One Of The Most Difficult Markets In 25 Years: CEO
Some housing bubble news from Wall Street and Washington. CNN Money, “Centex Corp., the fourth-largest U.S. home builder, reported a wider-than-expected fourth-quarter loss Monday as it responded to the U.S. real-estate slowdown by writing off and revaluing land and by exiting the sub-prime lending and commercial contracting businesses.”
“CEO Tim Eller said the company was scrambling to deal with what he characterized as ‘one of the most difficult markets in 25 years’ and he acknowledged that he still sees ‘uncertainty in many of our markets.’”
“In all, Centex said it booked $202 million in land option write-offs or land valuation adjustments during the quarter. The company said its results were also pulled down by higher discounts and sales incentives.”
From MarketWatch. “‘We know we won’t experience any significant margin improvement through house-price appreciation for the foreseeable future,’ the CEO Eller said. ‘So we must think even more as a manufacturer.’”
“Sales trends softened in March ‘as buyers became cautious due to the reports of subprime concerns and tighter lending standards,’ said Cathy Smith, Centex’s CFO.”
“She said the cancellation rate in the latest quarter was 34%. The historical average for cancellations runs between about 20% to 25%, the CFO said. ‘The main reason buyers are canceling remains the inability to secure financing or sell their existing homes,’ Smith said.”
“‘Considering the lack of clear directional trends in the market, tighter mortgage lending standards, and soft results in March, we don’t believe it’s prudent to provide earnings guidance for fiscal 2008 at this time,’ she said.”
The Oregonian. “Millennium Funding Group, a major regional subprime lender, has halted its lending and cut all its jobs amid nationwide mortgage turmoil.”
“The company had laid off 76 in March. After 71 layoffs late last week, only 10 workers remain in Millennium’s downtown Vancouver headquarters. Their jobs will end after Millennium’s remaining loans are closed.”
“As he did in March, Joe Bell, VP of human resources of Ace Holding Co., the Indianapolis-based owner of Millennium, pointed to the subprime lending market as the chief contributor to Millennium’s layoffs.”
“‘That was a large portion of our business,’ Bell said. ‘It was roughly 60 percent of business when we acquired Millennium in November, and that market just isn’t there right now.’”
The Record. “The Paramus-based lending and loan payment collecting arm of a real estate investment trust is trying to shake off a serious bout of the subprime contagion.”
“Within the past two weeks, Opteum Financial Services LLC, a subsidiary of Vero Beach, Fla.-based Opteum Inc., has closed its wholesale and conduit-lending businesses, eliminating 257 jobs.”
“Reasons for the loan-office shutdowns included ‘weakness in consumer demand’ and ‘deterioration in the secondary market for closed mortgage loans,’ the company said in an April 20 filing with the SEC.”
“About two-thirds of the loans the company makes are ‘Alt-A,’ which the company defines in its annual report as loans for those who would meet standard Fannie Mae or Freddie Mac underwriting guidelines, but are putting less money down and have less verified income than Fannie or Freddie would allow.”
The New York Times. “In the spring of 1998, the chief financial officer of New Century Financial wrote an unusual paper describing a then little-known accounting technique.”
“The executive, Edward F. Gotschall, marketed his white paper at industry seminars and conferences, and promoted it to Wall Street analysts as an insider’s look at New Century, according to people who read the paper.”
“The technique promoted by Mr. Gotschall allowed the company to report profits before they actually existed. The paper profits were pegged to future earnings from loan sales to institutional investors. Some financial analysts say that New Century appears to have also used gain on sale to hide losses as the subprime market began to falter late last year.”
“‘The thing about gain on sale accounting is that you can create a machine that just manufactures earnings out of thin air,’ said Richard Benson, an expert on securitization. Mr. Benson said that the stock prices of subprime home lenders like New Century Financial had ‘collapsed so fast because the income and balance sheet had been built on gain on sale, which turns out to be imaginary.’”
“‘The market woke up to the fact that there’s no there there,’ Mr. Benson said.”
From Reuters. “Subprime mortgage lenders created a surge in delinquencies in the past year by repeatedly breaking their own underwriting guidelines to capture business, analysts said on Monday.”
“So-called ‘exceptions’ to loans were made as written standards did not change much, Michael Youngblood, a managing director and portfolio manager at FBR Investment Management Inc., said.”
“‘The amount of loan exceptions made in 2006 must be historically the highest,’ he said.”
“Subprime lenders also paid scant attention to ’soft’ guidelines, such as how they analyze ‘FICO’ credit scores for each applicant, said Mark Milner, chief risk officer for PMI Mortgage Insurance Co.”
“For instance, relying on a credit score that was generated by an applicant paying back bills to a doctor and securing a $200 credit line ‘is just not enough,’ he said.”
“Pricing of collateralized debt obligation bonds laden with subprime mortgage securities is getting more perilous amid deep uncertainties over when ratings on the assets will be downgraded, money managers and Wall Street analysts said.”
“‘A lot of downgrading has to happen’ on CDOs that include subprime asset-backed securities, said Lang Gibson, Merrill Lynch & Co.’s director of CDO research.”
“The economist who prodded investors into the U.S. housing boom and has been skewered by bloggers during the bust is leaving a top real estate trade association, the group said Monday.”
“David Lereah, the author of ‘Are You Missing the Real Estate Boom?’, will leave the the National Association of Realtors’ by the middle of next month after serving as the head economist for seven years, a spokesman said.”
“‘David has been an expert in the field, is widely respected and has been an excellent spokesman for NAR,’ said said Lucien Salvant of the real estate agent trade group.”
“In October, Lereah said that he expected ’sales activity to pick up early next year.’ In recent months, Lereah has pushed his expectations for recovery deeper into 2007 and has trimmed his forecast for home sales for the year.”
“Problems in subprime mortgages caused a sharp drop in home sellers being able to find buyers for their homes in March, according to a trade group report Tuesday that showed the battered real estate market was much weaker than expected.”
“The National Association of Realtors’ Pending Home Sales Index fell 4.9 percent in March, following a 1.1 percent increase in February. The index was down 10.5 percent from the March 2006 reading.”
“‘Although the weather improved in March, we’re starting to see the effects of a decline in subprime lending and tighter lending standards,’ said a statement from David Lereah, the chief economist for the trade group. ‘Home sales will be relatively sluggish in the second quarter, but a modest uptrend should resume during the second half of this year.’”
“If fascism ever comes to America, it will come wrapped in the flag and carrying the cross.”
Upton Sinclair
Sinclair Lewis (not Upton Sinclair).
http://www.answers.com/topic/sinclair-lewis
I stand corrected…
Does that quote not describe our precarious situation to a T?
Absolutely.
Unfortunately, my “day job” is at a Catholic hospital, with a large military patient base/ex-military MDs; I wouldn’t dare to have that on a bumper sticker.
And it will be signing praises to the people until they are enslaved.
Upton Sinclair was the Muckraker. Octopus at least I remember.
Could fascism not appear wrapped in the cloth of debauchery and calling it the true and complete freedom? Fear the extreme right as much as the extreme left.
Fascism could come wrapped in a breakfast burrito carrying a red hot chili pepper. I don’t know what it has to do with this blog
Thanks for the reality check, jerry.
Sometimes the loony bins get the run of the place around here, but thankfully it usually doesn’t last too long.
Did I read that correctly? He is leaving? I stop reading the blogs for a while and come back only to find that a favorite topic is leaving
Honestly, I’m going to miss this guy. His predictions became so ridiculous after a while that even MSM outlets began calling him out, a welcome development given that the MSM was drinking the bulls’ Kool-Aid (and in many ways still is). My prediction is in line with others on this blog: they’ll just hire someone else to say the same exact things, let that person’s credibility be completely sapped after about a year of irrationally rosy predictions, and then just repeat the process. They’ll always be able to find another Baghdad Bob clone to toe the party line.
Don’t worry we still have LAY, YUN, and don’t forget the old battle axe Blanche Evans:
” Blanche Evans, the editor of Realty Times, an online magazine for real estate professionals, said Lereah’s outlook for the market is a reflection of his sunny disposition.
“That is part of his personality. He is one of the most bright and energetic people but that does not mean that he’s a Pollyanna,” said Evans, author of “Bubbles, Booms and Busts: Make Money in ANY Real Estate Market.”
Henry Blodgett got similar billing. Same end result too. People believe authorities. To the tune of things going up 20%+ annually in street price.
ISM vs pending home sales
looks like markets are more worried about housing
Cash out refi’s are dropping, too.
Why would a lender make a cashout loan on a home with negative equity gains?
because they are long the market….longer than 6 years I mean. Some people actually live in houses for a long time, and use those equity gains for REAL things…..only the bubble idiots spend it on vacation, cars, and stupid b#llsht!t
“because they are long the market”
I guess so long as lenders “know” that prices will go up, they can safely assume the current period of price decline is a short-term aberration.
All home equity loans are for idiots/losers! Period.
Lets try this one, “If you can’t afford it don’t buy (invest in) it”. Its an old saying your great grandfather liked to use.
my point being, my neighbor for example owes, 27k on a 5 bedroom 3 bath 1 acre lot….. So, when he has a really big fence job, he taps the credit in the house to finance the materials and labor……So, I m not so sure that 50% YOY price declines plays into that sort of scenario…..but its uncommon to say the least.
I don’t agree with that. My dad put three kids through college with the help of home equity loans. He also ended up paying his house off ~5 years early. He’s an exception, for sure, but definitely not a loser or idiot.
guess “education” is a iittle different than say a shiny new boat…… education’s not consumption….its investment.
At least for my situation, home equity loans are the lowest interest loans available to me. That being said, I don’t borrow 100 percent either. Also I spend the money on something I can use like my new 40×48 shop.
Using home equity for “good debt” is just being normal today. Normal being broke and overextended. I plan on saving and sending my kids through school on cash, but then I’m definitely not normal.
http://www.youtube.com/watch?v=9zULMLJPX1k
“I plan on saving and sending my kids through school on cash,…”
Good luck at surviving the War on Savers. I would prefer to do it the same way as you plan to do, but I am very leary about saving money when the moral hazard for the Fed to inflate is so extreme. Please share your inflation-hedge strategy if you have one.
My inflation-hedge strategy is to be completely debt free in 5 years when I pay off my house. My first kid will start college in 17 years. I’ll either pay for their college with the 12 years of putting a mortgage payment (plus extra) into the stock market, or just cash-flow college from my paycheck.
I am not sophisticated enough to have too many strategies, just to be discliplined and live below my means.
I look at inflation and tax strategies the same. If something I do has an inflation or tax benefit, then fine, but I won’t do something just to get that benefit. The IRS and FED policies can change.
If you have more than $5000 cash in the checking account then you are in the top 5% of Americans.
Why would you want $5000 in a checking account when inflation is at 7% or more?
In theory, the FB might have substantial consumer debt, and shifting that to HELOC probably results in lower total interest being paid and definitely makes the interest tax deductible, which reduces the total going to debt service and, in theory, makes the FB more likely to eventually pay off the debt.
Of course this is all theory. Doesn’t seem very smart to me, but I guess if the lender is already expecting to foreclose, throwing a little more money at the problem might work.
Yes, but it’s not as widely advertized that the HELOC interest deduction only helps you if you already have $10K of other itemized deductions.
I wonder how many people think that because mortgage interest is deductible, they’ll get the full benefit of that or, in many cases, any at all. The standard deduction is so high, and floors for deductions like medical expenses so high, that I haven’t been able to itemize for many years. I think that the neighbor above who owes 27K and borrows, say, an additional 50K, is unlikely to benefit at all from the mortgage expense, tax-wise.
And as long as you’re not hit by AMT.
Yes, but when you take CC’s and roll that debt into a HELOC, don’t you go from having “unsecured debt” to having “secured” debt?
Too big of a risk for me when I owned my house.
Chip,
its just easier for him to get the money than a business credit line, and lower interest than a credit card….. its not so much a tax strategy…..lowest cost, and lowest BS factor.
The lower interest rate is the key factor in this scenario. The tax benefit (such as it is) is a nice kicker. If you’re already in debt, you may as well structure it to your own best advantage.
Chip, you must not live in a state with a high state income tax. My DC income taxes almost cover my fed standard deduction.
JJ — correct. I’m in Florida.
Voz — I agree that a lower interest rate is a useful consideration, particularly if the borrower will have enough self-discipline to pay it down when he/she can.
Has housing really Bottomed out?
http://www.bloomberg.com/apps/news?pid=20601087&sid=aOOgvyl3UIkQ&refer=home
I think so, Stucco called bottom yesterday.
Lereah’s presentation august 2006
http://tinyurl.com/mefvp
Lereah, Liar pants on fire. He knew this was coming to an end eventually.
This is from the Kiplinger Tax Letter:
Home builders will get special attention from the IRS (ha hah!)
Agents will look for inappropriate income deferrals by builders using the completed-contract method of accounting. Among the targets: Developers who sell lots but don’t report income until common improvements are done. And those using a subsidiary to build all houses in a project so the firm can say the contract isn’t complete until all homes are built. Otherwise, the home builder would owe taxes after each house is finished.
They should have done this during the boom when builders actually had profits. Now they’ll do all the work and find that there’s no money left to collect.
IRS audits always go back 3 years and in some circumstances (like not reporting an item of income at all vs. reporting a smaller number than should have been reported) go back 6 years.
IRS can go back many many years my friend.
And collect blood from a turnip? If the builders have no assets… what is the IRS going to do? Confiscate all those mostly worthless, unbuilt lots, and huge portfolio of REOs?
And sell them for pennies on the dollar. The sierra club can buy the lots and give’m back to the deer (some parts of the country) and the sage brush (other parts).
You are correct if IRS is looking into any type of fraud otherwise 3 years is the norm. Are we in normal times? I think not.
I would think the IRS will also be looking for all the incentives to the homebuyers. Providing cash payments to new FB’s should be ordinary income. Perhaps it is self-employed income which needs both “halves” of social security, plus income. Then it migrates to the state. Think of all the 2006 incentives undeclared. Taxes due with interest and penalties ticking. There will be some surprised FB’s after the HB’s books get audited and they come around for for more from the buyers
Foreclosures up in Tucson. And Slim wants to know if there are HBB-ers posting comments after this story. Reason: Those comments sound a lot like what we’d say.
I’d have added a fourth choice: borrowers and lenders. Don’t want government in it, personally. They cleverly forced most respondents to pick “all of the above” by not offering that choice of #1 + #2.
This week is the endgame.
Wahoo! Thanks to absurd lending practices this whole thing is unravelling much faster than past busts. The good news is that we probably won’t have a 15 year slow decline like the Japanese RE bust. The way things are going we might even hit bottom by 2010.
Not 2010. Google “ARM reset schedule”. Maybe 2012.
scroll to “Exhibit 42: Adjustable Rate Mortgage Reset Schedule” in Credit Suisse’s “Mortgage Liquidity du Jour: Underestimated No More” report
http://www.recharts.com/reports/cshb031207/cshb031207.html
Not even close.
Banks are sitting on a pile of foreclosed properties.
The 80/20 and 90/10 piggyback loans still exist.
Muttering the words “Hybrid ARM” doesn’t yet get you a free drink at the bar.
Look at Jeff from the SDCIA boards: he isn’t even close to being completely destroyed. He still has some money in the bank via HELOCs on his existing properties, and he’s bleeding slowly. His properties won’t be owned by the bank until 6 months from now, and the subsequent price drops still won’t reflect the amazing runup that we’ve had in the past 5 years. There may need to be several rounds of this before we see the endgame.
Don’t underestimate the numbers being spitted out by honest computers…
No. The banks have still to much”printed money to lend. Keep printing until no one will sign for loans. That’s a long way off.
even better, the banks that aren’t sending out 1099’s
“David has been an expert in the field, is widely respected”
I honestly can’t think of an economist who has ever been less respected, or more vilified than Lereah. He is, by most people’s observations, the worst sort of industry shill.
What most people *Don’t* know about Lereah is that he also published a book on dot-com investing in June 2000, just a couple months before the market crashed.
http://tinyurl.com/2tmhas
So that’s two of the last bubbles that Lereah has attempted to self-capitalize on through a position of “industry expert” — and got it completely wrong.
“Respected?”
He’s now a two time “Profound Failure” who has a proven trackrecord of serving corporate overlords to the detriment of the American public. History will be extraordinarily unkind to this “economist”. Every bust has its villain. This one has Lereah.
Have you never signed a card wishing a departing co-worker best of luck in their new job, when you really wiched for them was burrito asphyxiation during the drive home?
It’s kinda like that.
“burrito asphyxiation”
I think that’s in this weeks episode of CSI.
So, find out where it goes and short it.
I wonder if ole Leslie Applehead Young will take his place? She’s a real good shill!!!
GREENSPAN!!!!!!!!!!!!!!!!!!!!!!
So what you’re saying is, we can expect to see him running for elective office sometime in the next few years?
http://tinyurl.com/3b47or
The Rules for Growing Rich : Making Money in the New Information Economy by David Lereah (Hardcover - Jun 27, 2000)
34 Used & new from $0.78
A HARDCOVER edition for only 78 cents?
Got 10% down?
10% down = 7.8 cents = the amount I might actually pay to read one of liarrhoea’s books
7.8 cents for fire kindling
OOOOHHHHHH Gwynster, you beat me to it! I was going to say I’d rather use it in the campfire for heat / cooking. So, should we all buy his books and do exactly this, or keep as many copies in print so the future generations can know what a butt-head he is?
I wasn’t not sure I wanted to spend the $0.78, so I peeked inside the masterpiece:
Quote from page 7, Becoming a new millennium investor:
“For example, in the final stages of an economic expansion, housing construction usually turns down, indicating that a recession, a slumping stock market, and falling interest rates are on the horizon.”
I hope housing construction won’t turn down.
So writing this book is why the NAR hired him to be their economist/spokesliar. By mid-2000 the market was already falling - the NAR wanted someone to continue fiddling while Rome burned.
“One blog, David Lereah Watch, cites passages from Lereah’s books and his encouraging words about the housing market and asks him to “admit he cheerleaded this destructive housing bubble.”
You’re famous, David!
Thanks.
Influential paid shills who manipulate facts, tell half truths or cheerlead bubbles need to be taken to task for their statements.
Congratulations David!
David,
Will you keep the blog going?
I guess David can morph the blog into LAY-watch, hey I like that, it rhymes with Baywatch, assuming Leslie is appointed or anointed.
“Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power”
Benito Mussolini
Homebuilder analysts expected a $.03 per share loss for Centex while the company actually lost $.18 per share. These homebuilder analysts just don’t get the depth of the problem. They spend their days focusing on housing and they still cannot figure it out. Sorry to say it, but I think they mostly lack intelligence and should be be doing manual labor instead.
My take is that these guys/gals have standard metrics used to evaluate companies but that they don’t really even attempt to understand larger macroeconomic or social factors. Basically, they are very good a drawing a trend line. Then when the trend reverses, they express surprise and revise the trend line down. Think of it as some guy tracing an upside down parabola with little line segments.
If Wall Street analysts had spent five minutes every morning reading Ben’s news summaries rather than reading each other’s research reports they would have seen the housing downturn coming over a year ago.
Actually, they would have done better by reading both the comments and “news summaries”.
And they should have been doing it two years ago.
CTX up a buck 30 on the news. Go figure!
“‘David has been an expert in the field, is widely respected and has been an excellent spokesman for NAR,’ said said Lucien Salvant of the real estate agent trade group.”
Widely respected?
One common element, all too common really…
Charlatans in a given field will stick up for other charlatans of the same persuasion.
–
Pretty soon we will hear about the Hundred Year Flood. This was the term that John Chambers of Cisco used in 2001 when the business started to decline as opposed to forecasts of “30-50% long-term growth.” He made a bundle by lying about the future (until the very end when he couldn’t hide) and it is considered par for the course for America’s CEO.
Jas
‘We know we won’t experience any significant margin improvement through house-price appreciation for the foreseeable future,’ the CEO Eller said. ‘So we must think even more as a manufacturer.’
This bodes well for higher construction quality.
I’m sure that they will look for ways to cut costs even further. Dump the illegal Mexicans, and replace them with illegals from even poorer countries. Maybe houses made of recycled popsicle sticks?
Dump the illegal Mexicans,
I know of one illegal Mexicano who is being dumped - for real.
Last nite my roomie told me her BF is being deported - you heard right…sent back to a sunnier, homier clime.
I was stunned. I thought they only deported murderers and such. (He was in jail for his second DUI.)
If I knew how to do a backflip, I would have done so at the news.
LA MIGRA - coming to a town near you.
I smile at the Border Patrol trucks whenever I see them.
From beyond the tortilla curtain…
http://banderasnews.com/0703/nz-tortillaprices.htm
After the whole Eric Volz story, the old MC Hammer “Can’t Touch This” is major good advice when it comes to illegal guys and gals. Unless you want to be saddled with children and an extended family, subject to blackmail and the laws of Mexico and Central American countries.
Taco munchers having a hard time paying for tortilla and beans…..all the corn is going into our SUV’s or gigantomobiles…..
…is not Peak Oil lovely….
One reason not to bag on immigrants from south of the border…
If we decide to send them all back, imagine a civil war on our backdoor steps?
Celebrate diversity~
“If we decide to send them all back, imagine a civil war on our backdoor steps?”
Remember the Alamo.
http://www.morganstanley.com/views/gef/index.html#anchor4613
“Last nite my roomie told me her BF is being deported”
Stop it - he will be back in the country the next day … maybe even marching in one of our So Cal parades.
“I thought they only deported murderers and such. (He was in jail for his second DUI.)”
Due to the recent high profile “murders” of American citizens by illegals with multiple DUIs (Virginia Beach girls, the Hollywood producer, etc.), there is a bit of an outcry to get these SOBs out of the US.
Phillygal, I give you points for staying with your roommate, but what the hell’s she been doing with an illegal BF? Maybe he hung around hoping she’d marry him? What’s the attraction? Must be that danger thang some chicks dig.
Due to the recent high profile “murders” of American citizens by illegals with multiple DUIs (Virginia Beach girls, the Hollywood producer, etc.), there is a bit of an outcry to get these SOBs out of the US.
That pretty much jibes with what roomie told me. DUI illegals have been killing SE PA citizens in numbers too big to ignore. I’m too cynical to believe gubmint gives a rat’s azz about our safety, so I’m thinking there’s a bigtime money loss involved in putting a fire under INS’ butt. Who could be the loss leader…the insurance companies? I’d like your thoughts or those of anyone else who may have info on the subject.
…but what the hell’s she been doing with an illegal BF?
Roomie’s BF was playing her like a violin. He discovered her primary weakness, and exploited it. If he hadn’t been deported, who knows what he could have gotten out of her…
In a word, I’m glad he’s gone. Roomie does recognize she has a problem in her choice of mates. Maybe now that there is a forced separation she will wake up from the surreal coma she’s been in.
I want to go visit him in jail and taunt him by waving a bottle of Corona la cerveza mas fina outside his cell.
“He discovered her primary weakness, and exploited it.”
Yes, whenever I hear people say that illegals are stupid, I laugh. Dumb like fox. Extremely cunning, is my experience. They’ve been very good at exploiting the primary weaknesses of the US: Money and political correctness.
“I want to go visit him in jail and taunt him by waving a bottle of Corona la cerveza mas fina outside his cell.”
Don’t do it, phillygal, not if you value your life and I am serious. IF and when he gets out, he’ll find you. And it won’t be pretty. Think of the lady up in Manhattan who told the illegal guy to eff himself. She wound up dead with a rope around her neck. In the US, women can cuss a guy out and get away with it in most cases. But the mucho macho illegals have long memories and weak egos.
“If he hadn’t been deported, who knows what he could have gotten out of her…”
Plenty. Good thing she never took a trip with him back to his home country.
You’ve all managed to give examples of bad apples…
And to be honest, I could do the very same, with plenty of non immigrants, that have been here for many generations, if you’d like.
My view of our country is that of an escalator.
Immigrants going up and lazy americanos going down and each side is at eye level, as they pass one another…
Oh for heaven’s sake aladinsane,
Nobody has any objection to folks who came here legally and manage to obey the laws of the land.
the operative word is…ILLEGAL.
Capisce? ¿usted entiende? Comprenez-vous?
OK two of those languages were taught to me by me legally immigrated family. How many languages will you use to reply to me, Mr. Diversity of the Universe?
And if we have “bad apples” who are born and bred in the USA, do we really need border-crashing perps coming in to add to the fray?
” lazy americanos going down ”
Step AWAY from the bong and speak for yourself.
What you don’t understand is that we will all be sharing the same shit sandwich and soon.
Like it or not, immigrants do far more than their share of the running of our country.
Are you ready to do all the menial tasks that we’ve outsourced to them?
hey, phillygal, my sentiments exactly. I love this “born in the USA bad apples” canard. Completely insane, because it states “Hey, we have bad apples here, let’s add some really bad apples from countries”. Now, THAT’s diversity for you.
Anyway, can’t you find a nice cugine for your roomie?
I meant “other” countries.
“immigrants going up and lazy americanos going down”
“Immigrants” is a legal term, and refers to someone who followed the rules, met the criteria, and was admitted legally to America. To them, welcome.
There is no such thing as an “illegal” immigrant. But there are millions of illegal aliens, including more than 1 million now resident in this country’s jails.
As for “lazy americanos” speak for yourself…everyone I know is working 50+ hours a week and more.
palmetto-
Anyway, can’t you find a nice cugine for your roomie?
Definitely on the agenda!
aladinsane-
No disrespect meant to you.
Nobody on this board knows the ethnic and/or racial make-up of my family and personal network. The periodic diversity sermonettes that appear on this forum are tedious and somewhat beside the point.
phillygal.
best news I’ve heard all day. another confirmed drunk driver off the american roads for good.
I’ve been amazed at the poor quality construction in most high end spec homes. Standard “off the web” plans with no thought to local climate, lot orientiation, light, views, noise, etc… Off the shelf “custom” cabinets. Cheap closet shelving. Minimum to code insulation. Standard acrylic tub/shower units with one of those monster soaking jetted tubs that gets cold before it can fill. Exterior doors that don’t close properly. HVAC units always in the garage with ductwork in unconditioned crawlspaces and attics –> adding 40% to annual utilities. These guys whip out a house in three months with everything off the shelf, slap on a granite countertop and call it a luxury home. THere is absolutely ZERO craftsmanship in these things.
I’m guessing that all of the builders and subs are going to have a lot more time on their hands and in the end that will mean more time for good work. And buyers will be in a position to demand good work.
The word “custom” has lost all meaning, at least as it is applied to new home construction. If the buyer is stuck with construction choices made by the builder there is nothing “custom” about it.
“custom” refers to the spinners on the framer’s truck. I’ve never seen so many high end contractor trucks as in the past 2 years. Everybody who got a contractor’s license went out and bought a 60K diesel tricked out monster.
You should be able to get some of these beasts used at a good price over the next couple of years. That is if you can afford the fuel to get one home.
From what I’ve seen “custom” means that at best you get to chose the “off the web” design and what lot to put it on. But builders start to get upset if you want to make any major changes other than choosing the color of your granite countertop.
But then most “custom” homes are just spec homes that find a buyer before they are completed.
Hey - if you can contract early enough so you can select off white instead of beige on the walls and serpent green instead of green pearl for your kitchen rock then your house is custom! Really worth that extra $100g’s…
Got 10% down?
Sounds like standard California track home “quality”. When we moved to Colorado I was amazed at how much better houses are built here.
“I’ve been amazed at the poor quality construction in most high end spec homes.”
You really touched on one of my big housing bubble pet peeves. Toll Brothers is a perfect example of shoddy “luxury.” Everything you have observed is 100% true. I’ve visited people’s McMansions, and had to just laugh when I left. Sorry, but if you are going to pay $1M for a home then the f’ing walls should not bow, the cabinets and trim pieces should be flush, the paint should not be sloppy, the hot-cold plumbing should not be backwards, the drains should not be clogged with construction debris, and above all: there should be some dirt left over which can be turned into a yard. No more of this zero lot-line crap where you and your neighbor can high five each other out the window without getting up from your lazy boy while watching Super Bowl. Sorry, but this chaps my hide. All these bubble builders SUCK A$$.
Ford Motor Co’s answer to improving North American profitability is to import billions of dollars a year in parts from China. What will the homebuilders import from China?
Got 10% down?
Bamboo?
Actually I’m really expecting the Chinese to get into the upscale prefab home market. That’ll be another huge nail in the american economy.
“‘The thing about gain on sale accounting is that you can create a machine that just manufactures earnings out of thin air,’ said Richard Benson, an expert on securitization. Mr. Benson said that the stock prices of subprime home lenders like New Century Financial had ‘collapsed so fast because the income and balance sheet had been built on gain on sale, which turns out to be imaginary.’”
Hey kids, can you say the word “fraud?” Good, I knew you could.
That’s just frikkin’ unreal. “I’m going to count as profit the money I haven’t made yet but am quite sure I will at some point in the future.”
For those of us (like me) who have little accounting knowledge, can someone explain in layman’s terms what “gain on sale” accounting is? TIA.
I’m not an accountant, but my understaing is that they are claiming the profits from “servicing” a mortgage at the time it is sold.
For example, you loan me $100K for 30 years, and I’m going to pay you back $200K over the lext 30 years.
Gain on sale allows you to book the $100K now as pure profit. Should I default, or pay off early, you then have to count it as a cost at that time.
Traditional accounting would calculate it as $600 the first month, $599 the next, etc….
Thanks for that info- based upon it I would suggest that none of the figures we have been dealing with are real. So bascially the financial markets are at see with no compass or astrolabe. Gotta be the “deadliest catch”.
I’m not sure this is correct, as it would require them to back out all their calculations once they sold the loan, since they won’t be receiving that stream of payments anymore. Remember, NEW and friends weren’t in the business of loan servicing, they were in origination.
My reading of the article was that they were booking the profits from the sale of the loan to an MBS. They book the 1 point or whatever they get from origination, but they book it when the loan is created. This became a big problem when the MBS decided to trigger buyback clauses. It’s particularly sneaky because it doesn’t require NEW to restate earnings for the period; they instead take huge losses, go tits up and no one can tell where the profits went.
Sorry, I forgot I was using the “you lend me” as only a starting point.
For the brokers that package and resell, they should count the proft over the life of the loan, knowing it could get kicked back. So, they should still count the profit in the way a tradition bank would.
A month went by and it didn’t kicked back, so the bond holder made $500 and I made $100. Another month went by, and it didn’t get kicked back, so the bond holder made $499 and I made $100.
The problem with the ARMs is that they would have been VERY low profits those first few years, if not negative. We’re in the 3% period, and a month went by, so the bond holder made $500 and I lost $100. Another month went by, and the bond holder made $499 and I lost $100.
Much better to account for the full 1% fee now, rather than showing a loss the first few years and hoping the loan doesn’t get paid off in full at the reset time.
Again, I’m not an accountant, but that is my understanding.
This is even better than Enron’s mark to market accounting. I can’t believe half of this stuff actually qualifies as GAAP. Talk about loopholes, gaming the system and fleecing the people unbelievable.
Profit means you swapped something for something else of value that is worth more than what you started with, it has nothing to do with actually recieving cash. Accounting was created for peddlers buying goods one day and selling them the next (at a mark up). It was never meant to be the sole form of oversight between principles and their agents, but it suffices to some extent and no one has come up with something better. Good accounting for anthing other than retail requires good estimates.
Gain on Sale accounting is proper and correct, but typically requires estimates (which can be good or can be very incorrect) of what the cash flows will eventually be.
In a securitization, typically a group of loans (which you know a decent number will be bad) go into a trust. For an auto lender I know of lets say the trust issues $1 billion in Asset Backed Securities (ABS). The trust would recieve ~$1.06 billion in auto loans and the originator would retain two things, the residual of the trust and a spread or interest only (IO) strip of the payments (say the average loan has an 8.5% coupon and the average trust security rate is 6.75% the difference would go to the servicer and originator (likely the same company). As the loans season the estimates of value would be adjusted to reflect the actual results.
Under gain on sale accounting, estimates of what the IO stream and residual were worth, because under accounting when a transaction occurs is when the profit should be recognised. This means that the company’s balance sheet strength depends on the accuracy of those estimates. If management inflates them over a long period of time, their earnings, equity, and assets will be oversated (making there leverage look lower than it economically is.
Wow I want that $720k home. Let me put a gain on my salary, I’m sure at some point in the future it will appear out of thin air.
Gain on sale accounting? Dude, what about neg am and pay option? This is the real Enron accounting.
Yeah, this sounds a lot like the scam where banks can count the fully amortized payment amount on OptionARM loans toward earnings even though 80% of payments were the minimum.
It’s just filth… totally fake. Eventually all that “profit” has to show up, doesn’t it?
Are we due for a total revamp of GAAP? I sure hope so. SIMPLIFY PLEASE!
OT, but had to share. Just found out I got the townhouse rental I wanted. Thanks to all your advice, I decided to forget about buying for at least a year (if not two+). No lowballs, no nothing. But, I really needed a better place for my son and I to live in the interim. The place I just got is a MUCH better fit. I’m very excited. As always, thanks to all for your insight and advice!
when you’re in the area you can catch a net sale next year- save another 5 to6% w/o a realwhore in the way
I think you made the right choice, and when your son is old enough to know. Give the reason why you made this decision and he’ll thank you for it.
My family rented for most of the time I grew up, not until my highschool years did we brought our first house. I funny thing is, I remembered more of the rented house in Cincinnati than the house we brought. Even though it was a dump, it had shaped me more than the sterile house my parent owns now.
Funny thing about my son - all he cares about are whether or not his toys will be at the new place. I assured him they will and so he’s good to go!
yep!
it is the history and relationship that we share and care deeply. Not the trendy paint color that those home improvement shows have us believe
Do I want to work 80 hrs/week doing extra consulting, etc… to pay mortgage on a monster home? Or do I want to have more time with my kid in a not quite so nice home? That’s the trade off… at least for now.
When this thing really implodes I should be able to buy a nice, not huge, home at a reasonable price.
Good on ya!
We really want to buy, too, but I won’t commit economic suicide to do it. I think that a few years of renting will pay off BIG TIME.
Bravo Eastcoaster. SCREAM IT FROM THE ROOFTOPS. YOU MADE THE RIGHT CHOICE! You see, you have only one chance to raise your kids. Oh well, here I go getting on the soapbox. So what, I’ll say it. This country is screwed because so many kids are not getting the relationship they need from their parents. AND ONE of the biggest reasons is that mom and dad need to keep up with the Joneses. I am so glad you didn’t commit financial suicide to be a home debtor for 30, 40 or even 50 years. Your son will remember the sacrifices yo made for him and the love you gave him. The place where you live is just that, a place to live. Again, bravo and hats off to you for not buying into the REIC hype (crapola).
Good luck in your new rental, eastcoaster.
Eastcoaster: That’s wonderful news - it’s nice to think of the two of you in a better place.
LA Times - Todays front page has a hilarious article on ‘Sign Flipping’
I find it hard to believe that anyone would get paid $60 per hour to be a human directional. I don’t care if he stands on his head while flipping the sign with his feet.
Human directionals remind me of the depression era sandwich board ads that a guy would wear while walking around (.i.e. Eat at Joes).
Me too. Thing is, here in Portland, they’re used mostly by furniture and mattress sellers, but there were none two years ago. Now they’re out every weekend.
A fine new trend spawned by Southern California.
Thanks.
Only in Los Angeles
“She said the cancellation rate in the latest quarter was 34%. The historical average for cancellations runs between about 20% to 25%, the CFO said. ‘The main reason buyers are canceling remains the inability to secure financing or sell their existing homes,’ Smith said.
‘Considering the lack of clear directional trends in the market(?!), tighter mortgage lending standards, and soft results in March, we don’t believe it’s prudent to provide earnings guidance for fiscal 2008 at this time,’ she said.”
How high of a cancellation rate would be needed to clarify the directional trend in the market? 50%? 80%? 100%?
“Lack of clear market direction.”
HA! That’s right up there with buyers who are “paralyzed” and “confused” by all of the choices available.
Even a blind man could see the market direction is down.
GS:
Perhaps one would have to give 110%, to make it so?
Good riddance to Mr. Lereah. Really. I wish I could say good riddance to the NAR, but for the time being at least the chief spokeswhore is gone.
The nation needs to realize that the NAR are NOT analysts, economists, or financial advisers. What the NAR *ARE* is salespeople and marketers. That’s it. The media quoting from those clowns is like asking a car dealership if it’s a good time to buy a car.
Or like asking a crack dealer if a buying a rock to smoke is worth the cost.
Or sadly, like asking reading analyst reports from major investment banks…
Can you say “enron”?
“The technique promoted by Mr. Gotschall allowed the company to report profits before they actually existed. The paper profits were pegged to future earnings from loan sales to institutional investors. Some financial analysts say that New Century appears to have also used gain on sale to hide losses as the subprime market began to falter late last year.”
I knew you could.
“The economist (David Lereah) who prodded investors into the U.S. housing boom and has been skewered by bloggers during the bust is leaving a top real estate trade association, the group said Monday.”
Suggestion for his next book title…….’I've hit bottom now & so will the housing market someday’
To describe David Lereah as an “Economist” is absolutely incorrect. His proper title was that of “Propagandist”
Propaganda
Wikipedia, the free encyclopedia - Cite This Source
Propaganda is a type of message aimed at influencing the opinions or behavior of people. Often, instead of impartially providing information, propaganda can be deliberately misleading, or using logical fallacies, which, while sometimes convincing, are not necessarily valid. Propaganda techniques include: patriotic flag-waving, glittering generalities, intentional vagueness, oversimplification of complex issues, rationalization, introducing unrelated red herring issues, using appealing, simple slogans, stereotyping, testimonials from authority figures or celebrities, unstated assumptions, and encouraging readers or viewers to “jump on the bandwagon” of a particular point of view.
Luv how the media is labeling Lereah…
Always optomistic, Re Wired, etc etc… now its “who prodded investors” …
Investors or people? Ahh!
He prodded …. shepple!
“‘The thing about gain on sale accounting is that you can create a machine that just manufactures earnings out of thin air,’ said Richard Benson
Why not? The FED has been creating IOU’s out of thin air for a very long time.One hand washes the other, or is don’t do as I do, do as I say do.
“CEO Tim Eller said the company was scrambling to deal with what he characterized as ‘one of the most difficult markets in 25 years’”
2007 - 25 = 1982, when mortgage rates were running at 17% and the economy was enduring the second leg of the double-dip recession early in Ronald Reagan’s tenure in office. How can current conditions begin to compare?
The will, they will.
Didn’t anybody else notice this lovely prediction?
“‘Although the weather improved in March, we’re starting to see the effects of a decline in subprime lending and tighter lending standards,’ said a statement from David Lereah, the chief economist for the trade group. ‘Home sales will be relatively sluggish in the second quarter, but a modest uptrend should resume during the second half of this year.’”
I did. Exactly what “modest uptrend” is “resuming”? The only thing trending up is foreclosures, but that is more of a skyrocketing uptrend than a modest uptrend.
If you read it carefully, he is talking about the sales, not sale prices.
I think he is covered
“‘We know we won’t experience any significant margin improvement through house-price appreciation for the foreseeable future,’ the CEO Eller said. ‘So we must think even more as a manufacturer.’”
Are they planning to outsource home construction to China?
“Are they planning to outsource home construction to China? ”
Ba-dum-bump rimshot.
I think they’re talking about cranking out houses as quickly as possible to get them into the market before prices drop, rather than “going into hibernation” to ride out a short-term slump.
Build and dumpl, build and dump… Generate cash flow to pay on their debt.
Housing starts up in March in Phoenix area. 3737 starts compared to “only” 7630 last month.
This into a market that has 52K houeses on the market, rising at 500-1000 a week, but selling only 5K a month. Over 60,000 on the market if you add houses in the southern edge of the metro that in in the neighboring county.
I see adds for brand new houses out on the edges of town for $180K. No way they would have been under $260K 2 years ago. They are probably smaller and cheaper at that price. I’m thinking it is a hook price to get you in the door, than actually sell you a house for $220K. Still, the STARTER was $260K, with hopes of getting you into a house over $300K.
http://www.nysun.com/article/53513
FBI Arrests 10 in Queens In Mortgage Fraud Scheme
By CHRISTOPHER FAHERTY
Special to the Sun
May 1, 2007
A new wave of mortgage fraud cases, in which brokers allegedly purchase identities from immigrants, has mortgage lenders taking a more proactive role in law enforcement, FBI officials said.
Last week, the FBI arrested 10 people with ties to a Bangladeshi community in Queens who allegedly conspired to create a pyramid scheme in which they purchased the identities of immigrants who were leaving New York to move back to Bangladesh, according to FBI officials. The price was usually about $5,000, the officials said.
How much longer can the Fed keep rates so low with the dollar going down so low. Eventually Bernanke will have to raise rates to defend the dollar, no? This is really shaping up into the perfect storm, can you imagine with all of the other crap what will happen if interest rates go up a point or 2?
Based on the move in the exchange rates today, that market seems to think so. After the manufacturing data came out strong, and indicated inflation preasure, then dollar came off its lows. The currency traders think the fed has to raise rates… or at a minimum, has NO ABILITY to cut…. which is what the fed has been saying since their last meeting.
They said “inflation is our main concern” but we’ll watch housing. All the reporters on the stock channels wanted to generate interestand ad revenues, so focused on the latter and ignored the former. Two more times the fed has come back and said… “HELLO…. We’re not dropping”. Well, not in plain english, but they keep saying “We’re worried about inflation!!!!!”
Still, the talking heads, and especially the realtors, are holding out hope for a rate cut.
the talking heads are throwing as much money as they possibly can at spin doctors…..talking heads=bear sterns, merrill lynch, nar, David Byrne….anybody, everybody with exposure to toxic loans are clammoring for a cut……Honestly, the way corporate earnings are accelerating with the depressed dollar…..stock market is gonna get BUBBLE-ISH-IER, which bodes well for some tightening by BB and CO.
Burning down the house?
Don’t need to change a word.
Watch out
You might get what youre after
Cool babies
Strange but not a stranger
Im an ordinary guy
Burning down the house
Hold tight wait till the partys over
Hold tight were in for nasty weather
There has got to be a way
Burning down the house
Heres your ticket pack your bag: time for jumpin overboard
The transportation is here
Close enough but not too far, maybe you know where you are
Fightin fire with fire
All wet
Hey you might need a raincoat
Shakedown
Dreams walking in broad daylight
Three hun-dred six-ty five de-grees
Burning down the house
It was once upon a place sometimes I listen to myself
Gonna come in first place
People on their way to work baby what did you except
Gonna burst into flame
My house
Sout of the ordinary
Thats might
Dont want to hurt nobody
Some things sure can sweep me off my feet
Burning down the house
No visible means of support and you have not seen nuthin yet
Everythings stuck together
I dont know what you expect starring into the tv set
Fighting fire with fire
This scenario has been discussed many times here: you get to choose your form of execution.
1. Lower interest rates and kill the dollar/kindle inflation
2. Raise interest rates and help the dollar/kill consumer spending
3. Do nothing and let the market decide for you
None of these results in a pretty picture, does it?
Isn’t this supposed to be a free market? It hasn’t been free since Greengas started raising and lowering rates on a whim.
In October, Lereah said that he expected “sales activity to pick up early next year.”
* * * * *
“Although the weather improved in March, we’re starting to see the effects of a decline in subprime lending and tighter lending standards,” said a statement from David Lereah…. “Home sales will be relatively sluggish in the second quarter, but a modest uptrend should resume during the second half of this year.”
Yup, things are going to get better after 6 months, until after 6 months, at which point it will get better after the next 6 months. So Lie-reah goes and they bring in another spinmeister. Any guesses on what his views will be? It’s a good time to buy, unless you don’t want to pay more than the house is worth.
How many times can one guy say the bottom is 3 to 6 months away before it becomes a joke? Eventually, you have to bring in a new guy to start saying that the bottom is 3 to 6 months away.
That is why he quit - as of mid may he is no more with NAR
If he actually leaves in May, it will be his first correct prediction.
“It was roughly 60 percent of business when we acquired Millennium in November, and that market just isn’t there right now.”
So when did all those Wall St companies acquire half-dead subprime lenders? Hard to believe that was just six months ago.
I was wondering if this 60% is in Ace Holding’s total or if the 60% was specific to Millenium and the Vancouver, WA market.
Vancouver is fairly low-priced, relatively speaking. That’s amazing if 60% of that market is sub-prime. If so, looks like the low-end is about to get lower.
Apparently PDX is still “going up” on the Case-Schiller index’ latest report - I call BS. I’ve been seeing Price Reduced signs for months; JLS Homes “giving away” furniture with new home purchases, $18,000 “savings” on some houses, and falling prices. This morning I dropped off our dog for grooming and noticed an empty office in the strip mall: Your Mortgage Money Source (looked like a one-person operation). Also, I’ve seen condo developments with poured foundations sitting for two months now, with no activity. There does remain new building going on by a couple major players (Polygon, Arbor, Centex, and Horton to a lesser extent). But things are awfully quiet.
Prices are always skewed and information scattered at or near the top.
The trend is your friend. When there is no trend, you have to change friends.
THe Case-Shiller index lags by a few months. Portland has just crested the peak of the bubble and will start the slow slide down this summer. the Pacific Northwest seems to be a year behind the national curve.
I agree (with the BS part). I do see many houses going pending but they are usually fixers and the obligatory dumpster shows up a few days later.
I now rent in SW PDX and I drive through Lake Oswego as part of my commute. Homes here have been sitting for months and more are popping up now that spring has sprung.
The high end appears to be sluggish. Just drive on Country Club Road between Boones Ferry and downtown Lake O and look down any side street. You’ll see at least one for sale sign.
This tells me that the median (for what it’s worth) will be declining soon.
Blanche Evans, the editor of Realty Times, an online magazine for real estate professionals, said Lereah’s outlook for the market is a reflection of his sunny disposition.
The MSM forgot to include this minor footnote with all of DL’s sunny predictions. Ironic, however, he faults weather for sales crash.
“sunny disposition”???
Well, zippity-do-da, that explains it all. The guy was channelling his inner Chopra Deepak and here we all thought he was an economist!
Any reports of stopped housing projects?
I’ve seen 3 in the Central Valley that are all graded and good to go.
Nothing has happened for months, since I first saw them.
Aladinsane,
Centex just dozed a huge number of acres west of I/75,south of exit 179. I have no idea how many homes this is for but maybe 750-1000,as a swag. Starting prices of roughly 250k up to 540k….
http://www.centexhomes.com/Sarasota/
dots 7/8/9/10 on the map in the link…Can you say lead balloon ???
Chris
Seen one in LA/Pasadena area. No progress or sign of activity in close to 5 months.
Recent comment on NY RE site Curbed, in a discussion of the state of the market in 2007:
“My wife and I just rented a great 2 bedroom on the UWS. We wanted to buy and looked for 6 months. We found 3 apts we wanted to buy and felt we would want to live in for at least 7 years.
We then searched for comp rentals apple to apple. same location, prewar, light, views, sq footage ,number rooms, etc. Our cost to rent was 40% cheaper. So we signed a 3 year lease, and are very happy.”
If cost to buy vs. rent thinking sets in, we’ve got a long way down. Can you imagine if foreclosed homes and mortgages were marked to market on that basis?
That ratio just about reversed itself in Manhattan during the early ’90’s. It was much, much cheaper to buy than to rent. So I guess rents are going to double? Nah……
“Centex Corp., the fourth-largest U.S. home builder, reported a wider-than-expected fourth-quarter loss Monday as it responded to the U.S. real-estate slowdown by writing off and revaluing land and by exiting the sub-prime lending and commercial contracting businesses.”
Now we know what to expect when we are expecting the latest quarterlies from these homebuilders.
Got 10% down?
“‘The market woke up to the fact that there’s no there there,’ Mr. Benson said.”
The (home resale) market is still asleep to the fact that without subprime lenders like NEW around to drive a wedge between incomes and home purchase bids, there is no there there for home purchase demand, either.
Right. The middle and top of the market were supported by sub-prime borrowers being able to buy their existing homes for above original purchase, giving these “upwardly mobile” people the downpayment to get into their own AMR, negative amortization “in the middle” home, which gave the old middle the money to move up to the high end.
Take out the foundation, and the whole card-of-houses comes falling down.
Anyone know what happened to IndyMac? Their stock ticker (NDE) comes up as invalid. I’m curious to know, since I bought puts on them a couple months back.
http://finance.yahoo.com/q?s=IMB
– Stock Ticker Symbol to Change to NYSE: IMB Effective May 1 –
Stock symbol changed today to IMB from NDE
They changed their symbol to IMB effective today.
Thanks all for the info.
IMB has already rolled back to 2004 prices. Let’s hope that home prices will follow suit.
Lereah! LOL! LEREAH! ROFLMAO!! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH! LEREAH!
http://www.mortgagenewsdaily.com/512007_Foreclosure_Solutions.asp
Freddie Mac CEO Richard F. Syron is going to get tough:
“Syron restated his corporation’s recent restriction of subprime investments to those that were underwritten at a fully-indexed and amortizing level and elimination of no-income or asset verifications loans and restriction of stated income in mortgage originations.”
Or maybe not….?:
“He said that Freddie is currently working on developing more consumer-friendly subprime mortgages and expected to have ready by mid-summer a 30 and possible a 40-year fixed rate mortgage and ARMS with reduced margins and longer fixed rate periods. The Corporation is also considering modifications to its existing Home Possible mortgage product which allows very high loan-to-value ratios for borrowers with less than perfect credit or who might be in debt beyond established parameters. “These characteristics overlap with those in the subprime market, providing viable upstreaming opportunities for some segment of subprime borrowers.”
I wonder who’s going to pick up the tab for all those defaulted loans?