An Unusual Hit To Home Sales
Some housing bubble news from Wall Street and Washington. CNN Money, “Home values and housing sales will take an even bigger hit than previously forecast and will not recover to their earlier levels throughout all of 2008, at least, according to the latest economic outlook from the National Association of Realtors released Tuesday. The group has continually been revising price estimates lower…As recently as the March economic forecast, it had still been looking for an annual gain of 1.2 percent in existing home prices.”
“The group is now forecasting an 8.6 percentage drop in the pace of existing home sales this year, which is not only worse than its previous estimate of a 6.8 percent decline, but also would top the 8.5 percent drop seen in 2006.”
“New home sales volume is expected to drop even more sharply, posting a 23.8 percent drop this year, and another 7.4 percent drop in 2008.”
From Bloomberg. “‘There’s been an unusual hit to home sales, starting in March when subprime problems emerged and more recently when problems spread to jumbo loans,’ Lawrence Yun, an economist for the group, said in the forecast.”
“New home sales won’t reach a bottom until the first quarter of 2008, the organization said. A month ago, the Realtors said the low point would be at the end of this year.”
“‘The Realtors keep splicing a little more off their outlook to make it more gloomy, but they are still more optimistic than we are,’ said Lehman Brothers economist Michelle Meyer in an interview. ‘The data from the mortgage and credit markets is all pretty dismal.’”
“‘Home prices need to come back down to more affordable levels so that people can take that inventory off the market,’ said said Alex Barron, who follows homebuilders for Agency Trading Group Inc. ‘Everything I see points to lower prices, much lower prices.’”
The New York Post. “Countrywide Financial Corp. is putting together another multi-billion dollar bailout plan as the nation’s largest home lender continues to struggle amid the global credit crunch and declines in the housing market, The Post has learned.”
“‘Countrywide is in desperate need of cash right now to continue funding mortgages and the credit markets are still largely closed to them,’ said one source familiar with the company.”
The Seattle Times Newswires. “Washington Mutual CEO Kerry Killinger said WaMu has the financial strength to add billions of dollars in home loans to its balance sheet, even while setting aside an extra half-billion dollars for old loans gone bad.”
“Frederick Cannon, who follows WaMu, wrote in a note to clients last week that the company ran the risk of picking up more low-quality loans than anticipated if it expands too fast.”
“‘The market is forcing you to be disciplined,’ Bradshaw said. ‘If you’re out booking loans that aren’t 80 percent conforming loans, you aren’t going to be able to sell them.’”
From Reuters. “A global credit crunch, fueled by an economic slowdown and U.S. subprime mortgage defaults, will remain ‘quite ugly’ possibly until March, the head of Canada’s second largest bank cautioned on Tuesday.”
“‘I think it is going to be quite ugly in the next few months. I think there are a lot of shoes to drop,’ said Ed Clark, CEO of Toronto Dominion Bank.”
“Clark said the core of the problem was that many investors didn’t understand what was in the investments they made. ‘I think the market sits there and says ‘I didn’t understand when I was buying that German bank that I was buying California risk,’ he said.”
“‘I think it’s going to be an ugly fourth quarter here and the market will reel back. I would counsel people that this is good because people did stupid things … You’ve got to cleanse this out,’ Clark said.”
The Chicago Tribune. “The problems in the housing market were supposed to stay there. Or at least that’s what most of Wall Street was espousing until July. Yet, in the last eight weeks, it has become clear that their analysis was wrong.”
“Investors would like to sell their holdings and escape, but no one wants these securities at full price, so they are plunging in value. Institutions holding the nearly worthless securities ‘are keeping mum,’ which is part of the problem, said Brian Bethune, an economist at Global Insight.”
“Merrill Lynch economist David Rosenberg said no one knows how big the losses are going to be. ‘Nobody knows which banks or funds are sitting on losses, and, as a result, lenders are refusing to lend,’ he said.”
The Washington Post. “When something goes badly on Wall Street, people wind up in court. And the subprime mortgage mess is no exception. A consortium of investors is going after the collapsed Bear Stearns hedge funds.”
“‘We will look at those responsible for any potential fraud, by company management, auditors, lawyers, credit-rating agencies or others,’ said Walter Ricciardi, a deputy enforcement director at the SEC. And this is just the beginning, say legal experts tracking the steady stream of lawsuits.”
“Russell Sherman, spokesman for Bear Stearns, said the allegations are ‘unjustified and without merit. The accredited, high-net-worth investors in the fund were made very aware that this was a high-risk, speculative investment vehicle.’”
The Dallas Morning News. “Don’t look for a quick turnaround in the housing market downturn. ‘We had thought we would hit bottom the second quarter of this year,’ Amy Crews Cutts, an economist with lending giant Freddie Mac, told mortgage industry members. ‘We have now pushed that out to the second quarter of next year.’”
“And even then, there may not be a sharp rebound. ‘We are in this for a while,’ Ms. Cutts told an audience.”
“Ms. Cutts said some of the subprime borrowers could have qualified for conventional loans but were persuaded to take nontraditional mortgages. Now, thousands of those homes are winding up in foreclosure.”
“‘Foreclosures create a vicious cycle,’ Ms. Cutts said. ‘They can’t sell the home so they end up in foreclosure. Then the foreclosure sales depress prices in the area.’”
“‘It’s hard to go get a mortgage now – especially a jumbo or subprime loan,’ Ms. Cutts said. For all mortgages, lenders are requiring more up-front money and better credit. ‘The days of $500 down payments are over – nobody is going to touch those,’ Ms. Cutts said.”
“Some 57 percent of mortgage broker customers with adjustable-rate loans were unable to refinance into a new loan to avoid higher monthly payments in August, a national survey reported on Tuesday.”
“The poll of 1,744 brokers in the last week of August found…prime borrowers were impeded by appraisals and high loan-to-value ratios.”
The Columbus Dispatch. “To stem the rising tide of foreclosures in Ohio, the state should urge mortgage companies to modify loans rather than foreclose on them, a task force said yesterday.”
“Michael Van Buskirk, CEO of the Ohio Bankers League, said that while his organization approved of much of the report, the emphasis to ‘coerce lenders to rewrite existing loans’ was outside the state’s authority and could ‘lead to the drying up of mortgage funding in Ohio.’”
“‘We’re not objecting to the concept, but some of the recommendations are phrased so vaguely that it could prevent (consumers) from being able to refinance or obtain a new mortgage,’ Buskirk said.”
From Dow Jones Newswires, “Regulators want banks to help subprime mortgage borrowers avert disaster by easing their loan terms, but for bond investors, the cure may not be better than the disease.”
“Changing the terms of these home loans after they have been packaged into bonds leaves investors scrambling to adjust to new terms they hadn’t expected at the outset. That type of uncertainty, the concern is, could make an already unpopular asset class even more unpopular.”
“It’s not clear, for example, that modifying the terms of a loan will ultimately bail out many struggling homeowners over the long term.”
“‘Even in the best of times, [many of] these modifications just served to push off foreclosures for a later period when home prices were increasing,’ said James Grady, a structured finance portfolio manager for Deutsche Asset Management in New York. ‘Now with home prices declining, you’re arguably just increasing your loss severity.’”
“By far the biggest objection investors have to loan modifications, though, is that if borrowers, for example, are suddenly paying a lower interest rate, then investors don’t get the cash flows they expected when they bought the bonds.”
“‘That’s coming out of someone’s pocket. That’s not a free ride,’ Grady said. ‘You may find investors no longer willing to buy future or similar securities on the same terms’ as they did earlier, he said.”
“On top of that, investors in bonds backed by loans that end up being modified also tend to find themselves having to hold those securities for far longer than originally expected.”
“That’s because borrowers who might have refinanced into new loans had the terms of their loans remained the same choose instead to take the modified rate and keep their loans longer. And bondholders, as a result, don’t get cash back early from as many loans as they had anticipated.”
“Suddenly, a bond that investors had expected to hold for three or four years now lasts 10 or 11 years, said Walter Schmidt, manager of securitized products strategy for FTN Financial. That not only upsets investors’ cash-flow calculations, ‘you’re extending the time over which you have credit risk’ to bear as an investor, he said.”
“The bottom line is market participants don’t seem to think easing loan terms will solve the subprime mortgage bond sector’s troubles.”
From Origination News. “The president of the National Association of Mortgage Brokers declared the industry to be ‘at war’ against a number of parties.”
“George Hanzimanolis, speaking at the annual convention of the California Association of Mortgage Brokers here, said, ‘We are at war against the legislators who want to legislate us out of business.’”
“The industry is also at war against the media who put the blame for the current mortgage crisis solely on mortgage brokers, against regulators who want to promulgate new rules, which only affect mortgage brokers and even some consumer who did not tell the mortgage originator the whole truth when they applied for a loan.”
“Echoing the themes of the other speakers, Rep. Gary Miller, said in talking with people in the lobby, ‘I thought you were on the deck on the Titanic.’ But the situation is not that bad.”
“A former developer, he remembered past recessions, including the early 1980s. ‘This time it took the press two years to get a decent recession going,’ Rep. Miller said.”
“Mortgage brokers are being blamed for abusive practices, Rep. Miller said, but the truth is many mortgage bankers need to be looked at.”
“Keeping alive jitters that the Federal Reserve won’t cut interest rates as much as hoped for, several bank presidents in speeches Monday said that the Fed’s job is not to protect risk takers.”
“San Francisco Fed President Janet Yellen said that while market turmoil has the potential to hurt the economy, rate policy should not be used to shield investors from losses.”
“‘Yellen said the goals of price stability and full employment must be the ‘unswerving focus’ of policymakers. ‘Monetary policy should not be used to shield investors from losses.’”
“‘I do not believe the Federal Reserve’s job is to protect specific risk takers who failed to protect themselves from potential downside wounds,’ said Dallas Federal Reserve Bank President Richard Fisher. ‘In my humble opinion, the standard tools of monetary policy are insufficient, by themselves, to deal with the subprime market fallout,’ he added.”
“‘I set aside the passions of the moment and the conventional wisdom in the markets and keep a steady focus on the Fed’s mission,’ he said. ‘Conducting monetary policy is not a popularity contest.’”
“The booming housing market is one of the ‘most unbridled failures’ of government policy, a leading economist has said.”
“Roger Bootle, managing director of Capital Economics, said ‘extraordinary’ house price growth in the UK in recent years has had severe consequences for the economy and consumers.”
“Bootle said: ‘Most people see the UK housing market as a story of great success: I don’t. On the contrary, I see it as one of the UK’s most unbridled failures.’”
“He said the rise in property prices had brought ‘misery’ to the masses, and that the blame lay with government of all political parties for sitting on huge swathes of the country’s undeveloped land.”
“‘I wish the government would forget all the gimmicks,’ he told the delegates. ‘The central issue is quite clear: it’s getting to grips with the availability of land for building and ensuring that the rate of building moves up quite sharply after that.’”
“Bootle concluded: ‘My question and challenge for the government is this: are you going to have the political will to raise the availability of land for building even at a time when house prices are pretty soggy?’”
“Mark Clare, CEO of Barratt Homes, said the Barker Review, which was published last year, found that most people thought more than 50 percent of land in the UK had been developed, compared to the reality of just 13 percent.”
‘the blame lay with government of all political parties for sitting on huge swathes of the country’s undeveloped land.’
Living here in the west, IMO this is an unreasonable situation. After all, whose land is it?
This land is your land, this land is my land
From California, to the New York Island
From the redwood forest, to the gulf stream waters
This land was made for you and me
–Woody Guthrie–
The not so often heard original final lyrics of an American Masterpiece, dreamed up in the 1930’s, and sanitized afterwards, for your protection…
As I was walkin’ - I saw a sign there
And that sign said - no tress passin’
But on the other side …. it didn’t say nothin!
Now that side was made for you and me!
In the squares of the city - In the shadow of the steeple
Near the relief office - I see my people
And some are grumblin’ and some are wonderin’
If this land’s still made for you and me?
Good song. I grew up on the original
“‘the blame lay with government of all political parties for sitting on huge swathes of the country’s undeveloped land.’”
The quote above didn’t refer to California or New York, or anything in between; it was referring to the UK.
I would bet that the various state entitites own an even larger percentage of the land in the western US than the relevant ones do in the UK.
Yes, but nobody wants to live there, unlike UK.
There’s no water, and nothing to do.
I think this is a major issue in many parts of the developed world. In the Netherlands, despite our record amount of homeowner tax advantages, incentives and freebies, the control of land sales and pricing by the government (using zoning and other tricks) is surely the major factor that has kept the bubble alive for so long.
The Dutch national government does not own any significant part of the land, most land that can be build on is owned by farmers (represented by the biggest conservative party), developers (who own small strips of land through the whole country, forcing local government to hand them the contract when the land is designated a future building area) and by local governments and housing corporations (former state-owned entities). Everyone who decides about land use and prices has a vested interest in rising land prices. And so they work together with national government (that gladly conspires against their own citizens and in favour of rich landowners) to keep 95% of available land outside the market. In fact this issue, called the ‘grondpolitiek’, has been the most sensitive political issue in the Netherlands for many years. It has brought down two governments (when they tried to make minor changes) and many politicians.
Just in case someone says again that it’s different in Netherlands because they aren’t making more land: the build area in the Netherlands (including towns, roads and other infrastructure) is just 11% of the total area; increasing the build area to 12% would provide enough land for homes for the indefinite future (even assuming that the Dutch population keeps growing for two generations, which is extremely unlikely at this point).
The quoted person is talking about the UK market, though. Did they have anything like the ridiculous building spree we saw out in Arizona, California, Nevada, etc.?
Europe’s bubble makes ours look mickey mouse.
I have been to Ireland, Prague, throughout Canada, and across the US this summer. Bubble evidence is apparent every place I have been, as well as evidence of sloppy lending. The US didn’t start this problem—it is a world-wide phenomena of real estate investing. I did notice in Dingle, Ireland that the locals were trying to fight the “holiday” home expansion.
Russia, China, India, Emirates …
definitely, the EU bubble is much bigger and older than the US bubble and still growing. The only EU country without a serious housing bubble is Germany. Even outside the EU there are housing bubbles in most of the countries that have some financial / political link with the UK.
It’s a world of bubble, a world of tears
It’s a world of dashed hopes, it’s a world of fear
Theres so much that we share
That it’s time we’re aware
It’s a Housing Bubble world, after all…
Very good, aladin — I had to recite it a few times before I got the Disneyland-Pepsi tune going.
Lets get rid of the marines. Camp Pendleton is huge. Its the only big piece of undeveloped coastal land between L.A. and Tijuana. Why should government workers occupy that valuable land when it could be solid Mcmansions from Mission Viejo to Carlsbad? We don’t have enough coastal property for our growing ranks of multi-millionaires. The marines can shove off to the 100-degree heat of Twenty-nine palms. Airforce - get out of Miramar. Navy can get lost too. We need more marinas and yacht harbors in San Diego Bay.
Camp Pendleton is San Diego’s last bastion against becoming part of Lesser El Aye.
You cant get rid of them or sell the land. Land was given to put in Trust previously owned by a family (sorry dont remember name - Pendleton family maybe) with legal attachments that it would not be developed by US Gov.
Camp Pendleton was named after a general. The land was taken by iminent domain from the Flood/ONeill families around 1942. A lot of the info is at Wikipedia of course…and some from the local historical society. I know TMI!!!
Obviously a joke/troll, but for those who aren’t familiar with SoCal:
Camp Pendleton is a massive (almost 200 sq miles) base on the Orange County coast which has been the primary USMC amphibious training base for 60 years. It would take another 60 years just to clean up all the live ordnance and toxic crap undoubtedly scattered across the base. Building any sort of livable structures there is a pipe dream. Another El Toro MCAS, only 100x bigger.
“Building any sort of livable structures there is a pipe dream.”
Don’t be silly. Live ordinance and toxins didn’t stop them from developing Tierrasanta.
Still my point is that they CANNOT sell it and develop it. They dont own it. It is owned by a trust which has legal restraints preventing anyone from selling or developing the land.
Sure Pendelton can be developed just like everything else in the US. Don’t you remember the Supreme Court ruling on Eminent Domain? It’s just a matter of time. THe new motto for the development might could be The Few, The Proud, The Billionares…
When things get real ugly, San Diegans will want a 200 square mile buffer filled with Marines to try to contain LA.
Ben : they are talking about the UK. Their planning restrictions are pretty severe. It keep countryside looking pretty but new housing is kept in its tracks. Most people would be surprized by the age of UK houses.
Those UK houses may be old, but they are still standing. Compare that solid workmanship with the endless tract developments of substandard houses held together with glue and staples that have trashed this country nationwide. An old, solidly built structure can always be remodeled. A new, overpriced shack is just fodder for a bulldozer.
How Rich We Were
I recently reflected on how rich we used to be. In my neighborhood all the houses were made of brick; these were affordable homes for the working class. Bare red brick was considered plebeian I guess, some folks painted their homes and a few even covered the brick with stucco!
Underneath the asphalt streets lies the original concrete lanes;
I’ve seen it when they dig for one reason or another. Residential streets of concrete!
In the summer of 1958 (I was 9 y.o.) I collected discarded soda pop bottles to get the two cents deposit on ‘em; 50 bottles got me an ounce of silver! That’s about $13 in today’s money. I collected enough that summer (mainly at construction sites) to buy a microscope and a 4inch diameter telescope! I remember wondering who could be so rich that they’d throw away 2 cents?
Today houses are made of particle board and covered with a paint and sand mixture; our tarmac streets need constant repairs and re-surfacing.
How rich we were!
Reminds me of an article about a couple who built a home in America to European standards…double wall of two by four with sheetrock between, 12 inches on center or some such. It was one quiet house!
Sorry for my post guys. I for one am happy the government (military, BLM, Forest Service, Parks Service) owns a lot of land in the west. With regards to So Cal, the remaining ag. land is rapidly converting to housing, so thats all the open space we have left. Pendleton is beautiful hills covered with native coastal sage extending right down to the ocean. Thank god the marines are there so we can see what the coastline used to look like. Crystal Cove and Torrey Pines are a couple of other small state parks but thats basically it in terms of natural open space along the coast.
Yun says “Unusual”, the only thing unusual is the way they predict that the market will rebound way before it ever will, and that the price cuts are over and we are at the bottom. Again….why does anyone ask the freaking NAR anything about RE, they are obvious shills and propaganda ministers for RE. We also know they were behind the push to bail out homeowners….errr…banks from this mess on our dime. Can we please just turn our backs on them and walk away?
Its kind of like asking a car salesman about the state of the auto industry. Would anyone really be surprised by his response?
Well, If I was a car salesman and no one was buying cars, I would demand that the sellers (automakers) lower the price. NAR members live on transactions. There won’t be transactions until prices get lower. I don’t know why they are so in fear of admiting the truth and telling sellers to lower prices now.
L.Y.’r,
Hack
Shill
The holy trinity of Hype…
Since Yun lives in DC (or the area) I will post this here, even though it probably belongs in the Bits Bucket.
Here, folks, is a 20% reduction in the asking price of a bank foreclosure that has been for sale just one month. It is a watershed event for this observer, as this is the first price reduction I have seen that brings a house very close to rental parity (fair value) that I have seen in a very long time. The Bubble is Dead. Long Live the Bubble.
http://www.ziprealty.com/buy_a_home/logged_in/search/home_detail.jsp?listing_num=DC6513216&page=1&property_type=SFR&mls=mls_baltimore&cKey=v2cczmk9&source=MRIS
in 90-91 dc came off 15% from peak- and stopped
so far same this time
15%? 90-91, maybe. But you forgot ‘92,’93,’94,’95 and ‘96. The grand total was a lot more than 15% and we sank way below rental parity. ‘Twas a darn sight cheaper to buy than it was to rent in those days.
By far the biggest objection investors have to loan modifications, though, is that if borrowers, for example, are suddenly paying a lower interest rate, then investors don’t get the cash flows they expected when they bought the bonds.
Look, this isn’t rocket science.
If the bond suddenly declares that it will pay 1% less interest, the price of the bond will drop. It will drop by more than the amount needed to make up the 1%: Investors will demand compensation for the uncertainty over whether the bond yield will drop again in the future.
So foreclosing will drop the bond price, or restructuring it will drop the bond price.
If they want to make sure no home loan is made for years, let congress get in there and deny the creditors access to their collateral. I can’t even see how this could be legal.
“The bottom line is market participants don’t seem to think easing loan terms will solve the subprime mortgage bond sector’s troubles.”
Ben, if I understand this correctly, they are already underwater. They don’t even know where all these products are in the world market. I’m not the brightest crayon in the box, but aren’t they already in a lose-lose situation?
Thanks,
Leigh
“I’ll make it legal” - Darth Bush
I’ll try again ($%^& filters):
“I’ll make it legal” - Darth Dubya
All the States have different lending laws. I don’t think the feds can do that much when it comes to twisting lenders arms.
Wednesday, June 01, 2005
Congress meddles with state lending
Notice the date of this article
http://www.stateline.org/live/ViewPage.action?siteNodeId=136&languageId=1&contentId=34787
Laws against abusive mortgage lending in more than half the states would be overridden by a congressional proposal that is the latest federal attempt to preempt state authority over financial services.
Supporters of the Responsible Lending Act, introduced by U.S. Reps. Bob Ney (R-Ohio) and Paul Kanjorski (D-Penn.), say a federal law is needed to protect consumers with poor or limited credit histories who often turn to lenders that cater to high-risk clients and therefore set more restrictive loan terms to cover increased financial risks.
Bob Ney is a good one to try to protect anyone. He should have written laws that protected citizens from his illegal actions. Isn’t he gone and still in jail?
If they want to make sure no home loan is made for years, let congress get in there and deny the creditors access to their collateral.
At the very least, interest rates would skyrocket. The whole reason that a bond is considered more secure than equities is that there is something to sell off in the case of bankruptcy.
Forced restructuring of those bonds would be a *really* bad precedent. Investors would demand higher interest on bonds for a long long time.
I guess it’s legal if CONgrass says it is…
Congress can either bail out the wealthy banker types or bail out the stupid gamblers.. so they will do nothing.
One advantage clear-headed antibubblers will have in the debate about bailouts is that the government is so closely divided. Republicans have every incentive to delay and obstruct, to cause frustration about a “do-nothing” Democrat-dominated Congress. Democrats have every incentive to shoot down any proposal by the unpopular President Bush, who in turn is unlikely to want to do any bipartisan favors, and has an incentive to veto any bill that would get Democrats political credit.
The resulting gridlock will, with any luck, yield the ideal situation: Government does nothing, and the malinvestments get liquidated at (radically lower) market value.
I think that this discussion and the gyrations in Congress with the market players and consumers is just a rehash of the mantra that there is no easy way out of this mess. It was a huge mess coming in and it will be a huge mess getting it cleaned up. Everyone wants someone else to take a bath and the bondholders are the most anonymous so let them take the hit. It’s like the old saying: don’t tax you, don’t tax me, tax the guy behind the tree.
Come to think of it, if the creditors don’t have the liquidity to back up “their collateral,” it’s not really theirs, is it?
Ben:
Exactly. If they think we have a credit crunch now, we will really have one if they deny access to sell their bonds or change the terms of them.
I would immediately sell all assets and move them elsewhere.
If you borrow and can’t pay the nut, renegotiate or walk. If you loaned and can’t collect, renegotiate or foreclose. Whatever you decide, leave me the hell out of it. After all, I did not sign your “too good to be true” contract.
Amen, brother.
I second that.
We are approaching a dangerous point in the psychology here. I think a lot of bondholders see their choices as bad or worse. Bad is foreclosing now and selling the home at less than the principal on the note. Worse is restructuring the note (which will still be long term unaffordable by the borrower), and foreclosing later, since without massive income gains, the home is going to be worth less than the principal for the foreseeable future.
So, sell now for less than the note, or sell later for a lot less than the note?
People are going to get trampled in this race for the exits. It’s nice to already be outside the burning building–I hope no embers fall on me.
Your analysis applies very well to interest-only loans. In the case of amortizing loans, the lender has a large incentive to renegotiate if need be, so long as there is still SOME monthly contribution to amortizing the loan. The lender just hopes the amortization is faster than the depreciation.
“‘Countrywide is in desperate need of cash right now to continue funding mortgages and the credit markets are still largely closed to them,’ said one source familiar with the company.”
People, we need to talk…
If we lose Tantrywide, we lose Tanzilla and all the mirth he provided for us, gratis.
We need to do a Blog-a-thon and raise awareness of the potential for comedic harm, serious comedic harm.
I’ll start the ‘thon with a plugged Nickel.
Countrywide has morphed into a strange business model indeed.
Its business model was to loan out money to borrowers (that’s cash out), then they packaged up the loans and securitized them (that’s cash in). Take a fee for originating the loans and an ongoing fee for servicing the loans (that’s profit). Pretty good business model.
Now, nobody wants to buy their securitized loans. So they have cash going out the front door to borrowers, but nothing coming in. Since the cash infusion from BofA was done by selling a convertible note, Countrywide essentially raised cash by selling off a portion of the company. But, since they lend out money each and every day, the cash is still going out and now they are looking to sell off another piece of the company to raise more cash. You cannot keep this process up for long. Pretty soon you will not be able to find any investor will to put new money into the company because they will get diluted very soon.
they are looking to sell off another piece of the company to raise more cash.
The answer is simple, whenever a company begins to sell off it’s best assets, it is probally going to file bankrupcy in due time.
‘So they have cash going out the front door to borrowers, but nothing
coming in’
Are they far off from being like a house-builder then?
Countrywide has morphed into a strange business model indeed.
Its business model was to loan out money to borrowers (that’s cash out), then they packaged up the loans and securitized them (that’s cash in). Take a fee for originating the loans and an ongoing fee for servicing the loans (that’s profit). Pretty good business model.
Now, nobody wants to buy their securitized loans. So they have cash going out the front door to borrowers, but nothing coming in. Since the cash infusion from BofA was done by selling a convertible note, Countrywide essentially raised cash by selling off a portion of the company. But, since they lend out money each and every day, the cash is still going out and now they are looking to sell off another piece of the company to raise more cash. You cannot keep this process up for long. Pretty soon you will not be able to find any investor willing to put new money into the company because they will get diluted very soon.
are you talking about CFC or USA?
How about donating a heat lamp for Mozilo, so when he is in prison he can both keep his reptilian hide warm and keep up on his tan.
How about donating a heat lamp for Mozilo, so when he is in prison he can both keep his reptilian hide warm and keep up on his tan.
That won’t be needed, BUBA will keep him warm!
“BUBBA will keep him warm!”
And well fed…….
Is the orangification of Mozilla a precursor to an impending molt? Will one day they find an empty skin-suit occupying the bottom bunk in said prison?
$nakes $hed $kin
A chart is worth 1000 words…
http://www.marketwatch.com/tools/quotes/intchart.asp?symb=CFC&time=20&freq=1&comp=&compidx=aaaaa%7E0&compind=&uf=0&ma=&maval=&lf=1&lf2=&lf3=&type=2&size=1&txtstyle=&style=&submitted=true&intflavor=basic&origurl=%2Ftools%2Fquotes%2Fintchart.asp
I guess CFC is not too big to fail after all? Why does FNM get too-big-to-fail status but not CFC, in light of the fact that both are “private corporations?” Seems patently unfair to CFC shareholders (aside from the guy at the top who cashed in his chips at the top…).
http://www.marketwatch.com/tools/quotes/intchart.asp?symb=fnm&time=20&freq=1&comp=&compidx=aaaaa%7E0&compind=&uf=0&ma=&maval=&lf=1&lf2=&lf3=&type=2&size=1&txtstyle=&style=&submitted=true&intflavor=basic&origurl=%2Ftools%2Fquotes%2Fintchart.asp
Tim-B-E-R..
I’m SO glad I got a clue and sold the last of my CFC back in April. This had been probably my best stock idea over the years, and I rode it almost all the way up.
the Realtors said the low point would be at the end of this year.”
things were going to rebound 4th qtr 06 too
an idiot patrol
The housing market will bottom out after the Souper Bowl.
“Changing the terms of these home loans after they have been packaged into bonds leaves investors scrambling to adjust to new terms they hadn’t expected at the outset. That type of uncertainty, the concern is, could make an already unpopular asset class even more unpopular.”
——————————————————————————–
There are a lot of derivative CDOs based on credit default swaps, so what happens when loan terms get modified? Any modification that benefits one party has to hurt the counterparty, and I can’t imagine that this will fly. It seems like that would cause a terrible mess!
Can you say… “Bait & Switch.”
“Any modification that benefits one party has to hurt the counterparty, and I can’t imagine that this will fly.”
I feel a twinge of sympathy for ‘physical settlement’ cred default swaps (where one of the parties actually has to have the bond in hand), but as far as I’m concerned the ‘cash settlement’ types can burn. The latter is just a way for people to speculate on credit spreads. And the ultimate value of this to the economy is… what? If you want to hedge bonds, go to the options market… or just sell the darn bonds on the 2ndary market. These hallucinogenic derivatives (CDOs, CDO-sq, cash settlement cred default swaps, etc.) are about to vaporize anyway because nobody can value them due to their multiple sources of default (IMHO).
“Trade Gap Narrows In Welcome Sign for Growth
WASHINGTON (Reuters) - The trade deficit narrowed slightly in July as exports continued to outpace imports, the government said on Tuesday, suggesting trade could offer a welcome lift to third-quarter economic growth….”
USA is exporting inflation during our deflationary crisis.
BRILLIANT!!!
you still don not think the FED knows what they are doing?
What deflation? Stocks up, commodities up, health care, education, up up up. Also, in deflation your currency is supposed to get stronger but the dollar is like a lead zeppelin, smashing 20 year support and still dropping. Gold is trying to tell you this in inflation, not deflation.
I never said we are not experiencing inflation, rather I said deflationary crisis.
The PTB understand that deflation is among the worst fears, and will steer the herd in manner that is more comforting to soothing those fears. With deflation in credit items(cars, houses…..the big stuff), and inflation in cash items(food and energy) and throw that in to a consumer lead recession.
Presto Chango: US consumers purchasing less of the inflationary goods, and almost none of the deflationary goods, in conjuction with unsustainable growth in China (who is already experiencing significant inflation), and guess what the recipe gets ya? Yuan6P broke, again.
Ill say that I have been donning the tin foil as of late, but getting at the FED poker hand is a terribly mind numbing experience, and un-knowable.
The Fed has been bluffing all along. They never have had anything in their hand to begin with with regard to interest rates, but they like to have everyone think they have all this power over the economy. The Fed simply follows the interest rates set by the open market but the news media likes to describe it as the open market “anticipating” Fed moves. Ever wonder why the open market is so accurate at anticipating? It is because it isn’t anticipating, it is setting the rates.
I guess that explains why they have pumped bazillions worth of “liquidity” into the lending market since the onset of the credit crunch?
“I guess that explains why they have pumped bazillions worth of “liquidity” into the lending market since the onset of the credit crunch?”
I said they don’t set interest rates. My entire post was about how the Fed likes us to believe that they set interest rates, which is not true.
They used to be able to have an effect on the money supply by increasing or decreasing reserves, but since the fractal system has been pretty much let go, I doubt that it has that much effect on the money supply in practice any more, so I don’t think the “pumping” will have much effect on the money supply. What they did do was give banks time to sell assets, so the price of assets wouldn’t drop unduly from the sudden selling spree. How is this “pumping of bazillions” going to affect the lending market? Very little, if at all; neither the Fed nor anyone else is more willing to do risky loans that they were the hour before they started the so called pumping. The Fed isn’t handing out free money, all they did was offer to loan (it seems strange to call this pumping, as if they required the banks to take loans, instead of merely offering to give them) up to such and such bazillion dollars using guaranteed collateral from the banks, which does not include sub prime mortgages, in a very temporary loan.
This does seem like a movie we’ve seen before: Asian exporter, flush with cash, invests buckets of money in U.S. assets, which accordingly become overvalued. U.S. assets then deflate, leaving the Asian exporter with assets worth substantially less than what was paid for them. American seller of (overvalued) assets laughs at Asian exporter/investor all the way to the bank, from which he periodically makes withdrawals to purchase a new round of cheap goods from a new Asian exporter. Rinse and repeat.
Housing costs are not in the CPI rents are. Therefore, if housing falls in half it will have as much bearing on the CPI as housing did when it doubled. No deflation here.
…unless they change the CPI calculation to include housing. In the EU this has already been debated for some time. I’m pretty sure that when the EU housing bubble pops, the statistics offices (like Eurostat and the Dutch CBS) will suddenly include housing costs (probably some kind of phony value derived from market price) in the CPI.
“FRANKFURT, Sept 11 (Reuters) - European Central Bank policymakers said market turmoil had clouded the outlook for monetary policy on Tuesday, but Executive Board member Juergen Stark also insisted that rate tightening had not been abandoned.”
Well we got Japan on board, now it looks like the Euros on on as well,,,, get ready for the cut…..its gonna be global.
All the jawboning about not knowing the direction coupled with the “global market” facade is painting a charcoal black picture of the move.
Amy Crews Cutts??
Ben…..your’re just making these up, aren’t you.
I was wondering why she goes with both names too. Sounds absolutely ridiculous. Better than Amy Bowls Cutts though I suppose.
I hope she doesn’t really have a crew cut.
Got gold?
got copper?
Got Grain?
got water?
Got guns ‘n’ ammo?
Yes, no, yes, yes, yes.
Her name is “Amy Crews Cutts”?!? ….
How appropriate. I think “crew cut” is going to describe the buzz-cut that housing prices are going to take.
Mein Gott …. we can’t make this stuff up ….
“…accredited, high-net-worth investors…”
What a joke. Like these people have more brains than your average joe off the street. The primary reason many of these people invest in a hedge fund is so that they can tell all of their accredited, high-net-worth investor friends “I’m a hedge fund investor too.”
The number of hedge fund blow-ups, whether fraud or mismanagement, should tell these “accredited, high-net-worth investors” that hedge fund returns are not adequate compensation for the risk. And fund-of fund firms charge an arm and a leg on top of the 2 and 20 for very meager fund screening.
Out outbreak of reality:
‘Home prices need to come back down to more affordable levels so that people can take that inventory off the market’
‘Most people see the UK housing market as a story of great success: I don’t. On the contrary, I see it as one of the UK’s most unbridled failures..the rise in property prices had brought ‘misery’ to the masses’
Not to my brother and his soon to be wife. They’ve refi’d for multiple vacations and landscaping and thought he was a genius. I can’t talk to him about finance as he’s only interested in Sport and TV shite.
The poll of 1,744 brokers in the last week of August found that subprime borrowers had trouble refinancing mortgages because loan programs were no longer available, according to a statement from Campbell Communications, the Washington-based research firm that conducted the survey. Prime borrowers were impeded by appraisals and high loan-to-value ratios, it said.
WOW! I can’t believe it.
“‘I think it is going to be quite ugly in the next few months. I think there are a lot of shoes to drop,’ said Ed Clark, CEO of Toronto Dominion Bank.”
Good Old Shoe…
http://www.youtube.com/watch?v=42ItH1Ywzv4
from an article about ben’s speach today in germany:
“So-called “global imbalances” occur when countries such as the U.S. run up bloated trade deficits, while other countries, such as China and oil-producing nations, produce big trade surpluses. The International Monetary Fund has been leading efforts over the years to reduce lopsided trade and investment patterns.
As for prospects of fixing the problem, Bernanke said, “Signs of progress have appeared but … most countries have only just begun to undertake the policy changes that will ultimately be needed.” ”
so is ben basically saying, “frack the dollar”?
welcome to the currency corner. The timing seems really good right now with panic ready to strike seemingly at every momment.
Dangerous games are afoot, and dont be suprised as foreclosure season is coninciding with insolvency season in credit deflation resulting in magnificent out-of-nowhere dollar rally.
man I gotta get the tinfoil hat off…..Im havgin trouble sleeping with it on.
“The president of the National Association of Mortgage Brokers declared the industry to be ‘at war’ against a number of parties.”
“George Hanzimanolis, speaking at the annual convention of the California Association of Mortgage Brokers here, said, ‘We are at war against the legislators who want to legislate us out of business.’”
“The industry is also at war against the media who put the blame for the current mortgage crisis solely on mortgage brokers, against regulators who want to promulgate new rules, which only affect mortgage brokers and even some consumer who did not tell the mortgage originator the whole truth when they applied for a loan.”
War? Get you butts over to Iraq and you’ll see war! Idiots.
This is why things got so bad, everyone had someone else to blame.
“Its not my fault, I simply wrote up the no-dock loan that allowed an illegal strawberry picker to buy a $750,000 house. How was I suppose to know he did not make $200 an hour?”
no-dock - I like it, as in don’t dock your assets here…or as in their ship ain’t comin in…
Mortgage brokers don’t need legislated out of business. They don’t really have any money to lend, they just do loans against other lending institution’s money. I’m sure most institutions will choose not to let them use their money anymore and they’ll be out of business by default.
Isn’t the Los Angeles chapter of the National Association of Mortgage Brokers more commonly referred to as NAMBLA?
Lol, you’re joking, I hope.
I’ve got a mmouthful of beer on the computer screen now. Thank you Houseless!! Thank you very much!
I volunteer to take the first sniper shots in that “war”.
If the cost of housing had been included in the CPI a long time ago we would never have been in this mess. Mortgage rates would have been much higher as the prices started to escalate thus helping to curb demand and keeping prices in check. CPI measures equivalent rents and as we can see the current vacant homes cannot be rented to cover current overhead.
Mortgage rates must be contained. If the inflation risk premium (as currently reflected in the LIBOR) were fully priced in, U.S. housing prices would go from burnt to blackened toast in no time.
The 3-mo Libor always goes up…
CURRENT /1 MO PRIOR / 3 MO PRIOR / 6 MO PRIOR / 1 YEAR PRIOR
Federal Reserve Target Rate 5.25 5.25 5.25 5.25 5.25
3-Month Libor 5.70 5.58 5.36 5.34 5.39
The Old Lady is not playing ball. Let them eat cake, she says.
PB (AKA GS),
1-mo LIBOR is even worst (circa 5.80%). The 3-mo is pricing in 2 fed eases vs. the 2mo additional credit spread.
Fed futures are now at 75% probability of 50 bp cut on 9/18, and 70% of full 100 bp cut by December.
I wonder whether Libor will stay stubbornly high even when cuts become reality. Sure hope so, though.
Ubaldas
LIBOR = London Interbank Overnight Rate. I would imagine when they lower rates in London, Libor will go down.
Not quite.
LIBOR is in US dollars, the banks just happen to transact and set the price in london.
The “They” in lowering the rates are the banks themselves. LIBOR market is pure private sector to private sector lending, no government involvement.
Libor is at 5.8% while treasuries are at 3.8% (an unprecedented spread) because some the participants in LIBOR or those who would otherwise lend from them think there is a significant chance that some of the biggest banks on the planet may default.
Not quite.
LIBOR is in US dollars, the banks just happen to transact and set the price in london.
The “They” in lowering the rates are the banks themselves. LIBOR market is pure private sector to private sector lending, no government involvement.
Libor is at 5.8% while treasuries are at 3.8% (an unprecedented spread) because some the participants in LIBOR or those who would otherwise lend from them think there is a some chance that some of the biggest banks on the planet (who are in the LIBOR market) may default.
If the cost of housing had been included in the CPI
It’s not included because buying a house is not consumption. It’s an investment, and it no more belongs in the CPI than stock prices. You don’t have to buy a house to have somewhere to live.
Living in a house is consumption, and the value of that consumption is what it would cost to rent the same place (imputed rent). And that’s included in the CPI.
“The problems in the housing market were supposed to stay there. Or at least that’s what most of Wall Street was espousing until July. Yet, in the last eight weeks, it has become clear that their analysis was wrong.”
Kudos to all the HBB posters (GetStucco included) who saw through the sham all along and stayed the course until it was common knowledge.
“‘I do not believe the Federal Reserve’s job is to protect specific risk takers who failed to protect themselves from potential downside wounds,’ said Dallas Federal Reserve Bank President Richard Fisher. ‘In my humble opinion, the standard tools of monetary policy are insufficient, by themselves, to deal with the subprime market fallout,’ he added.”
That is one heck of an admission.
Fed plays good cop, bad cop.
“‘I do not believe the Federal Reserve’s job is to protect specific risk takers who failed to protect themselves from potential downside wounds,’ said Dallas Federal Reserve Bank President Richard Fisher. ‘In my humble opinion, the standard tools of monetary policy are insufficient, by themselves, to deal with the subprime market fallout,’ he added.”
Hence the need to use nonstandard tools of monetary policy, such as directly intervening to prop up the price of assets when the bottom has dropped out of the bid distribution.
Why do stocks rally every 9/11? Free markets my a**…
Take a look at this CNBC video from this mornings show.
http://www.cnbc.com/id/15840232?video=510866729&play=1
The shill for Freddie and Fannie made the point that $600k buys an entry level home in CA. No, a $600k home is not entry level because almost no first time buyers at or below the median income (or below the 90%-tile for that matter) can actually afford a $600k home. THe lowest priced homes might be $600k in some markets, but then those markets don’t have entry level homes.
This is all about Fannie and Freddie expanding their government-subsidized and privately realized profits.
$600K home = affordable California starter home?
yes, it buys a starter home buts of course its not afforable. Instead of trying to prop up home prices, those in the g’ovt that want to promote homownership should celebrate the fact that maybe a starter home will actually be afforable again if the market is left alone.
Nah — they would rather say they are “saving our homes” while tempting more GFs to buy homes they cannot afford. Then they can rush to pass another bailout tab on to the taxpayers when the next (policy-induced) foreclosure crisis strikes a couple years down the road (after the next election).
it’s a proven mechanism in the Netherlands: the median home price tracks the loan limit for our NHG (semi-gov sponsored mortgage insurance) very well. Resetting the loan limit every few years is great for the RE mob, but it doesn’t help any normal citizen (except help them getting deeper into debt).
If something cannot go on forever, it will stop.
– Herbert Stein –
OT: But did anyone watch CNBC this morning when they interviewed a home owner trying to sell and the mayor from a small town in Ohio? The mayor was very informed on the causes and consequences of the housing bubble. However, the home owner has been trying to sell her house for 18 months. The first question asked of her was if she had lowered the price. She said that she has lowered it $10,000. Give me a break, 18 months and only a $10,000 decrease!! She also complained that foreclosures are driving up inventory. I know they are in Ohio but if you haven’t sold in 18 months you better lower it more than a measly $10,000.
I did catch the interview and my jaw dropped because I grew up in the city next to the one featured on CNBC. The name of the city is Maple Heights; and CNBC probably picked it up because it was the entire feature of an article published by the NY Times. Unfortunately, the NY Times article is no longer free and you must pay to get access to it.
This is the abstract from the NY Times:
One thing to remember is that NE Ohio never experienced the same rate of appreciation during the bubble and the median home value in Maple Heights is $113K according to Yahoo Real Estate. For her to drop 10K is roughly a 10% price cut and with little to no appreciation benefit during the boom years to support a cut, the 10K will really hurt.
Maple Heights is also a very low middle class/blue collar working neighborhood. Median household income is $44K. The lending here was primarily not from flippers trying to get rich, but from subprime vultures preying on the unsophisticated and uneducated.
You are so right. NE Ohio did not bubble. We probably went up 1-2% a year or in some years sideways with no appreciation. $10k is a big drop if she lived in an 80k-115k house. Problem is the foreclosures in the Cleveland area. There aren’t many buyers that can even qualify for a loan in some areas. I did read that Cleveland was the city with the highest foreclosures in the country. Plus crime is way up and that would only further compress sales.
I did catch the interview and my jaw dropped because I grew up in the city next to the one featured on CNBC. The name of the city is Maple Heights; and CNBC probably picked it up because it was the entire feature of an article published by the NY Times. Unfortunately, the NY Times article is no longer free and you must pay to get access to it.
This is the abstract from the NY Times:
One thing to remember is that NE Ohio never experienced the same rate of appreciation during the bubble and the median home value in Maple Heights is $113K according to Yahoo Real Estate. For her to drop 10K is roughly a 10% price cut and with little to no appreciation benefit during the boom years to support a cut, the 10K will really hurt.
Maple Heights is also a very low middle class/blue collar working neighborhood. Median household income is $44K. The lending here was primarily not from flippers trying to get rich, but from subprime vultures preying on the unsophisticated and uneducated.
I live in NE Ohio. Dont kid yourself…people were flipping this dead dog of city for the past few years.
There IS a bubble in NE ohio. Sellers in 400-600 thousand neighborhoods (yes there are plenty here in NE ohio) refuse to accept foreclosures on their street. Doesnt exist and shouldnt effect the value of my home they like to say. I have seen some houses in cleveland drop their price 100K, 500 to 400 with 2 year market time. However there are tons that refuse to accept the fact they have to lower their price to move it.
Yes there are neighborhoods in NE Ohio in the 400-600 range, but the houses are also 3500-5000 sf.which still only averages $120 sf. Maybe some of the more expensive areas of Cuyahoga County are more. However the bulk of NE Ohio have average prices of 80-100sf and probably run about $125k. In my area prices have stayed pretty stagnant since ‘04. Now they’re ticking down a little.
You are not correct about the 1-2% apprecation. When it used to be 100/sq foot a few years ago 120 is a huge increase. McMansions line indepdence, brecksville and wannabe cities like n royalton, strongsville…..Doesnt matter, it will all fall back. There are no new jobs coming to the cleveland/akron area - there used to be gossip and political speak about new job, we dont even have that anymore (except for proposed medical mart that increase sales again). There is more inventory in Medina, Lakewood then ever before. There are foreclosures in more prestigious communities like brecksville (800k house sold for 400). BTW zillow does a poor job at showing the houses that are for sale by realtor, not sure why it misses sooooooooooo many…also love how zillow shows properties bought a few months ago with 10K INCREASES in ‘value’ of home.
‘Nobody knows which banks or funds are sitting on losses, and, as a result, lenders are refusing to lend,’ he said.”
Someone, somewhere is going to have to start the process of recognizing these losses. What I think is happening now, is simply that no one wants to make the first headlines….they want to be the 20th story, not the second.
Once this dam breaks, however, how is it going to be possible to contain the damage? Even if the fed lowers rates; its not going to change the outcome of these securities being marked down dramatically, the losses being recognized and the ensuing psychological impact being felt.
How can it possibly end peacefully without something “good” to mute its impact? I don’t think a fifty basis point cut by the fed is going to mute billions of dollars in losses all that much, do you?
“I don’t think a fifty basis point cut by the fed is going to mute billions of dollars in losses all that much, do you?”
No, jag, I don’t think it will either.
IMHO, this is where the so-called “subprime problem” becomes an economic one. The markdown of the securities is first, then the losses are realized on balance sheets …. Here’s where it gets ugly, for the entire economy.
I have been wondering the same thing.
But my question is:
What if all the institutions holding these securities do nothing?
Don’t all these securities eventually expire / mature / renew?
In other words, wouldn’t the force of time cause
the first rubber band in the big dried out ball of
rubber bands to break?
“Don’t all these securities eventually expire / mature / renew?”
In general, not for a long time. The maturity depends on the FB selling their house or refinancing, at which time the principal payment is forwarded to the bond holder. Traditionally, the average mortgage in most pools lasted about 8 years before being paid off. But some principal could remain up to the bitter end - 30 years. So you should think of these securities as having a variable maturity. And it is probably getting a lot longer now that no one can refinance or sell…
The maturity depends on the FB selling their house or refinancing
Or walking.
I think it is pretty clear by now that most of the junk is owned by EU banks, pension funds and the like. Why otherwise would the ECB arrange such massive liquidity injections (5-10x bigger than the FED) and even consider lowering rates despite building inflationary pressures? Probably the bulk is owned by pension funds and similar institutions, who will not report their holdings until well into 2008. Probably they hope that by then all problems have been magically inflated away by the central banks (not good for their pensioners, but at least the pension statement for this year will look good).
The CNNMoney article quotes the following from the NAR press release: “While the trade group sees gains in prices in 2008 from the current weak levels, it projects that the median existing home price will be $224,600 in the fourth quarter of next year. That would still put the price slightly below the record price reading of $225,000 in the third quarter of last year.”
So 2008 will bring us back to the peak level, off by four hundred bucks? Wow, I guess now really is a great time to buy!!!
‘This time it took the press two years to get a decent recession going,’ Rep. Miller said.”
I guess Rep. Miller is still riding the short bus. Maybe he’s so clueless that he believes the press has been on top of this story, warning folks for years. Basic math is beyond this one. Good thing he’s in government, otherwise he’d be unemployable.
Serfs up, Hoser…
“Clark said the core of the problem was that many investors didn’t understand what was in the investments they made. ‘I think the market sits there and says ‘I didn’t understand when I was buying that German bank that I was buying California risk,’ he said.”
“George Hanzimanolis, speaking at the annual convention of the California Association of Mortgage Brokers here, said, ‘We are at war against the legislators who want to legislate us out of business.’”
——–
…
“My name is Hanzimanolis, king of kings:
Look on my works ye mighty and despair!”
Nothing beside remains. Round the decay
Of that colossal wreck, boundless and bare
The lone and level sands stretch far away.
-apologies to Percy Shelley
Merrill Lynch: Clueless on America
“Merrill Lynch economist David Rosenberg said no one knows how big the losses are going to be. ‘Nobody knows which banks or funds are sitting on losses, and, as a result, lenders are refusing to lend,’ he said.”
These are alleged professionals using the “my dog ate my homework” excuse.
Looks like the Federal Trade Commission has found that many recent mortgage advertizements are misleading compared with the true cost of the loan.
http://www.msnbc.msn.com/id/20725063/
You mean that ad on the back wall of my cubicle — “3.25%, no money down, no income or asset verification” — may not be the truth? Hmmm, what are those teenie weenie words there “restrictions, rate increases and fees may apply.”
big gov is kinda slow - those ads a comedy now, but in olden days folks believed em
Hilarious. Look at the ads at the end of that article.
Corporate defaults to surge, Moody’s says
Credit crunch cuts off access to borrowing for weaker companies
By Alistair Barr, MarketWatch
Last Update: 1:11 PM ET Sep 11, 2007
SAN FRANCISCO (MarketWatch) — The credit crunch has cut off access to borrowing for many weak companies, which will trigger a surge in corporate defaults, rating agency Moody’s Investors Service said Tuesday.
http://www.marketwatch.com/news/story/credit-crunch-mean-more-companies/story.aspx?guid=%7BD3A53425%2D8A55%2D43B7%2D94A7%2DDCD7EA1C1E27%7D
I like the Dow Jones newswire headline better:
“Credit Crunch Will Mean More Companies Go Bust, Moody’s Says”
Gee, ya think? It’s reassuring to know Moody’s and the other rating agencies are ahead of the game.
Hmm, they probably got cut off before they could finish their sentence:
“Credit Crunch Will Mean More Companies Go Bust, Moody’s Says, including us”
Moodys- the Arthur Anderson of the housing bubble…
http://stjosephstatue.com/letters.mv
Saint Joesph Statues
September 04, 2007
Hi my name is Wendy and I live in Venice Florida, I recently purchased two of the statues, one for myself and one for my mother n law. We both have our houses on the market, hers has been on for several months and nothing. She adjusted the price on the house since she really needed to sell it. I gave her the statue on a Thursday, she buried it and the following Sunday she had a offer on the house, The closing is on September 14!!! We are still waiting for our house to sell, it has only been on the market for a short time, but we are in no hurry to sell it. Thank you for all of your inspring stories!!
Wendy
Venice, Florida
Another house Sold!
Dang Wendy you be stooopid! What mother n law didn’t tell you is that she tossed the statue and cut her asking price in half. THAT is what sold her house Wendy and that alone.
God bless Saint Chris, patron saint of equity extraction.
Decent of God via St. Joseph to come through and hand that FB some human cannon fodder. “God, please help me f$ck over someone else with this overpriced POS. Amen.” LOL
This whole housing bubble should have been the tact they took in Iraq, forget guns and bombs. Much more devastating impact getting the populace complicit in their own downfall via 2/28 ARMs and interest only loans.
rate policy should not be used to shield investors from losses.”
Even if the Fed were to lower the short term rate by 25 basis points, it would not resolve the problem and in fact would probally increase inflation. Wall Street has relied upon the Fed in the past to bail them out and it needs to be stopped now! Let the greedy fools pay the price for their stupidity!
rate policy should not be used to shield investors from losses
this is exactly what the FED and ECB are doing and are going to do: help out the big speculators. The little guy (mostly the savers - are there any left in the US? probably mostly savers in EU and China …) will get stuck with the bill. Central banking means inflating away until the system collapses.
starting to spread to commercial.
SUBPRIME FALLOUT
Empty offices leave landlords high and dry
As the credit squeeze from escalating residential loan defaults takes a toll on real estate services companies, the owners of commercial buildings are also experiencing pain
By Susan Diesenhouse | Tribune staff reporter
September 11, 2007
http://www.chicagotribune.com/business/chi-tue_landlords_0911sep11,0,3939268.story
seeing it here in N VA - a rental unit going for 40% off = wow
then pow , right in the kisser
Who could’a seen this train wreck coming??? Oh, we did……4 years ago….
Does anyone know what HA stands for? It’s not High Availability.
It’s HeloHolics. Has anyone been to a Heloholics Anonymous meeting? It’s ruff. I can picture it now.
“Hi, My name is Bob, and I’m a HeloHolic.”
“Hi Bob,” responds the crowd.
… later that same meeting.
Suzanne says, “Real Estate is not selling. I researched this, I really did. I put a poor family in a home they couldn’t afford. I lied to them on their answering machine.” *cries* “I can’t make a decent living now. I got buy with pulling money out of my house for vacations and new cars. I want a new car and the bank just tells me no. My life is pathetic, I sit around the house and do nothing. I want a life. I deserve a vacation”
David L, “Suzanne, you have to come to grip. I did, I quit the NAR. I feel so free now. I feel like I don’t have to lie anymore. It’s great.”
Suzanne, “but I thought you researched this David?”
David, “I did, why do you think I quit my job? You were living a lie.”
Suzanne, “I never really researched it.”
David, “See”
Suzanne, “I listened to you instead.”
David, “Well that’s your fault.”
classic
LMAO
NAR now predicts a rebound in late 2008. Ah, yes. The always dead on prognosis from the NAR the, “Now is a good toime to buy,” group. Here’s a prediction that the NAR will put forward in late 2008. “Unfortunately, the recession has caused us to change the timing of the rebound in housing, which we now think will be in 2009.” As*holes.
“NAR now predicts a rebound in late 2008.”
So, are they admitting there will yet another silent spring?
“New home sales won’t reach a bottom until the first quarter of 2008, the organization said. A month ago, the Realtors said the low point would be at the end of this year.”
A question, please (not being sarcastic either). Where does the NAR think all these buyers with downpayments are going to come from after 1Q08 to buy this massive amount of inventory???
If you read the fine print in the release it said they predict the bottom will be reached when Ben starts dropping money out of helicopters, which is expected in 1Q08, hence the bottom.
Then again, most of their predictions are what they hope to happen. They never cite any proof of how they came to their conclusions.
It’s like me predicting the Oakland Raiders will win the super bowl in 2012. I think I would have a better chance of being correct.
Formula in the economics handbook for the NAR is this:
bottom = n + 6months.
Please feel free to add your own.
Just around the corner (+) weather conditions (-) “negative” press (x) n days until Superbowl = bottom
Donald Trump, 3 a.m., selling something plastic that “makes (insert cooking task) easier” = bottom
No, Trump peddling the Flow-Bee, and using it in the infomercial.
“It’s sucking my will to live!”
They don’t. But we’ve noticed the bottom is never more than six months away, so why don’t you just buy now?
A coworker just sold a home for $254k; he feels lucks. Note: closed, check cleared, new owner in home, etc. Circa last Wednesday. Homes in his neighborhood were at ~$360k a year ago. He’s just happy as he bought in at $112k. The sale was to preserve equity for a move into a larger home in 2009.
I guess someone listened to me at work.
Got popcorn?
Neil
Neil
Are you in So Cal?
A home for 254k? Must be in the desert.
The NAR doesn’t care. They are in the business of suckering in buyers. That’s it. All the NAR sound bites are dedicated to selling in ANY market. Boom or bust. That’s the function of the NAR - that and paying off politicians. Selling is always a numbers game. In boom times, 100% of suckers buy. It bust times that numbers drops drastically so they up the sound bite pressure. They are in the business of hyping and selling. Nothing else. They don’t care if a buyer gets in over their head. They’ve made the sale and if the buyer was over 21 - tough sh*t.
Another hedge fund is in trouble.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aKe6zEkVFGOg&refer=home
Pirate designated the four stocks held by the funds as “special investments,” meaning that clients won’t be able to get money back until they are sold, according to an Aug. 31 letter to investors.
Walk the plank, Loanlubbers…
“We canna find the treasure map! Methinks the first mate absconded with that blackguard moor! Yo ho yo ho, a capitalist pirate’s life for me, barnacle soup for you!”
“Pirate Capital Bars Withdrawals From Two Hedge Funds (Update1)”
Arghhh!
Here’s a hedge-fund-related funny from the Borowitz Report
Y’all. Take a read, it is a very funny.
Actually, they are on the deck of a submerged Subprimemarine…
“Echoing the themes of the other speakers, Rep. Gary Miller, said in talking with people in the lobby, ‘I thought you were on the deck on the Titanic.’ But the situation is not that bad.”
We have yet to see the ripple effects of this crisis,” Mr. Klujian said. “When these guys have to freeze their trophy wives’ shopping allowances, there’s going to be hell to pay.”
Gee they have a shopping allowances. A lot of people’s “shopping allowances” are for gas and groceries. I feel so sorry for them. They may have to wear an outfit twice, or god forbid, something from last season. How utterly tacky.
GW: you plonker
it is a spoof.
LOL, you guys are killin’ me!!!!
Sept 18th mark it down because on the 19th nothing is going to change because your lovely Fed Reserve lower rates, if anything for you savers your CD’s go down and you stop spending also another hit?
“The industry is also at war against the media who put the blame for the current mortgage crisis solely on mortgage brokers, against regulators who want to promulgate new rules, which only affect mortgage brokers and even some consumer who did not tell the mortgage originator the whole truth when they applied for a loan.”
Maby he should do the honorable thing and have the mortgage brokers association give back all the commisions he made from all the loans he wrote that go into forclosure!