“We Face Strong Headwinds”: CEO
Some housing bubble news from Wall Street and Washington. The Dallas News, “Slower new-home sales in key Texas markets are adding to homebuilder D.R. Horton Inc.’s woes. ‘We are struggling with softer markets in San Antonio and softer markets in Dallas-Fort Worth,’ Horton CEO Donald Tomnitz said. ‘San Antonio is much softer this year than it was last year.’”
“‘In D-FW, there is a lot of press about foreclosures and defaults right now and that is adversely affecting future buyers,’ Tomnitz said. New sales orders were down about 34 percent in Horton’s region that includes Texas. But the builder faces its biggest hurdles out west. ‘California is tough,’ Mr. Tomnitz said.”
“The company charged off an additional $67.3 million related to canceled land purchases and inventory write-downs. Almost half of the 26,000 houses Horton has under construction are speculative, with no buyer. And almost a third of the buyers Horton signs up never complete the sale, the company said.”
“Mr. Tomnitz said the cancellation rate is likely to stay high as new homebuyers have a hard time selling their current house. Plus, some mortgage companies have made it harder to qualify for financing. ‘We face strong headwinds, we believe, in the course of the next six to 12 months with illiquidity in the mortgage industry,’ he said.”
From Bloomberg. “H&R Block Inc., the largest U.S. tax preparer, said it found a buyer for its money-losing subprime mortgage unit after a six-month search, and will sell the business for about 40 percent less than it sought.”
“‘What matters most is that it’s being sold,’ said analyst Scott Schneeberger. ‘Just to make it go away is what investors really want the company to do at this point.’”
The Associated Press. “Opteum Inc., a real estate investment trust and mortgage lender, on Friday said it plans to exit its money-losing wholesale mortgage loan origination business.”
“Opteum said it has put the business on the block due to a deteriorating secondary market for closed mortgage loans and ongoing weakness in demand for mortgage products and services in a soft housing market.”
“‘In the last month or so, however, the secondary market for mortgage loans has experienced significant distress and substantially increased volatility that was initially precipitated by lax underwriting standards, early payment defaults and high delinquency rates involving subprime mortgages and concerns over the general state of the U.S. housing market,’ said CEO Jeffrey J. Zimmer.”
“Shares of First Horizon National Corp. sank Thursday after the bank said it lost money on mortgage lending because of more payment defaults and weaker demand for home loans from investors.”
“The culprit was bad credit, which led to losses in the bank’s mortgage business. The bank is writing off more loans as borrowers miss payments. The bank said the investors who buy mortgage loans in the secondary market have soured on home loans backed by bad credit. This squeezes profit margins because banks collect lower prices for loans.”
“First Horizon said it will stop making ’subprime’ loans to people with bad credit.”
“GMAC LLC’s Residential Capital home- lending unit and General Electric Co.’s WMC Mortgage division announced more than 1,400 job reductions as losses mount in the U.S. subprime loan industry.”
“‘The subprime mortgage market is going to shrink by 75 percent in terms of jobs and volumes of origination,’ said Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California at Berkeley. ‘These companies got too big. They were giving people loans they shouldn’t have and now they’re getting rid of all that.’”
“Spokeswoman Gina Proia said the cuts were made because of ‘current market conditions and the deterioration of the U.S. mortgage market.’”
The Star Tribune. “‘Because the U.S. mortgage market continues to underperform, we regret to have to announce additional layoffs,’ COO Jim Jones wrote in a memo to employees.The layoffs come one day after the company said that CEO Bruce Paradis will retire in June.”
“Last month, the company said it lost $651 million in the fourth quarter, compared with a profit of $118 million during the same period a year ago. ‘ResCap did not move quickly enough to reduce exposure in the face of this downturn,’ Paradis recently told investors.”
“Company executives and analysts warn that the subprime market will deteriorate further this year. Interest rates on more than 10,000 of the company’s subprime adjustable-rate mortgages will reset by the end of the year, with many borrowers seeing their monthly payments jump by more than 30 percent, which likely will lead to more defaults.”
“A Hennepin County judge has granted class-action status to a lawsuit that accuses subprime lender Ameriquest Mortgage Co. of abusive and fraudulent lending practices.”
“‘The problems we have seen in the subprime market are exemplified by Ameriquest,’ Rudd said. ‘The rush to write as many loans as possible regardless [of whether consumers] were able to satisfy their obligations.’”
“Plaintiffs Luke and Tracy Ricci were seeking to consolidate debt by refinancing their mortgage. The couple allege that Ameriquest inflated the appraisal on their home and failed to disclose that their loan had an adjustable rate and several prepayment penalties and fees.”
From Ken Harney. “Have inflated appraisals helped fuel the current surge in foreclosures by credit-strapped borrowers? Are they at the core of many mortgage fraud schemes? The four largest trade groups representing appraisers say yes, and they are asking federal financial regulators to crack down.”
“(Appraiser) Gary Crabtree in Bakersfield, Calif., documented the practice recently for the FBI and state financial and real estate regulators. The basic scenario, said Crabtree, involves realty agents who have listed houses that aren’t selling.”
“To move the properties, they entice buyers, or friends, to ’submit an offer [for the home] that is $30,000 to $100,000 above the current list price,’ with the promise that they’ll get substantial cash at closing.”
From Bankrate.com. “On April 17, the House Financial Services Committee held a hearing called, ‘Possible responses to rising mortgage foreclosures.’ Of a dozen witnesses, none were mortgage servicers, the people whose companies collect mortgage payments, deal with delinquent debtors and initiate foreclosures. The committee didn’t call any lenders, either.”
“David Berenbaum, executive VP of the National Community Reinvestment Coalition, suggested a…mandated temporary halt in foreclosures.”
“A mortgage servicer might have responded by asking who would pay the accumulated interest payments during a moratorium. The servicer, the investors who own the loan, the borrower? If it’s the latter, is that fair? Or would the taxpayers pick up the tab?”
“George Miller, executive director of the American Securitization Forum, warned that ‘policies designed to further regulate subprime lending or provide relief to borrowers’ could cause investors ‘to shun the market altogether and cut off mortgage credit for worthy subprime borrowers.’”
From Reuters. “Citigroup Inc. CEO Chuck Prince said Thursday some subprime lenders flooded communities with inappropriate mortgage products, skirting what he described as a ‘patchwork’ of regulation.
“Prince, the head of the world’s largest bank, didn’t name any names but said some mortgage lenders took advantage of light regulation.”
“‘People find out how to game the system to get capital through the least possible regulatory oversight,’ Prince said. ‘When that happens, bad people do things to harm our community. … Very exotic, aggressive mortgage products were pumped into communities where they are not appropriate.’”
O.T. question (posting high so I’ll get answer) — my understanding is that purchase-money mortgages in Calif are non-recourse, while HELOCs and cash-out refi’s do allow lender recourse beyond the mere resale value of the house. What about refi’s with NO cash out? Does that create recourse?
I believe “Only” purchase money loans are non-recourse in California…All others have deficiency judgment capability.. …I will stand corrected if anybody knows differently….
My understanding is similar to scdave’s with one more caveat.
It depends if the lender chooses judicial or non-judicial foreclosure.
Non-judicial is no recourse on any loan and is cheaper and faster for the lender.
Judicial is no recourse on purchase money only and takes longer and is more expensive for the lender.
Generally, the lender is going be darn sure that there are good and plentiful assets to go after if they hassle with judicial foreclosure.
I think the applicable phrase is “single action state”, they can go after the property OR the individual, but not both. Not sure how it applies in the cases of mortgages, but CA is a single action state.
in cali, only a purchase money mortgage for a primary is exempt from a deficiency judgment. that includes 80/20’s. investor properties, cash out and rate and term refinances are not exempt. so the the lettuce picker with the $700,000 80/20 that went bad after 9 months is exempt from a deficiency (like they had assets to attach anyway), but the heloc set that bought hummers are on the hook. you can also bet that the flippers that claimed 5 owner occupied residences are gonna run into a little legal trouble as well.
Thanks to all who contributed the answers above. Relevant to the case of my FB friends.
d.r.
Listen up:
If you clowns had just gone to vegas and put everything on black or red, there wouldn’t be all the partial to complete crappyshacks all over this fair land.
But no, you had to build houses nobody wants.
got Sprawl?
David Liar… back at it again.
The National Association of Realtors, which has long proclaimed that U.S. home prices haven’t declined on a nationwide basis since the Great Depression, now says they are likely to do just that this year.
The Realtors, which had been projecting as recently as February a 1.9% increase in the median home price this year, now say prices for previously occupied homes will slip 0.7% this year from the 2006 level.
Here is the full article:
http://tinyurl.com/2jbcp7
leiRAH
2000 buy stocks
2005 buy housing
what an idiot
He made money by enticing people to buy stock in 2000. He made money by enticing people to buy houses in 2005. All the while, he added no real value to the economy.
He’s not an idiot. He’s a “product of market forces.”
So might we have the ceo of Citibank formerly known as Chuck Prince?
I’m sure he’s left a lot of fingerprints…
hey, it’s a one in 6 shot
Almost half of the 26,000 houses Horton has under construction are speculative, with no buyer. And almost a third of the buyers Horton signs up never complete the sale,
yeha
Looks more like Russian roulette with 5 bullets in the revolver….
Wait, make that 4 bullets:
0.5 x 0.66 = a 0.33 chance…
‘Almost half of the 26,000 houses Horton has under construction are speculative, with no buyer.’
Horton hears a Hoo - there will be no joy in Hooville this year.
A Hennepin County judge has granted class-action status to a lawsuit that accuses subprime lender Ameriquest Mortgage Co. of abusive and fraudulent lending practices.”
“‘The problems we have seen in the subprime market are exemplified by Ameriquest,’ Rudd said. ‘The rush to write as many loans as possible regardless [of whether consumers] were able to satisfy their obligations.’”
“Plaintiffs Luke and Tracy Ricci were seeking to consolidate debt by refinancing their mortgage. The couple allege that Ameriquest inflated the appraisal on their home and failed to disclose that their loan had an adjustable rate and several prepayment penalties and fees.”
Ameriquest, the poster boy of the subprime lenders. This is one of the biggest subprime lenders that has already agreed to pay a large fine for illegal lending procedures. To top it off, the owner is the US ambassador to the Netherlands appointed by President Bush himself. The moral of the story is if you are going to steal do it within a corporate structure and just bend the laws but don’t do anything blatantly illegal. So much for the depending on the government to help against white collar criminals. Instead, they are in bed with each other.
–
““‘People find out how to game the system to get capital through the least possible regulatory oversight,’ Prince said. ‘When that happens, bad people do things to harm our community. … Very exotic, aggressive mortgage products were pumped into communities where they are not appropriate.’”
“People” are trained to profit from anything that they can get away with. It is all about what is allowed to go on. Regrettably, it starts at the top — the fountain of money that emanates from DC and NYC.
Your neighborhood lender is just the guy near the bottom of the chain just like a neighborhood drug pusher.
It is the System, Stupid!
Jas
Very exotic, aggressive mortgage products were pumped into communities where they are not appropriate.
Is it getting warm in here?
oh my god that is so funny - I’ve got this image of Tim Curry as Doctor Frankenfurter, making mortgage loans…
anyone what to guess what RE agent and mort broker commissions will be in the aftermath ?
RE 2% total
Mort less than 1/2 of 1%
imo
“CEO Chuck Prince said Thursday some subprime lenders flooded communities with inappropriate mortgage products….”
I can’t disagree but I wonder if Citi has any swap insurance exposure as a result.
Thanks for the Sun story! Here is a link on the Bakersfield newspaper blog:
http://people.bakersfield.com/home/Blog/Bakersfieldbubble/8227/#-
And yet, the Dow approaches yet another all-time (nominal) high.
When the f$#k does gravity re-assert itself?
txchk?
The Greenspan put is alive and well in the retirement years of its namesake. Why not inflate the stock market — that way, you impose a stealth tax on the masses (who have no savings, anyway!) and also reward the top 0.5% of the wealth distribution, as they are having trouble making ends meet on the paltry paychecks they bring home from their day jobs.
IMHO - If you are long and do not sell today, you may not get as good prices for 10 years. The market is choppy and could easily reverse on any bad news. Lots of news over this weekend and a lot will be horrible.
Look for the Carry Trade (which has been unwinding this week) to collapse next week. The Yen is likely to raise rates etc.
Hoz — why would the powers that be let a little bad news get in the way of the ongoing policy to “contain risk” by inflating U.S. share prices?
If you look at the share prices of the S & P 500 in any currency except for the dollar, they have stayed unchanged (British Pound, Euros, Yen) or lost huge (Canadian dollar, NZ, Ausssie) for the last 2 years and worse, if you sell, you have to pay taxes on the “profit”.
The carry trade is the only thing keeping the stock market up, as the Yen strengthens the stock market collapses. I pointed out earlier this week that there are few “real bids” under current prices. A “real bid” is where you can get out of a large(r) position in one hit generally w/o moving the market by more than a quarter. Current “real bids” are points under prevailing market prices. The foreign investors in the US securities are not stupid and total foreign investment in the US significantly dropped last year. In terms of 2006 market performance, we ranked 56th in the worlds market. The PPT (if it exists) is to small to fend off the Trillions of US dollars floating overseas.
The storm is about to come ashore. The wind is blowing through the trees and I am seeking shelter.
“…as the Yen strengthens the stock market collapses.”
But why would the Japanese want to kill off their auto manufacturers’ best customers?
Yeah, well Cramer says everything is cool. Buy Buy Buy!
Hoz, how is this prediction working for you, today?
Comment by Hoz
2007-04-18 15:49:11
“The Yen crosses opened the US session sharply lower after EU Junker expressed criticism for one-way bets in the currency market. Europeans are beginning to express their dissatisfaction with the recent weakness in the Japanese Yen but until the US becomes concerned, it is unlikely that currency traders will care. Expect the recent weakness in the Japanese Yen to have a profound impact on the earnings of Japanese exporters. The record high that the Dow reached today should help spur sharp gains in the Nikkei overnight. Looking ahead, we continue to only have secondary data from Japan. The country is releasing the tertiary industry index for the month of February. With lackluster economic growth, the tertiary number should do little to stem the currency’s slide. The Bank of Japan however will be releasing their monthly survey tonight which could lead to some Asia session activity.”
The market will reverse on Friday the 20th of April.
We perceive our problem with the Yuan Renminbi, Europe thinks its problem is the Japanese Yen. Currency traders care!! From small differences huge fortunes are made. This arb has gotten so much press that probably as many people that are aware of a housing bubble are also aware of a “carry trade”. These last 2 weeks the volatility in the forex I have only seen before on key reversals - intra day 200bps swings in the carry trade on rumors. A trader has to ask himself “with this much volatility, do I really want to be in this position” . Unfortunately most Hedgies are not smart enough to know when the game is over. Liquidation.
I’ll stick with the Asian traders.
Now as to the above matter, Europe, Asia, Australia, South America, (most of) N. America think the problem is the US dollar.
“The battle between top pickers and carry traders has been fierce with Asian and European traders opting for the former and US traders opting for the latter.
Carry traders aren’t giving up quite yet as we see evidence of consistent buying throughout the US trading session. This is the same sort of price pattern that we saw yesterday, which indicates that the battle is continuing with no clear winner in sight. What the price action does tell us is that there are strong players on both sides of the spectrum and should one triumph over the other, the reversal or continuation will be just as sharp as the rally that we have seen over the past month.
Dollar bearishness is still the dominant force in the market as economic data continues to disappoint.
I happen to be in the “top picker” category, there has been an enormous profit made in the Carry trade in the last 2 weeks annualized 13% or if 50% hedged ~40%. Although the economy in Japan has mixed signals - the general signal is for greater exports.
The “yen” is not going to raise rates. Neither is the Japanese Central Bank. They’ll probably raise rates in the ECB, but that won’t affect the carry trade.
Hi Hoz and Getstucco and TxChchick,
I dont understand too much, if anything about puts, carrytrade, going long, calls, or this type of stuff even though i’ve read this site for quite a while now.
I mean this in all sincerity, and I’m poking fun at myself here, but is there a complete idiots book for this stuff.
Then I could buy the book and get up to speed on what you guys and gals are talking about. Or is there any book at Barnes and Noble or Books a Million that you would recommend for me.
I think that it would help my financial understanding if I could understand it. I have tried to just read along with you over the past 2 years but I guess I havent grasped this info. Thanks. I’m a slow study on this subject i guess. But I do have the desire to learn the material.
Investopedia is probably the best basic to understanding the terms site I know of. You can buzz through their tutorials (hit the basic ones and then options, margin, short selling, fundamental and technical analysis (and use the dictionary to define anything you don’t understand).
I don’t know of a single book that would cover the whole spectrum of your question (even reading the 20 or so articles I’m pointing out will only scratch the surface for most of the topics). Almost all of the articles could and does have several thick textbooks devoted to the complete discussion of the subject.
If you insist on something dead tree, you could try a set of CFA study notes on ebay, but they probably skip too much to make it understandable.
Fat Lot of good that was, tell you all about the resource and forget the link:
http://investopedia.com/university/
I just did some quick poking around on Amazon. I don’t think that the book you are looking for exists. The “Complete Idiot’s Guides” and the “…for Dummies” guides tend to focus on personal or small business finance.
I suggest a long slow afternoon in your local public library. The info is out there. It just may not be collected in the kind of book you are thinking about. A big box bookstore could do the same thing. I would just spend the time reading while I was there - you don’t want to have to take 5 or 6 books home with you.
I also recommend Wikipedia. This stuff might be right up its alley.
Captain Jack — Check out:
http://cboe.com/LearnCenter/Tutorials.aspx#Basics
Read everything by and about Warren Buffett. He’s a genius investor, he’s honest, and he’s a great teacher.
April 13, 2007
Perched Precariously on a Precipice
“…The strength in gold is also a good indication that this time around the U.S. dollar can count on little help from its friends. Rising gold prices reveal the suspicion with which many now view fiat currencies and central bankers’ resolve to keep them sound. Therefore, foreign central banks will be reluctant to take actions to further weaken their own currencies, ushering in greater domestic inflation and calling into question the soundness of their own respective monetary policies. Low gold prices gave cover to such inflationary interventions in the past, but today’s rising prices urge caution. As a result, the chances that the dollar can dodge another bullet are increasingly remote.
Despite the impending gravity of this situation, few show any worry. Perhaps the dollar will bounce from these levels and will buy us a little more time, but how much? When the support ultimately gives way all hell will break loose. A sharp decline in the Dollar Index below the 80 level will likely take down the bond, stock, and real estate markets as well. Since a lower dollar will exert additional upward pressure on already rising consumer prices, the ensuing combination of rising inflation, higher interest rates and lower asset prices will be a toxic mix.”
I like there motto: “because there’s a bull market somewhere”
Euro Pacific Capital
http://tinyurl.com/3bcchl
There opinions make a nice read.
Peter Schiff does a good radio show every week, which is archived on his site.
Goldseek.com also has good financial radio show that is archived.
“When the f$#k does gravity re-assert itself?”
As soon as corporate profits decline which as evident from the 1st quarter’s earnings announcements so far, isn’t going to happen anytime soon. That’s why I’m not counting on home prices declining much this year. The economy is too strong which means people have jobs and are spending money. Until that changes, home prices won’t decline much.
Thanks for the breath of fresh air from troll country. Are you suggesting that wage inflation will be strong enough to offset the implosion of 50+ subprime lenders?
The only thing I’m suggesting is the economy is fairly strong and as long as people have jobs it will remain strong. If the economy is strong then home prices probably won’t decline much. I want home prices to decline just as much as everyone else on this board but that’s reality as I see it and not wishful thinking.
As for wage inflation and the implosion of subprime, I don’t know enough to know what effects it will have on the economy and I suspect most people don’t know either. One thing I am fairly confident of though, is that the U.S. and world economies are more diversified than ever which to me means that weakness in one area is likely to have less of an impact than it would have one or two decades ago.
“If the economy is strong then home prices probably won’t decline much.”
I guess you don’t understand the implications of the subprime collapse, then. The immediate problem is a gaping hole blown between the bid distribution (the purchase offers buyers are willing to make) and the asked distribution (the purchase offers sellers are willing to accept). That explains, for example, why the median SFR sales price in my zip code (92127) for last month was 18% lower than in March 2006.
This is only the immediate effect of the subprime implosion. The long-term effects will take a slower toll with the tightening noose of foreclosures in the wake of subprime resets the 2005-2006 FBs cannot afford. The rising inventory levels which will ensue presage lower future home sale prices, and inventories have risen by 10% in my zip code since Jan 31.
Then there are the risks to consumption (no more cashout-ATM money available) and employment (layoffs in the lending industry and ripple effects from reduced consumption spending) to consider, and a few more “headwinds” I don’t have time to write about at the moment (e.g. high risk Alt-A and prime loan resets that don’t peak until 2011). Otherwise, the subprime problem is fully contained.
I tend to agree with you, Observer, with respect to the greater economy, especially he red hot global economy. It may in fact be true that exports will buttress the American economy in the coming years. The performance of Caterpillar seems to auger that development.
I’m not sure anything can stop the fall of housing at this time though. Too much supply, and, with the increasing tightening of credit, too little demand. There’s no way wages can inflate enough to prevent a significant decline.
I would encourage those thinking of buying puts against the stock market, or, heaven forfend, a bear muni, to simply write a check to a hedge fund instead. It’s much more direct.
The one thing that is helping the overall economy considerably is that we are now in 2007, exactly 62 years following WWII. Every year, for about the next 20 years, approximately 1MM more people per year will turn 62 than will turn 20.
When you overlay labor force participation rates with this, you see that even with weak job growth, people will have jobs.
Now, the financial end of things is completely different. The cat is out of the bag on aggressive lending. We are going to see people completely recreate their risk models with respect to exotic loans, thus actually require different underwriting, and greater risk premiums, taking people out of the housing market today (decreasing demand).
What this means is that even if people have jobs, they will be able to afford less for their houses, in all locations, at all price points (plankton theory). It will take a while for this effect to hit everyone, but it will effect the entire market (to a greater or lesser extent depending on location and price points).
This pricing correction will take more time since people will still have jobs, but it will happen. I expect a long slide in housing prices until incomes, prices, and interest rates make more sense. Today, in most markets, they don’t.
Obviously you do not have any ability to read with understanding the 1st quarters earnings reports. Understanding the Banks earnings reports and the banks write downs for “bad” loans as well as future forwards to show a profit, does not instill confidence in the US markets.
And if you think rating 56th in the worlds equities is great, I think you have a lot of homework to do.
This thing is going to blow up much sooner than you guys think. Any day now. Keep your patience and keep your powder dry.
“…going to blow up much sooner…”
How do you know? Do you have a superior crystal ball?
‘Until that changes…’
True, but the change will be very, very swift. The current protests by sub-p lenders that they didn’t see the change coming is a word to the wise. This bubble, this expansion is a credit expansion…it’s Red Queen time. When the liquidity slows (not stops, just slows) the race is over. We are close, I fear, and so is Hoz.
2 days for the enormity of the situation sinking in…
Might seem like forever.
As soon as corporate profits decline which as evident from the 1st quarter’s earnings announcements so far, isn’t going to happen anytime soon. That’s why I’m not counting on home prices declining much this year.
Yes. It sure does seem that nothing is happening anytime soon. We are in for a long ride on this one.
Yesterday I had a verbal exchange on the blog about whether the 5th month on the Credit Suisse ARM-reset-schedule is May 07 or June 07. The poster on the other end of the conversation was saying it makes no difference whether “month 1″ was January or February. I think it makes a difference to those now asking “When does gravity re-assert itself?” For months 5-6-7, the volume of ARM resets will be about $38 Billion per month, in contrast to the paltry $25 Billion per month of months 1-2-3-4. Months 8-9 look like $44B/mo, 10-11 like $50B/mo. Nobody knows the time lag exactly, but considering how foreclosure problems are already affecting the financial system, it’s hard to see how the US stock mkt can hold up except in terms of a fast-falling US dollar. All those TV talking heads telling you how to pick stocks, what a joke. Did they ever tell you not to buy a house? Do they tell you now that US Treasury securities will be paid back with a strong guarantee but in a worthless currency?
The appraisal issue really shows how the dishonest get ahead. The Enron scandal had its accountants, this one will have its appraisers. I guess no one makes money by telling the truth. Or at least not enough to live the new millenium version of the American Dream.
There are very few honest AND nice people that are successful in the business world. NIce guys don’t finish last, they don’t even finish.
To the contrary, Ray. I know a fellow who writes a nationally syndicated business column. Over the years, he has interviewed quite a number of successful business people.
Despite the stereotype of the dishonest, not-so-kind successful business person, he has been struck by how NICE his interviewees are. And they aren’t just putting up a good face while he interviews them. They truly are nice people.
“by how NICE his interviewees” Would you put Donald Trump in the category. He is the stereotype for what is revered as success. Your friend is being snookered.
“The secret to creativity is knowing how to hide your sources”
Albert Einstein
Donald Trump is a pretty near complete business failure (shoot the guy’s casino loses money). He is a success at promoting himself. Most business sucesses I’ve met were competitive, but were also pretty good folk, few do much promotion of their sucesses (as is generally true with most really successful people).
WT- I am an appraiser but mostly review them. I laid off the workin during the boom. Just could not stomach the BS. Now I am out of retirement and reviewing work of other appraisers. In a word it is “crap” for the most part. I have had only 1 report come through that was within reason in the last month. Granted someone is screening them but wow what a lot of garbage must be out there. It is just a matter of time till they get around to hammering these asses.
“To move the properties, they entice buyers, or friends, to ’submit an offer [for the home] that is $30,000 to $100,000 above the current list price,’ with the promise that they’ll get substantial cash at closing.”
!#&%?!
BTW, I suppose any bailout that passes through the large cracks in our system will reward those who “took out cash” and now find themselves with a mortgage they are unable to pay?
Read Serin’s blog; he’ll explain the logic behind that one. Plus, he explains why keeping good business records and filing your income taxes on time are optional.
“keeping good business records”
Probably not a good idea if you are in the fraud business.
“keeping good business records”
That’s what my lender has been trying to say that they’re doing with our loan in gathering documents MONTHS after the closing. More like trying to make the loan more attractive to prospective investors. I told them to pound sand and so far that’s as far as it’s gone.
““The company charged off an additional $67.3 million related to canceled land purchases”
I find it humorous that after years of whining about land shortages due to environmental and planning restrictions, it now becomes evident that developers themselves were causing the shortages by tying up huge tracts of land in purchase options.
Never mind the fact that it would not be a bad thing if it was economically unfavorable to build these “communities” of 3000+ lookalike houses.
You have some great comments today.
“Plaintiffs Luke and Tracy Ricci were seeking to consolidate debt by refinancing their mortgage. The couple allege that Ameriquest inflated the appraisal on their home and failed to disclose that their loan had an adjustable rate and several prepayment penalties and fees.”
It was all there in the loan documents. They were just too lazy to read the damn things before signing. I think people who think they can sue the lenders for not disclosing all the negative aspects of a loan will be in for a rude awakening when they’re in front of a judge and he/she says, “It spells this all out right above where you signed”. “What questions did you have about this at closing and ask the mortgage broker?”
True enough. But you’ve gotta wonder why loan documents have the format they normally do.
Is there any good reason why the loan documents should not contain a title page that clearly states whether the interest rate is fixed or adjustable, whether it is interest only, and what the maximum and minimum possible payments are? Is there any motivation for burying this information in a 30-page document besides hoping that the borrower might not read it so you can swindle him?
Testify, Annata! Testify!
Shouldn’t the fact that you are anchoring yourself to 100s of 1000s of dollars for X years be enough motivation to look for and understand the terms and ask LOTS of questions? It sure is for me.
I don’t disagree with you but responsibility cuts both ways.
I agree. It’s a legal document written by lawyers to protect who? The lender, not the borrower.
Part of the problem is that by the time you finally get to closing, your’re sitting around with all these people staring at you waiting for you to sign. There’s so much pressure to just do the deal that many people just wing it and hope everything is in their best interest , even if they don’t understand what they’re reading. This is especially true for people who don’t have higher educations and aren’t used to deciphering legal mumbo jumbo…. just the type of people who take out these toxic loans
There should be some cover page that explains everything that might affect them down the road, including what the maximum the payment might hit in LARGE text.
Here in the Midwest where the escrow style of closing so common out west is not generally practiced, it is expected that both parties hire a lawyer to assist them in a face-to-face closing. Everyone sits down in a conference room somewhere (most often at the title company) and someone leads the closing, making sure everything necessary is present and signed, etc. Takes about an hour or so…
Anyway, most people just hire any old lawyer that offers the lowest rate. The lawyer does the minimum to avoid malpractice (glances at the contract and says, yep, this is pretty standard). I have a friend that does real estate closings on the side, but he charges $500 or so. However, he keeps an eye on everything and follows up. If the contract says the closing has to happen within 90 days and the parties agree to a certain date beyond 90 days, the contract gets amended. This guy watches the whole process like a hawk and makes sure that when you sit down to close, everything is perfect. He’ll even explain anything in the contract if you ask.
Why wasn’t he swamped over the past few years? Why aren’t most real estate lawyers so diligent? Because most folks don’t give a crap about what the contracts say and the extra $300 at closing isn’t worth it to them.
One legal aspect (I ain’t a lawyer, but I do write P.O. specs) is you never want to put any information down twice, because good ol’ Murphy will always manage to change one instance of that info and not the other. Say you have a title sheet and a long contract with interest rates that differ by half a point. What governs? The title sheet or the actual contract?
Think of it this way: you go rent an apartment that has a title sheet and an actual lease. The lease says the rent is $1300 but the title sheet says $1400. What governs? Who decides? What if the title sheet says “in the event of a discrepancy, the lease governs” given that the purpose of the title sheet is so you don’t have to read the lease? What if the title sheet says, “In the event of a discrepancy, the higher rent value governs” - same thing. What if there is no disclaimer, and you sign both the lease and the title sheet?
Can ‘o’ worms. I suspect there is a reason there isn’t a title sheet: becuase too many people on both sides of the fence have been burned by having one. Your title sheet cannot possibly contain all 30 pages of information, and what is important to the FB’er may not be the same as what is important to the bank.
Title sheets wouldn’t make the problem of ingnorant FB’ers go away, it would simply have them screaming louder. I’m pretty tired of hearing about stupid people. I do stupid stuff every day, usually getting a couple dumb things in my 9:00am. The only difference between dumb people and smart people is smart people know when they do dumb things. Dumb people blame others.
All I can say is that when I’m personally signing something that legally binds me to hundreds of thousands of dollars for the next 30 years, I’m nervous as hell and will read every period and staple in that document. Those salespeople can sit there and wait until I’m satisfied
I would recommend that nobody sign anything in front of the salespeople and take the damn docs home for a careful review. It is hard to read things with people watching.
It didn’t matter, because they knew next year their ‘investment’ was to increase 50%. And the same the following year. And so on. Suddenly they realize it’s not going to do all that, and there they go getting all cranky on folks.
“But the builder faces its biggest hurdles out west. ‘California is tough,’ Mr. Tomnitz said.”
Tough indeed. It is hard to get your hopes up for a resurgence of the California home construction boom when the state is full of empty brand new tract home developments that will not sell at anywhere near bubble prices without the fuel of subprime loans.
We used to grow food in the Valley. Now it’s housing tracts. Everybody’s happy…until the music stopped about 6 months ago. The sub-p problems were just the stick in a gas-blotted cow…the cure may kill ‘em, but in time housing may recover.
And what will we do when we start facing food shortages? Grow our own on our zero lot line properties?
Ask for help from the pot-growers. They seem to grow a lot of greens in the bedrooms.
“Slower new-home sales in key Texas markets are adding to homebuilder D.R. Horton Inc.’s woes. ‘We are struggling with softer markets in San Antonio and softer markets in Dallas-Fort Worth,’ Horton CEO Donald Tomnitz said. ‘San Antonio is much softer this year than it was last year.’”
Translated. “There are no appreciating markets left for speculators to dump money into. As a result, we have lost the last bit of demand for our houses. With first time buyers priced out of markets and/or incapable of getting mortgages, we are in a heap of trouble and could face insolvency soon. We can only sell so much land and fire so many people to stop the bleeding. Dammit all. Dammit all to hell.”
I love how they keep saying the market is “softer” as if the market has settled into a light, fluffy pillow and gently floated off to a short nap.
What they really mean is that the market is much harder as it slams headfirst into a cutthroat environment that’s soon to be a nightmare.
“‘The subprime mortgage market is going to shrink by 75 percent in terms of jobs and volumes of origination,’ said Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California at Berkeley. ‘These companies got too big. They were giving people loans they shouldn’t have and now they’re getting rid of all that.’”
No worries — Fannie Mae, Freddie Mac, the FHA and the Wall Street kingpins can doubtless pool their efforts to pick up the subprime slack left in the wake of 50+ U.S. subprime lenders that went out of business in the first quarter. Subprime is “contained” — end of story.
More luxury apts coming to my borough . . . 42 stories worth. These are rentals. All the more reason the chuckleheads dropping 800K in DUMBO on shitty new construction condos are going to be FXXXed for years to come. That, and the many thousands of condo units coming on the market in Wmsburg, LIC, Lower Manhattan, etc.
Insane high-end supply coming.
Hello all- I wrote both of my senators last night to say NO! to a foreclosure bailout- I hope all of you are doing the same.
I’m sure that was effective if your name is Brandon Gates, Brandon Buffett, Brandon Bernacke, or Brandon God. Otherwise, just keep voting on American Idol.
Brandon God probably won’t work either.
I wrote to Senators Kyl and McCain several weeks ago. As for Rep. Grijalva, forget it. He’s probably going to try to engineer a bailout. And don’t get me started on Grijalva. Just don’t.
I wrote my Senators and Congressman. Two of the three are Dems; I helped put them in office last year, and I’ll be happy to vote them out for government fiscal irresponsiblity and supporting personal financial irresponsibilty. I’m all for giving people a leg up when they need it, but not when they’ve ignorantly or intentionally placed themselves in a bad situation. You wanna roll the dice, you gotta be willing to pay the price.
If they vote for a bailout, then I will demand a tax credit for the $250 I lost in Reno last month. The casino did not explicitly tell me I could lose money, they only advertised what I could possibly win.
You can either vote for socialists or warmongering Jeezus freaks. In the end, they both have their nose in your business and their hands in your pockets.
Aw, put your hands in your own nose.
Thanks for the well reasoned political debate.
OB_Tom posted this in an earlier thread. I think this should be made known to law enforcement, or is it a joke I’m missing?
http://sandiego.craigslist.org/rfs/315157739.html
“Would you take a foreclosure on your credit for $$1,100,000?!?!
“It’s simple. Buy the house with 100% financing and receive $1,100,000 at closing.
“Ya, you’ll have a foreclosure on your credit, but what do you need credit for when you have OVER A MILLION IN THE BANK!!!!!!!
“Call or e-mail Jon at 858.225.5008 for more info.”
Property shown below.”
flagged for removal already? Too bad- maybe the FBI is on the way now.
““To move the properties, they entice buyers, or friends, to ’submit an offer [for the home] that is $30,000 to $100,000 above the current list price,’ with the promise that they’ll get substantial cash at closing.”
Construct rec’t of cash. Isnt this actually Boot back and thus taxable income, since no repayment of loan is made. IRS should be all over this. Yet all this is unreported income to buyer and to top it off their base for reporting gains is increased even further not even including the cash back. Where is the IRS on all of this?
“Where is the Police officer when you need one?”
Try this:
http://www.irs.gov/newsroom/article/0,,id=121584,00.html
I think I’m getting PHBSD - Post Housing Bubble Stress Disorder. As bearish and pessimistic as I’ve been during the past couple of years, the bad news is compounding even more rapidly than I’d have guessed, particularly here in Florida. M-W.com shows the primary usage of “tank” as a noun. I suspect that “verb” ought to rise to the top spot, soon.
To alleviate stress I recommend maniacal laughter, petting a dog, or sex. Keep in mind, don’t do them all at once as that is most likely illegal or, at least, frowned up, in most jurisdictions.
Jimmy, I like your style!
Yeah, I’m pretty sure that it is illegal in most jurisdictions to be laughing maniacally while having sex with a dog that you are petting. Oh, that wasn’t what you meant? Nevermind.
Actually last night I did two of the three simultaneously.
won’t tell you which two
Fannie to the subprime rescue (didn’t you know we would all end up paying for this mess somehow):
http://www.realestatejournal.com/buysell/mortgages/20070420-hagerty.html
How do they all of a sudden become good loans just because Fannie buys them??? Aren’t they still the same crap that the subprimers cant pay back???
Who in their right mind would buy these packaged securities just because they are owned by Fannie instead of NEW… its still the same junk…
I must be totally missing something here on how this could possibly work…
maybe they are just buying it all up so our wonderful government can socialize the losses through these GSE’s and we will eventually all pay for it through our taxes….
Well, I think what they are doing is largely cosmetic. I saw a number of $20-$30 Billion as the amount available. This is a drop in the bucket compared to the $1.3T subprime loans out there. IF they actually underwrite appropriately, I think they could easily find $20-$30B of borrowers who actually might be getting stung by liquidity draining out of the subprime market, but are actually reasonable borrowers based on more traditional subprime underwriting standards.
In any event, if Fannie and Freddie lend to only the MOST credit worthy subprime borrowers, I’ve got little problem with them stepping up their efforts, but if they are lending indiscriminately (as before), or to only the least credit worthy who are in the most trouble, well, their money won’t go far, but I’ll still be quite ticked off.
Ginnie Mae (which passes-through VA and FHA mortgage securities) is a part of the Federal government and is guaranteed with the ‘full faith and credit” of the U.S. Gov’t. The GSEs such as Freddie Mac are stockholder-owned corporations that are Federally chartered. As such, they are NOT guaranteed by the Feds. Because they are relatively conservative in their lending (compared to non-agency) the CDOs they pass-through are considered quite safe. However, GNMA securities are guaranteed- they can’t lose interest or principal due to foreclosures. So if Freddie or Fannie issue these bonds, it (might) come out of the stockholders equity before the gov’t has to pay anything. In fact, the gov’t could even let them go under. Investors grade Fannie and Freddie CDOs as AAA, high rating, but some finite (but small) chance of nonpayment are priced in.
A site which explicates this a bit more:
http://www.investinginbonds.com/learnmore.asp?catid=11&subcatid=58&id=28
We face strong headwinds, we believe, in the course of the next six to 12 months with illiquidity in the mortgage industry
Sounds like this CEO learned to sail on a fancy sailing yacht, with all the electronic gizmos. I bet his yacht even has something to keep the boom from swinging across the deck as the winds change, preventing the oblivious CEO from being knocked out into the water.
You see, those tiny little sailboats most people learn on have these little pieces of yarn on the jib sail. They’re called telltales. And when the telltales start flapping around you know something’s happening. The winds are changing? You’ve steered to far into the wind? Probably! Better watch out - get into the headwind and you lose momentum really quickly. You’re pretty much dead in the water if you come to a complete stop!
Hate to say it Mr. CEO, but strong headwinds are a lot easier to sail in than weak headwinds or even worse, no wind at all. But then again, I guess you have to know where the wind is coming from.
according to larry cinderella kuntlow, subprime meltdown is a dog that never bit.
a story never told except on his show.
worthy subprime borrowers, hmmm that kinda jumbo shrimps me.
Josh
“A number of real estate agents have said the foreclosures are also contributing to the local housing slump. Rick Pennington said that when homes are foreclosed, or homeowners struggling with high payments decide to sell their house, those homes go back on the market and drive housing prices down.”
NO KIDDING!! What do you think happend on the way up the ladder. You Real Estate people didn’t think that each tic up in price would send the valuse up on each property. Well guess what? It is going to happen on the way back down. Do I see $250K as median in Calif?