This Environment Is Certainly Not Getting Better: CEO
Some housing bubble news from Wall Street and Washington. The Atlanta Journal Constitution, “Atlanta-based Beazer Homes appears to be struggling to avert bankruptcy. The troubled home builder filed a complaint Tuesday in U.S. District Court in Atlanta asking that the court prevent its creditors from calling for immediate repayment of about $1.3 billion in loans.”
“‘It’s clear that Beazer way overextended themselves during the boom period,’ said Barry Ritholtz, president of Ritholtz Research and Analytics.”
“Reports in Charlotte of unusually high foreclosure rates in Beazer communities sparked an investigation by the U.S. Attorney’s Office there into whether the company’s mortgage arm filed false loan documents so Beazer could sell houses to unqualified buyers who later defaulted on the payments.”
“That news was followed by an SEC investigation, as well as pending lawsuits by Beazer’s customers, shareholders and pension plan participants.”
“‘All the other improprieties have given these creditors no reason to cut these guys any slack. The creditors will get paid in full. They don’t care if the company goes belly up,’ Ritholtz said. ‘It’s heartless and cold, but, as they say on Wall Street, if you want a friend, go get a dog.’”
The Associated Press. “Moody’s Investors Services on Tuesday placed the credit ratings of three leading homebuilders under review for a possible downgrade. Moody’s said the review will look at whether the builders will be able to reduce their respective inventories of unsold homes.”
“Most homebuilders overbuilt during the five-year housing boom that ended two years ago.”
“Now that cancellation rates among potential buyers are rising again, ‘these physical industry reductions will be harder to achieve,’ Moody’s said. The agency will also review whether the companies can continue to generate positive cash flow, which they have done by selling homes at sharply discounted prices.”
From Reuters. “Countrywide Financial Corp. CEO Angelo Mozilo said Thursday the housing market is showing no signs of improvement and could lead the U.S. into a recession.”
“In a televised interview, Mozilo said, when asked if housing would lead the United States into a recession: ‘I think so … I can’t believe … that this doesn’t have a material effect … on the psyches of the American people and eventually on their wallet.’”
“There is a ‘very serious situation going on’ in the U.S. housing market, Mozilo told CNBC Television. ‘This environment is certainly not getting better.’”
“The cost to insure the debt of Countrywide’s home loan unit rose to around 187 basis points, or $187,000 per year for five years to insure $10 million in debt, after earlier trading at 150 basis points, according to data by CMA DataVision.”
“Fitch Ratings said Thursday it is changing the way it judges insurers’ credit risks to assume more borrowers will default on their mortgages, possibly leading to some downgrades of mortgage insurers’ credit ratings.”
“Fitch hiked the likelihood of default in its model by 20 percent to better reflect the risks of the current mortgage market, which has been marked by deteriorating home prices and decaying credit quality.”
“Moody’s Investors Service on Wednesday downgraded the servicer quality ratings of several mortgage servicers, including NovaStar Mortgage Inc., citing increasingly difficult market conditions.”
“Moody’s also downgraded Accredited Home Lenders Inc., Specialized Loan Servicing LLC and Fremont Investment & Loan.”
“German banks wrestled to break free of liquidity bottlenecks on Thursday amid talk that foreign lenders were not loosening their grip on cash. Money market dealers complained that the situation for German banks was still tight despite big inflows of central bank money aimed at smoothing interbank lending.”
“‘The people who require the money still can’t get the money,’ said a trader at a large bank. ‘The money is lying in the wrong place and wrong bank accounts. The people who have it aren’t lending it out.’”
From Bloomberg.”Outstanding U.S. commmercial paper fell 4.23 percent, the biggest weekly drop in almost seven years, as investors fled asset-backed debt and opted for the safety of Treasuries.”
“The decline in outstanding commercial paper was driven by a 6.8 percent fall in asset-backed commercial paper, which represents about half the commercial paper market and has been used to finance purchases of subprime mortgages.”
“Outstanding paper may slump by a total $300 billion, representing the entire amount of debt backed by home loans, said Tony Crescenzi, chief bond market strategist at Miller Tabak & Co.”
“‘The shrinkage of the commercial paper market will force companies to obtain money elsewhere,’ Crescenzi said. ‘Some will be unable to obtain funding and will shut or scale back their operations.’”
“‘There is a significant amount of cash in the system, it’s just not getting to the parts of the market that need it,’ Conrad DeQuadros, a senior economist at Bear Stearns Cos., said.”
“U.S. banks and thrifts suffered the biggest increase in late loan payments in 17 years as more homeowners fell behind on mortgages, the Federal Deposit Insurance Corp. said yesterday.”
“Loans more than 90 days past due rose 10.6 percent to $66.9 billion in the period ending June 30, the largest quarterly increase since 1990, the FDIC said in its Quarterly Banking Profile.”
“Lenders set aside $11.4 billion for potential loan losses in the second quarter, up 75 percent from a year earlier and the most since the fourth quarter of 2002. The amount lenders wrote off for bad loans grew 51.2 percent to $9.16 billion in the second quarter from $6.06 billion in the second quarter of 2006.”
“Residential mortgage loans 90 days delinquent increased 12.7 percent to $27.5 billion in the second quarter from $24.4 billion in the first quarter.”
“‘Current conditions do underscore that regulators must be vigilant and banks need to follow sound risk-management practices,’ said FDIC Chairman Sheila Bair.”
From Fortune. “Judging by its cautious and finely-calibrated responses through a very ugly August, the Fed appears keen to put the Alan Greenspan years firmly in the past and take a much more orthodox approach to monetary policy.”
“‘I think Greenspan would have cut rates already. So I do think things are beginning to look different at the Fed,’ says Paul Kasriel, economist at Northern Trust.”
“In a June speech, Bernanke commented on the shake-out in subprime mortgages in a conspicuously neutral way, suggesting the Fed was monitoring housing problems, but was not unduly concerned by adjustments taking place in it.”
“‘I think the Fed is happy to see that risk aversion is increasing,’ says Kasriel.”
“The Federal Reserve’s strategy of increasing liquidity rather than resorting to a cut in the benchmark interest rate survived a third day.”
“Chairman Ben S. Bernanke wants to avoid an emergency easing of monetary policy, contrasting with predecessor Alan Greenspan, who cut the federal funds rate target three times in 1998 after the collapse of Long Term Capital Management LP.”
“‘We did use the fed funds rate and that may have been a mistake,’ said former Fed Vice Chairman Alice Rivlin, who voted for the 1998 rate cuts. ‘It might have been smarter to try what they are trying.’”
“Bill Gross, manager of the world’s biggest bond fund at Pacific Investment Management Co., urged the Bush administration, rather than the Federal Reserve, to bail out U.S. homeowners to avoid ‘destructive housing deflation.’”
“‘This rescue, which admittedly might bail out speculators who deserve much worse, would support millions of hard working Americans whose recent hours have become ones of frantic desperation,’ said Gross.”
“‘Even cuts of 200-300 basis points by the Fed would not avert a built-in upward adjustment of adjustable-rate-mortgage interest rates,’ Gross said. ‘Nor would it guarantee that the private mortgage market, flush with fears of depreciating collateral, would follow the Fed down in terms of 15-30 year mortgage yields and relaxed lending standards.’”
“If U.S. home prices fall by 10 percent, it would be the worst asset deflation in the U.S. since the Great Depression, according to Gross.”
“‘Now many of those that bought homes in 2005-2007 stand a good chance of resembling passengers on the Poseidon — upside down with negative equity,’ he said.”
The Washington Post. “Memo to the media: Everyone who is defaulting on a home mortgage is not necessarily a victim.”
“Some were undoubtedly pressured into buying by unscrupulous lenders. Too many greedy players on Wall Street got away with making shaky loans for too long. They sliced and diced mortgage debt into increasingly exotic paper and lost sight of the risks involved, figuring the Fed would bail them out if things got out of hand.”
“But let’s face it: Most of the people who took out home mortgages for no money down knew that this was a roll of the dice.”
“Who gets to buy a house without a down payment? And most of those who took out adjustable-rate mortgages knew that their rate would balloon in a couple of years, and could do so at a level that would be hard to afford. They took the risk anyway. No one forced these folks to take on big mortgages they could barely handle.”
“My colleague Michael Rosenwald owned up to this the other day, describing how he and his wife bought a $459,000 Maryland home with an interest-only, adjustable-rate mortgage just as the housing bubble was about to pop. Now he’s facing a difficult time, with a rate that could jump to 10.1 percent.”
“He’ll probably be okay; many others are not. Like people who raced to buy dot-com stocks of companies with no profits, folks bought houses they couldn’t afford because the escalator had been going up so quickly for so long that it seemed like a reasonable bet.”
“But when the mortgage meltdown pieces are written or broadcast, the lead is inevitably someone who is about to lose his or her house, with not so much as a nod toward the notion that these people might have overreached or bears any responsibility at all for their financial plight.”
“I’m not unsympathetic. And there’s plenty of blame to go around. But we shouldn’t let homebuyers completely off the hook just because it makes for a better narrative.”
‘Even though a bankruptcy judge in Delaware this week saved them from financial ruin, real estate closing attorneys said they learned a powerful lesson from the collapse of HomeBanc Corp. — never accept anything but a wire transfer at closing.’
‘At least a dozen Atlanta-area law firms received bounced checks from HomeBanc last month, before the company filed for Chapter 11 bankruptcy protection Aug. 9. By HomeBanc’s count, it bounced 134 checks worth at least $18 million, but the Georgia Real Estate Closing Attorneys Association estimates the figure was $28 million.’
‘Some law firms are requiring 100 percent wired funds from everybody — lenders, buyers, even other attorneys,’ said closing attorney Jennifer L. Dickenson of Dickenson Gilroy. ‘There is a really high sensitivity right now to how we get the money into our accounts.’
“…real estate closing attorneys said they learned a powerful lesson from the collapse of HomeBanc Corp. — never accept anything but a wire transfer at closing.”
Nice to see folks, who think they know it all, learn something new.
And not a fun ’something new’ either.
Funny.
Nothing like hearing about flesh-eating, dung-hopping lawyers getting ripped off.
don’t insult dung beetles and flies by assimilating them to lawyers.
Sounds as if Homebanc righteously ripped off those that formerly believed in blind faith dealings…
Comes with the territory~
When I closed on my ex-house I had to bring a bank check for the deposit, which I am told is as good as cash. Is this what they are referring to? If so this rates on the holy sh@t scale.
“South Florida,” he said, ”is working off of a totally new economic model than any of us have ever experienced in the past” according to a realtor who predicted that a land shortage will support higher prices indefinitely.”
- New York Times, Trading Places: Real Estate Instead of Dot-Coms, 3/25/05
This seems so crazy now - LOL!!!!
Test…test…for some reason none of my posts are showing up.
SoCalMtgGuy
“I just don’t think we have what it takes to prick the bubble… I don’t think prices are going to fall, and I don’t think they’re even going to be flat. ”
- Diane C. Swonk, chief economist at Mesirow Financial in Chicago, New York Times, Trading Places: Real Estate Instead of Dot-Coms, 3/25/05
Well, she was half right. LOL.
BTW, I should have been bored of those quotes a long time ago. Still hasn’t happened yet tho.
“Rising mortgage interest rates are natural at this stage of the economic cycle, and the impact on homeowners with adjustable-rate mortgages — including interest-only and payment-option ARMs — should be “relatively small,” according to Treasury Secretary John Snow
(Per National Mortgage News - May 10, 2006)
Is Diane working the pole yet?
LOL.
I have emailed here numerous times to find out what she was smoking, what a surprise - no reponse.
Ask her when they are going to fire her for being a moron.
If that were an offense that merited termination, unemployment would be sitting at 82%, even with the Bush Administration counting the numbers.
LOL!
“Ask her when they are going to fire her for being a moron. “
“If that were an offense that merited termination, unemployment would be sitting at 82%, even with the Bush Administration counting the numbers.”
Hate to point out the obvious but if we could fire people for being morons the Bush Administration would not be in power.
““South Florida,’’ he said, ‘’is working off of a totally new economic model than any of us have ever experienced in the past” — sadly, he was right. It’s just that the model doesn’t work.
Actually, It wasn’t a new model at all.
They used this very same model in 1926.
They were “running out of land” back then, too!
Land shortage.
I hear that from people in Chicago too. How are we using up more land when we’re building straight up?
“It’s heartless and cold, but, as they say on Wall Street, if you want a friend, go get a dog.’”
Same goes for your smiley Real Estate Agent
And if you don’t have any friends in real estate, you don’t have any friends. (Should I be treating the f-word this way, as in “friends”?)
The sentiment is right, but the quote belongs to Harry Truman..
“If you want a friend in Washington, get a dog.”
We need fewer dogs in my neighborhood, not more. I’m tired of stepping in dog pee every time I leave my apartment. Let’s just get rid of some of these Wall Street guys and be done with it.
No Korean restaurant nearby?
We must have slow Koreans in the neighborhood.
Keh-gogi! Yummy stuff.
NYCityBoy, have I got a couple of websites for you:
1. http://barkingdogatlas.blogspot.com/
2. http://barkingdogs.net/
Great site - thanks, AS. I had to deal with a neighbor’s incessantly-barking dog in my old neighborhood. And people who don’t pick up after their pets should be publicly flogged and heavily fined.
“Memo to the media: Everyone who is defaulting on a home mortgage is not necessarily a victim.”
At least one paper has managed pull its head from it’s rear end.
One columnist in one paper.
You forgot one rear end.
“Bill Gross, manager of the world’s biggest bond fund at Pacific Investment Management Co., urged the Bush administration, rather than the Federal Reserve, to bail out U.S. homeowners to avoid ‘destructive housing deflation.’”
“‘This rescue, which admittedly might bail out speculators who deserve much worse, would support millions of hard working Americans whose recent hours have become ones of frantic desperation,’ said Gross.”
Bill Gross is a comlete jagoff. I’d like to see Gross put up his own money to help out these FB’s since he is so concerned.
He wants to socialize mortgage losses, while he keeps his millions of private gains. Privatize gains/socialize losses is how this country is now run. No moral hazard for super rich risk takers. Being a card carrying member of the 2% rich inner party, he will not be effected by the wealth redistribution that he expects the sheeple to bear.
Bill Gross want wide reaching bail outs even though he admits it will benefit those who lied or just gambled.
Time to do some ” serious ” letter writing to tell our local and federal officials we are “firmly” against bail outs and will vote accordingly in the next elections.
http://money.cnn.com/2007/08/23/news/newsmakers/gross_homeowners/index.htm?postversion=2007082312
“Bill Gross, manager of the world’s biggest bond fund at Pacific Investment Management Co., urged the Bush administration, rather than the Federal Reserve, to bail out U.S. homeowners to avoid ‘destructive housing deflation.’”
“‘This rescue, which admittedly might bail out speculators who deserve much worse, would support millions of hard working Americans whose recent hours have become ones of frantic desperation,’ said Gross.”
Excuse me while I run to the bathroom to vomit.
These POS finance Pig-Men have virtually no shame or morals.
We of HBB need to figure out how much Gross has at stake in the Housing meltdown?
Yep, it is all about money on Wall Street and the big firms.
If I weren’t vomitting myself, I’d hold your hair back. Seriously, if I had any money invested in his bond fund, it’d be gone in a second. Fortunately, Loomis Sayles offers much saavier bond funds.
Any respect I had for Gross is now out the window. NO BAILOUTS! Don’t skrew the savers to bail out the gamblers.
“Frantic desperation,” Gross says.
OMG, I’m going to lose my house. Sure, I didn’t have to put any money down, so I don’t have any skin in the game. Sure, I won’t be losing any equity if the bank takes it. Sure, I was a renter for years and I probably wouldn’t have been allowed to buy a house under traditional underwriting standards. Sure, my FICO was already lousy and now it’s going be … still lousy.
But I’m entitled to a house, dammit. I can’t stand the “shame” of going back to being a renter. What will my friends think, with all their iPhones and cool gadgets. I’ll be the neighborhood loser! You can’t expect me to live with that shame!
This is in a nutshell is the current situation. Why are foreclosures regarded as “bad?” Because traditionally, the homedebtor lost all of his equity, including his 10 or 20 percent downpayment, too.
But that was the old paradigm. We’re applying an old standard to a new situation of “no skin the game.” So, why should bailouts be proposed to stop foreclosures? There’s no equity to lose. But we’re trying to save people the “shame” of foreclosure because, after all, foreclosures have always been “bad.” What a joke.
– Judge Smales
“You’ll get nothing and like it”
FB’s are the new ’serf class’. The MBS holders desperately want them to keep paying 4k a month on a house that rents for 2k a month.
But the problem is they are voluntary serfs and can walk free and rent at any time! How to keep them paying on an upside down depreciating asset to save the MBS holders ass? its an issue.
Gross profits
Why is it that these guys only believe in a free market when they’re making money?
“Why is it possible to rescue corrupt S&L buccaneers in the early 1990s and provide guidance to levered Wall Street investment bankers during the 1998 LTCM crisis, yet throw 2 million homeowners to the wolves in 2007?” Gross wrote. “If we can bail out Chrysler, why can’t we support the American homeowners?”
Gross advised President George W. Bush to set up a “Reconstruction Mortgage Corporation” and “write some checks” to bail out homeowners.
I have a better idea. Why don’t YOU write some checks Bill Gross and waste YOUR money.
I think he has a point. If the government can bail out Chrysler, airlines, passenger rail, and the steel industry, why can’t they bail out Joe and Jane Homeowner, especially if they’re a first-time buyer with only one home?
“Judging by its cautious and finely-calibrated responses through a very ugly August, the Fed appears keen to put the Alan Greenspan years firmly in the past and take a much more orthodox approach to monetary policy.”
I just checked Bernanke’s Facebook page. Yep, turns out he’s Geek Orthodox.
Oooohh. That’s punishment.
“But when the mortgage meltdown pieces are written or broadcast, the lead is inevitably someone who is about to lose his or her house, with not so much as a nod toward the notion that these people might have overreached or bears any responsibility at all for their financial plight.”
EXACTLY.
The current “media” is nothing but a bunch of corporate shills that will lie, distort, and fudge any data to help their clients, in this case The Realtwhores.
I used to work for a big news/online company in CA. The profits come from ADVERTISEMENT, not circulation. Upper management was always bugging reporters and editors to slant the news a certain way, to focus on the “positive” (for the sponsors) and to toe the corporate line.
The last straw for me was having my “editor” (aka the CEO’s in-law) remove all references to cigarette companies in an article I wrote about the dangers of teenage smoking. I wasn’t “allowed” to mention Camel, or Marlboro, or any other company by name. Why? Because those companies spend HUNDREDS of MILLIONS of dollars in advertisement and sponsorships… Instead, the “editor” wanted me to focus on the awareness campaigns these companies are funding!!! LOL LOL LOL They spend $1,000 in teenager-friendly ads for every $1 they spend on “education”. UNBELIEVABLE!!!!!
The same goes for the realtwhores, and the banks, and the Wall Street corporations.
Joe Six Pack has been duped into believing that Anderson Cooper will “keep them honest” ROTFL… or that Bill O’Reilly hosts the “no spin zone” ROTFL… or that Cramer is “on their side, booyah!” ROTFL.
Follow the money. Follow the money. Follow the money.
Just another reason blogs have put the nail in the coffin of print media.
I am completely amazed that the MSM still don’t realise that they are losing so much credibility now that they have become the laughing stock of a sizeable proportion of the population. IMHO that is the problem with greed and lack of ethics: When you are found out you end up losing everything.
That editor scum bag. I hope he/she dies of lung cancer. If information gets censored, that is treason (against the first amendment — almost entirely what our nation stands for) in my book.
Um - it’s not “treason” - which as I recall is a crime against the nation/state. And what happened was not against the first amendment. They were paid money to write stories for a newspaper - that doesn’t convey the right write anything you want. (Yes, I know, I know, journalism ethics and all…) If the above poster were put in jail for expressing the opinions above, then that’s against the first amendent.
My husband works in IT at a local media outlet. All of the above mentioned is true. The media is first and foremost concerned with their advertisers. There’s also serious issues with general laziness and/or intelligence level of the “average” journalist (with apologies to the above poster.) (Let’s just say turning on their computer can be challenging…) The combination of just plain old incompotence and advertiser bias makes most media a big waste of time. (And the sheeple have not yet caught on but most of my generation can’t be bother with the newspaper..)
I love how I spelled incompetence wrong.
Yeah, “incompotence” is what happens when B of A jumps in the sack with Countrywide.
Just a question. How will the fed lowering rates help all the ARM resets - aren’t most of them tied to the LIBOR?
Even if it did, I doubt that 1% or 2% reduction would help most of these FBs. It’s simply not enough money and they’d have to wait until the reset date.
I think that a bigger percentage of these loans than any of us know are interest only. They took interest only because that’s the max payment they could afford. Then again they said many people couldn’t even afford the 1st months payment so they defaulted. Are we supposed to help them too? Want to help, better be building more homeless shelters.
Yes. A rate cut won’t help. There was an article on Yahoo finance a bit earlier today. It was headlined something like “Mortgage Rates Sink”. The Fed didn’t do anything for the fed funds rate, and according to Fannie May’s “survey”, 30 year fixed mortgages are down from 6.62 to 6.52. Big friggin deal. That makes a $5 difference for every $100,000 financed.
yes, but the whole craziness for so many people was predicated on the mortgage rate game. Since everything was about monthly payments, the rates were all-important. The price was whatever the seller asked, the big issue was wow! look at those rates…lock in now, lowest ever, *buy* something you idiot look at those rates! I know too well the mentality, my husband would come home daily saying oh my god when will we find something you’d be willing to buy, rates have inched up .1 ! Oh my, look, they’re down again today, let me buy something, anything! gotta lock in the rate or we’ll be priced out forever!
“mortgage rates sink” lol is another pathetic appeal to the buttons that seemed so easy to push a short time ago…
Wow! Lucky Husband. Most wives would have pushed such an eager beaver into Bankruptcy by now. All the while his friends would be talking about the materialistic wife behind his back.
Good for you and keep it up, and more importantly tell all of your single friends your philosophy.
Of course, in the bubble markets, virtually everything is priced higher than the conforming loan maximum, and jumbo rates are doing anything but sinking.
In other words, where it counts, mortgage rates are rising, not sinking. I don’t think the misleading reporting owes to media’s sensitivity to real estate advertisers. I think it owes to the fact that most journalists are undereducated idiots with the critical thinking skills of a creationist brown trout. Who flunked out of trout school. And who’s suffered a major head injury.
Years ago when we got 7% we thought we’d died and gone to heaven. Rates are low. If someone can’t afford a fixed rate @6.5% then they can’t afford to buy a house.
LIBOR follows the Fed Funds rate pretty tightly (it’s what big banks charge each other for dollar denominated short term loans in London rather than NY).
That sounds like a pretty arbitrary change. I get the impression that they didn’t feel that they had time to adjust the model, so they just moved the bias a few clicks in the right direction. Why not just throw darts at a board? It would probably be about as accurate.
‘It’s heartless and cold, but, as they say on Wall Street, if you want a friend, go get a dog.’”
Too bad Bill Gross doesn’t feel the same way:
http://biz.yahoo.com/cnnm/070823/082307_gross_homeowners.html?.v=1
This Gross thing is simply outrageous. Of course, it will go nowhere.
Goss translated – Please, please bail me out from all those worthless RE bonds I bought!!!!!
You know what is really bizarre? Bondholders are generally the only ones who make out like absolute bandits in a deflationary environment. Unless, PIMCO is holding MBS?
I’ll bet. And he’s also saying here, “Don’t look at our books, because you won’t find “Waldo”". He’s a total shmuck (sp?). The Bush admin cutting checks won’t create inflation??? If he thinks this, he is an absolute retard.
Gross’ plan doesn’t make any sense given his stewardship of bond funds. If this country could somehow fund a bailout - it would cost trillions and have to be borrowed from the Chinese - inflation would absolutely go ballistic and ruin the value of bonds, period.
It is great to see this level of desperation, however.
Seems like all I do these days is post phone numbers for boneheads who deserve to hear the full wrath of HBB’s, but here goes another:
Pimco:
866-746-2602
212-739-3000
949-720-6000
Call them and tell them Bill Gross is an a-hole, and you’re switching your bonds to Vanguard or whatever.
Bill Gross’ recording:
949-720-7753
Hey lainvestgrlie
Can you post the phone number for Nigella Lawson also? Geena Davis would be nice too . .. !!
I’ll second the Nigella request. A hot woman with an accent who can cook? Sign me up. And the fact that her dad was Chancellor of the Exchequer means that she’s probably smart too. That decade she has on me means nothing! We can make it, Nigella!
Dang!! She’s sharp. Same age as me too. You young pups don’t have a chance against me (and I don’t even need Viagra).
Bill Gross is nobody. Call Congress instead.
Seriously, get out of PIMCO bond funds. If they print money to get out of this you need to be in Treasury Inflation Protected Securities or TIPS. Also check out Loomis Sayles bond funds. LSBRX has been a very solid fund, they invest in Canadian goverment securites in addition to their large positions in U.S. treasuries and bonds.
Is it me or does Gross sound desperate?
As desperate as Whipped Creamer did a few weeks ago. But he is a lot more mature in asking for his blanky. Creamer was probably raised as a trantum baby.
That and Bank of America investing in Countrywide makes me think a lot of big shots are desperate. I think this is one of those things that go down as a close call. On the same scale as a Bay of Pigs, Three Mile Island or some other major disaster. We will only know after the fact how severe it really was, or what could have saved us from a total meltdown.
BZR. Just the start of the collapse of builders. I posted once before about the last collapse (late 80’s) when a friend was getting divorced from her building contractor husband. He had built a spec house in Glendale, ca. His asking price was $625,000 and, of course, the proceeds from the sale would have been part of the divorce settlement. Then the fit hit the shan but it was NOTHING like we are seeing now. That last collapse was like a 2.3 earthquake. This one is a 7.0 at least. Anyways, end result was he went bust. The house was sold in the low $400,000 but the price didn’t cover his bank loans, etc. I figure there will be very few big builders around when this is over but there will be a lot fewer smaller contractors who have built spec homes (anything from 1 to 5) and hadn’t finished them or hadn’t sold them up until 1 month ago. I have a feeling DH Horton will teeter on the edge or even keel over. They have hundreds, if not thousands, of tacky sh*tboxes in scores of developments around the US. Where I live (close to the 101 in southern california) they have several very large developments. Some finished but not sold. Some nearing completion but not sold and some (get this!) just starting construction! It makes you wonder just how much these CEO’s are hiding the truth about the companies finances and the companies future. Can you say “Kenneth Lay” anyone?
Leave it to Beazer.
Now THAT was funny. I don’t care who ya are.
“Lord, I apologize for that right there and um, bless them starvin pigmies up there in New Guinea, Amen.”
last collapse was like a 2.3 earthquake. This one is a 7.0 ??
81-82 was not a 2.3…..Potentially this was is far bigger because of the enormous leverage but 81-82 was the worst downturn that I have seen in 30 years……Thousand of smart, conservative people went broke and some have never recovered from it….
US dollar now worth less than a Canadian Loonie, just the way it was back during all those Winter Carnival jaunts to Quebec City from ‘73 to ‘83.
Barkeep Canucks would actually refuse to accept a greenback!
Great job, Al.
On the flip side, French Canadians have flooded into New England this summer.
It grieves me - NOT! - to see the builders of these grotesque monstrosities going out of business as the pretentious posers who “bought” them with easy credit leave the keys on the counter and skulk away under cover of darkness. It’s twilight for the Age of Excess.
Bill Gross, doncha love him??
http://biz.yahoo.com/cnnm/070823/082307_gross_homeowners.html?.v=1
And in the article he says housing could fall by 10% if there isn’t a bailout. Even then the dirty ba$tard couldn’t be honest. Housing will fall by 50% or more in some areas. This guy slithers. Somebody grab a spade and beat him.
In fairness to reptiles and crawling things, please don’t compare them to Gross and his ilk.
Get President Bush involved?
Yeah, that will help…..
Gross is an idiot.
It is comforting to know that the wealthy people buying homes in recent years, and keeping the medians high, will be taking the biggest hit. A 1 million dollar home, now going for 500k, is a 500k loss. A 300k home, now going for 150k, is a 150k loss. Looks like the smart money wasn’t so smart.
Money doesn’t have the ability to think. Unfortunately, most people that possess it also share this quality.
First let me say that I’m violently opposed to any bailout of homeowners, but why would speculators squeeze through on any buyout? If you don’t live in it, you won’t be homeless, so why would you qualify? If you own more than one house, why would you qualify? If you lied on your loan docs, why would you qualify? By the time the questions are asked most wouldn’t qualify for any buyout.
You are assuming Gross actually cares about the homeowners, when the reality is he just cares about the bonds he’s sitting on. And those bonds cover everyone: homeowners, speculators, the whole lot. So it’s obviously best for us to just bail them all out indiscriminately, right?
Sorry, I see it posted above now.
Still, how amazing is it that this guy wants me to bail out speculators.
In the next revolution Gross should be shot for crimes against the people.
I wish he’d disclose every position he has that would be affected by this proposal and his projected gain or loss from it.
The Bloomberg article nailed him on that, but the Yahoo version didn’t.
I nominate Bill Gross for a$$hole of the year. Do I hear a second?
Second.
Second second! How pathetic is this?!
I don’t want to have to deal with all this…don’t want to have to call my senators and representatives on this issue. I don’t want to deal with such a joke of a ‘populist’ position lol, it’s so horrifyingly annoying!
At the very least the interviewer could and should have put the question to him. I read his comments earlier but watching the interview had a more profound impact upon me in an even more negative way.
This is how our free market works. What a friggin joke.
Everybody wants a bailout. Move to Cuba!
Now, now. Shooting people for crimes against the people is un-American. The red-blooded American way goes no further than tar ‘n’ feathers, dignified tea parties (how ’bout we go to Pimco dressed as Mohawks and toss its records into Newport Harbor?), and running folks out of town on a rail.
Him and the CEO of Ameriquest should be in jail right now.
Let’s not all get carried away calling for Gross to be castrated. And anyway, we’re too late.
This is a little OT, but just last night I got into the old “real estate always goes up” argument with a good friend. He was insisting that New York City real estate has only ever gone up.
The irony is that he was very proud of his (circa1913) Brooklyn brownstone purchase, and he kept referring to the “renaissance” that Brooklyn was experiencing. And he was explaining that Brooklyn had been one of the nicest parts of the city 100 years ago.
I asked him a very simple question: “If real estate always goes up, then what exactly do you mean by “renaissance”? What’s the neighborhood coming back ‘from’? And what happened during that long period of time between it’s heyday, and now?”
He didn’t have a good answer, but he was extremely sure that whatever happened could ‘never happen again’.
Bwahaha.
Don’t even get me started. 5th generation New Yorker here - I have seen real estate beaten into the ground, twice - 70’s and 90’s. My parents and grandparents can tell you stories that would make your hair stand up.
Your question to your friend is a brilliant one. And every neighborhood in Brooklyn has seen very tough times over the years. Every one.
guess he slept through the late 80’s and early 90’s
If we bail out the speculators, do we get part of their home equity?
Yep, the non-existant part.
We get 100% of their negative equity. Sweet!
U.S. Bank National Association. “Many of the noteholders, including various hedge funds and other opportunistic investors, have purchased Beazer’s bonds at depressed prices in the market and are now improperly seeking to secure a windfall by demanding accelerated repayment in full.”
Heh heh heh. Sounds like the whining from fiberoptic companies and networkers circa 2000 - 2003. Funky financing on the way.
“Bill Gross, manager of the world’s biggest bond fund at Pacific Investment Management Co., urged the Bush administration, rather than the Federal Reserve, to bail out U.S. homeowners to avoid ‘destructive housing deflation.’”
Well, I just lost respect for Bill Gross. Does he realistically think that having the government purchase or guarantee the mortgages will solve the problem? It seems to me that it postpones the problem and makes it bigger when the government gets stuck with all of those foreclosures.
It reminds me of that classic quip from Ronald Reagan. The most dangerous words to hear in the English language are “I’m from the government and I’m here to help”.
Where are the so-called conservatives when we need them to save us from government spending? Have they all turned to the dark side?
It might not help you and us, but it sure will help his portfolio.
Bill may have ended up on the wrong side of some CDO agreements.
Check out National Review Online’s editorial today, declaring that the Fed absolutely should not lower the Fed funds rate, and endorsing allowing the speculative excess to get wiped out.
True conservatives follow Andrew Mellon, i.e., liquidate the bad investments and purge the rottenness from the economy.
The problem is that the Federal Reserve just bailed out the banks and investment houses.
The government has a recent history of bailing out companies and businesses that get into trouble.
Sorry, we have not practiced conservative spending in 80 years. Why should we start now?
It’s been 2 years since Katrina and New Orleans has not recovered despite billions in govenment aid as well as and low cost loans.
A far as the housing market goes, deflationary pricing destruction is exactly the remedy that’s needed. The quicker the better too. As soon as affordable prices are reached, the market will finally be able to find a bottom. The average home price should be about 3X the average salary for each individual market. Until we reach those levels again, don’t look for a bottom.
Reality has set in on this B of A bailout…stock is almost back to yesterdays close.
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“Bill Gross, manager of the world’s biggest bond fund at Pacific Investment Management Co., urged the Bush administration, rather than the Federal Reserve, to bail out U.S. homeowners to avoid ‘destructive housing deflation.’”
This is disgusting. Did he asked the govt. to interfere with ‘destructive housing inflation?’
The very idea that anyone with a brain would suggest this tells you how corrupt our system is and how corrupt the thinking in America has become.
Jas
You make the assumption that he has a brain? He has a greed cortex and I would guess that’s about it.
None of these JOs were crying about responsible people being priced out by liars and gamblers. Most were laughing about it.
LBO deals on hold.
http://www.reuters.com/article/reutersEdge/idUSN2335716920070823
Good, can we put the WS euphoria on talks of buyouts on hold? So tired of it!
“On Tuesday, the bankruptcy judge handling HomeBanc transferred ownership of the loans to the closing attorneys. This move lets the lawyers recover their money by selling the loans to banks or other mortgage lenders.”
So, can we assume these loans won’t be sold at full value, so that the lawyers are going to incur a loss anyways????
LOL. Yes.
Lawyers aren’t the sharpest tools in the shed sometimes when it comes to things like this. This is something I know personally.
“Gross advised President George W. Bush to set up a ‘Reconstruction Mortgage Corporation’ and ‘write some checks’ to bail out homeowners.”
Something needs to be done about these idiots that just dont want the market to correct. I used to think that Gross was one of the good guys.
Mr Bush, I dont like you very much, but if you DO NOTHING, I will have some new respect for you.
Woke up last night from a dream I had the night Before, where A pigmaN blew ppt smoKe into the wideshut eyes of America. Turned off the yellow tv to get a taste of unsalted PigMan spam and heard it squeal crisis over. I’ve been 1984′d before but not like this….
Then I awoke, laughed out loud, and whispered thank you HBB posters, thank you Ben, thank you. I’m wide awake now.
http://www.youtube.com/watch?v=aPyhYczii8I
“If U.S. home prices fall by 10 percent, it would be the worst asset deflation in the U.S. since the Great Depression, according to Gross.”
Bring it on. Considering in the last 5 years home prices DOUBLED or TRIPLED and wages remained flat, 10% is just a start to save this country. Pray for more like 30%.
I know… if all it would take is 10% to cause a Great Depression then we are in for something very huge. That statement by the whinning, Socialist SOB Bill Gross was the scariest I thought.
Hey, he ain’t no Socialist — he’s just a moron.
Way back when about two years ago a regular poster at that time, Robert Cote’, said if we had only a ten percent correction it would be enough to be devastating.
Um, maybe the median hasn’t dropped 10%, but if you did a house to house comparison, haven’t prices already dropped 10% everywhere??
Easily down 10% EVERYWHERE.
Either Gross is incredibly ignorant or duplicitous here.
That’s just not true. Salem, Oregon’s numbers increased something like 16.7 percent.
http://tinyurl.com/2ymz83
Things are bad, but it’s too early to go hyperbolic!
You beleive NAR numbers? If it is really up that much, sell now! Learn from EVERYWHERE else! (except Salt Lake City, everyone wants to live there)
No - per Case/Shiller which does a good job tracking same-house sales, prices are down 1.74% nationwide, at least as of March. Presumably they’re down some more since then, but probably at most 3% or so.
There are pockets where prices have declined 10%, but there are also pockets where prices are still increasing.
Actually I was off some - they were down 2.06% as of 3/07
And which homeowner who is underwater by 20%, would want to save their home by refinancing at the full principle amount? Take Jim Cramer’s advice, just mail the keys back to the bank.
Quick question: What is up with the Neighborhood Assistance Corporation of America (www.naca.com)? How are they able to offer below prime (-1%) mortgages to people with subprime credit? The limits in my area are over $250K for a home loan. If I can’t get those terms with an over 800 FICO score, why should a deadbeat get them simply because they were stupid enough to use a toxic mortgage?
If the government is taxing me to pay for this, I am gong to be furious.
Sorry, hit the button twice (see below).
They’re a non-profit, so they probably get some kind of goverment funding.
Their eligibility criteria seem very reasonable: owner-occupied properties only, current interest rate of at least 10%, no multiple homes, no serial refinancing.
Quick question: What is up with the Neighborhood Assistance Corporation of America (www.naca.com)? How are they able to offer below prime (-1%) mortgages to people with subprime credit? The limits in my area are over $250K for a home loan. If I can’t get those terms with an over 800 FICO score, why should a deadbeat get them simply because they were stupid enough to use a toxic mortgage?
If the government is taxing me to pay for this, I am going to be furious.
“But let’s face it: Most of the people who took out home mortgages for no money down knew that this was a roll of the dice.”
A big “Brilliant Wow” for YOU at the Washington Post !
It ONLY took you guys 3-4 years to put into Print what most FISICAL RESPONSIBLE Americans on the street KNEW 5 years ago
The guy who wrote that piece (Howard Kurtz) writes about the media, not business. Just goes to show ya, it doesn’t take a rocket scientist to figure that out. How did most of Wall St miss it?
Wall Street did not miss it. They were busy selling these AAA bonds to the Europeans, making huge profit.
The Mafia did not miss it either, just watch the surfacing bodies.
Right Ken.
They made a fortune from it too.
I don’t get why all these people want to keep housing prices artifically inflated? I work here in San Diego and am a contractor that works in our biggest industries next to tourism, Biotech and Defense.
I see everyday how educated people are ditching San Diego to work at companies in other parts of the country because housing is too expensive. You aren’t going to lure an employee living in a 3000 sq ft home in Austin to a dinky sub 1000 sq ft apartment in San Diego. The region doesn’t see the long term consequences of high housing prices. Businesses can’t afford to pay a 100% premium on wages to help their employees find housing, they will do what most companies do and outsource the work either out of state or out of the country . Soon there won’t be enough high paying jobs and housing prices will just deteriote more and more and more people leave San Diego to find better job markets. Give it another decade and you will start to see more and more companies get out of this area.
Soon California will be home of the super-rich and the super-poor, with no middle-class. Its already starting to look like a third-world country no matter where you go.
pUnk->Release();
Now there’s a blast from the past.
I’ve said this before here, but it looks as though the inability to get the right people to the right places for the right jobs will exacerbate (an even more) sluggish labor market.
People who are mobile will thrive. Contract engineering and health care for professionals who are unencumbered with possessions is what I mean. The money is great if you are footloose.
I did exactly this - moved to Portland and rented a place here.
No way in hell would I go back to San Diego - standard of living is way better up here.
The region doesn’t see the long term consequences of high housing prices. Businesses can’t afford to pay a 100% premium on wages to help their employees find housing, they will do what most companies do and outsource the work either out of state or out of the country . Soon there won’t be enough high paying jobs and housing prices will just deteriote more and more and more people leave San Diego to find better job markets. Give it another decade and you will start to see more and more companies get out of this area.
You just described Boston.
“Shanna, they bought their tickets, they knew what they were getting into. I say, let ‘em crash.” –Jack Kirkpatrick, Airplane
I just love the desperation obvious in today’s yahoo front page harping on mortgage rates…”mortgage rates sink” on the finance page, “mortgage rates drop to lowest level since May”. Since 3 months ago?! Wow! Like this isn’t utterly unremarkable variation in mortgage rates, and what a pathetic attempt to get people feeling like things are okay to go in an apply for a mortgage, lock in those lowest-rates-since-may lol. Is it some desire on the part of the mortgage-brokers to see if there’s anybody out there who can still actually qualify for a loan anymore, to see exactly how screwed they are? too weird…
Yep, save a whopping $50 per month on a million dollar mortgage! I feel great!
/sarcasm off
This is the moment of truth for the Republican Party. For decades they have touted the free market. Let’s see if these conservatives bail out the speculators.
My money says they will.
The last republican (besides Ron Paul) with true free-market principles was Barry Goldwater.
“Outstanding paper may slump by a total $300 billion, representing the entire amount of debt backed by home loans, said Tony Crescenzi, chief bond market strategist at Miller Tabak & Co.”
Maybe I have my “stupid” shirt on today. How can this be correct? Perhaps better put, why am I misreading this? The entire value of outstanding mortgages in the U.S. just $300 Billion? Can’t be.
Maybe he means, for their firm. Think, the entire amount of debt backed by home loans is actually waaay more than the actual home loans. Slice and dice, baby!
He is saying 300 B of the 1.8 trillion dollar commerial paper market is tied to housing.
OK — that makes sense — just the short-term portion, correct? Thx.
Yep. That’s why CFC and others are desperate for cash. They can’t raise funds in the CP market anymore.
That has got to be the most pathetic thing anyone has said in a long time.
Bill Gross is a POS.
If you want to speak out then sign this petition.
http://www.petitiononline.com/bailout/petition.html
I signed and happened to read a number of the comments.
It’s interesting, given the number of signers how many legit, honest appraiser’s were run out of business.
The real estate purchase system is 100% corrupt.
Maybe some of you stock market types can weigh in here, is Wall Street completely schitzophrenic? One day, they’re panicking about the RE bubble/credit crunch, the next day they blow it off and rally? Or is this volatility just calculated to make themselves rich on trading? It’s just bizaare how this disappears and re-emerges as a crisis issue from day to day.
Trading is no longer happening based on fundamentals. Every piece of good news, no matter how miniscule, can make the market rally. After hours the loan to Doublewide was announced, and we knew that the market would open stronger today. But, new news has been bad, with tiny veils of good. They reach for the good first, then when they re-read the release, they realize things like, “Oh, even though NEW unemployment claims went down (only a couple thousand), the actual rate of unemployment is UP.” And, “Gee the loan that Doublewide got only covers operating expeses for today, and tomorrow morning.” They can connect the dots and they do, eventually, realize what this means.
I’ve not been one of those “abolish the Fed” types. Until now. Americans seem to want a free market, as long as they’re making money.
The value of the stock market would then be based on aggregate company strength not the whims of Fed rate changes. I’m so sick of the market moving “in anticipation” of Fed moves. About the only good thing I can say is that they haven’t caved….yet. They’re teetering though.
–
“Maybe some of you stock market types can weigh in here, is Wall Street completely schitzophrenic?
Wall Street is a haven for born-and-bred crooks raised in “a culture of fraud.” They know the game and the gambling tendencies of people. My prediction is that the US stock market will be shut down by the Congress for all practical purpoes as it happened in jolly old England in 1700s after the South Sea Bubble burst.
My 2 paisa (Indian penny, worth 0.025 US penny),
Jas
Shut down Wall Street, for what a day, a week—til things blow over? Please expand your views on this.
One thing is for sure, the powers that be in the rest of the world are painfully learning of the games Wall Street plays.
is Wall Street completely schitzophrenic?
Yes.
It’s the uncertainty that makes the market volatile. Also makes some good buy and sell oppportunities.
The Stock Market has always been this way. Don’t try to figure it out as it’s a waste of time. If the market happens to go up, they will say it’s because interest rate may be going lower. Later the same day if the market is down the reason given will because of lower earnings expectations even though interest rates are lower. The stock market bubbleheads are all bi-polar. One day bad news is bad and the next it’s good. Now how can that be? One truism is when everyone is bullish and goldilocks looks her finest (like last July 19th) there’s no one left to sell to who already isn’t fully invested. Housing has always led the economy out of post WWII recessions and will lead us out of the one we are in now. It’s just a matter or time (10 years or so) until we see a recovery this time.
”Outstanding U.S. commmercial paper fell 4.23 percent, the biggest weekly drop in almost seven years, as investors fled asset-backed debt and opted for the safety of Treasuries.”
I guess the paper was not really that ‘outstanding’ after all, then.
15 minute long CNBC interview with Countrywide’s Angelo Mozilo, in which is says he sees no light at the end of the tunnel and that we are sure to enter a recession…
http://www.cnbc.com/id/15840232?video=481763309&play=1
Tanzillo!
Tangelo!
or how about this beauty…
Mohszilo
(The Mohs procedure is a common method of surgery for skin cancer)
the man knows a thing or two about getting burned
I like Cramer now because everyone else rips on him.
He just told Erin Burnett on CNBC that only “2 square miles” in the US is experiencing any appreciation and the rest of the US is terrible. He said that “a fire would improve the value of many developments around the country.” Made me laugh.
I don’t think that your’s is a good contrarian move.
His humor in this crisis has grown on me. I think he realizes his days are numbered and he is starting to parody himself sometimes.
I think he’s just collecting sound bites so that when RE crashes and burns and is hated by almost everyone (except for the people here who are finally buying) he can say “See, I told you so - a horrible investment!”
People are stupid and their memories aren’t that long and he’ll have instant “expert” status again because he called the destruction of the housing bubble. We’ll know the truth but probably only as many people will listen to us as would have two years ago.
“‘Now many of those that bought homes in 2005-2007 stand a good chance of resembling passengers on the Poseidon — upside down with negative equity,’ he said.”
Nothing that didn’t happen to lots of people in the early 1990s. And nothing that is a problem for those who bought a home they could afford and plan to stay in.
I think the real difference here is the HELOCers. We’ll see many seniors who consumed all their home equity getting foreclosed. But do we really need to subsidize excess middle class consumption and pay off their debts? What did all those people think of welfare recipients a decade ago? Bad enough we’ll end up paying their PUBLIC debts.
We have people in our neighborhood who are in such a position but they don’t even want to keep the houses - they live elsewhere. I sure hope they don’t get a check from the government. Gross is really silly to suggest such a thing. Sorting things out would take a major program involving a lot of planning.
I was somewhat encouraged seeing this link
http://money.cnn.com/2007/08/09/real_estate/pols_play_subprime_blame_game/index.htm?postversion=2007081314
to alleged ‘positions’ on this whole scene…I’m hoping that it stays at the level of suggesting that we need to reign in the loan people, because clearly we do and though of course they don’t ‘deserve’ all the blame, the HELOCers for instance and people who consumed all their home equity are a new and unfortunate phenomenon.
They can just live on their SS and hope the kids who they helped financially pity them enough to visit sometimes. We’ll need more affordable senior housing so they can get together and compare sob stories. I’m getting increasingly pissed off at the idea of bailing anybody out, you had it and you lost it on a gamble and you really can’t argue elsewise. Reform the industry of greedy twits who couldn’t care less that they encouraged people to gamle, who *knew* it was a ponzi scheme, and accept it all as lesson learned, one can only hope.
If you are used to SUNW, then get used to JAVA instead.
“In a televised interview, Mozilo said, when asked if housing would lead the United States into a recession: ‘I think so … I can’t believe … that this doesn’t have a material effect … on the psyches of the American people and eventually on their wallet.’”
“There is a ‘very serious situation going on’ in the U.S. housing market, Mozilo told CNBC Television. ‘This environment is certainly not getting better.’”
Why isn’t every one battening down the hatches? Look at Mr. Mozilo’s record, a year ago he said “in 53 years, I’ve never seen a soft landing..” , then compared the economy to a ship going in the wrong direction. Now he said when asked if the US was going into a recession “I think so.”
I doubt there is any financial institution in the US that is not at risk if we go into a recession.
The ripple effects from the 42,000 layoffs this week in finance are not even being felt in retail yet, but sequential layoffs are already occurring across the board. It is getting really ugly.
BEN!!! BEN!!
This one is priceless… F*-ed homedebtors are “pressing” Countrywide to restructure their loans!
Countrywide borrowers feel the pain
Advocacy group wants mortgage lender to restructure loans
http://www.marketwatch.com/news/story/strained-homeowners-ask-countrywide-redo/story.aspx?guid=%7B88F9E363%2D27B4%2D4033%2DA247%2D91E848EE464F%7D&dist=hplatest
Some delicious morsels from this tripe article:
Cynthia Bryant, one of the panelists, said Countrywide refused to accept a late payment last year. The 42-year-old single mother of four, with a home in Pomona, Calif., has filed for bankruptcy to stop the rate from climbing on her interest-only loan.
“We want [OTS] to go back to Countrywide, and we want them to say ‘We are going to require you to restructure loans,’” Marks said.
Require???? LOL, obviously these fools have never dealt with Mozillo before.
But Marks said Countrywide has been unwilling to work with troubled borrowers to make loans affordable. The company makes 10,000 to 15,000 foreclosures per month, according to Marks. A Countrywide spokeswoman said the amount of foreclosures is “much less” than Marks’s figure.
10,000 to 15,000 foreclosures a month!! Of course Mozillo denies it, which means the figure is HIGHER!!!
The company said its efforts have kept more than 35,000 borrowers out of foreclosure so far this year.
So far?????? LOL… And how long will they stay above water with equity evaporating every day?
No wonder Tan Man Mozillo said the country is headed for recession… Brace yoourselves!
I read today that Countrywide’s contracts with secondary-market purchasers of its loans require Countrywide to buy back loans if it modifies them. Supposedly about $122 billion worth of loans are subject to this provision. That means if it modifies even 2% of its loans, it triggers buyback provisions that would lap up every last cent of the $2 billion it just got from B of A.
Liquidity crisis, indeed. No way Countrywide is going to modify any more than a trivial amount of mortgages. Even a few modifications would trigger enough buybacks to sink the company toot-sweet.
The 42-year-old single mother of four, with a home in Pomona, Calif., has filed for bankruptcy to stop the rate from climbing on her interest-only loan.
So let me get this straight. Is this idiot going to try to keep renewing her “interest-only” loan from now to eternity? She obviously can’t afford interest and principal. She was late on her payment for interest-only. She could probably rent somewhere for half the cost, and they’re supposed to bail her out. I am so sick of this crap.
That’s what is so stupid here. With that I/O, she IS renting and at twice the price!! How can people not see that?
Ex-Cal -
10,000 to 15,000 foreclosures a month!! Of course Mozillo denies it, which means the figure is HIGHER!!!
Since the total number of REOs on the Countrywide website is only 11,252, total as of today, I seriously doubt they are foreclosing anywhere near 10,000 to 15,000 homes a month.
http://countrywide-foreclosures.blogspot.com/
Things are bad enough without having to beat ervery dead horse which is carried down the road.
Go figure that this cretin Cynthia Bryant, one of the panelists, is a 42-year-old single mother of four. Let me guess: four different daddies, none of whom pay child support. IDIOCRACY, here we come!
http://www.youtube.com/watch?v=fAYnc_-ddlw
America, meet your future - IDIOCRACY.
Wow, I absolutely love that. It’s genius. The not so subtle point is that smart people have less or no children than dumb ones, and that medical advances keep the unfit alive. Fast forward several generations and the planet is populated by idiots. Perhaps this is why the rich are getting richer.
“Good God, Americans are so in debt that they can not afford for the nation to get back to normal interest rates, which is around 8%. The interest rates were lowered to the Eisenhowner era for debtors to go on a borrowing party to forget 911 and stimulate the economy. (Seems we may be following the path of Japan, 17 years of real estate declines in a nation where there is no more land.) The present American economy is not stable and looks more like a crack addict having withdraw symptoms, from easily borrowed money. “
I certainly get that feeling. What an era.
Exactly. The only way the American economy can survive is if Americans are given free money. The plug has been pulled on the life support machine.
Will China, India step up with the new money or will Japan chip in with some old money to bail out USA?
Doubt it.
no.
(Bank of Japan) “More broadly, it sees one of its functions as preventing the formation of bubbles of any sort. It still bears the psychological scars for failing to prevent the wild property speculation of the 1980s that proved so ruinous in the long run.
The BoJ’s desire to head off inflation well before it lumbers into sight is an implicit criticism of the Fed’s apparent tolerance for asset bubbles.” FT Aug 23
The Fed’s problem is that it distinguishes between asset bubbles and inflation. In fact, asset bubbles ARE a form of inflation. Just as “inflation,” as commonly defined, is essentially a function of too much money chasing too few goods and services, asset bubbles are a function of too much money (or credit) chasing too few productive investment opportunities.
Either way, the cause is the same: The money supply has been too loose. When the excess money is broadly distributed, it causes inflation (since most of the average person’s money is spent on consumption). When the excess money is concentrated in the hands of the wealthy, whose marginal dollars are more likely to be invested than spent, the result is asset inflation.
The Bank of Japan has it right. The Fed is out to lunch.
I love that point, so easily forgotten. This is such an interesting mass psychology, because recall when we were truly worried, every day, that this would be the day when anthrax came in the mail or a dirty bomb would go off at the mall. People were encouraged to *shop*, so that the terrorists wouldn’t win. The terorrists really wanted to take down our economy. Maybe they did win, because we just couldn’t stop shopping, even when we had no money to do it. And now these big powerful men are pretty much begging for us to be allowed to do more shopping, on credit. It’s kinda scary biblical, no wonder even the Dems are talking religion lately,wow. And fascinating really. Crack addicts indeed. Lots of people got really high and the come down isn’t pretty. And given the rhetoric coming from wall street I think we need to put some downers in the water, poor strung-out boys need something for the detox.
We have a nation conditioned to believe they can borrow money at 5%, but make 10-15% on their investments…. It is their right as an American to borrow for 1/3rd the rate of their investment returns…..
What eva…
You’ve actually hit on the critical point. If you watch CNBC for a few days all they talk about is lower the Fed Funds rate. It is pretty clear that our economy would be toast at higher interest rates. There is just too much debt to support.
I just realized that, in effect, the Fed just bailed out Countrywide. The Fed opens the discount window and loans $2b. The very next day, Bank of America takes it’s share and uses it to bail out Countrywide. Coincidence? No. Net it all down and the Fed just bailed out Countrywide. How lovely.
Isn’t it just great? You and I borrow at 6.25% but banks get to borrow at 5.75% and loan it right back. So in essence, you and I lose the value of the dollars we save and the bank gets money for no risk. On one hand they say no bailout but they are doing exactly that…who knows the discount window will be lowered even more to “help” joe6pack to keep his home and there by keep prices up and screw the savers in the long run. I got to tell you, its such a fair scheme.
You just got that? $2 billion borrowed… 2 hours latrer, BofA gets FTC permission to buy LaSalle bank (which will result in about 10,000 lay offs in Chicago)… two hours after that, BofA hands Countrywide a $2 billion “investment” that shows up as preferred stock, NOT as debt.
All these shady dealings did not escape our blog’s eyes and ears.
I wouldn’t be too down, John. It’s been said, and it deserves to be said again. $2B aint gonna do jack for Doublewide. Remember just a week or so ago when they “borrowed” $11.5B? They thought it might cover op expenses for a week. This only covers one day. They need to borrow $2B EVERY DAY to stay afloat. They will not.
There’s a poll on CNNMoney asking if the Fed is doing a good job with 60% saying yes. I wonder if the yes votes are because of the recent discount rate drop or because the Fed has held steady by not dropping the FFR to date.
I remember a question:
“Do you still beat your wife - yes or no?” - The answer is terrible whichever is yours.
I’m going to call my Congressman about getting some debt relief. My credit card bills are killing me, and something’s just got to be done about these credit card companies that are being so unreasonable.
I have asked them time and time again to restructure my debt and reduce my rate, but they won’t budge. Now I’m in danger of having to return all the sweet stuff I purchased at the mall last weekend.
I’m starting a website to petition for a bailout for people like me who got lost control while shopping at Macy’s, the Body Shop, Victoria’s Secret and the like.
For crying out loud America, how can you sit by and watch while fellow Americans lose their stuff? How dare you sit there and gloat at the misfortune of others?
I also think we should start a lawsuit against unreasonable pricing, afterall the sales woman told me that the premium denim jeans I bought were “on sale” for $210 but that they were “actually worth $375″. Now it turns out they’re actually only worth $195!! (Which seems absurd, how can these oh so fancy bluejeans be so cheap??? They’re clearly worth at least $300). I’ve been COMPLETELY SCREWED by the system!!
We have to make sure that these credit card companies never take advantage of helpless consumers like me ever again.
ps: Can anyone recommend any “Can’t Lose” stocks for me? I need to make a ton of money, really really fast.
The government has to do something to keep these folks in their $300 denim jeans …
“I’m not unsympathetic. And there’s plenty of blame to go around. But we shouldn’t let homebuyers completely off the hook just because it makes for a better narrative.”
I AM unsympathetic. Completely so.
I have absolutely NO sympathy. We had to scrape and save to buy our house and we did without plenty to get it paid off in 15 years. We took fewer vacations, drove our cars 10 and 12 years, bought clothes at discount stores. Those who wanted it all should get it all, including sitting on the streetcorner begging for money in their designer outfits. I wonder how they’ll like when they find out their refrigerator boxes don’t have any electricity to plug in their big screens. I’m totally disgusted with whole mess and all the people who lived high on the hog for the last 7 or 8 years. As they’ve said over many years, “you’ve made your bed, now lie in it.”
I’ve said it before… but I’m gonna say it again. If we’re gonna do a bailout, it has to be a cash injection to EVERYONE that didn’t profit from the bubble.
Start with the set of all U.S. Citizens. Remove:
Millionaires
Mortgage borkers, appraisers, realtwhores, originators, etc.
People that sold a house in a bubble market the last few years and didn’t buy like kind.
Anyone else we can come up with that contributed to this crap.
Then, they each get 1 year’s income (as reported on 1040). Household over $100K lose $.50 for each dollar over $100K income. If you have debt, the money goes directly to your debt holder(s). If you have less than a year’s total debt, then it goes directly to you.
Sure, we get inflation, but most people with positive net worth are compensated for losses through the cash payment. People on the edge, get their loan bought down so they can likely refi. People that don’t own, now have a substantial down payment to allow them to buy from people that don’t own.
Lenders are bailed out by getting loans paid down and inflation to raise income to allow people to pay their debts back with higher incomes. And, by return of buyers with ability to buy,
Of course, we also have to add TONS of regulation back to the lending industry to punish them… the return of moral hazard. Cap interst rate on credit cards and tightly control their ability to change rates and terms. Require all parties be represented by a lawyer, or a mortgage doc is unenforcable. Appraisals are done on fundamental support factors, such as cost of construction, cost of rent, and availability/affordability instead of on comp sales that may be inflated. Higher taxes and tigher regulation on “equity funds”.
Any bailout that doesn’t reward those that weren’t stupid, is a non-starter, in my opinion.
A gem. I like it…would like to post it on other boards if ok.
no prob
You would not include in your scheme, “people that sold a house in a bubble market the last few years and didn’t buy like kind.”
I would consider those people kinda smart, personally. I saw the writing on the wall in 2005, sold, and now I rent, same as many people on this board. I’m not a flipper, but was the pragmatic thing to do. Do you think it was morally wrong for me to profit in this way? Just curious.
I especially like the reference to “mortgage borkers.” It makes what those #$#%@# do sound as obscene as it is.
“Dude, I just got totally borked on my mortgage.”
“But when the mortgage meltdown pieces are written or broadcast, the lead is inevitably someone who is about to lose his or her house, with not so much as a nod toward the notion that these people might have overreached or bears any responsibility at all for their financial plight.”
Even on NPR! They simply won’t let up! Is NPR beholden to corporate sponsors, too? Does the typical NPR listener have a toxic mortgage? Seems unlikely. Why do they assume that I’m always ready to cry for people — from the moment my clock radio goes off, no less? Help me Jebus!
NPR isn’t objective, it’s left wing propaganda, you didn’t know that?
Enter cynic mode…
Because most Americans think with their hearts, not their heads. Liberals love sob stories and Conservatives are more into the Rambo type stories al kicking tail and blowing stuff up.
Telling people that this is their fault, and there is no easy fix, would just pizz people off, and even the NPR can’t pizz of its listeners… I mean, listener.
Lately, I’ve taken to yelling at NPR during their mortgage meltdown stories.
Don’t you hate it when MSM commentators sugar coat the situation they are describing?
BOND REPORT
Treasurys end higher as credit concerns replay
Countrywide CEO predicts mortgage loan woes will lead to a recession
By Nick Godt, MarketWatch
Last Update: 3:17 PM ET Aug 23, 2007
NEW YORK (MarketWatch) - U.S. Treasury prices on Thursday closed higher, with yields tracking the stock market’s downward trend, as credit worries returned amid renewed debate over whether the Federal Reserve would cut interest rates ahead of a meeting next month.
“The markets didn’t like what the chairman of Countrywide had to say on CNBC - stocks turned negative and Treasurys firmed,” said Tom Di Galoma, head of U.S. Treasury trading at Jefferies & Co. Inc. “Mozilo speaks the ‘r’ word and ‘no light at the end of the tunnel’ for real estate market.”
http://www.marketwatch.com/news/story/treasury-yields-end-lower-after/story.aspx?guid=%7B8EC15A3D%2D2B9C%2D4558%2D9A54%2D7AE28360A785%7D
So Yahoo says
30 yr fixed is 6.52
15 yr fixed is 6.18
5yr ARm is 6.34
Question is, why would anyone get an ARM unless they don’t qualify for the fixed rates? Then the question is why are they qualified to buy at all?
Who was that Trennert dude that was on Squak on CNBC this morning?
Oh, he has a book… shock… NOT!!!
http://www.fictionwise.com/ebooks/eBook33274.htm
Anyway, it was his assertion that since the street had already priced in a cut, the Fed HAD to cut… It is priced in!!!!!
He also said that the Fed has to keep cutting until liquidity returns the the areas of the market that need it.
In short… I have $1 billion in toxic waste now valued at $700 million. I want to dump, and the Fed HAS to drop interest rates until I can sell it for $1 billion. Even if that means inflation for “the little people”.
What an ignoramous!
Do these people have to pay money to be on CNBC? Seems like they should since all they do is pimp for whatever they want. Should be charged flat ad rates for each 30 seconds they are allowed to spew lies and other dinsinformation.
Astute…
http://articles.moneycentral.msn.com/Investing/SuperModels/RateCutsWontCureAilingMarket.aspx
Heh heh heh
http://www.sprott.com/pdf/TheVisibleHand.pdf
Wow chick….thanks.
Man, that’s long. After skimming this caught my eye:
The continuing silence of government officials about this expanded reach [into free markets] is easily
explained. First, they no doubt recognize that an electorate supportive of free markets
would frown upon market interventions. More pragmatically though, the government
must also realize that to publicly acknowledge such activities would be to invite the
greatest of moral hazard situations. To use a famous quote, the risks would be socialized
while the rewards would remain privatized. Such a disconnect invites increasingly
reckless speculation by investors who believe that the government stands ready to rescue
them should crises arise.
If the people that surround me are any indication, J6P already believes in a defacto PPT. Heck, even the very existance of the housing bubble after the tech crash seems to indicate the belief that the Fed will make everything alright.
I guess what I’m saying is that regardless of the truth either way, the moral hazard already exists. Advertising is totally unneeded at this point.
Wow that’s John Birch Society material.
Flipper are so screwed. Now it’s not even a matter of lowering prices, there’s less money to lend and stricter lending standards for what money there is available. This is getting uglier by the day.
“Your stocks and risk-oriented levered investments will spring to life like the wild flowers in Death Valley after a flash flood,” Gross wrote.
-so we should piss on ‘em?
“In a televised interview, Mozilo said, when asked if housing would lead the United States into a recession: ‘I think so … I can’t believe … that this doesn’t have a material effect … on the psyches of the American people and eventually on their wallet.’”
Only those that were stupid enough to take out one of the toxic loans or believe the spin and hype from the various associations to buy at overly inflated prices would have a material effect on their psyches and over time, their wallet. That is the price you pay for greed and stupidity!!
Other People’s Money…
“‘The people who require the money still can’t get the money,’ said a trader at a large bank. ‘The money is lying in the wrong place and wrong bank accounts. The people who have it aren’t lending it out.’”
Because the people that need the money have Trillions of dollars worth of toxic waste and the bank doesn’t want to lose the money.
Let them blow up!!!!
Have you guys ever noticed that people who step of dog poo immediately start limping about like they stepped on six inch nails. Ditto for subprime mortgage bonds. That is why banks and other investors are stepping gingerly around them.
sorry I meant “who step on dog poo………”
The current situation looks very bad. There will probably be many more revelations too come as things turn down.
I hope one of them is that the corporations won’t have excess money to buy their Congress man/woman. Will the lobby industry be thinning out their ranks in the future?
“The markets didn’t like what the chairman of Countrywide had to say on CNBC - stocks turned negative and Treasurys firmed,” said Tom Di Galoma, head of U.S. Treasury trading at Jefferies & Co. Inc. “Mozilo speaks the ‘r’ word and ‘no light at the end of the tunnel’ for real estate market.”
That is nothing more than a scare tactic used to get under the skin of the common sheeple and the political shepples. Think about it, Countrywide is in trouble and wants congress to bail out Wallstreet, the banks and the mortgage industry, etc. Using scare tactics is just one tool used to get their way. it works the same way as spin and hype.
Good post
second
“‘There is a significant amount of cash in the system, it’s just not getting to the parts of the market that need it,’ Conrad DeQuadros, a senior economist at Bear Stearns Cos., said.”
So this is what pushing on a string looks like .
Remember that catch phrase “We got a problem Houston” now just ad NY,Chicago,LA, Phoenix,SF,Denver,Miami,Dallas,Atlanta,Las Vegas, and many more towns in America to that catch phrase?
“‘This rescue, which admittedly might bail out speculators who deserve much worse, would support millions of hard working Americans whose recent hours have become ones of frantic desperation,’ said Gross.”
Support them how? By keeping them chained to a mortgage which will gradually bleed them to death? His comments reek of frantic desperation. Did he bet wrong and needs a bailout to make it all work out to his advantage?
As a counter to Gross’ bailout plan, I think we should start pushing the idea that the goverment should give every citizen that did not buy into this amazing bubble a tax credit for $100,000. Not only would this do wonders for the rich/poor divide, but it would also hand over capital to those who know better how to employ it.