Subprime Loans “Continued To Decline”
Some housing bubble news from Wall Street and Washington. “Mortgage insurer MGIC Investment Corp. said on Wednesday its first quarter profit fell 43.4 percent as losses and expenses cut into its business. ‘Deterioration in home prices…a downturn in the domestic economy or changes in our mix of business may result in more homeowners defaulting and our losses increasing,’ the company said.”
“MGIC is closely watched by analysts and investors because of the ‘meltdown’ in the subprime loan market.”
From MarketWatch. “MGIC said it incurred losses of $181.8 million in the latest period, up from $114.9 million last year. ‘To see a large uptick in the provision for losses well worse than even our below-consensus estimates this early in the year is a bit concerning,’ Goldman Sachs said Thursday.”
“Also in the headlines, Countrywide Financial Corp said loan fundings last month totaled $43 billion, an increase of 5% from March 2006. Subprime loan fundings fell 29% to $2.4 billion in March.”
“Countrywide said…that subprime loans ‘continued to decline, accounting for 5% of total mortgage loan originations for March 2007 and 7% of total mortgage loan originations for the first quarter.’”
From Reuters. “Countrywide Financial, the largest U.S. mortgage lender, said on Thursday the amount of mortgages in its portfolio that are in foreclosure nearly doubled, amid a difficult U.S. housing market.”
The Associated Press. “Moody’s Investors Service said Wednesday it cut its rating on Hovnanian Enterprises Inc.’s debt, saying the homebuilder is bleeding cash amid a downturn in the housing market.”
“‘The housing market has experienced a steep decline,’ Moody’s said. Normally, homebuilders burn cash during an upswing in the market as they build houses they expect to sell. Then, they generate cash during a downturn as they clear homes in their inventories.”
“Now, however, Hovnanian is burning cash during a downturn, Moody’s said.”
“U.S. bonds backed by commercial real estate loans have become riskier over the past few years as lenders have loosened their standards and property appreciation has slowed, according to a Moody’s report.”
“‘Today’s deals have become increasingly fragile,’ Moody’s said in the report. ‘The continued erosion of credit standards in the marketplace has caused us, for the first time, to reverse course and push subordination levels back up.’”
“Moody’s cited a number of factors suggesting growing risk in CMBS deals, including record high leverage, increased use of interest-only loans and fewer investment-grade loans used in deals.”
From Bloomberg. “More homeowners with subprime adjustable-rate mortgages face tests of their ability to handle higher monthly payments starting later this year, RBS Greenwich Capital Markets Inc. said.”
“‘At first glance,’ many subprime borrowers wouldn’t qualify for refinancing if lenders are forced to assess whether they could afford the higher payments from an adjustment that would occur without a change in benchmark rates, Lehman Brothers analysts said.”
“‘A much larger issue’ that will limit refinancing opportunities for the borrowers, potentially making loan performance ‘exponentially’ worse than in the past, are the new standards for how much consumers can borrow compared with the value of their homes, the Lehman Brothers analysts wrote.”
“Relaxed lending standards may have contributed to a surge in U.S. mortgage failures this year, but the chance of recession could hang on the complex derivatives used to hedge loan risk, analysts say.”
“About 40 percent of CDO collateral is residential mortgage backed securities, according to Joseph Mason of Drexel University, and Joshua Rosner of research firm Graham Fisher & Co.”
“Two-thirds of that is subprime and home equity loans, a market which on a dollar basis has grown from $35 billion in 1994 to $625 billion in 2005. In effect, U.S. residential mortgage finance has been propped up by the CDO market, and vice versa.”
“‘Even a small decline in CDO funding of lower-tier investments can have a large effect on MBS funding overall, and therefore consumer mortgage funding,’ said Albert Edwards, global strategist at Dresdner Kleinwort.”
“By February, 12.4 percent of U.S. subprime loans were delinquent by more than two months, up from 7.8 percent a year before, according to FirstAmerican LoanPerformance. Subprime and Alt-A (sub-prime/prime) account for 21 percent of U.S. loans and 39 percent of mortgages made in 2006.”
“The impact of the delinquencies on the bond market are seen on the ABX index of credit default swaps on subprime mortgage bonds. Spreads on BBB- rated tranches traded at around 1400 basis points on March 23, compared with 200 basis points last July.”
“Moody’s found that subprime mortgage-backed securities were on average 45 percent of structured finance portfolios made from 2003 to 2006.”
“Signs of contagion are already emerging. A Federal Reserve Board of Governors report in February showed the net percentage of lenders tightening mortgage standards was around 18 percent, the highest level since 1991.”
The Financial Times. “US politicians are drawing up a bill that could make it less attractive for Wall Street investment banks and other financiers to repackage risky mortgages into securities and then sell them to investors around the world.”
“Spencer Bachus has backed an ‘assignee liability’ system which would mean investment banks that repackage mortgages into bonds would be liable to pay compensation to borrowers if loans turned out to have been mis-sold. unless they can show they conducted extensive due diligence.”
“Such a move would make it less attractive to repackage these loans and to buy mortgage-backed securities.”
“Mortgage late payments and defaults reached record levels in the first quarter and may threaten the modest U.S. economic expansion seen this year, Moody’s Economy.com said in a survey released on Wednesday.”
“‘Delinquency and default rates jumped to new highs in the quarter, and all indications are that they will continue to rise measurably into 2008,’ the survey said.”
“The first-quarter rate outpaced the previous record delinquency rate in the fourth quarter of 2001.”
“Credit problems exist all over the country, the report said, with the largest increases in California, Florida, Nevada and much of the Northeast. Beyond that, 30-day, 60-day, 90-day and 120-day delinquency rates all rose strongly.”
“At an annualized pace, first-quarter defaults reached 1.16 million, far outpacing the 900,000 defaults last year.”
“More financially stretched borrowers are realizing even declaring bankruptcy can’t save their homes from foreclosure.”
“According to a study released in March by Credit Suisse Group , more subprime borrowers are turning to bankruptcy court to stave off foreclosure, as softening housing prices make it harder for them to sell their homes to repay debts.”
“At least part of the blame, says the report, lies with the bankruptcy law passed in October 2005. The law raised the bar for people to qualify for Chapter 7 ‘fresh start’ bankruptcy proceedings. With access limited, more subprime borrowers are forced into Chapter 13, where some can’t maintain their payment schedules for more than a couple of months.”
“‘It’s become harder to file for Chapter 7 to release debt burdens,’ said Jay Guo, the lead author of the study. ‘Going forward,’ he added, ‘delinquent loans are more likely to go into foreclosure directly rather than into bankruptcy,’ resulting in higher losses for mortgage-bond investors.”
‘Most of the news coverage of Federal Reserve chairman Ben Bernanke’s comments on hedge funds yesterday seemed to have underplayed what struck us as the most important aspect of Bernanke’s speech—his insight that the way to control the potential for ’systemic risk’ posed by hedge fund failures is through hedge fund counterparties, the investment banks providing margin leverage for hedge fund investment.’
‘Of course, many banks would like to pass along the cost of hedge fund regulation to the broader public. They argue that it is unfair that they should have to become regulators of their clients, and even that this might not be possible since it requires them to perform a regulatory role that conflicts with their responsibility to serve their clients. But this a deft verbal jujitsu—more bold than it is true. Banks are not being required to keep watch over their hedge fund clients—because they are not required to have hedge fund clients. The only requirement is that if they are going to collect the coin, then they have to play the tune, to reverse a popular saying.’
What a crock of shit. The broader public does not generally participate in hedge fund profits, why should they pay.
How about they cut us in on the profits if they want us to pay the regualtion costs.
Perfect comment txchick57.
For the same reason that the general public pays for any government program - because government has gotten too big and too intrusive.
Not sure I agree. A lot of pension money in HFs.
http://www.nytimes.com/2005/11/27/business/yourmoney/27hedge.html?ex=1290747600&en=f1f8a2ada9436d16&ei=5090
PUBLIC pension money? Or private? The answer is both.
Let the pension funds pay for the regulation if they want it–both public and private, but not all taxpayers.
It’s all about risk/reward. You cannot get a reward without taking some risk. And risk/reward becomes meaningless if investors don’t have the mighty back-hand of the market slap them from time to time.
You make an investment in a risky hedge fund? Regardless of who you are, YOU bear the risk that you lose some of your capital.
You make the margin loan to the hedge fund so they can play these risky games? You take the risk that they fail and your loan isn’t paid off.
If you don’t like the risk for the potential reward, don’t invest or loan the money. It’s simple, the system doesn’t work otherwise.
I’ve been worried about hedge funds. They are a huge part of the credit bubble. Leveraged to the hilt on their investments and allowed to do it because they are so big and only rich folks are allowed to invest in them. Hasn’t one of the “private equity” firms been talking about doing an initial stock offering?
I don’t know the size of the problem, but big non-profits invest in off-shore hedge funds. You might not be directly effected, but be prepared for a deluge of fund raising letters from your alma mater when their endowment takes a hit.
Not sure if pension funds also do this.
“Not sure if pension funds do this”
Oh yes. In fact the non-profits and endowments are almost a non-issue compared to the pension funds. Pension plans have vastly overpromised compensations over the past three decades, and now they’re frantically seeking oversized annual returns in order to meet obligations. Teachers, government workers, manufacturers — you name it — all of them have pension funds which have advanced from fixed (ie: secure) income investments to higher risk/higher return strategies.
Its *the* reason that policy makers are so concerned about the markets. Most people assume that a down market just makes voters ornery — but the reality is far more serious: A down market bankrupts retirees.
And it gets worse: Many major pension plans (GE, IBM, etc.) are already staring at the face of default and asking the PBGC (that’s sort of the US government’s “pension” equivalent of the FDIC — it guarantees all pensions in the US) to cover the pension. Except the PBGC actually only insures a third of anyone’s pension — which means that plenty of retiring boomers will actually only be getting a third of the pension they expect.
Of course, many economists believe the PBGC will actually have to file for bankruptcy in the next few years, which will make the savings and loan scandal look like a parking ticket.
But yeah… pensions and hedge funds have been partying for a while. And all is not well.
Amaranth Sued By San Diego, Warns of Refund Delays (Update3)
By Jenny Strasburg
March 30 (Bloomberg) — Amaranth Advisors LLC was sued by the San Diego County retirement fund for securities fraud, a step the hedge-fund firm said may delay refunds to clients hurt when it collapsed under $6.6 billion in losses in September.
Amaranth lied about trading strategies and made “excessively risky and volatile investments,” according to a complaint filed yesterday by the San Diego County Employees Retirement Association. Amaranth said fighting the lawsuit, the first tied to the largest-ever hedge-fund failure, will drain remaining assets earmarked for investors.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a12cSn2AKd5Y&refer=home
Damn. Glad my dad took the lump sum when he retired.
My pension is a line item in the federal budget, not an underfunded legal entity.
Time to talk to little brother about his situiation….
“Except the PBGC actually only insures a third of anyone’s pension — which means that plenty of retiring boomers will actually only be getting a third of the pension they expect.”
Not sure if the PBGC covers public employees, but cities across the country have underfunded liabilities for pensions for teachers, cops, firemen and bureaucrats…what are the odds that localities will actually be able to make good on all the pension promises, in addition to retirement health benefits for these folks?
“Not sure if the PBGC covers public employees, but cities across the country have underfunded liabilities for pensions for teachers, cops, firemen and bureaucrats…what are the odds that localities will actually be able to make good on all the pension promises, in addition to retirement health benefits for these folks?”
The PBGC does not guarantee public pension plans as far as I know…. But civil servants - even in places like San Diego that have severely underfunded plan - have little to worry about. Many states, including California I believe, have constitutional protections for public pensions, and localities like San Diego cannot renege on these obligations. So basically, the taxpayers (and especially property tax payers, unless you have Prop 13 caps on increases) in the affected localities are f&*ked!! Usually there is more leeway to jettison retiree health benefits if necessary, but never underestimate the power of public employee unions …. They will scream bloody murder if any politician breathes a word about cutting back on their rich pensions and retiree benefits.
TG,
thanks for the answer, though I think a major battle will ensue…public employee unions can scream all they like, but I doubt that private employees, without pensions or health insurance benefits, will care. I think a lot of cities and towns will go bankrupt, and these pensions will be up for negotiation.
California may have constitutional protections–but that does not guarantee there will be enough money. If outmigration by the middle class continues, who will pay? Illegals? Retail workers at $8 bucks an hour.
All these promises were made when America was a different country. The future will meet reality.
Just FYI, but most cities no longer provide health insurance during retirement. I think your info is outdated.
What one city does is match an employee’s contribution to a health savings fund which is earmarked for retirement. Once the employee is retired, the city no longer pays.
BTW, private employees SHOULD care about what happens to public pensions & healthcare benefits. The public sector is the only thing standing between the middle class and a third-world standard of living. Too many ignorant people in this country…
Need to clarify: I can only speak for a few cities in San Diego County, & LAUSD (last thing I knew they had phased out the retirment healthcare benefits & LAUSD had one of the best benefit packages in CA).
I’m generalizing because these cities/employers had some of the best packages & if they’re not providing these benefits, it’s likely nobody will (or they’re phasing them out as well).
Bernanke is reacting to Germany which is cracking down on Hedge Funds and is going to be the major topic at the IMF this weekend. The US is the largest abuser of hedge fund risk analysis. Since the IMF statement is going to read “Uncontrollable risk” or some such drivel, Bernanke is trying to stem the world outcry by showing that the US is trying to do something.
‘Of course, many banks would like to pass along the cost of hedge fund regulation to the broader public.’
Noted many times on this board: Privatize profits, socialize risks.
The problem with the Fed taking a pass on hedge fund regulation is that if and when systemic risk rears its head via a domino effect of counterparty failures, they will consider JP Morgan, Citigroup, and the I-Banks as too big to fail and thus bail them out for fear the system would otherwise collapse. If we (the Feds) will be on the hook to clean up the mess, I’d at least feel a little better if they were actually paying attention to the risks and dangers that exist before an explosion takes place. The fact that BB wants to keep his head in the sand isn’t comforting to me.
Plus, the idea the big banks who are the counterparties will ride herd on the hedgies and private equity pukes is a laugh. As illustrated by Traders, Guns, & Money by S. Das, they don’t even have a good handle on their own risk exposure. The blind leading the blind.
Regarding the percentage of loans being prime vs. subprime, such as for Countrywide, we do not know how they define the difference. 100% financing with high score may be considered prime or Alt-A and big down payment with low score might be subprime. The 100% financing is much riskier regardless of the borrowers score and this will be proven over the next few years.
When I read that their loans funded were up 5% YOY, it struck me that, with subprime too risky, they are probably heavily funding high FICO Alt-A loans. Not a good strategy. If it’s true, perhaps Countrywide will go down.
Agreed. A 720 FICO score matters not when the bottom line is you cannot meet your financial obligations. A lot of borrowers went into this housing boom with stellar credit, but they will be ejected out of the housing bust with their credit in shambles. All having a great score got them was the ability to do something extremely stupid, like buy a home you could in no way afford, with a loan program that was financial suicide. It is for this reason that I see Alt-A as beeing as big a problem, if not more so, than subprime.
Why are these thoughts never expressed outside of our blogs? The average person is completely stupid, and I will feel no sympathy when I see people getting foreclosed on. I’m in my early 30s and live in a rental condo, and drive a Honda. Lots of people my age around driving beemers, benz, acura, lexus, etc. Our two person household income is above the area’s median for a family of four. I’ve checked title to alot of homes around me and there is alot of 100% financing. More than anything, the real problem boils down to people borrowing way more money than they can ever hope to re-pay. People here in the east bay are oblivious. Me thinks it is going to get ugly around these parts.
I am 43 years old, a computer software consultant programmer. My 1099-form last year income was $278,750.00. I drive a 1999’s Toyota Corolla with a 154K on it. My house is bought new in 1999’s for a 165K, 4 bdr 2 1/2 bath, 2305 sqf, interest rate 7.65%. The house will be paid off at the end of this year since I have been paying extra $1500 a month extra principal for the last 2. 5 years. Is that lean or what ???
Wow. You must be one heck of a programmer to make almost 300 grand. What kind of work do you do?
Nice job on keeping down your spending too. You’re definitely bucking the general trend! Kudos.
Andrew: I thought I was bad, but you get the lean-living award. What will you do next? Hopefully something that makes you happy.
i am also in the same boat , me and my wife both work as programmers, last yr we sold our house took 30 % profit. moved into an aptment. waiting for the right time to buy our next home
Geez Andrew do I know you? I’m a computer software consultant as well, making similar money (I nosed you out this year). There’s not *that* many people in the industry making that kind of money - what do you do, exactly? If it’s Windows-related I have a feeling we know each other…
I agree with you to a point. However, younger people (less than 35 yrs old) have been pressured from financial advisors, parents, friends, etc… to not only buy a house, but buy a big house (more appreciation potential) and for God Sakes, buy today. You don’t ever want to rent - that’s for crazy people.
There are a lot of young people out there that were told by everyone (TV, Radio, co-workers, etc…) that real estate was a no loose proposition. You can only make money in real estate. And these days, real estate appreciates at 25% a year. So, the best thing a person can do is buy a place they can not afford and hope everything works out. Similar to the gold Rush days, sell the farm and head for the hills.
And they have mega student loans too….
I’ve had to stand up for myself many-a-time regarding this. I think my parents finally left me alone since I clearly understand finance and real estate, and they know it. Had I not a finance and real estate background, I’d bet the pressure would have been far greater to buy.
In the meantime, I get less and less debate when I talk about how bad housing is going to get each time I see them…
Agreed, Rental Watch. Whenever I wanted to do something silly because others were doing it, my parents always asked me, “If everyone was jumping off a cliff, does that mean you need to do it too?” It doesn’t matter how many relatives, friends, commercials, magazines, etc, tell me it’s buy now or never! Screw that economic suicide. I know how much money I make each month, and I know that current prices are out of reach and unsustainable. Yeah, I got my BS in business, but it doesn’t take Warren Buffet to figure out that buying during a frenzy is for fools. All the I/O FBs out there are going to learn the hard way and I have my popcorn at hand.
I was curious since so many people are putting money into the stock market (401k’s, IRAs, etc.) Does the everyone buying real estate even though it might not have been a smart move fall into something similiar to everyone investing in other things that dont have any clue what they are doing? This is one reason I was scared to start maxing out my 401k as soon as I was able to at my current job.
No, for a couple of very good reasons.
People are putting savings into the stock market. People buy RE, on the other hand, with borrowed money. So if the stock market goes down you still have something. But if RE goes down you have a negative net worth.
Also, stock market investing is a continuous process over one’s working lifetime. Because of this you average out all the market fluctuations and it doesn’t really matter when you start. But if you buy RE at the very top of the market, you’re screwed for life.
Ex, that black-swan is not on most radar screens. Most 700+ FRAUDCO scores have the stress-testing of rice paper.
Most borrowers with 20%+ down payment have the stress-testing of tanned rawhide.
Funny how Wall Street financial engineering models got it reversed; there’s enough
rice paper mortgages for an inferno, and its just now smoldering.
“A 720 FICO score matters not when the bottom line is you cannot meet your financial obligations.”
There is the ability to meet financial obligations, and then there is the will to do so, and both matter for how 720 FICO score FBs with 100% LTV will respond to falling home prices. It must really hurt to have been conned into buying back in 2005 with the “real estate always goes up,” only to be told by the NAR in 2007 that “prices will decline through 2008.” I think the NAR ought to rethink the wisdom of offering price forecasts.
Sensible Lender,
I wish you would post more often. You always add excellent insight from an insider’s viewpoint.
Sensible: you are exactly right. I pay no attention to FICO scores, income (stated or mute), hair-color, handedness, or what kind of sneakers they wear. LTV is just about all that counts.
What if its a really hot chick?
“LTV and boobs are just about all that counts” seems a tad… unsubtle.
those are called “leg” loans
All that counts when deciding if a loan is prime, alt-A, or subprime? Or all that counts when you’re lending? Because in the latter, I sure hope income is a factor (proven income, that is).
HOW MUCH DO POLE DANCERS MAKE?
If I’m in the club… A LOT!
This is exactly the point that was missed that spawned the whole bubble in the first place, all the way back in the beginning. The idea that we need to increase homeownership because “owning a home can increase responsibility and stake out a man’s place in his community….The man who owns a home has something to be proud of and reason to protect and preserve it.” — Lyndon Johnson
But this is confusing correlation with causation. There is nothing intrinsic about having a deed in one’s name that causes these virtues, but rather they are the result of the truckload of money dumped into the house up front. You were actually an owner with some debt and not purely a debtor.
I think of money as a unit of productivity. Like I had to write 20 lines of code, or a migrant worker picked 4,000 grapes to generate this 10 dollar bill. But some people will do anything to decouple the value of the money from the work that went into that value. Something for nothing. Easy money. It’s the gambler’s gene, preferring to win 5 dollars gambling than earn 10 dollars dealing the cards.
“owning a home can increase responsibility and stake out a man’s place in his community….The man who owns a home has something to be proud of and reason to protect and preserve it.” — Lyndon Johnson
This is somewhat but only if the owner has some skin in the game (20% DP). Many people who get caught up in this will lose very little money. It’s their credit that will take the hit but since your credit score isn’t posted on your lawn for you to see everyday it doesn’t matter to most.
Well, when LBJ said that, it was understood that you had a big money stake in your house. But in the last few years just suggesting people should put more money down on a house purchase made you a financial heretic.
We were spurned and laughed at and told we were too negative and didn’t know ‘how things are done now’. Madness! Now we are scorned because we were proven right. The concept of critical thinking is all but a relic in this country, but give it a few years and that will change.
Like saying that marriage makes people more successful, live longer, stay healthier, etc. It’s not the marriage or the “purchased” home that makes a person a more responsible, productive member of society.
When you had to have 20% down, high credit scores and good, **proven** income, only the most successful could buy a home. Homeownership = productive member of society because ONLY productive members of society could buy a house.
Same with marriage. It’s the **already- successful**, dependable, stable, committed person who’s willing to get married.
Just curious - does a person normally pay points on an FHA loan? I may buy a house in the next year or so and I want an FHA loan. Do most lenders waive points?
when I was looking at CALFHA (California) I was looking at over $10k in closing costs, blah blah blah to buy a $400k place with 20% down. Currently I think you can do a lot better using e-loan and paying the points. I was starting to think that CALFHA was only set up for people who couldnt get credit anywhere else because the FICO and stuff doesnt really matter. But it sounds like other lenders are much more loose on their standards. So I have almost no idea what the purpose of FHA is. btw no one could afford a decent place in an ok area in Southern California with an FHA loan that falls under the low income guidelines.
“Signs of contagion are already emerging. A Federal Reserve Board of Governors report in February showed the net percentage of lenders tightening mortgage standards was around 18 percent, the highest level since 1991.”
Pinch me HARD!!! Only 18% of lenders have tightened lending standards. ONLY 18% … Is this a joke. I guess these lenders haven’t experienced enough pain to “get the message” If 82 % are still doing business as usual, the delay on this meltdown will be longer and deeper than I first guessed.
I saw a TV commercial on a major network channel yesterday for no document, 100% loans, $1200/mo for a $500K loan.
hey finnman look in the ny post every damn day with full page ads for those crappy loans
still alot of crappy products out there for the next gf
The direct result of loans is coming. Widespread foreclosures in Brooklyn and Queens on seriously overpriced homes. I know the ads you are talking about. But the blatant ad I saw on TV which had to cost a bundle on network tv shocked me.
That number struck me too. This sort of evidence is why I think this thing is going to take many years to play out. Nobody talks about the percentage of Alt-A loans being funded which are “investment” properties for high FICO borrowers. The lenders are drunk with greed. They love the origination fees, etc. And the speculative fever is of epidemic proportions. It’s still going on right now. Look at the PNW. While the writing is on the wall, the sheeple keep right on buying.
Be sure and see the Itulip thing I linked on the Florida thread re this.
Thanks tx, that was a great read.
the sheeple keep right on buying.
true. I posted yesterday about my best friend. They just signed a 95% CLTV loan on a 714 sq ft condo, with only $120k of documented income.
clouseau how much was the place bought for?
Ooops!
$800,000. 714 sq ft.
$40,000 down payment
$640,000 first mortgage
$120,000 second mortgage (HELOC)
building to be completed July 2008.
Omg, is that Manhattan?
I was personally responsible for tanking two (2) sales yesterday. One potential condo purchase in Seattle and one SFR purchase in Scottsdale. In addition, I added one more SFR to the inventory role in the southern Seattle area. This is hand-to-hand trench warfare and we have to revel in these small victories when they occur!
Share the details, did you enlighten an aspiring Greater Fool at an open house?
Congratulations, auger-inn. I hope the not-buyers will be very grateful in a year.
“Only 18% of lenders have tightened lending standards.”
Are you excluding the subprime sector in that 18%? Because I cannot think of a more effective way to tighten standards than to go out of business.
GS, the 18% sounds correct. There are a lot of small lenders that will only lend if your FICO is above 700 and full docs. Current interest rate on a 30 year fixed conforming with one of these lenders is 5.625% with 1pt. 5.875% Jumbo with 1 pt.
The 18% of the lenders includes WAMU, Countrywide, Wells Fargo etc. The big boys that generated 75%+ of the loans.
My question could be rephrased as “18% of what,” as it is clear that upwards of 50 subprime lenders have recently tightened lending standards to the maximum possible degree.
“My question could be rephrased as “18% of what,” as it is clear that upwards of 50 subprime lenders have recently tightened lending standards to the maximum possible degree.”
LOL, that’s hilarious GS.
I think this statistic basically means that ALL the subprime lenders have tightened. Alt-A, which will be next, will be the next 20%. But yes, this will take years to play out.
I saw the same ad and could not believe it! The fuse on the bomb is very long. You have to believe that every one of the loans made thru this ad will be a bust for the ultimate lender. But apparantly the lenders (unsavvy pensions and banks) are still willing to pony up money. I think that if it weren’t for the Fed and the big Ibanks protection the sh&*T would already have hit the fan. Ultimately the music won’t stop until 1) the Fed and Ibanks run out of cover 2) the hedge funds and banks holding the craap actually mark to market and 3) grandma and grandpa get their pension statements and some banks go belly up.
This is really amazing how quickly the press has turned over night. When they decide to push a story, it’s all green lights as far as they are concerned. of course the truth is still far worse than what is being reported, and we all at HB smell the bloodbath coming this summer and fall.
It’s as if the entire US housing market is a wool sweater and a loose thread just got snagged by a passing car and just pulled out unraveling the sweater.
The loose thread was snagged several years ago, but the thread was designed to be long enough so that the car could drive away for several years before the sweater would unravel.
Nice image. I can just see some FB getting spun around in circles by his sweater. LOL.
The MSM didn’t react until the RE Assoc. told them there might be something to react to.
from the trench,
being bombarded daily with emails about discontinued programs, hikes in pricing, particularly for alt-a programs and total freeze up on subprime. deals with option one are price well north of 10%, you have to take a leap of faith to place a loan there. they are either going to get acquired by bank of scotland or they’re toast. don’t know why anyone would buy them with the existing liabilities, i would just pick the carcass after bankruptcy.
“deals with option one are price well north of 10%”
Are you kidding ? What sort of deals ?
I’ve said several times that mortgage rates are going to 10% because of all the risk out there.
Thanks, tweedle. My rates started at 10% in 1993. Over time my desire to stay competitive caused me to reduce them … to 9.6% (!!!) and finally to 9%. Since I have been saying I don’t want to make any more loans, I guess what I must be saying is, no more 9% loans from here. I don’t want to make any new 10% loans either, but somebody will.
i would rather pay 9% on a 250k loan than 6% on a 600k loan
I totally agree, BUT I would really love to pay 6% on a $250K loan on a house that used to be worth $600K but is now worth $250K because anybody without savings and great credit has to pay 10% and people who qualify for the lower rate are few and far between.
I wonder what sort of spread will emerge on mortgage rates between good risks and less good risks (presumably bad risks won’t get loans at all, at least for a while)? I wonder what it is now.
“‘Going forward,’ he added, ‘delinquent loans are more likely to go into foreclosure directly rather than into bankruptcy,’ resulting in higher losses for mortgage-bond investors.”
Unintended consequence of the new BK law, no?
the BK laws were passed for those who really wanted them, the CREDIT CARD companies.
Yeah, we rube investors will get screwed in our Pension Funds and 401ks, but Goldman and Citigrouop will do just fine.
urgh.
IMHO the one good thing to happen from this will be revision in the BK laws and in the way the IRS treats property losses for financial institutions. It is horrible to go BK, but it is worse to have indentured servitude for years.
“…the chance of recession could hang on the complex derivatives used to hedge loan risk..”
That should make everyone sleep better. Who knows what type of mental gymnastics were used in crafting these derivatives. The creators may not even know exactly what they do….
Somehow, the Idaho Statesman feels confident to pronounce that Boise has avoided the sub-prime fallout: “Idaho avoids crash in subprime lending” http://idahostatesman.com/103/story/79156.html
“We’re not seeing many (foreclosures) because the value of people’s homes have increased, and they’ve been able to sell and get out of debt,”
“The Idaho market is stable because we don’t have a big subprime presence here,”
The reporting is sloppy and the logic is pretty flawed. Two homes within two block of me are in pre-foreclosure and financed with Aegis, a sub-prime lender. Homes123 has a branch in Boise as well as Aegis and a slew of other Alt-A companies like Countrywide and First Horizon. I just think it’s a little too early to pronounce that a particular area is out of the woods.
Oh, its different there. Wait until they figure out that the buyers from CA, OR and WA moved those prices higher. When they disappear, the prices fall.
And it doesn’t matter that the loans were sub prime. The real problem here is ARMs to people who couldn’t afford them. The sub prime sector fails quickly because they miss payments in the first 90 days. The rest have enough cash flow to make the first 90 days, but they will fail later. Just a matter of time.
OMG! The MGIC news is HUGE!!!! It indicates major spreadage to the insurance sector. The FIRE (Finance Insurance Real Estate) economy is in full meltdown. There is no stopping the carnage. Run for the hills! Run Forest! Run!
Company description from MarketWatch.com:
MGIC Investment Corporation is a holding Company which, through its wholly owned subsidiary Mortgage Guaranty Insurance Corporation, is the provider of private mortgage insurance in the United States to the home mortgage lending industry. Private mortgage insurance covers residential first mortgage loans and expands home ownership opportunities by enabling people to purchase homes with less than 20% down payments. If the homeowner defaults, private mortgage insurance reduces and, in some instances, eliminates the loss to the insured institution. Private mortgage insurance also facilitates the sale of low down payment and other mortgage loans in the secondary mortgage market, including to the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation.
Hard to see how MGIC can continue to write increasing amounts of coverage if/when no volume of 81%+ LTV mortgages are being written. Thus, how can MGIC continue to collect premiums? Thus, how can it pay for the necessarily increasing defaults? Hmm.
How about the idea that the elimiation of suicide second loans and 100% financing will force buyers to get mortgage insurance? This will be a growth business once housing prices return to affordable levels relative to income, assuming people continue to not save.
Exactly, and it helps that PMI has now become tax deductible like the interest of a second mortgage. Those PMI companies that survive the next losses or those that are opened in the next years can have a good future. (I prefer downpayments of 20% becoming the norm, but there will be always the 10% crowd).
IIRC, they collect premiums on existing business for quite awhile.
“‘The housing market has experienced a steep decline,’ Moody’s said. Normally, homebuilders burn cash during an upswing in the market as they build houses they expect to sell. Then, they generate cash during a downturn as they clear homes in their inventories.”
“Now, however, Hovnanian is burning cash during a downturn, Moody’s said.”
This is the story of many homebuilders, yet they don’t lower the prices enough to get the sale done. I’m not sure what, if anything, will make them capitulate. They seem resigned to hold onto vast inventories of new homes, indefinitely. I guess they have no plan.
I think the plan is to pray for the blue state politicians to get their industry bailout proposal passed into law before the rug no longer can hide the new home inventory elephant.
What’s worse, with all of the bad news, builders and developers are still unveiling plans for several new “monster sized” communities. I am speechless. This just defies logic.
Bantering,
Plans ???
I just noticed a new development getting graded
off of I/75 here in Port Charlotte/North Port. I swung by
after work today. 500 plus homes !!!!! Starting at 249k.
I am so there !!!!!! NOT !
Chris
“This just defies logic.”
There are a few explanations that might be used to reconcile continued speculation against the backdrop of an obvious housing market meltdown:
1) Denial.
2) Belief in reassurances (aka economic propaganda) from top economic leaders.
3) Faith that a bailout measure will be passed.
GS…true, but all emotional explanations which is boggling to the mind.
Is it so transparent that the big dogs at the top have already extracted their profits and are just sitting back in their fly-fishing vests in Jackson Hole, letting the middle tier sweat this out???
This story is nowhere NEAR finished. As a matter of fact… it’s just beginning. Countrywide is obviously sugarcoating their numbers. Their subprime division, Full Spectrum, was one of the worst. They did 100% financing down to a 520 score, overcharged most of the borrowers by making at least 4 points and giving rates in the 12-15% range. They should be hung.
No kidding!!!!!!!!!!!! 4 points and 12-15%!!!!!! And people agreed to that?????????????????
All day long txchick all day long…
All day, all night and all year.
I’m so stunned that adjectives fail me here. People are paying credit card rates on their home loans? Color me naive, I guess.
Since many people use their homes as credit cards it does make some sense.
They don’t pay the 4 points up front, they borrow it along with all the other fees, which can be pretty high. As for the interest percentage they pay seems high at least for California, but California caps residential mortgage rates, other states don’t know. Also California limits points on residential mortgages to 5 points, which they pay oh I mean borrow all day long.
kc: This story is nowhere NEAR finished. As a matter of fact… it’s just beginning. Countrywide is obviously sugarcoating their numbers. Their subprime division, Full Spectrum, was one of the worst. They did 100% financing down to a 520 score, overcharged most of the borrowers by making at least 4 points and giving rates in the 12-15% range. They should be hung.
If their earnings are taking a hit because of these loans, they obviously undercharged, since loan pricing has to take into account the possibility of bad loans for given categories of customer.
“One glance at a book and you hear the voice of another person, perhaps someone dead for 1,000 years. To read is to voyage through time.”
Carl Sagan
First vonnegut, now sagan? Enough quotes from my dead heroes!
Kurt kicked it, I owed him.
They are Heroes, dead or alive.
aladin: I haven’t thought of him in billions and billions of years.
“‘The housing market has experienced a steep decline,’ Moody’s said. Normally, homebuilders burn cash during an upswing in the market as they build houses they expect to sell. Then, they generate cash during a downturn as they clear homes in their inventories. Now, however, Hovnanian is burning cash during a downturn, Moody’s said.”
HOV has the same problem facing the flippers who did not make it through the exit door before the bubble turned to bust.
One thing I noticed in my neck of the woods (Larimer County) is that we never had a lot of spec homes on the market. Even builders like Lennar, Centex, etc., wouldn’t start building a house until someone signe don the dotted line. Occasionally a buyer would back out (like the house next door) in which case they would finish it and pop a for sale sign in front of it. Most spec homes were higher end and built by local mom and pop builders, usually one at a time.
This is quite different from San Diego (were we moved from), where IIRC, builders would slap entire neighborhoods toogther in a few months (our Loveland neighborhood took 5 years to sell out).
SD politicians somehow manage to ignore thousands of vacant homes and buildable land when they tell their scary stories about how there is no more land to build on and soon we will all be living in apartments.
IC, right you are. I’m in Fort Collins. We still have an inventory problem though - just at the upper end. In Loveland for example, in March, there were 135 homes on the market over $520M, zero sales. This info only counts multilist data, but shocking nonetheless. The mom and pops are bleeding for sure, but still a new development seems to come on line every month and more permit ready lots are available. Builders only know how to build.
Inventory in Northern Colorado is a major problem. Don’t try to fool yourself (or are you trying to fool others?), In Colorado. The Northern Colorado market is in crisis and will continue to be in crisis for about 3 to 5 more years.
“‘A much larger issue’ that will limit refinancing opportunities for the borrowers, potentially making loan performance ‘exponentially’ worse than in the past, are the new standards for how much consumers can borrow compared with the value of their homes, the Lehman Brothers analysts wrote.”
The housing ATM machine has been crushed under the double whammy of falling home prices and higher LTV requirements.
The housing ATM machine has been crushed under the double whammy of falling home prices and higher LTV requirements.
Don’t worry, this has been “contained.”
The news is really starting to scare me…
Got popcorn?
Neil
“potentially making loan performance ‘exponentially’ worse than in the past”
Exponentially worse - that doesn’t sound good for lenders, mortgage insurers, MBS bondholders, or FBs. Pretty strong language from Lehman Brothers. Seems like each week the predictions (from Wall St., analysts, “experts” and others in the MSM) of the meltdown become gloomier. Talk of a soft landing has faded almost completely.
Perhaps I am just too ticked off to care about how bad this will be. I wanted a decent SFH in the DC area a few years ago, having been a life-long NoVa resident, but once ’03’s prices skyrocketed I remained a renter (still am). Just can’t see myself ever paying $600K for a little Cape Cod that in ‘99 was going for $175K. Simple unadulterated greed, as demonstrated by the daily stories and analysis on HB, is why I am not in that sensibly priced house today, mowing the lawn and enjoying the backyard.
Instead, I am now comforted in this crazy market by visualizing a certain Omaha Beach scene in “Saving Private Ryan.” The flamethrower team just wiped out the German bunker, causing the Wehrmacht machine gun crew to leap out of the bunker engorged in flames.
I am the American sergant on the beach, ordering his troops not to fire on the burning Germans because of the massive carnage they caused him and his command.
“Don’t shoot–let ‘em burn!” is my rallying cry in the midst of this financial catastrophe.
Let ‘em burn, indeed…it’ll be an invaluable lesson in financial responsibility for most of the nation.
I now return to my usual cheerful self…
Poshboy,
But people here make more money and can afford these prices- not. I make 120K and am barely remaining above water with my overpriced rental- forget saving for a downpayment. If things don’t change quick I am out of this dump- and don’t be fooled, it is a dump with all the immigrants all over the joint.
“Relaxed lending standards may have contributed to a surge in U.S. mortgage failures this year..”
No really? Thanks for that “understatement”!
Relaxed lending standards + stupid people were the main reason prices doubled since 2003.
“Spencer Bachus has backed an ‘assignee liability’ system which would mean investment banks that repackage mortgages into bonds would be liable to pay compensation to borrowers if loans turned out to have been mis-sold, unless they can show they conducted extensive due diligence. Such a move would make it less attractive to repackage these loans and to buy mortgage-backed securities.”
Forget about the blue state party Congressmans’ bailout proposals. This is more like it — hold the parties which caused the subprime meltdown accountable for their actions, at least going forward if not retrospectively.
The practice of repackaging loans was bound to lead to this craziness. In the old days when you borrowed from your local bank, your local bank (like az_lender) wanted to be sure you were likely to pay back the money. Wonder how many individual non-demented investors are in MBSs. Or are the MBSs mostly in the hands of state and union pension funds, whose administrators are not really at risk.
OPM, baby. OPM.
This is pretty much what Barney Frank has been talking about for last few days. At least people have been reporting it for the last few days.
I agree.
As a middle-man with a hand out, if you face the risk of shoddy lending practices, you might just make sure that shoddy lending practices aren’t happening on your watch…
Retroactive might be tough, but implementing such a thing going forward will accelerate the correction.
This is definitely a step in the right direction.
Not a single penny of taxpayer money should be spent on this mortgage “crisis”.
They (the lenders/financial firms/hedge funds, etc.) made their beds…
Any idea how construction loans are doing? Down the street, a builder has three homes on the market since the end of last summer. It’s gotta hurt when a small builder has to carry a lot of spec homes in inventory for a lonf period of time.
In Dowtown Boise, a developer just defaulted on a $2.6 million loan used to buy property to build a 31 story commercial/condo tower. http://www.idahostatesman.com/103/story/79220.html
I think a lot of mom and pop builders are going to bite the dust, especially the greedy ones who kept on building spec homes.
I know that a lot of mom-n-pops have changed their focus to remodelling (like finishing basements). I don’t know too many people who have done this lately, and those I do know have been doing most of the work themselves (except for the electrical and plumbing work.
I hear the same thing. Small builders move to additions and renovations. Folks can’t afford a bigger house so they add on to what they have.
MGIC (MTG) the gathering was off 3.5percent when I woke up nowits in the green! WTF am I missing??
Short covering…….
Anyone in the market for a subprime lender?
=============================================================
NovaStar puts itself up for sale
Company becomes latest subprime mortgage specialist to seek buyer
By Alistair Barr, MarketWatch
Last Update: 7:05 PM ET Apr 11, 2007
SAN FRANCISCO (MarketWatch) — NovaStar Financial said late Wednesday that it’s considering selling itself, becoming the latest subprime mortgage specialist to propose relinquishing its independence.
NovaStar said it hired Deutsche Bank to help it consider strategic alternatives including a possible sale or other “change of control transactions.”
The company warned that a deal might not happen and said it won’t comment further until its board of directors has approved a specific transaction or reached another definitive conclusion.
NovaStar has been hit hard by a downturn in the subprime mortgage business, which caters to poorer borrowers with blemished credit records. As interest rates climbed and house prices stopped rising, subprime delinquencies have jumped.
http://www.marketwatch.com/news/story/subprime-mortgage-lender-novastar-puts/story.aspx?guid=%7B2569DC3A%2D31C7%2D48DA%2DB15A%2DD83D4B31AFB1%7D
This “sale” may become a negative auction. They’ll pay me how much to take it?
Nova= No Va: translated into Spanish means “it doesn’t go”
Appropriate.
“Nobody likes the man who brings bad news.”
Sophocles
Don’t forget Myth #5: “Priced Right”
http://www.viewfromsiliconvalley.com/id320.html
You can track the weekly DQ data for,
Santa Clara County:
http://www.viewfromsiliconvalley.com/id125.html
San Mateo County:
http://www.viewfromsiliconvalley.com/id157.html
Santa Cruz County:
http://www.viewfromsiliconvalley.com/id156.html
Thanks!
Another 100K price reduction in Ventura:
http://vcrdsmls.rapmls.com/scripts/mgrqispi.dll?APPNAME=vcrdsmls&PRGNAME=MLSLogin&ARGUMENT=niIwW5pCH9pLaCHCB98f4Nk7TGSxvQYGSOOksb9/xeQ=&KeyRID=1
At least 400k overpriced.
My neighbor has had there home up for short sale for 3 months now and still hasn’t sold and the Realtor says they have 2 offers of 480,000 and 510,000. They bought the house in 05 for 620,000.
I’m in East Ventura and there are 13 other homes for sale within a 6 square block of me. A friend of mine, who has worked in Real Estate for over 20 years locally here and for Troop says that it is going to be a blood bath real soon here in Ventura County and surrounding areas….
“Blood bath?” That’s great news. Cheers
Nice to see the happy face Lainvestorgirl…There were about 15 houses in about a 3 block area here in the vicinty of Kimball and Colton Ave. that sold in 04-06 that are really showing signs of neglect and outright blight. One house on my street for example, sold in 05 and they tore the driveway out a year ago and still haven’t poured the slab nor have they done any yard work. There is still a mound a dirt on the front yard from the excess dirt from the driveway and weeds all around.
Aaah, the bottom-feeding vulture in me that has lay dormant for the past 7 years is starting to awaken…
This is only going to get WORSE here in Ventura…Was in the local Albertson’s up the street and buying some groceries. at the check-out I said to the cashier, Jeez, this housing market is really going to hell isn’t it. And she said, I hope not, we just bought a house and are STILL trying to sell our house!…I said, Good Luck! and left. This is in Ventura and I might add that the Unions are in the midst of striking and the last strike lasted 141 days in 04. Prices should get to 1999-2000 levels to become AFFORDABLE again here in Ventura.
Anyone have any good data on Santa Barbara? The DataQuick and California Association of Realtor figures are completely different. BTW there are an unprecedented 5 houses for sale right now in our neighborhood (listed from $1.6 to $4.6 million). My landlady, who has been here since 1959 (she lives in “the big house”, I live in the beach house) says she has never seen this in her lifetime.
Wow, I guess the lender doesn’t feel any sympathy for the seller’s credit rating. Tell those buyers to stop kicking them while they’re down and increase those offers. (per yesterday’s thread). Foreclosure coming? Just bidness…
Ladies, Gentlemen and other Fbers,
I have an brief ANNOUNCEMENT,
We are experiencing a a slight Bump in the Dark and a “minor correction” in our RE course. There is absolutely No NEED for any Apprehension or Panic as All is Well.
That said, would everybody please stand, gather your personal belongings and procede to the EXIT signs marked “Titanic Lifeboats” in an orderly and quiet lockstep fashion.
Women and Children first and Please refrain from Pushing, Shoving, Kicking, Biting as well as Shouting, Stabbing or Screaming the words CRASH, FORECLOSE or RE ICEBERGS.
Band…A little music Please.
Please excuse the Frigid Water, the USS Uncle Sam, has been contacted with an S.O.S. and is just few short moments away from your assistance.
P.S. Best of luck to everyone as I must leave you as I see that my Uncle Ben has arrived with his Helicopter.
Hugs,
Captain David and
RE Management,
Ship of Fools, Llc
Everybody call these stupid Demo-rats and tell them NO FB BAILOUT:
http://www.latimes.com/business/la-fi-subprime12apr12,1,7432078.story?coll=la-headlines-business
“Demo-rats”
Good spelling. It seems to pass right through Ben’s spam filter.
I really hope this doesn’t attract the rantings of that wacko left wing guy, whatever his name was.
KennyBabes?
Lingus?
Or were they one and the same….?
If you don’t mind crying into your coffee, listen to the latest bail-out plans conjured by both the public and private sectors here:
http://www.npr.org/templates/story/story.php?storyId=9539726&ft=1&f=1006
Retail sales strong in March because FB’s are buying Easter crap instead of making mortgage payments??
I heard that. Jesus Jumping Christ, how many Easter baskets does it take to make a “jump” in retail sales??? Next, we’ll be hearing in August that retail sales strong in July due to cherry bomb sales.
More interesting observations: the bankruptcy filing statistics for EDVA continue to trend upward, but are still only about a third of the volume prior to the law change. http://vaeb.uscourts.gov/stats/trend/trend.htm
I think this is because (although I still eventually expect a large volume of filings to strip liens) prices haven’t dropped enough to justify the filing to strip down liens. This could be because lenders are sophisticated enough to understand that selling REO properties at prices which will move them will enable waves of lien stripping, thereby amplifying losses. It is more likely simple denial and refusal to accept the losses in REO, with a secondary benefit of making it impossible to lein-strip. Nevertheless, foreclosures continue unabated, with lenders taking serious baths in NOVA, particularly on condos. I’ve seen lenders write down their bids by $50k to $100k in the hope that they could get a buyer. Nobody’s buying.
Relevance: lenders (and construction companies) are still misstating and under-stating their losses because I guarantee you they are not valuing the properties at current fair-market prices which would result in sales. Losses in 2q will therefore be greater no matter what anyone else says.
Question of the day (yesterday) on cnbc.com - Should the government bail out suprime borrowers?
http://www.cnbc.com/id/18059429
I am still totally incredulous that this is even being discussed. Why don’t we just earmark a third of the federal budget for id!ot relief.
lainvestorgirl says “Why don’t we just earmark a third of the federal budget for id!ot relief.”
LOL
You go girl. HILARIOUS.
IAT
This talk of a govt bailout is the most ridiculous bullsh@t I have ever heard.I cannot not even believe someone in office would suggest it.Isn’t it called a market for a reason?Let all the moronic people lose their money and homes and let the smart finacially savy, responsible people win.This is how the game works isn’t it?
The new game is the politicians pander to whoever can offer the most votes, which in this case is, well, not us. Being financially responsible puts you in the minority, and this has the disadvantage of making you irrelevant except insofar as you are a useful as unit of savings to be used to forcibly fund these the bailout of the same people we have been laughing at over the past 5 years or so.
Read the comments in response to the CNBC poll. Pretty much every respondent said a bail-out is a bad idea.
Bah, those are just other irrelevant people like us who regularly fund their IRAs, carry life insurance and buy a house within their means.
That’s not true lainvestor, everyone I’ve spoken with is against bailouts for FB’s. Know why? They all pay taxes. That’s the first thing out of their mouths “No way with my tax money”.
Talk to people about this. Not everybody is aware of the bailout talk. When they hear about it, they’re pi$$ed. And who can blaim them? Your average American is struggling a little too hard to get by right now to feel generous towards idiots who couldn’t add 2 + 2 if their life depended on it. Not to mention the greed, and the fraud of the overall market.
People are NOT for this once they know about it. So tell everyone.
There’s something else to consider in re: to the potential bailout, investorgirl, guys like Shumer have been around a long time; he probably recognizes that pushing this through Congress is nearly impossible, so it’s a win-win for him. He fights for “the little guy”, and Republicans will therefore be against them. The bill never passes, or gets vetoed, so he wins.
I would agree with you, except that I am hearing so much bailout talk it makes me wonder if this concept really does have legs, you know?
Who is going to bail out the bailouters?
The bailouters won’t need bailouting because they just keep working hard at their jobs (and never protest) to generate more tax revenue for the next bailout, and to rebuild their meager savings.
you make sense, but unfortunately we here at the blog still are in the minority, most J6P and janes (who bought many years ago) have no clue what is going on, or have a stake i.e. bought in the last 4-5 years. so politicians will talk all this BS but do nothing, WHY–> because I personally believe there is not much to be done, too much money and fools involved.
These Federal plans are based on nothing more than the same concept as lottery winners. Maximum political exposure for Schumer and the Dems for offering assistance, but when the law is passed with $100 mil in funding only a few hundred borrowers get helped out, while the vast majority of those facing foreclosure (hundreds of thousands) get F’d.
It’s a shell game, and the Ds on Capitol Hill are seeing who is dumb enough to buy their nonsense. They know the MSM won’t report on it until it is too late–and well after the ‘08 elections.
More irony in the afternoon…
http://www.local6.com/spotlight/11661262/detail.html
You know how I know the gig is up?
Like many of you, i’ve had to read between the lines to get at the truth, for a long time now.
Here’s today’s truth:
In the midst of a financial meltdown, the sophomore savant drudge decided that some guy named imus should be the lead story. Interesting, but…
Not one news story about things, real estate, in his whole blog page.
Sometimes what you don’t see is more revealing than what is shown.
http://money.cnn.com/2007/04/09/real_estate/forecast.moneymag/index.htm
CNN Money’s Forecast: 100 biggest markets
Some markets are still being forcast to go up…they’re the ones with low housing cost/median income ratios.
Does anyone have last years version of this, I am pretty sure they were still predicting increases accross the board…
anyone catch NYC is forecasted as DOWN 4%
where real estate “can’t” go down.
Subprime news finally hits home in the Southern Oregon media:
Default dilemma
Choice excerpt:
Another try… sorry!
Subprime news finally hits home in the Southern Oregon media:
Default dilemma
Choice excerpt:
Great but totally overpriced rental property in Ventura. It seems the owner purchased it in or around 2005 and can’t lower the price. Good luck finding a buyer at 850K for 60K in income…
http://vcrdsmls.rapmls.com/scripts/mgrqispi.dll?APPNAME=vcrdsmls&PRGNAME=MLSLogin&ARGUMENT=ZYBXixnZWBCMZ6m7e6Bi6YzbYGK1VE3k0w4vXwRfiyM=&KeyRID=1
169k a door for a rotted out wood frame/sided 5 unit building with a 60k a month income. With 25-30% down it wouldn’t even cash flow. The question becomes… why?
60K a year…it’s a big lot, maybe it makes sense if you have the money to build a ton of units, however, with the anti-development laws in Ventura, combined with the fact that this is basically a residential neighborhood, I think the chances of that are pretty low.
I love the $60k gross income…so, no one cares about the net anymore? Take off $10k for property taxes, $5k for downtime, $10k for maintenance of the old buildings and management hassles/costs.
$35k NOI??? 4% cap??? LOL. Don’t let it slip away….oops, it’s gone.
Scary thing is, old, run down apartments have been selling for a 4% cap rate.
Don’t be surprised if some enterprising individual buys it for their ask, slaps a condo map on it, fixes them up somewhat, and tries to sell them as bungalow townhomes for $250k-$300k each. Probably the only business plan that has a chance in hell at that price, if it were 2004.
Mortgage brokers under fire…Can anyone hear this, my speakers are down. Looks like two very sorry looking FBs at the table?
http://cosmos.bcst.yahoo.com/up/player/popup/?rn=289004&cl=2364373&src=finance&ch=289023
Will the subprime bailout extend to those who profited through fraud? If not, how will it be limited?
================================================================
Mortgage fraud seen as undercurrent of subprime woes
Thu Apr 12, 2007 2:58PM EDT
By Carey Gillam
KANSAS CITY, Missouri (Reuters) - On the surface, Brent Barber’s Kansas City real estate investment company appeared to be serving a greater good — refurbishing low-income housing across the city’s blighted urban core.
But in reality Barber and a crew of eight others aimed to bilk eager lenders out of more than $11 million in 300 fraudulent mortgage loans, according to the FBI.
Now Barber is in prison and the houses sit abandoned, stark examples of a wave of mortgage fraud that law enforcement and banking experts say is an undercurrent washing through America’s subprime lending woes. Lax lending practices, which led to a record level of U.S. home loans defaulting and sliding into foreclosure, also invited outright fraud similar to the one that Barber was involved in, experts say.
“These subprime lenders were just sort of out of control. They were going so fast no one was really questioning the loan files,” said Bruce Morgan, a Kansas City-area banker and former member of the Federal Reserve Board’s Consumer Advisory Council. “Now within the subset of the subprime market is all this mortgage fraud.”
http://www.reuters.com/article/domesticNews/idUSN1223655620070412
“Now within the subset of the subprime market is all this mortgage fraud”.
God, I cannot wait until this part of the puzzle is understood by the vast majority of Americans. Really happy to see it being reported on more often the past few days.
People aren’t excited about bailouts now, even when recipients are described as “hapless victims”. Wait til they hear the about the straight out criminals that’ll be in on the taxpayer funded bounty.
(I am still totally incredulous that this is even being discussed. Why don’t we just earmark a third of the federal budget for id!ot relief.)
Isn’t that already the case? 1/3 for idiots, 1/3 for greedy sharks, and 1/3 for everyone else.
The HB stocks rose today as if the housing market has bottomed (again). Who are the idiots buying these stocks?
Credit scores and such, while important, pale in comparason to “skin in the game”. For me it’s LTV - I’ll loan buckets of money to the biggest deadbeat on the planet if the LTV is low enough. (Tony Soprano does the same thing but his idea of “skin” is different than mine.) Big house payments have a way of being made if there’s equity or one’s hide at stake.
The foreclousure meltdown will track the equity meltdown.
I’m less convinced that job losses are going to be extreme enough in the near term to be the proximal cause of massive home price declines (too many boomers retiring, not enough new bodies to take the jobs).
I DO believe that what you mention above will be the cause. Once there is a consistent theme of falling prices across the board (this is the start right now with all these ARMs adjusting), capital for that 80-100% LTV piece will dry up completely, or at least be priced appropriately to the risk…up to 90% at 20% interest with full documentation anyone?
I digress. Anyway, once down payments are required again, in the face of falling home prices, most potential buyers either a) won’t buy at these prices because they don’t have the down payment or b) won’t buy because they are afraid of losing their down payment.
Then we’ll see fundamentals matter again.
Anyone just hear 640 am KFI / John and Ken Show rant against a federal bailout of FBs?