canot make the P&I based on actual income.
e) 0% the number of people applying for a SubPrime mortgage that can make the full P& I at the “NEW” maximum interest rate computations.
f) Due to (e) above assume the new home buying “plankton” have disappeared.
Compute:
85% at a minimum of ALL Subprime borrowers cannot refi nor make P&I payments.
Model suggests “TILT”
““Subprime lender Jim Howe in Racine, said most defaulting borrowers he sees are people who bought and borrowed beyond their means. ‘It’s not the lenders. They’re just going by their (regulatory) guidelines and doing what they can do,’ Howe said.”
Ha ha!! The Great American Bob and Weave from Responsiblity. It’s a fricking national pastime.
Disgusting.
Like Challenger and Columbia… no manager ever got fired at NASA for it.
Now that we officially have a Gulag, maybe use it as incentive for people to stay in line?
Nobody got fired for 9/11, either.
Perhaps the prospect of actually going to prison is starting to sink in.
You can read all about the Wisconsin Housing Implosion at:
http://madisonhousingbubble.blogspot.com/
They were attacked by the infamous NINJA loan!
(No Income, No Job or Assets)
Gets you in the middle of the night, it does.
More like the Neil and Bob as he gives humming praise to the do-no-wrong folks on Wall Street
14 Country Lane, Rolling Hills Estates, 90274
Status: ACT MLS#: P939720 $1,780,000*
List Dt: 01/13/2007 PType: SFR-A Orig Price: $2,050,00
Nearly a 300K drop in price. Good thing I didn’t buy it last week at full price!!!!!!!!!!!!!!!!!
that house is not worth over 1.3 mill. Need a lot of updating on that house…similar house sold in the same subdivision last year for 1.4…with a pool and more updates
Oddest listing price history.
2,050,000 Jan13 original listing
1,850,000 Jan16 Lowered price
1,799,000 Feb23
1,780,000 Feb24
maybe the strategy is to keep dropping prices until it reaches a reasonable level. (Owners paid 830,000 in 5/1993.)
A mystery: Why are top U.S. economic leaders so sanguine about the subprime implosion?
Theories:
1) It is part of their jobs to project an image of calm regardless of what kind of crisis is playing out in the markets.
2) Intervention is already underway to “contain” the subprime problem.
3) Deep-pocketed Wall Street investment banks make lots of money, anyway, by mopping up after a crisis.
4) They don’t grasp the depth and breadth of the problem.
Thoughts?
Uh, I’ll choose door number three for ten GS.
I love how Greenspan can’t keep his mouth shut now that he is out of office ! I wonder if Bernanke calls him and tells him to shut up ?
Easy Al has to make money somehow. No one wants to pay his exorbitant speaking fees to hear him talk about rainbows and butterflies.
The Rise and Fall of the Housing Empire will have happened, in entirety, under the reign of our erstwhile leader.
My suggestion on how to handle it would be from “Oh Brother, Where Art Thou?”
The scene where the crooked political gets tarred and feathered and run out of town on a rail?
That’d work.
dude, read the community housin bill
As another blogger alluded earlier this month, we are witnessing another “Heckuva of job Brownie” moment.
Laughs. Thats a great line.
“heckuva job greenie”
I’m going with #4.
5) All of the above.
BTW - I just finished reading Fooled by Randomness. What a great book! Thanks for the recommendation. I’m going to lend it to a friend and, when he’s done, I’ll read it again. Lots of insights to absorb.
I will go for #1 & #4. Remember that these guys are there to maintain the status quo. The problem is that the status quo has now changed drastically but they still have their heads up there in the clouds. In my experience the most effective leaders always look for change and prepare themselves for it. To expect the same attitude and mindset from these clowns is like expecting a donkey to run like a thoroughbred. Possible but highly improbable.
I don’t know about any “leaders” understanding the subprime issue but I’d bet the vast majority of people (the sixty percent who either own their homes or rent) don’t have a clue or an interest in “subprime”.
Unless you do some digging and thinking about the issue (which is somewhat complex but reasonably understandable over time) I doubt any of us here would pick up on the issue, quickly.
I don’t think even most of the subprime “lenders” knew what they were really getting into (though they surely do now). All they knew is that “everybody was doing it” and they wanted their piece.
So, you have greedy or stupid people borrowing from greedy (and maybe stupid) lenders who sell their “product” to brokers who greedily package anything together to sell to “clients” they don’t care about who are either greedy or stupid as well but, in fact, are mostly “sophisticated” investors who simply didn’t do the due diligence on the “product” they were buying.
The lenders did their job, the brokers did their job. Individuals took heedless risks and “investors” took similar, heedless, risks.
The lenders will be sued, but won’t have any money to pay any judgement. The brokers will be sued and will pay a pretty big number….somewhere down the road. The investors will get hosed (deservedly). And Joe Sixpack? Some will survive and learn, some (sadly) won’t survive and some will survive but learn nothing and get scorched again on another “get rich quick” scheme of one sort or another.
Oh, and there will be an impact on the rest of us who did not take these risks, make these loans, sell these products or invest in them. How big that impact will be…..who knows?
“‘It’s a very interesting situation that we’re in right now,’ she said.”
Ser-ry eenteresting … but not nice.
she’s not Chinese, i hope?
Verrrry interesting… but shtupid!
I am really interested in whats happened in previous collapses. Who were the ones who benefitted from a depressed market with the cash to move? And where the hell did they keep their money?
well, they are all different.
In the 80s in Houston, housing prices were not all that high. Interest rates were astronomical. 10%, 12%, even 15% for a while. So it was hard to qualify to buy a house. ARMs were new, but really scary because the interest rates were going higher.
Then we all lost our jobs.
I don’t think previous collapses will be relevant to this one, if only because the the sheer size of the market which is trapped in these ridiculous loans is unprecedented. This is not just a shakeout of wealthy people with the means of recovering down the road. A lot of this is going to involve people who will never be able to restore their credit to the point they can even consider buying another house - especially if the industry regulates the hybrid loan out of existence and requires 10% down. On top of that, one of the aspects of credit scoring that I don’t see a lot of people touching on is the fact that prospective employers regularly use credit checks when vetting out applicants. Not only is another house out of the picture, but it will affect their ability to get a job, as well (at least in the white-collar world).
This crash represents a “whole new paradigm”.
Seriously…
So true about credit scores and employment….My wife is a Manager at a local Camarillo company and has had to let go new hires because the Company noted the employee had a terrible credit history. She has seen quite a few a these lately.
Try to buy insurance with a low FICO.
I find that to be absurd. These people need to earn money in order to improve those scores. What in the world is this country trying to accomplish? First, we deny them rental housing, then insurance, and now jobs? Do we want to just put all of these people out on the street as bums? This is unconscionable madness. And I have a good credit by the way.
Have to really agree with you on this Chris. No one seems to have even come close to talking about the $ 350 trillion out there in the twilight zone in derivative land yet. That compounded with all the black box stuff and other types of regalia used by the bankers, brokers, Fed and all the rest of the dorks out there that have allowed this to happen, i think will make the 1929 crash look like a picnic and perhaps ultimately even eclipse the Tulip Bulb and South Sea Land Bubbles by a mile ot two. One needs to really work on cashing out things and finding a quiet little place to migrate to imho. Don’t think for a ,inute that the fiat paper banking system anywhere will be safe for much more than a minute if this really starts to unwind.
“Foreclosures and late mortgage payments are hitting high marks in Will County and across the country.
Not a surprise. The cardboard subdivisions in places like Coal City and Morris sprang up like weeds and attracted a lot of city folk who saw a shot at owning a home in the country. Not only that, but suburbanites who jumped at the chance of building their own cardboard McMansion are finding out that most people don’t want to spend four hours out of their day commuting to and from work at $3.00 a gallon. Suburbanites who live near mass transit in the collar burbs are going to fare best if the mortgage shakeout gets ugly. I expect we’ll see price reductions, but if the far-suburbs go kaput, proximity to the job center will again be fashionable. Since Chicago proper is ridiculously expensive, that leaves the near-burbs as the most affordable and practical place to live (all things considered). At some point,the desire for restful sleep will win out versus the three-car garage and a cornfield for a backyard.
“Suburbanites who live near mass transit in the collar burbs are going to fare best if the mortgage shakeout gets ugly. Since Chicago proper is ridiculously expensive, that leaves the near-burbs as the most affordable and practical place to live (all things considered)”
Problem is that some of the worst housing stock in the Chicago area is in those burbs. Only a handful of Cook Cty collar burbs (Oak Park, Evanston etc) are even worth looking at. Once you go west past the Ryan Exp. from downtown you don’t get into areas with consistently good housing stock until you’re past 53/355.
http://chicagobubbleblog.blogspot.com/
“…that leaves the near-burbs as the most affordable and practical place to live.”
That’s an interesting point, especially considering many of America’s older burbs are currently undergoing a cycle of disinvestment. In Chicago the inner ring burbs are a mixed bag but examples of those of the downslope are plentiful - Oak Lawn, Cicero, Shiller Park, Melrose Park, Phoenix, etc. If you’re right there could be some real deals to snag in those locales someday. On the other hand, if the opposite holds true then Chicagoland might someday resemble Paris - where the poor have been pushed into the burbs where they can supply cheap labor to town and country alike. We’ll see.
cardboard subdivisions
That’s one silver lining to this whole meltdown. New houses might actually be better-designed and better built and just better looking overall. I once walked down a street full of the cutest little ~1200 sq ft mini-Tudor-ish brick homes. I zillowed them, and they were built in 1933-1934.
http://www.artsandcraftshomes.com/
The Arts & Crafts Revival (smaller, warmer, better-built houses) is picking up steam.
One of my co-workers lives in Aurora (I live in Naperville) and drives everyday to WoodDale in a minivan (the gas price really hurts her, my car is a focus so my gas consumption is “only” $20 a week)…anyway, she refinanced her house last November (I didn’t dare to ask for details), she got a Caribean cruise vacation with the kids and hubby for Xmas and a Las Vegas long weekend in January for her birthday…and now she is all stressed because her parents have health issues and she has to work everyday for a long time with the commute travel (to pay for the mortgage and the kids activities and the gas and her parents healthcare) wow I really think she is going to get sick with all the strings pushing in different directions. And now they are starting dumping a lot of work on her…I think she can not go on for long under this circumstances, either she works from home or closer from home. Although her husband works too, it looks they need two salaries just to pay the bills. I have the feeling they overextended themselves with the mortgage and spent the money on “fun” activities.
“It was all too easy for Jason St. Martin of Franklin to get a $600,000 loan in the summer of 2005. ‘I’m a teacher. There’s no way that I could have afforded a $600,000 loan for two years,’ St. Martin said.”
Then you shouldn’t have taken out a huge loan to specuvest! Also, it’s interesting that the article mentions WI as having a reputation of paying current - my parents paid off the mortgage on their home in Green Bay about 10 years early.
It’s not his fault. They should have stopped him from hurting himself.
I say that every FB that wants a bailout should be required to play single elimination russian roulette with a S&W PC627 8 round 357 magnum. The pool starts with 16 FB’s per group and each group winner gets the bailout. Now that’s March Madness I’d be interested in. (Ok I know that is excessively morbid, but good god it seems that we need some bleach thrown in the gene pool.)
Why a .357?
Have them play Russian Roulette with an automatic!
Well I certainly can’t have anyone complaining that the game is “unfair”!
This issue gets debated every so often on this blog, and people come down on both sides. Most of me thinks he should have known better, but I agree the broker/lender did a number on him too.
He’s a teacher of what? Certainly not economics, or math…. perhaps basket weaving. This guy most likely has a degree plus a certificate, and Im sure he could just not control himself as the dollar signs bulged his eyes out getting this “double house deal” done.
He is NOT a victim, he’s just sick, and now he’s getting his medicine. The very same medicine that thousands, nay, tens of thousands (how many are there) are getting and its a GOOD thing. I am not revelling in his pain, but this is overdue.
He’s a teacher pretending he’s a builder because he deserves to be rich. Screw him. He needs to spend the next 30 years pimping his ass on the street to pay off his loan.
TGIRent,
I grew up in Wisconsin, and get this, my parents in the Green Bay area have NEVER had a mortgage! They bought their first house in the mid-70s for CASH! My father sold that house in the mid-90’s when he got remarried and with his new wife, proceeded to pay CASH for a huge 5 bedroom newly built custom spec home that they designed.
I still remember my dad being very curious when I got my first mortgage, as he had never been through the process….
oh wow - where in the GB does your father live now? That must be so sweet to pay for a home with cash. Hope someday I can do that!
My parents, true products of the Depression, were much the same. They paid over 50% down, got a 15 year mortgage (probably standard at the time), and paid it off in 6 years. They then lived in that same house, mortgage-free, for 40 more years!
My grandmother (from Chicago) jokes that it was said of the Bohemians that the Bohemian downpayment was CASH. Smart folks.
Jason St. Martin of Franklin is a flipper. He gambled & lost. He deserves to be in bankruptcy & his credit ruined for the next several years.
The lender, stupid enough to lend this guy $600K, deserves to be stuck with this guy’s properties & a huge loss on the loan.
Let’s review the situation - the FB is toss & the dumb lender is toss… I would say that free market is working & it is good.
Teacher is getting schooled - hard knocks are the best education for fools like this.
PPT rumors bubble up on marketwatch.com. My question: If PPT intervention becomes an open secret, will it continue to “work?” Because many folks dismiss the idea, and assume instead that any rally in the stock market is a sign of economic health and future economic strength.
Official manipulation would be quite another signal.
——————————————————————————-
‘Miracle on Planet Wall Street … PLUNGE PROTECTION TEAM DOES IT AGAIN!”
Murphy is a leading proponent of the view that investment markets, above all gold, have long been subject to extensive official-sector manipulation through various private-sector chosen instruments, nicknamed the “Plunge Protection Team.”
Murphy wrote before the market opened: “As always, the S&P has rallied from a substantial deficit to go up in pre-market trading. That action had the same predictability as the sun rising this morning. The PPT never allows any serious investor panic to manifest itself. Downdrafts have become one day wonders.”
After the close, he added: “I was stunned to see the Dow down 130 points around lunchtime. Had the PPT gone to lunch themselves? Two days of market turmoil in a row? This is a PPT no-no. Had the price managers run out of ammo all of a sudden? This was bewildering. Well, not for long … the Dow rallied 130 points in minutes and then went up on the day late in the afternoon. The PPT’s Hail Mary play worked to perfection again. They let stops get touched off below the lows of two weeks ago, then made their move with fervor. Subprime problems ended.’
http://www.marketwatch.com/news/story/storm-over-just-supressed/story.aspx?guid=%7BC97ACF09%2D66DC%2D421F%2D8D94%2DA8AA5F152513%7D
Boring! Throw a fibonacci grid on the S&P and you’ll know why it stopped where it did yesterday.
Would that also explain today’s feeble water treading exercise after higher than expected PPI inflation?
P.S. I don’t believe in fibonacci grids. But I do believe in markets that follow fibonacci grids due to noise traders who believe in this form of tea leave reading.
I dunno about that.
I think if you look at a lot of natural phenomena and feedback models that kind of thing drops out.
Just like the perfect ratio shows up in a lot of spirals.
Probably works out to some odd bessel function for markets if throw some diff eqs at it.
Just like the perfect ratio shows up in a lot of spirals.
They’re both just approximations of exponentials (The ratio of two successive fibonnaci numbers goes to phi, the perfect ratio, of course.)
Putting a grid of fibonnaci numbers up is the same thing as putting up a grid of constant ratio items. Sounds fancier though.
That ‘fibonacci thingy’ sounds delicious. I’ll have mustard on mine please.
How ridiculous to assume you can mathematically model the wants and needs of millions of people. I don’t even know what I want for dinner tonight.
Congratulations! By figuring this out you have proven yourself to be smarter than 99.99% of the population; most of whom think math = magic. These are the same people who don’t understand the difference between correlation, causation, and chance.
how about a fibonacci thingy? yum!
Eat a broker. Nice and fatty, and you’re assisting the public good, too.
It looks like lots of the bubble stocks that had “good” days are having a bad night already. Maybe the PPT needs to work 24/7?
http://www.marketwatch.com/quotes/quotes.aspx?symb=tol+kbh+len+ctx+dhi+fnm+aapl+goog+bzh+phm+sbux+peet
Well, if there is a plunge protection team, they are operating in the wrong market. They need to operate in the housing market, not the stock market. We have about 1 Million too many homes on the market. The average selling price is probably $400K. It would really help if they bought about $400B worth of real estate. That would be a good start.
“‘It appears to be the affordability of housing has changed and I`m not so sure its the pricing of the house. I think its the income levels of the individuals and that is a concern.’ said John Stolar, Senior VP of National Bank of Pennsylvania.”
I really hope that this quote is somehow out of context. If this guy is actually a senior VP of a bank then I wish all of that banks customers the best of luck in their future banking endeavors.
The only way that comment would make sense is to change the word housing to Lamborghinis. I guess this is just another banker that was in love with affordability products that stimulate house price increases without that pesky wage inflation that in a “real” economy would be necessary to effect housing price inflation.
Beanie babies, stocks, houses and gambling houses. I’m guessing that the next bubble will be in trading homemade amatuer porn.
i’ll show you mine if you show me yours…
Believe it or not in this part of the country in the past twenty years wages have come down further as a percentage than housing prices have risen.
Granted thirty years ago this area had a lot of manufacturing, coal, timber and steel related jobs, so the average salary was pretty decent. Since the 1980’s it has been a slow decent into a market where there is more housing available than potential young homeowners.
It is the opposite of many other markets. Not anywhere near the problems of Detroit, but far from a booming market like AZ, CA, NV and others.
The Banker is actually right on that the problem isn’t so much housing prices, which are very reasonable by most standards, but a declining average income that is causing the problems.
Me thinks this trend will start to affect many other areas in the near future.
Heh heh heh
http://chicago.craigslist.org/nwi/com/294568291.html
That is odd to say the least
http://chicagobubbleblog.blogspot.com/
So did you write to her and tell her she could find his job description in the municipal code?
Oh, and make sure to let her know that you know that she’s really in Salt Lake City and that you’ve contacted the authorities.
Hahaha! That’s too funny. Here’s the text in case it evaporates from Craigslist:
—–
Hello,
I’m simply picking a city far away in order to ask a little question. I was dating a man who said his job was to “break in” to houses that have been foreclosed upon and do some basic things, then report back to the real estate company or the bank. Does this make any sense to someone? What kind of a job would this be…? Such as, where could I try to ‘look that up’ so as to find out if he really does do that? I looked under foreclosure services but all I found were sites helping people to avoid foreclosure.
Just very curious and would like to investigate a little.
Thanks.
“In Will County, foreclosures in 2006 reached 3,226, the highest in at least four years and a 30 percent jump from the number of foreclosures in 2005, according to the Recorder of Deeds office.”
To all those yuppies in downtown Chicago, battan down the hatches because this is coming your way.
http://chicagobubbleblog.blogspot.com/
No, it’s different here - we’re gettin’ the Olympics! Onwards and upwards all the way to 2016 and beyond.
***ALERT***
Layoffs at Ameriquest parent
ACC Capital Holdings doesn’t say how many employees to be cut, but workers say number in O.C. is 100 or more.
By ANDREW GALVIN and MARY ANN MILBOURN
The Orange County Register
ACC Capital Holdings, the Orange-based parent of Ameriquest Mortgage Co., said it is laying off workers today “across all lines of business” and combining some of its operations to cut costs amid a downturn in the subprime mortgage industry.
The company declined to say how many workers are being laid off. Employees said the number in Orange County was at least 100, and possibly many more than that.
ACC, in a statement, also said it is “centralizing its retail origination and portfolio retention operations to Southern California and consolidating its New York wholesale loan production operations into its Illinois facilities.”
“This is a very challenging non-prime market,” the company added. “Only companies with the ability to control costs and improve loan quality are going to be successful.”
In an internal memo to employees, the company said: “Throughout the day managers will be meeting their teams and associates individually to describe how they are impacted by these changes.”
The company said laid-off employees will continue to receive salaries through May 25 and benefits through May 31. This enables the company to comply with WARN act provisions, which require employers to give 60 days’ notice of layoffs that affect more than 50 workers, the memo said.
How can Orange County survive this mess without a significant drop in home prices?
Because it’s different there?
I’m in Orange County and I cannot fathom who is buying the homes around here. In order to qualify for a traditional mortgage you would have to be making over $300K and I don’t know anyone who makes $300K that would even want to live here!
I never saw the allure of OC. When I lived in San Diego it was a place to avoid. Places like Irvine, Anaheim, Fountain Valley, etc. - yeech. Has it changed that much?
has it changed since 1988? you bet!
Here in irvine it is foreign money keeping things aloft. The majority of purchases this year have have been by Asian buyers.
Ameriquest to go “New Century” very soon?
“‘It’s not the lenders. They’re just going by their (regulatory) guidelines and doing what they can do,’ Howe said. ‘Now you’ve got the people who got the loans not living up to their obligations.’”
No its both, true its the people who got loans obligation to live up to them, but its also the obligation of the person giving the loan to make sure that its possible for them to pay it back. The lender is suppose to be a professional who knows enough not to just give out loans to anyone who can fog a mirror. They don’t pay those salaries and commissions just so the lending officer can just rubber stamp anyone.
It takes two tango as the old saying goes and both parties are guilty as hell of dirty dancing. Let them all burn. Every last one of them.
Some lenders are predators and they will convince some people (through marketing) that they can afford such and such. They just want to generate commission, and have no feelings toward their client afterwards when payments rise beyond their abilities to pay.
The Star Tribune from Minnesota. “The subprime mortgage crisis, which already has shaved billions of dollars off the value of U.S. stocks, is starting to hit home for some Minnesota workers and borrowers.”
Whew I first read that as Saving and Loan Crisis. 1988 called they want their crisis back.
http://blogs.usatoday.com/oped/2007/03/post_35.html#more
USA today has a bit of fun at Subprime’s expense:
“Even the federal government, hardly known for its prescience or nimbleness, flagged the problem 15 months ago when the Treasury Department, the Federal Reserve and other agencies jointly urged lenders to:
*Refrain from giving loans to people who can’t repay them.
*Educate borrowers on the risks involved with these subprime mortgages.
*Increase their cash reserves to prepare for the possibility of widespread defaults.
Today, these guidelines stand less as pillars of wisdom than as testaments to the obvious, like telling kids not to play on the freeway or use electrical appliances in the bathtub.”
“McClaughlin said it was something he couldn’t afford but the broker falsified his income so he’d qualify.”
So whats the problem? Everyone has a right to own their own home!
There was a full-page ad in the Philadelphia Inquirer today for a workshop on “How YOU can make money on buying foreclosed properties.” I don’t know what bugs me more; the stupid people that put themselves in foreclosure, the firms that lended them the money, or these people.
My former landlady spent the better part of a decade doing repairs and deferred maintenance on a foreclosed property that she bought at auction. And that was AFTER she paid off the liens on the place.
“To date, problems in the subprime market have not spread to the broader mortgage market,” Bear Stearns Chief Financial Officer Sam Molinaro told analysts.
Lee Forker, president of New England Research & Management, said it was far too early to say subprime problems are contained when the market is only in the early stage of deterioration.
“He’s going to have to eat those words in a matter of months,” said Forker, whose company owns shares of Bear Stearns and other investment banks. “I think this is going to be very analogous to the Internet bubble of 2000.”
http://www.cnbc.com/id/17625319/for/cnbc/
BS thinks they are going to make a lot of money buying distressed mortgages !
That would be the icing on the cake for these guys.
These ‘Master of the Universe’ types have been in a bull market so long that they see every plunge as a buying opportunity. It’s going to take time and significant losses before reality filters through.
Now that I think about it, maybe BS and Goldman are just pumping the and dumping subprime stocks with statements of intent that cost them nothing.
To date, problems in the subprime market have not spread to the broader mortgage market
Its 6pm, and its not dark yet.
House prices down by 10%, stock market down my 30% unless Fed cuts.
http://www.cnbc.com/id/17631222/for/cnbc/
Does a Fed cut in the face of inflationary pressures seem like a free lunch to Merril folk? It seems like the Fed could accidently spark a selloff in the long bond by ignoring inflationary pressures in order to pump up the stock market (unless the PPT has a way of avoiding such a scenario).
Yes, its like a free lunch to ML.
A rate cut won’t help people who no longer qualify because of a crap FICO and no downpayment.
The recession’s baked in.
Every day we hear that word more and more. Recession.
I agree its getting baked in.
Have you guys seen this article on Yahoo?
http://finance.yahoo.com/real-estate/article/102603/why-your-home-is-not-the-investment-you-think-it-is
Test
Congratulations, You passed.
Psst. Wanna buy a house ?
Sometimes I feel like we’re on a merry-go-round and it won’t stop… can’t get off. What a wild week this has been.
I think we’re going to see what a depression feels like.
Neil, where’s your popcorn? I want some (wink).
“I think we’re going to see what a depression feels like.”
I hate to say this, but I look forward to it because I prepared. (Actually, hoping more for a recession)
We must wring the excess out of the system. We will be better for it in the long term.
yeah, and I look forward to another world war, too. or maybe a plague. or a huge earthquake or volcano or something. or maybe sharks with freakin lazers on their heads and jet engines under their fins…
You have me laughing so hard… thank goodness I wasn’t drinking anything.
Dude, you sound like Vincent Price in some horror flick “Ve must wring zee excess out of your system, but I look forward to it.”
Oh wow, your name is Vincent.
http://www.reuters.com/article/newsOne/idUSL1470530620070314?src=031407_1316_DOUBLEFEATURE_mortgage_troubles&pageNumber=1
Anyone see this from yesterday?
MOSCOW (Reuters) - Commodities investment guru Jim Rogers stepped into the U.S. subprime fray on Wednesday, predicting a real estate crash that would trigger defaults and spread contagion to emerging markets.
“You can’t believe how bad it’s going to get before it gets any better,” the prominent U.S. fund manager told Reuters by telephone from New York.
“It’s going to be a disaster for many people who don’t have a clue about what happens when a real estate bubble pops.
Reuters Pictures
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“It is going to be a huge mess,” said Rogers, who has put his $15 million belle epoque mansion on Manhattan’s Upper West Side on the market and is planning to move to Asia.
Worries about losses in the U.S. mortgage market have sent stock prices falling in Asia and Europe, with shares in financial services companies falling the most.
Some investors fear the problems of lenders who make subprime loans to people with weak credit histories are spreading to mainstream financial firms and will worsen the U.S. housing slowdown.
“Real estate prices will go down 40-50 percent in bubble areas. There will be massive defaults. This time it’ll be worse because we haven’t had this kind of speculative buying in U.S. history,” Rogers said.
Rogers is no tinfoil-hat conspiracy guy. He is a respected, accomplished investor. Not that the sheeple will be listening…..
I posted it yesterday in one of the forums. So many of them and articles that I lost track.
Jim Rogers is a very respectable investor.
gotta agree, Rogers is a sharp cat….
I just shat myself, from fear
I like Rogers but I have to laugh at him describing a RE meltdown while he’s trying to sell a $15 million house.
Apparently he’s betting on finding a buyer who knows nothing about the market as well as Rogers himself.
You’ll enjoy this article, from JimRogers.com:
http://www.jimrogers.com/content/stories/articles/Unreal_Estate.html
I had to bust it out of the frames, but if you go to the articles section of his site, you’ll see that this missive was posted almost five years ago.
His house on Riverside Drive and 107th is indeed very nice, but not as nice as the only free standing mansion in Manhattan which is on the corner at 107th St. Of course that one has been for sale for years, and has recently been reduced to 27 million. At a mere 15 mil, Rogers is pricing his place to sell. Wonder if he’d entertain low-ball offers?
I posted this on Tid Bits have gotten to reply, so I’ll try here.
Does anyone know of a company called The Milli Group? They are nation-wide but have a strong presence in California - any info would be appreciated. They tell people that having equaity in the house is a loosing proposition, and instead they encourage them to get all the equaity out and invested with, you guessed it, The Milli Group, promising a 10 to 14 % return.
Mili or Milli - ironically they both do mortgage stuff.
Milli seems to be mainly in North Carolina.
Am I off track?
I had written the name wrong; it is “The Mili Group, Inc.” with one L. Do anything about them? They encourange people to take out all the equaity and invest the money with them.
Invest in what specifically ? , I see nothing about this on their obtuse website. More sub-sub-sub prime loans by any chance ?
Don’t know anymore details; this is one group that has been bugging my sister to join them. I’ve scared my sister into not joining them just because of the unreal real estate prices but she still gets pitches like “so and so is doing so well… you should have joined us.”
Anyone promising you 10-14% returns is some one to avoid like the plague.
What’s been driving me batty in all this coverage is the focus on subprimes going to “people with spotty credit”, which is another way of distracting from the fact that idiots like the teacher mentioned above used subprime lenders to overextend themselves in the pursuit of a fast buck.
In other words, it ignores the greed factor (on the part of both borrowers and lenders) that plays so heavily into this wierdness.
“Home prices can fall beyond your fears”
http://money.cnn.com/blogs/generationrisk/2007/03/real-estate-can-only-fall-10-to-20.html
“…if the oil boom-and-bust of the 1980s was an anomaly, what should we call the easy-credit-driven housing inflation of the early 2000s? Liar loans, interest-onlys, option ARMs, and aggressive subprime lending have changed the rules. History wouldn’t seem to be a very reliable guide right now.”
‘One reason real estate prices tend to be less volatile than stocks is what housing economist Karl Case calls “downward stickiness.” When prices fall, many people just decide to stay in their houses rather than cut their price low enough to make an easy sale. But that also means there’s a lot human pain behind a housing decline of “just” 10%. People get stuck in their houses, and that can change their lives.’
It’s different this time, because many folks decided to eat negative cash flow in exchange for the opportunity to become the next Donald Trump when they sold their ten flip properties out in the AZ desert. These folks will not be able to hang on, the way owner occupants were generally able to in previous busts, and when they have to get out of their ten or so deals, all those houses will be dumped on to the inventory pyre.
Symantec, Argent, Sony, MTI are cutting their workforce. Who’s next?
The leaders of General Motors, Ford, Toyota and Chrysler, along with the head of the United Auto Workers union, made a rare joint appearance before a House subcommittee. They stressed that proposed increases in gas mileage standards for new vehicles would be extremely expensive and could have calamitous results.
“This could include the closing of additional facilities and the loss of tens of thousand of automotive jobs,’’ UAW President Ron Gettelfinger said.
Blame it on the damn OIL!!!
Genesis (nursing home) in PA will lay off 50
Grady (hospital) GA will lay off 200
Kodak has additional layoffs
The Ohio Department of Job and Family Services has awarded $645,000 to the Workforce One Investment Area, a three-county regional organization, according to a news release.
“This grant will assist our workforce region in gathering and analyzing specific employment and training information that will be used to develop an infrastructure for services needed in the event of a mass layoff,” said Jeff Weber, executive director of the Workforce One Investment Board.
The closing of Ford Motor Co.’s (NYSE: F) transmission plant in Batavia, scheduled for 2008, and the layoffs from Delphi Corp.’s (Pink Sheets: DPHIQ) Dayton operation affect the three counties, according to the release.
36 states and territories reported an increase in jobless claims in the March 3 week, while 16 reported a decrease. The state breakdown is not adjusted for seasonal factors. New York had the largest increase, 10,768, due to layoffs in transportation and service industries. Massachusetts reported the biggest decline, 4,665
Avon is recruiting sales reps.
Boo hoo hoo hoo! We didn’t prepare for the future! We already fired all our engineers! And, oh gosh, please don’t lower the federal highway speed limits … why, why … tiny cars cut our profit margin. No more bonus vacations! And I always wanted a pony … no, not Seabiscuit … don’t take my cape in Martha’s Vineyard away … nooooooo!
Melody,
Once New Century vacates their fancy digs, do you think their landlord would rent’em out to us for a Bubble party???
Greenspan opens his mouth more !
http://www.cnbc.com/id/17630401/for/cnbc/
“You can’t take 10 percent out of mortgage originations without some impact.”
“Greenspan said the housing downturn appeared to stem more from the recent stagnation in housing prices after years of appreciation than from a decline in mortgage quality ”
“Greenspan, whose words still move markets even though he vacated the Fed chairmanship more than a year ago, said much of the strength in consumer spending over the past five years could be traced to capital gains, both realized and unrealized, on surging housing prices.
If home prices keep falling, there could be more of an impact on the broader economy’s momentum, he indicated. Consumer spending fuels two-thirds of national economic activity.”
“If home prices keep falling, there could be more of an impact on the broader economy’s momentum, he indicated.”
Did he mention “reverse wealth effect?”
Okay, Stucco, try this:
http://bigpicture.typepad.com/comments/2007/03/was_yesterday_a.html
PPT doing what they do best.
Lots to chew on in those comments. Which of these caught your eye, if any?
———————————————————————————-
Posted by: toon | Mar 15, 2007 8:24:39 AM
“The market has nowhere to go but up because stocks are not a zero sum game. If they were, the average of all markets would be flat since, in a zero sum game, the winners cancel out the losers. Since essentially all markets are going up over time, this means that new money is continually entering the game.”
This is pretty much the same rationalization used on the real estate blogs to explain why real estate only ever goes up and never down. I think the ancients called the attitude on display ‘hubris’. People like this are necessary so market professionals have someone to fleece when the time comes. (Perhaps the writer is a stockbroker in training? This does have that mantra-like sound…) Odd to see this on display here at Barry’s place.
Forgive the snark, Mr. R. That post just boggled my mind for a bit.
Posted by: Fenner | Mar 15, 2007 8:40:31 AM
Yesterday, the Fed pumped in 10.75 billion in overnight repos verses 0.00 expirations.
Posted by: Winston Munn | Mar 15, 2007 8:47:47 AM
See the below link to a post from David Fry of Seeking Alpha in which he reports that almost of $28 billion was “lent” to primary dealers from both the Fed and the Treasury yesterday.
http://biz.yahoo.com/seekingalpha/070315/29620_id.html?.v=1
It must be nice to be a primary dealer on a day when the markets are threatening to breach critical support levels.
Mike F
Posted by: MikeF | Mar 15, 2007 9:09:27 AM
Seriously, how long are the Fed and Treasury expecting to prop up this market? Clear through to the next election?
Art Cashin (on CNBC) said he didn’t think the reversal yesterday was anything to get excited about. He didn’t see the volume, and the mad rush to keep from missing the train that he usually sees on real intraday reversals…for what it’s worth.
Posted by: Polly Anna | Mar 15, 2007 9:26:37 AM
1.3 percent PPI? … I think the party is over.
Posted by: wally | Mar 15, 2007 9:30:06 AM
JPM has lots of SPM exposure? How about BAC?
Posted by: Tom B | Mar 15, 2007 9:31:36 AM
Was Yesterday a Key Reversal Day?
For a trade, maybe. Otherwise, I wouldn’t think so.
Why? The sub-prime mess hasn’t even scratched the surface of the economy. If so many sub-prime lenders are in such a mess, that would mean the sub-prime holders (aka consumers) are in an equal mess. And we haven’t even seen them pull in their reigns as of yet.
When they do, we will know it.
Posted by: Michael C. | Mar 15, 2007 9:58:32 AM
Wally-
Well, 1.3% PPI and dead NY manufacturing seems to have the markets on an upswing. All news is good news once again. At least for now.
Posted by: MattS | Mar 15, 2007 10:37:24 AM
Was Yesterday a Key Reversal Day?
Well yeah the PPT borrowed $27.75 billion from the Fed yesterday to pay for it. And why would the markets be up today? Well at least inflation isn’t an issue as we go into a recession, oh wait…..
‘$28 billion was “lent” to primary dealers from both the Fed and the Treasury yesterday.’
BTW, does anyone know if the primaries get to keep the $28b? Is it considered a fiscal stimulus (taxation) or monetary stimulus (inflation)? I cannot say I recall ever coming across this sort of macroeconomic policy in a textbook…
“Greenspan said the housing downturn appeared to stem more from the recent stagnation in housing prices after years of appreciation than from a decline in mortgage quality ”
What does he think CAUSED high housing prices? C’mon, he’s gotta be smarter than that! Or, perhaps he realizes most people won’t see through that statement?
This was in response to Tweedle’s 14:26 posting re Greenspam.
Everyone’s piling on. From Bloomberg: hedge fund trader (who bet against them) predicts the entire subprime industry will go bankrupt.
http://www.bloomberg.com/apps/news?pid=20601087&sid=agHGvijV55fM&refer=home
Leaving who? MSNBC reports Wal-Mart is planning to offer mortgages in the near future.
CostCo mortgages, anyone?
“Harbinger Capital Partners and Paulson & Co., hedge-fund managers who profited when subprime- mortgage defaults surged, told investors that delinquent loans will soar and more lenders will disappear.”
Ironically, another fellow named Paulson says the subprime problem is ‘contained.’ And LEND saw a big bounce off its lows earlier this week. I guess NEW fell too quickly for the safety net to catch it before it hit the pavement?
Comment by aladinsane
2007-03-15 12:49:22
The Rise and Fall of the Housing Empire will have happened, in entirety, under the reign of our erstwhile leader.
——-
I say bring him back as Fed Chairman to fix this mess he created. Ben is just going to be the scapegoat for sure.
Avon is recruiting sales reps.
—-
Oh boy, now we are in trouble.
“You never think that this could happen to you. You feel like an idiot,” said Sobel, 48, who has a doctorate in education. “You fall down and they stab you.”
Mortgage meltdown pulls in more than those on edge:
http://www.reuters.com/article/domesticNews/idUSN1533432920070315
Another ugly surprise reported Tuesday by the Mortgage Bankers Association was that Wisconsin, long known for superior bill-paying performance, had a foreclosure rate worse than the nation’s - 1.42% of all loans in the fourth quarter
Wisconsin is not a state that’s gentle on delinquent mortgage loan customers.
And we’re REAL hard on Witnesses TOO. CHEEZE…I mean Sheesh..IS this Microphone thingy ON ?..
IT MUST have been those darned Cash Cows that DID this.
All Honest people UP here in Wisconsin. We didn’t SEE or HEAR a thing, cept for those danged Cash Cows always doing Nothing, cept for eating and quietly Plotting their Revenge on our here Housing Market.
We’re gonna round them all up and Stampede them off a Cliff afore they ruin our Spring Harvest of Tulips and Bigger Fools next month.
I could swear I saw one of those Treasonous Ayrshires speed dialing those FEDS on Emma’s Cell Phone after Speculation on a few beers the other night. The Cow’s all DID it up here.. Blame THEM..NOT our FAULT !
So what’s the plan for someone relocating to Colorado? Rent for a couple of years until prices drop 20%? I’m not opposed to doing this, especially in light of the current realities of the Colorado housing market (Broomfield specifically). I’m considering a new TH instead of a 20-30 yr old SFH in need of a new roof and wiring (like many in this area).
I’m approaching a possible purchase choice as something I’ll stay in for 10 years+ rather than buy something that won’t support a change in my life (like marriage/kids) and then hoping I can move up.
Can someone more intelligent than I please explain how this can be considered “predatory lending”? This is pure, bad speculation.
After the subprime blowup of the last few weeks, it won’t be long before attention gets turned to these “speculators” and “flippers”
Flippers are just are responsible for the housing boom then bust as: lendors, agents, and the FED.
“”I’m a teacher. There’s no way that I could have afforded a $600,000 loan for two years,” St. Martin said.”
When he sues, his lawyer will undoubtably claim the lenders in this situation did know or should have known that many teachers are helpless dupes who do not have the intellectual capacity to make intelligent decisions about their personal finances
The legal theory will be the plaintiff will claim he didn’t know he was a “teacher” at the time - however the lender should have
He has always thought of himself as an “educator”