The Credit Hit Parade Has Only Just Begun
Some housing bubble news from Wall Street and Washington. The New York Times. “Deutsche Bank finally put a number on its losses from the home-lending crisis, saying today that it expected to write down $3.1 billion in loans and mortgage-backed assets. Early on, Deutsche Bank appeared to be a rare beneficiary of the subprime mess. It had profited by selling mortgage loans with derivative contracts that appreciated as the American housing market slumped.”
“The first inkling of trouble came last month, when the bank’s CEO, Josef Ackermann, appeared on German television, acknowledging that the country’s banks had erred by expanding pell-mell into financial products that later proved risky.”
“Deutsche Bank said today that it would write down 700 million euros in the value of its leveraged loan portfolio and 1.5 billion euros on the value of assets, including mortgage-backed securities.”
From Newsday. “Federal prosecutors and the FBI have opened an investigation into whether criminal misconduct was involved in the collapse of Melville-based American Home Mortgage, according to several sources familiar with the situation.”
“The investigation…has been going on for several weeks, is looking into whether various federal criminal statutes have been violated that resulted in the company’s bankruptcy, the sources said. Among the statutes are conspiracy, securities, mail and wire fraud, and money laundering, the sources said.”
“American Home Mortgage, once one of the nation’s 10 largest mortgage lenders, collapsed at the beginning of August, filing for bankruptcy on Aug. 6, and laying off most of its 7,000 employees, including 1,400 on Long Island.”
“Stressing that the investigation is just in its initial stages, and that no charges have been brought, the sources said investigators are beginning to put together a picture of how American Home Mortgage operated, whether all documentation behind mortgages was legitimate, and whether the company began to cut corners as the mortgage market began to collapse.”
“Given the hundreds of millions of dollars lost in the company’s collapse, a conviction for fraud could led to prison sentences of 10 years or more under federal sentencing guidelines.”
From Inman News. “Mortgage and subprime lenders have announced nearly 70,000 layoffs in the first three quarters of 2007, according to outplacement consulting firm Challenger, Gray & Christmas Inc.”
“‘The heaviest job cutting has occurred over the last two months as the bottom suddenly fell out from the mortgage and subprime markets,’ said CEO John Challenger. ‘The dominos are likely to keep toppling as home values fall and foreclosures continue to climb.’”
“The 51,851 layoffs in mortgage lending reported in August and September represented 82 percent of announced job cuts in the financial industry during the period.”
Investors Business Daily. “The credit crunch slammed housing activity as pending sales of existing homes fell a surprising 6.5% in August to a record low, the National Association of Realtors said Tuesday.”
“That latest decline suggests sales of previously owned homes will keep dropping from August’s five-year low. Tight lending standards and a lack of affordability make it hard to sell homes, analysts said. ‘We’re not seeing a bottom in home sales on the immediate horizon,’ said Scott Brown, chief economist at Raymond James.”
“A lack of affordability will make it difficult to whittle away a 10-month inventory of unsold dwellings, an 18-year high.”
“‘I think you’re going to continue to see worse numbers,’ said Bob Moulton, president of the Americana Mortgage Group. ‘Buyers are still expecting prices to come down, and they’re going to wait until they think they’ve bottomed out.’”
From Bloomberg. “‘The existing homes market is now in freefall,’ said Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd. ‘The downside from here is still substantial.’”
“So far, the Fed’s half-point rate cut has failed to lower mortgage rates and boost demand. Average 30- year, fixed-rate mortgage rates ended last week at 6.42 percent, compared with an average 6.3 percent the prior week, according to Freddie Mac.”
“Buyers have been further constrained by the tighter lending standards and the shutdown of mortgage lenders such as American Home Mortgage Investment Corp. in early August that closed off access to credit.”
“‘Fewer contracts were being written because of mortgage- availability issues,’ said Lawrence Yun, a senior economist at the real estate agents group. ‘More than 10 percent of sales contracts fell through at the last moment in August, primarily the result of canceled loan commitments’ from lenders.”
“‘There is still no bottom in sight,’ said Joshua Shapiro, chief U.S. economist at a New York forecasting firm. ‘Sales will continue to fall until there is a greater price capitulation by sellers. It still appears that we have not reached market-clearing prices to reduce the inventories of unsold existing homes.’”
From Reuters. “The audacious rise in the Dow industrials to a record will do little to prevent the millions of new ‘For Sale’ signs likely to dot U.S. lawns soon.”
“‘I don’t think the worst is over,’ said Robert Arnott, chairman of Research Affiliates LLC, an investment management firm. ‘We are coming off the greatest lending bubble — not housing bubble! — in U.S. history. We will feel its impact for a very long time.’”
“Millions with subprime mortgages, which go to borrowers with checkered credit histories, are faced with negative equity in their homes that could make it increasingly unlikely they will qualify for new mortgages in an environment of tighter lending standards.”
“At current home prices, about $693 billion in ARMs are ‘already under water,’ according to Stephanie Pomboy, financial economist at MacroMavens.”
“That’s frightening news for banks that already have absorbed losses on their balance sheets due to delinquent subprime borrowers. The losses so far amount to about 10 percent of the forecast of $100 billion in losses.”
“‘The disturbing number here isn’t 10 percent … but the $100 billion,’ Pomboy said.”
“With nearly $700 billion in ARMs in negative equity facing interest-rate resets, ‘depending on how much lenders can ultimately recover, this implies (bank) losses will be more like $210 billion to $346 billion,’ she said. ‘And that’s assuming the situation doesn’t get worse.’”
“In July, Federal Reserve Chairman Ben Bernanke had estimated the losses at $100 billion at the most. But it appears Bernanke had underestimated those figures and their effects on the consumer.”
“‘With the reset wave about to gather intensity and ‘For Sale’ signs dotting the lawns of 5.1 million homes across the country, the credit hit parade has only just begun,’ Pomboy added.”
The Wall Street Journal . “For Countrywide Financial Corp., this time it’s personal. At least that’s what a top executive says. Having suffered a barrage of negative headlines while battling to shore up its finances and shrink its work force of 60,000 by as much as 20%, the nation’s largest home-mortgage lender is launching a PR blitz aimed at repairing its reputation.”
“For the demoralized employees who remain, the new campaign means wristbands with the phrase ‘Protect Our House’ and pep talks promising to keep ‘amply’ rewarding the most successful among them amid a struggle with the sharp drop in mortgage lending as defaults soar and house prices decline.”
“Excerpts from executive managing director Drew Gissinger III’s motivational speech to key Countrywide employees: ‘Let’s call it like it is, as I mentioned earlier, it’s gotten to the point where our integrity is being attacked. NOW IT’S PERSONAL! The FUD campaign is now questioning our — yours and mine — ethics, morals, and business practices. And, WE’RE NOT GOING TO TAKE IT!’”
“‘It’s gotten to the point where our integrity is being attacked. NOW IT’S PERSONAL!’ says the transcript of a talk made last week by Mr. Gissinger. ‘… And, WE’RE NOT GOING TO TAKE IT!’”
“It says that employees are expected to sign a pledge to ‘demonstrate their commitment to our efforts,’ and Rick Simon, a Countrywide spokesman says about 11,000 have signed. Each employee who signs up receives the Protect Our House wristband made of green rubber.”
“To counter criticism that its lending practices are to blame for a surge in foreclosures, Countrywide plans to emphasize its ‘mission’ of helping Americans become homeowners, the transcript says. ‘I want employees to look down at their wristbands and remember our fundamental mission to help customers achieve the American Dream, and to help them withstand those malicious outward attacks and to motivate them to continue on our journey with unwavering conviction,’ the transcript quotes Mr. Gissinger as saying.”
“The combative tone reflects the blunt-spoken style of Angelo Mozilo, Countrywide’s chairman and chief executive, who helped to found the company in 1969. ‘We’re demonized something fierce,’ Mr. Mozilo said in an interview two weeks ago.”
“Mr. Gissinger sought to reassure employees about sticking with the company in the transcript: ‘I’ve made a lot of people rich or richer who have joined me on my past crusades. Please trust the same holds true here.’”
‘Early on, Deutsche Bank appeared to be a rare beneficiary of the subprime mess. It had profited by selling mortgage loans with derivative contracts that appreciated as the American housing market slumped.’
What do you know, DB is the biggest knife catcher yet!
Yes, and it appears as if they’re about to catch a guillotine blade with their corporate neck.
“’tis merely a flesh wound”.
LOL… That would also be a good summary of the NAR’s delusional statements on the housing debacle.
“Look, you stupid bastard. You’ve got no arms left! “
You mean no ARMs!
IMHO the reason for DB are disclosure laws in Europe as opposed to the US’s lack of full disclosure. DB is not even close to being the largest knife catcher. The losses are enormous. When Citi took its writedown, they also transferred 2B into loan loss reserves, this is disclosure? Not in my book. $2B in loan loss reserves covers upto $125B in transferred debt held to maturity instead of MTM.
Well, Ben said “yet”. They’re maybe the biggest knife catcher that we know about, but I suspect there’s some people that are all cut up and bloody that we don’t know about.
Off topic: a little sweet short sale Schadenfreude. The realtor paid $402,669.00 on 06/02/2006. This is the write-up of the listing:
$385,000
Subject to short sale and bank approval. List price is a best guess at what a lender might entertain. Buyer has no recourse. Bring all offers! Seller is a licensed realtor. Beautiful home Brazilian Cherry Hrdwd Flrs,slab granite cnttop,SS appl,Tile fl/cnt bath upst, A/C, built ins, Mst w/ 10×7 retreat, huge walk in clst and mst bath,new park down street. Lots of Upgrades!
This morning CNBC has been running a clip about Washington apple growers not having enough pickers.
They are using guest worker program, but that costs them an extra $800 per employee for the month they have them.
They complain about the new directive from the Bush admin that Homeland Security will be sending out “no match” letters to employers indicating which employees are likly illegals.
They are complaining that they are being converted into immigration police. Liars. They aren’t being asked to arrest the illegals and take them back across the border. They are employers being asked not to hire illegals.
There aren’t enough workers, and fruit will be rotting on the tree next year.
BS! Every year they complain about not enough workers, yet the fruit gets picked.
One guy says that there are days where he shows up and none of his workers do. They are frequently hired off by other growers who offer more money!!!!
AND, here we FINALLY get to the root of the problem. There aren’t enough workers AT THE WAGES THEY WAN’T TO PAY!!!!!
If you’re having trouble getting workers… oh.. I don’t know… MAYBE you could pay a higher wage!!!!
On the flip side, I get SOOOOOO irked about people saying Wal-Mart underpays. Ummmmm…. If they were underpaying, they wouldn’t have workers. They have workers, therefor, they are not underpaying.
Apple growers can’t get employees…. therefore, they are underpaying!
Why is this so hard to understand?
Don’t know what this has to do with the housing bubble… but anyway, when I was a kid, agriculture jobs were what you did after school to get extra money. All of my friends did it when they could get the time… go pick apples, asparagas, grapes to make a few bucks to spend on candy. What the hell do kids do these days?
Also on CNBC… they continue to bet on more rate cuts from the Fed. Maybe by the end of October the Canadians will give us 50 cents for every U.S. dollar.
RE: What the hell do kids do these days?
You really don’t expect all those soccer mom darlings to get dirty and work in an environment without A/C do you?
They don’t work around here. I have a heck of a time even finding a babysitter.
Darrell — great points that show the problem from both directions. Though there may be some, I can’t think of a single MSM writer who describes economic situations in the manner that you did. I suppose it wouldn’t be worth selling if it weren’t slanted.
Lemme’ guess, DB stocks are soaring higher on the news.
The credit crunch is old news according to the morons on cnbc.Time to buy stock because chindia is booming and need our tractors,coke products and fake tits.All the problems are gone because they fed will save us all. They say housing will recover next year and citi has upgraded the homebuilders. All is well , move a long little fellow.
I was watching that this morning on Squawk. There was this one guy they were interviewing on the trading floor that said something like, “bad news is good news, and good news is good news.” It had to be one of the dumbest things I’ve ever heard, these people realize that we can see them right? That little red light means the camera is on you twit.
That is the definition of “Goldilocks”. So, in a sense, he has a point. The market has proven him right for the past 13 months. Just wait until bad news starts being bad news. That is when these guys will be soiling themselves. My neighborhood isn’t going to smell very good.
He is talking about the strategy of buying on bad news and selling on good news( ie. buying a condo in Houston for $20k when the papers are full of bad news about the real estate business and selling said condo when the papers tell you things are doing great - being a contrarian ).
I often just lurk and laugh and laugh and laugh. I love it here guys and gals. Thank you for the laughter (and abstute observations!)
Best
Leigh
Lurkin’ & smirkin’.
“2:00 pm : The stock market has continued its drift lower on afternoon profit-taking. The positive market sentiment that has kept the major averages near Monday’s highs over the last day and a half appears to be dissipating.”-Briefing.com
When will the market crash? When all the insiders decide it’s time to take their booty and head for the high lands is when.
“For Countrywide Financial Corp., this time it’s personal. At least that’s what a top executive says. Having suffered a barrage of negative headlines while battling to shore up its finances and shrink its work force of 60,000 by as much as 20%, the nation’s largest home-mortgage lender is launching a PR blitz aimed at repairing its reputation.”
********
Does the PR campaign parallel the NAR’s efforts of late last year?
“Now is a good time to buy or sell a home.”
I should have also asked whether the PR campaign’s actual goals are to keep Angelo Mozilo out of jail.
The real question is, once Countrywide goes bankrupt and shuts down, will those green wristbands have any resale value on ebay? They might be the most valuable things those former employees own at that point.
Quote:
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The real question is, once Countrywide goes bankrupt and shuts down, will those green wristbands have any resale value on ebay? They might be the most valuable things those former employees own at that point.
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What a bunch of pathetic dorks !!! Wearing a freaking god-darn greenie band on your wrist because you can’t find another job that at least protect your professionalism and dignity. Talk about DESPERADOS !!!
I just had an idea…
We’re likely facing the worst downsizing era of the information/internet age. These 12,000 drones at Countrywide are likely indistinguishable from the 48,000 drones that won’t be fired (in terms of skill sets, attitude, etc.)
Why doesn’t Countrywide auction off employment positions on Ebay?
“For the demoralized employees who remain, the new campaign means wristbands with the phrase ‘Protect Our House’ and
mandatory 5 hours per week in the corporate tanning booth……when Tan Man isn’t using it.
Would this be similar to those stupid reality shows, like the flavor flav show, where they give out the green bands to those few lucky people that get to keep their jobs, while the unlucky ones get booted out of the office. Until the next round of unlucky losers.
“At current home prices, about $693 billion in ARMs are ‘already under water,’ according to Stephanie Pomboy, financial economist at MacroMavens.”
Holy Cow!
That number is growing daily as ARMs reset and housing prices fall. The big thing in the near future is home SELLERS getting financing so they can sell their (underwater) home.
“SELLERS getting financing so they can sell their (underwater) home.”
Boy, great point. I never even thought about that one. Thanks.
There’s the next bubble for you
Check out CNN. Couple of $2M houses in LaJolla fell through the ground in a sinkhole.
Wait, I though RE only goes up?
LMAO!
Those people are screwed.The EPA will be in there with ground sniffing dogs looking for terrorists and enviromental problems.They might quarantine the property due to an earthquake fault. Probably never build there again.Hopefully they had insurance.
RE: Hopefully they had insurance.
My guess is it would be for the house only, so they’ll eat the
lot value. What’s a houselot in La Jolla worth? $500k?
EPA finds out the whole groundtable integrity is suspect-uh, oh…Nobody’s gonna underwrite that location.
Bye, bye million dollar neighborhood.
Easy come…easy go.
Great to be a renter.
Most homeowner policies do not cover ground movement. Most likely these homeowners are totally hosed.
I was going to say. There’s precious little that homeowner policies actually cover anymore except fire and theft.
picked a good time to do it if their property insurance is up to date..
Uh, no coverage for landslide/earth-movement under a Home Owners policy. Some companies provide $10 -20K for loss of support to the dwelling, but that’s it.
Holey Moley!! Did you see the picture of that sink hole? The whole road collasped. Of course the city attorney says water pipes have been leaking there for sometime. Great, not really surprising though. I wonder how much this little defered maintainence fiasco is going to cost taxpayers? My neighbor house (where I used to live) was flooded twice by a broken water main. Our city has been charging us extra fees for repairs for years and instead uses the money for other purposes.
http://tinyurl.com/yrkukv
I was wrong the earth movement is what caused the street cracking, water and gas line breaks.
More like Holy Catastrophe!
According the reporter on the scene, “This area has a history of being unstable,” since it was developed back in the sixties. Here’s what I say: Anyone who was stupid enough to buy a house on unstable land gets what they get - their house in a sink hole or at the bottom of a hill in the backyard of another house. ha ha ha
I used to laugh myself silly at the geniuses that built in the riverbed here in SD. I imagine they laugh at me now.
Unstable? I think that could be said of California in general.
True dat. Anyone who buys property anywhere that can’t be described as “flat as a pancake for miles around” needs to look up the phrase “angle of repose.”
And no, if all you come up with is a reference to a Wallace Stegner novel, you’re not done with your research.
Real estate is a sinkhole.
Um this happens rather frequently in that nieghborhood. Other places in SD County slide like in Oceanside a couple of years ago…
“Deutsche Bank said today that it would write down 700 million euros in the value of its leveraged loan portfolio and 1.5 billion euros on the value of assets, including mortgage-backed securities.”
Those silly Germans were the ones buying all that paper. Nice going guys, hey here’s a novel idea, sell some more gold out of your vaults to cover the losses
Banks seem to be writing off the losses on the stuff they “own”. The assumption is, that’s it! No more losses.
But wait! When will they be writing down the loans that they made to people that “own” MBS and CDOs… loans they will never be able to collect on??
This is SOOOOO far from being “the end”.
Swiss are selling gold too
hmmmmmm
Don’t believe the hype. CB gold sales are on paper, to each other.
How many people have this “not us look on their face.” Of course so called home buyers had no idea? the agents no clue? the lenders maybe a few slip thru the cracks? Fed Reserve, ” we thought something wasn’t right for several years”, i hope they don’t put a few easy pickings in jail and then proclaim we did some thing about it, because that would leave many many who knew what the ponsi scheme was and pretend they are inocent bystanders who just wanted to make a little side money yeah sure???
“‘The existing homes market is now in freefall,’
Sometimes I read these headlines and they are screaming at me. The worse the news for realtors the happier we all are. By the time I’m done reading some threads I just feel excited period.
Then the homebuilders go up 23%.
What on earth does ‘in freefall’ mean? Does it mean anything?
..homes market now in freefall
lemme take a shot at writing NAR’s spin on this..
“Although the market is in freefall, it is still far from attaining terminal velocity. Act quickly. There will never be a better time to buy.”
I actually saw a craigslist ad that said “Prices are falling, now is the time to buy!” Uh, what?
how many fools do you think will fall for it?
next question
do they have the down payment?
i dont think so.
Terminal velocity = 0 — at point of impact with the ground.
Yep, it’ the acceleration to zero that’s the killer.
Joey - LOL - good one.
Countrywide’s FUD campaign???? Is that as in Elmer Fud?
FUD:
Fund Urban Destitute’s
“….Each employee who signs up receives the Protect Our House wristband made of green rubber…”
Protect Our House…..as we foreclose those who trespass against us….How Ironic….
yeah yeah.. i’ll sign the f%^&in pledge.. and wear this stupid rubberband.. not just leave me the f%$# alone.. jeeze.. i need a real job.
“It says that employees are expected to sign a pledge to ‘demonstrate their commitment to our efforts,’ and Rick Simon, a Countrywide spokesman says about 11,000 have signed. Each employee who signs up receives the Protect Our House wristband made of green rubber.”
Supervisor to employee:
I’ll tell you what…you sign this here form and wear this here green rubber thingy and we’ll talk about keeping your job. oh and who’s you’re favorite boss again?
how about a pair of shiny metal wrist bands joined together by a chain link as well as a nice new jump suit that brings out the orange tones for Mozilo?
Do you really think he would get arrested? I don’t think he has actually done anything illegal.
I wonder if those rubber thingies hurt when you slingshot them at Suzanne in the next cubicle.
“Now, before starting your review, I will just remove my pants. Did I mention how lucky you are to still be with our fine company?”
I think those employees are being set up -
Now management has an excuse to discharge them for cause, and deny them unemployment benefits…(if at any time their behavior can be construed as not displaying a “commitment to the company”.) And God only knows what else those folks signed off on…
They can do this with the WARN act.
Here’s a site that sums it up:
http://www.kclabor.org/severance.htm
Here’s a quote from the site:
. “If an employer gives at least 60 days advance notice, no severance pay is required.”
My husband got screwed out of his severance pay when he worked for CMGI in the late 90’s. David Weatherall, there’s a special room waiting for you in hell, you stadium-naming turd.
So, let me get this straight…. I’m an employee of CW. I know have to sign some sort of OATH in order to keep my job, and in return I am given a snot colored WWJD wristband that I must wear to show my Nazi like superiors that I really like my job.
Anyone got a copy of this pledge? Does it include bloodletting or some sort of sacrifice?
Jesus H. Criminy, it’s a flippin job. My dignity ain’t worth signing an allegiance to OompaMozilaLoompa. Did he sign a pledge NOT to sell any stock as the price was tanking?
Enron part II.
“So far, the Fed’s half-point rate cut has failed to lower mortgage rates and boost demand. Average 30- year, fixed-rate mortgage rates ended last week at 6.42 percent, compared with an average 6.3 percent the prior week, according to Freddie Mac.”
Rates are still low, and in price bubble (as opposed to supply bubble) markets sellers could still sell to bona-fide buyers at a price higher than they have a right to expect. They either refuse to sell at an affordable price, or cannot.
The foreclosed property auction price is the only real price.
I have noticed that banks are holding onto REO properties for months and months. This is based on seeing the same POS properties in Woodland Hills 91364 sit on the market for close to a year! The properties are so overpriced yet the bank will make a token $30K reduction (original list price of $1.25 million).
What I want to know is how does it make economic sense to hold onto these depreciating assets? I don’t get the logic. Do the banks plan on holding onto these and renting them out? What gives?
First, what banks? Is this a mortgage servicer for an investment pool? Is it taking a while to get organized? Or is it something worse?
In these securitizations, the financial company issuing the securities often holds the “first loss” tranche. Those organizations have already booked the massive fee income sucked out of the initial deal, so any losses are big losses.
Now these securitizations typically have a reserve to cover “expected” losses. It could be they are draining the reserve to meet required interest payments to the bondholders, hoping for a turnaround. The minute they sell and book “unexpected” losses, the value of their security would be wiped out!
In this scenario, what is crunch time? When so many have stopped paying the servicer doesn’t have the income to make full interest payments to the highest, “AAA” tranche. Then what?
“…Then what?
“…then it went dark”
“…net absorption plunged to a seven-year low in 2006, as the housing boom ended and the companies that supported it downsized or, in some cases, went dark.”
It’s always darkest just before it goes pitch black.
You know I don’t know specifics. I’m only basing my observations on the “Bank Owned” sign.
I’m in the market for a nicer house. A 1/2 point rate change doesn’t help me any at all. Houses are overpriced, lower interest rates only prolong the misery. Meanwhile my salary is going up and I’m paying off my current mortgage. If we can just hold things together for a few years or so I’ll be able to afford the current prices in my non bubble area. I don’t think the bubble markets have that same hope.
“So far, the Fed’s half-point rate cut has failed to lower mortgage rates and boost demand.
I can’t believe anyone seriously thought the rate cut would boost demand. Your post pretty much describes the situation a lot of us fence-sitters find themselves in: waiting for prices to come down.
The foreclosed property auction price is the only real price.
I agree, most people are now trapped or upside down and have no way out except for being forclosed.
“Mr. Gissinger sought to reassure employees about sticking with the company in the transcript: ‘I’ve made a lot of people rich or richer who have joined me on my past crusades. Please trust the same holds true here.’”
Is this the reason employees are suing Countrywide for locking them out of their 401-ks while OrangeMan made a killing cashing options? He certainly is richer.
“…I’ve made a lot of people rich or richer who have joined me on my past crusades”
Bugs: “eh, well you going with that helmet & sword Daffy?”
Daffy: ” I’m off to join the “New Crusade” with Yosemite Sam, Bugsy”
Bugs: “eh, what’s y’all “Crusading” for Daffy?”
Daffy: “Silly Wabbit, to save all those Looney Tune Character’s that are in Foreclosure.”
Bugs: “eh, Daffy…I hates to be the one’s to tell ya this, but…
the Character’s in foreclosure have already been erased from the script.”
Daffy: “page 9…Daffy gets his feather’s plucked again!” ..”Where is that blasted pistol packing varmint anyways?”
clap clap
Priceless.
My hubby did the math on tan man’s…ahem…stock sell off.
Drum roll please…………………..
$44,179,900 (seems low?)
$138M according to this:
http://www.cbsnews.com/stories/2007/09/29/business/main3311669.shtml
Anyone know how to contact those 1,400 now-unemployed former American Home Mortgage workers on Long Island (NY)? I’d like to buy on Long Island if the price were right, and that sounds to me like a large group of motivated sellers…
Go to walmart and talk to them.I hear some ended up at kmart too.
No joke. Was in a fairly nice restaurant this week and the waitress was not young, but she was attractive, well-spoken and obviously from a background that would not normally culminate in a rise to waitressing. My first thought was former mortgage broker or former RE agent. She had a ring on, but I suppose all women want to think they’ll be hit on if they don’t wear one.
Omitted the key fact — she said it was her first night on the job.
let them come to you.. hop in the car and drag a C-note through the streets..
lol!
I thought that only worked in trailer parks .
check out the reaction to countrywides campaign
http://www.fool.com/investing/dividends-income/2007/10/03/countrywides-misguided-pride.aspx
That’s good blow by blow coverage.
From the Motely Fool article:
It also features creepier measures; employees who take a loyalty oath get rewarded with green rubber “Protect Our House” bracelets. (Quick suggestion for Countrywide: Send these to customers instead. Putting one of these on the doorknob of a home facing foreclosure might keep the deputies at bay for a day or two.)
WE’RE MAD AS HELL AND NOT GOING TO TAKE IT ANYMORE
Yes! Network!
“It says that employees are expected to sign a pledge to ‘demonstrate their commitment to our efforts,’ and Rick Simon, a Countrywide spokesman says about 11,000 have signed. Each employee who signs up receives the Protect Our House wristband made of green rubber.”
“Mr. Gissinger sought to reassure employees about sticking with the company in the transcript: ‘I’ve made a lot of people rich or richer who have joined me on my past crusades. Please trust the same holds true here.’”
And they all loyalty-pledged to increase tractor production during the next Five Year Plan for the greater glory of the socialist motherland.
Funny how corporations who philosophize about ‘free markets’ and ‘freedom’ frequently resort to authoritarian, collectivist, conformity-demanding personnel tactics reminiscent of communist/fascist societies, especially when they’re in trouble and need to distract the troops.
Debt is wealth. A mortgage is freedom.
Renting is owning.
Live to rent, rent to live.
“our fundamental mission to help customers achieve the American Dream”
It’s working out well for Mozilo, not so much for the customers unless the new American Dream is to end up in financial ruin while trying to achieve the so-called American Dream.
- Is the USD the new peso?
I didn’t think it was possible, but I believe you just insulted the Peso.
‘We are coming off the greatest lending bubble — not housing bubble! — in U.S. history.
If only the sellers obstinately holding out for their wishing price understood this. I think the peeps are under the mistaken impression that real estate has some intrinsic value that requires it to stay freakishly expensive.
Realestate DOES have intrinsic value (materials & labor costs). Unfortunately for sellers, many of them purchased at multiples of the intrinsic value.
“Realestate DOES have intrinsic value (materials & labor costs)”
real estate may have a negative value — the labor cost of carting the material away after the house is bulldozed.
Labor costs? LABOR COSTS!!!???!! Good frackin’ Lord, the guy’s a bleedin’ Marxist! The “labor theory of value” is the fundamental flaw in Marxist economic theory. Look, bub, it matters not one little bit how many labor hours were invested in creating a product IF NOBODY WANTS IT. I spent probably 600 hours writing the world’s best Revolutionary War screenplay — but its value (in a time when historical dramas are out of favor, and there’s no Democrat in the White House so Hollywood can be comfortable being unabashedly patriotic) is pretty much zero.
I guess there’s some “materials” there, too — 118 pages of typed-on paper. Anyone want to bid on the value of that?
Back in the late 1970’s, I remember my family looking at a home. Appraisal came in as follows: lot was worth $90K. But, because the house was on it, the lot was only worth $70K. It was a house from the early 1900’s, in a very sad state of repair. We ended up buying, rennovating, and living in it; turned into a really neat old house.
“Deutsche Bank finally put a number on its losses from the home-lending crisis, saying today that it expected to write down $3.1 billion in loans and mortgage-backed assets.”
As long as the deflating housing bubble is written down in $3b-$4b chunks, the housing market panic potential will be contained.
A few hundred such chunks will make it a sizeable sum. But you are right, if they put them out in a slow-paced manner, may be strecth it out over the next 12 - 18 months, hardly anyone will notice.
$300B in losses divided by $12B/quarter (not including moneys for loan loss reserves or lost interest income) = 6.25 years of write downs.
That’s what the Japanese did. They wrote off some each year to save the banks. It made the whole process longer, though.
Cass — I wonder how many Japanese now consider that they would have been better off renting during that 14-15 year decline, rather than paying maintenance and taxes on an asset that depreciated steadily during all that time. In terms of reformed sinners, my wife now does the math almost daily and it will be tough to get her to seriously think about buying until we’re near 100x rent. That is a long way from now. Wonder if our banksters are hoping to copy the Japanese model for the reasons you noted.
my wife now does the math almost daily and it will be tough to get her to seriously think about buying until we’re near 100x rent.
I’m with her. I don’t think we will get to 100 times here in LA, but I won’t touch anything for over 125x.
125x in California would be good, indeed.
One thing anyone who has spent any time in corporate America knows is that the time to really get nervous about your job and the future of your company is when executives start giving you pep talks and telling you everything is going to be fine. If things are going well they speak for themselves and there is no need for any pep talks or PR firms. It really is a sign of desperation and will tell any savvy or marketable employees that Countrywide has left that it is time to update their resumes.
So true. So true. When all you hear is how god it is, then you know it is bad. Remember, when all is really good there is nary a peep about the business.
It is just like sports. When a coach is given the vote of confidence, you know he is out the door pretty soon.
Ah, such is life!
Meant to say,…how good (not god) it is,…
I just figured you were talking about Mozilo’s apparent impression of himself…
“…when executives start giving you pep talks and telling you everything is going to be fine.”
Option #2 : Bonuses & weddings in Italy…calling Enron & Tyco…your “table” is ready!
Countrywide’s management is behaving like Ken Lay of Enron, shortly before the meltdown. You have management putting on a circus show to distract the employees from thinking about the sinking ship.
Oct. 1st Green bands for you wrists.
Dec. 1st Cardboard boxs for your desks.
Happy Hollidays!
I mentioned to my pretty sister that we are going straight to a Depression that we may not even do a Recession. She said let’s change the subject. Her husband agreed with me. He says at his firm Grant Thorton, they about talk about the Crash all day.
I’ve heard the definition of recession as being something like two consecutive quarters of negative growth. Not to be trivial with this question, but is there as clear of a definition for a depression?
11 quarters
kinda silly ,as there’s only been one
we’ll just turn Japaneese as the gov “saves” us from the needed creative destruction
A famous definition is “When your neighbor loses his job, it is Recession. When You lose your job, it is Depression”
A lot of people in my circle don’t want to discuss/acknowledge the coming economic crash. Back during the housing bubble years they made fun of a rational thinker (me). Now that the stock market is irrational and hitting records, some are jumping into that. I am tired of pointing out that it is risky. I know that by next year I get to say “I told you so,” but it really doesn’t matter. There is no fun in saying ‘I told you say’ any more. It is better to go on with our lives and watch the fun from sidelines.
I really hope we soon get a major depression that takes care of all the irrational excesses. The sooner the better.
Did anyone see Maria Bartiromo on Real Time with Bill Mahr? She must have stumbled over the phrase “housing IS in a slump, but look at the markets!” like 3 times. She looked very nervous at certain points and evaded one of Mahr’s questions about how “China owns these mortgages”
She’s a skank.
Not from where I sit. But intellectually I’d agree.
I hope you pick your BIL’s brain from time to time about Macro Econ chat at Grant Thornton. What division is he in and where is he based? (If you don’t mind me asking.)
Wipeout. I did pick his brain and for once he was impressed with my knowledge about housing. He said he builds infrastructure all over and sells bigs bonds to big guys. I asked if i could buy some but he only sells to cities. He told me to google his name.
My precious nephew I just found out works at Apollo Group. What am i doing with my life? Preserving Capital.
well well well… Market is down 83 points with the jobs report due out Friday…
I have every confidence that a secret finanical/government cabal will soon step in to manipulate the market higher.
They cannot do this every time, lest they make it too obvious
Market is well above the Bernanke put level of 13250.
The other thing: On correction days, the downside has to be contained. No more 20% plunges will ever be allowed to occur post- Black Monday (10/19/87).
True — I hope someone comes out with a clever metaphor/symbol for that, like a rigged roulette wheel or slot. How bad does it suck that the government rigs the game so blatantly? It reminds me of a slot machine my friend’s dad owned when we were kids — inside, you could slide a weight in, anywhere along the wheel, to rig where it would stop. Maybe someone will sell “The Market Is Rigged” bumper stickers or license plate holders.
“There are few things more personal than the danger of being tossed out of your home because you can’t afford the gimmicky loan you little understood, and whose risks you weren’t prepared to assume.”
This BS is still floating around. The people taking out these loans were fighting others to get into the door first because they truly believed the mantra that RE property only goes up. I have absolutely no sympathy for any of them.
dems unvailed savior plan today
gop will tomorrow
only ronpaul and lp.org offer free markets
How would expanding Fan & Fred help them achieve their affordable housing mission? So far as I can tell, the main results would be a taxpayer-funded bailout of the lending sector, through shifting of bad debt from the lending sector to the taxpayer, and still LESS affordable housing off a low base.
And if you want to fix anything, then by all means create a new Federal Czar position to handle the situation.
This would be a great point in time for R-cans to point out the absurdity of these D-ratic proposals to slam the barn door shut after the horses have been long gone.
“Sen. Dodd along with fellow Democratic Sen. Harry Reid, the Senate Majority Leader, and Nancy Pelosi, the Speaker of the House of Representatives, called for the current limit on Fannie Mae and Freddie Mac investments to be lifted so the mortgage finance companies can buy more troubled home loans.
The two government-sponsored enterprises are under orders from their federal regulator, the Office of Federal Housing Enterprise Oversight, to freeze investment holdings near their current level of a combined $1.4 trillion.
The regulator has said those caps, imposed over a year ago, could be lifted in February, but lawmakers said they should be lifted now in the face of a crisis.”
http://www.reuters.com/article/politicsNews/idUSN0320749120071003
They would still be facing the qualification issue (income verification/debt ratio) and NO 1% teaser rates added to the fact of being underwater value-wise!
‘We’re demonized something fierce,’ Mr. Mozilo said in an interview two weeks ago.”
Really dawg? That’s messed up yo! I feel ya homie.
Not
Dang him ,Dang him
They ought to take a rope and hang him
High from the highest treeeeeeeeeeeee
Test
It says that employees are expected to sign a pledge to ‘demonstrate their commitment to our efforts,’ and Rick Simon, a Countrywide spokesman says about 11,000 have signed.
- Didn’t the Fuhrer do that?
all I know is if your employer starts asking you to sign bullsh!t documents look the eff out…
I smell a big fat lawsuit coming the first time an employee doesn’t sign and gets fired because of it.
Countrywide should be sued frequently, and with gusto.
lol.
Yup. This happened at one place I was at, two months before layoffs. A new employee manual came out, with a form acknowledging that one was an ‘at-will’ employee and could be let go at any time–you had to sign it and return it to HR.
Then, when I finally got hit in round 3 of the layoffs 1.5 years later, they had us sign a one-year non-compete form in order to receive our severance!
Oh, and one other tell-tale sign of impending trouble–if they start beefing up security and making sure everybody is wearing their employee IDs . . .
“‘The disturbing number here isn’t 10 percent … but the $100 billion…With nearly $700 billion in ARMs in negative equity facing interest-rate resets, ‘depending on how much lenders can ultimately recover, this implies (bank) losses will be more like $210 billion to $346 billion,’ she said. ‘And that’s assuming the situation doesn’t get worse.’”
So far we’ve seen, what? A few billion write off at Citicorp, a couple of LEVERAGED hedged funds loosing a couple of billion and Deutsche Bank’s billion or so…….and the “consensus” is that these will be the extent of the damage…….
I’ve been waiting to see someone quantify the exposure and I think Pomeroy’s estimates are pretty reasonable. She’s talking about, realistically, 20% losses on a trillion dollars of loans. Does anyone reasonably expect it to be LESS than that amount? As she says, what’s been revealed is (at best) only about 10% of the CURRENT losses!
I know its hard to wrap your head around S200 billion being vaporized but how is this magnitude of loss NOT going to impact a “Goldilocks” economy? Wasn’t the LTCM loss of $4 Billion near earth shattering at the time? And at least in 1998 the dollar was strong as well as the economy.
Can anyone explain to me how LTCM was a “crisis” at $4 Billion and today we likely swallowing $4 billion losses like candy at major banks?
In my opinion, the Fed cut rates to give banks breathing room because they see a SYSTEMIC risk. And that risk isn’t going to be absorbed over merely one quarter’s write downs. The Fed didn’t cut rates to help the mortgage market (they’re smart enough to know it wouldn’t I’m sure) and they didn’t cut the rates because of recession risks (though those are probably apparent as well). They cut to buy time. Unfortunately, over time the losses Pomeroy notes will have to be revealed by the players one way or another. Those who think the worst is behind us in the credit market or housing market are, I believe, in for a very nasty surprise.
“I know its hard to wrap your head around S200 billion being vaporized but how is this magnitude of loss NOT going to impact a “Goldilocks” economy?”
That figure is vaguely reminiscent of the preliminary Katrina damage estimates. (More recent estimates place the damage costs on the $150b+ range.)
http://en.wikipedia.org/wiki/Economic_effects_of_Hurricane_Katrina
$4 billion was LTCM’s total equity, which was highly leveraged. The notional amount of the securities they held was far higher, over $120 billion. They also had over $1 trillion in off-balance sheet derivatives. The major concern with LTCM was avoiding the massive unwinding and cross-defaults that would have occurred in a liquidation. The bailout was not all that different from the Bear Stearns bailout earlier this year, although BS bailed itself out while LTCM needed the Fed to put together a consortium of banks.
simi, thanks for the input.
The 1998 LTCM involved moneys, which were real. This involves paper moneys that are not real.
ABC — Alec Baldwin Closing.
http://www.youtube.com/watch?v=y-AXTx4PcKI
You think this video is obscene?
What’s obscene is CFC claiming it’s some kind of victim in this housing bubble debacle. After all the lives it has destroyed, to claim it is a victim, that is effing obscene.
What’s more, they are gearing up for more destruction. There is your stinking moral hazard: Keeping sh!t like this afloat and not flushing it out of the system.
You see this watch? This watch cost more than your car.
We have MILLIONS of people saying they had no idea: 1. They had an ARM; 2. they had a pre-payment penalty; 3. prices could cease going up or even slow down (even if there’s still some lost souls who think prices can’t go down); lending qualifications could change. Answers 2 questions: 1. Drivers; and, 2. Voters. We are also announcing to the world that we are a nation of idiots and bigger idiots that want to enable them. Rant off.
–
‘We are coming off the greatest lending bubble — not housing bubble! — in U.S. history. We will feel its impact for a very long time.’
This guy gets it. I have been saying, “It Is the Debt, Stupid!,” for years. Housing price bubble and the building bubble were just the manifestations of the Debt Bubble, or what some call The Credit Bubble.
Jas
Finally someone gets it. I bet a lot more people get it by Christmas.
what, the joshua tree?
–
“We are also announcing to the world that we are a nation of idiots and bigger idiots that want to enable them.”
Many in the world has known it for a while; now we at home know it. And some in the world were copying us. We do influence people outside quite a bit.
Jas
Every single one of those 11,000-green-rubber-band-wearing employees at Countrywide NEED to watch “The Smartest Guys in the Room” - the Enron story. They will see the powers-that-were at Enron saying almost the exact same things as the powers-that-be at Countrywide. How scary for them! People just need to educate themselves!
Also, in these parts (Cincinnati-metro area) we are hearing over and over (in print and t.v. ads) that we have very stable housing prices and that, of course, it’s a great time to buy, blah, blah, blah. I don’t see how some of the numbers I’m seeing about housing prices and sales in the U.S. can be so wrong about our area. I spoke with a RE agent this weekend and she told me things ARE really bad around here. She said there are builders sitting on “market homes” that they have priced way too high, but are apprehensive about dropping prices too low because they supposedly put “so much into upgrades” to get the house sold. Who cares! I told her as far as I’m concerned I’m way past wanting hardwood floors, granite countertops and stainless steel appliances as upgrades - I want all that and a well supplied media room, pool table and a flat screen in the kitchen!
No kidding. Too bad those mcmansions are all crap, those long hallways make it feel like a Michael Mann movie. One guy at Tim Lewis had the nerve to ask my wife and I if we’d like to “take a look at the smaller units” while motioning to the “courtyard” homes. Uh, how ’bout NO. I’ll stick with the 3000+ sq ft thank you very much. It’s too much fun.
“Smartest Guys in the Room” is a great call. Both the book and movie are well worth watching. Words can not describe some of the things Enron employees at all levels were doing.
“smartest guys in the room”, the book and movie are crap. if you want to really know what went on at Enron read “conspiracy of fools” by Kurt Eichenwald. lay was no evil genious, fastow was the evil fool.
the DoJ treats these cases just like they do drug lord and mafia cases, get the guy at the top no matter the cost. what the DoJ does not realize is that in the corporate world there are plenty of folks below the “guy at the top” that can swindle the shareholders.
Absolutely. The recommendation to read that book was one of the best things that came out of my last accounting class.
RE: NOW IT’S PERSONAL! The FUD campaign is now questioning our — yours and mine — ethics, morals, and business practices. And, WE’RE NOT GOING TO TAKE IT!’”
“‘It’s gotten to the point where our integrity is being attacked. NOW IT’S PERSONAL!’ says the transcript of a talk made last week by Mr. Gissinger. ‘… And, WE’RE NOT GOING TO TAKE IT!’”
Pffffffffftttttttttt…Whatta bunch of losers.
Nothin’ more than sound over substance.
Not to mention copyright infringement. Where is Dee Snider when you need him?
Does anyone remember that cell phone commercial a few months ago?
VP: Makes me feel like I’m sticking it to the man.
Asst: But sir, you ARE the man
VP: I know
Asst: So you’re stickin it to yourself?
VP: Kinda
I adored that commercial. I like a good commercial, probably because of the ADD and all. A good commercial is like a good short story. I also love the Burger King commercials, and, oooh, look! A moth! I must go chase it!
“look! A moth! I must go chase it!” totally
Some of my best memories were disctractions.
I tell you-if my boss EVER got up-in-my-face with some girly talk about my ethics or integrity…grrr.
Seriously, I don’t even want to think about how I would respond.
Then, I don’t have the stomache for finacial sector. I like sleeping soundly at night!
Must suck to have your house fall in. Good symbolism for the whole house of cards. And ironic for it to be in one of the bubble central places.
http://news.yahoo.com/s/nm/20071003/us_nm/usa_landslide_dc
“Weather was not thought to be a factor in the landslip.”
For once, weather was not implicated as the cause of an adverse development.
they call that a sinkhole?
This is a sinkhole:
http://www.ordena.com/digg/sinkhole.html
Yep! Housing is Guatemalan sinkhole.
I’d like to see the NAR call a bottom on THAT one!!
“The investigation…has been going on for several weeks, is looking into whether various federal criminal statutes have been violated that resulted in the company’s bankruptcy, the sources said. Among the statutes are conspiracy, securities, mail and wire fraud, and money laundering, the sources said.”
Now this is a great incentive for mortgage brokers to loosen up on their standards. Sorry gang, but a threat of hard-time WILL get the attention of the mortgage hucksters out there. Cannot be good for liquidity at all. So there goes 10 to 20% of the potentiall buyers. Throw in the missing speculators and I would guess conservatively that 35% of the total buyers pool is gone.
“Stressing that the investigation is just in its initial stages, and that no charges have been brought, the sources said investigators are beginning to put together a picture of how American Home Mortgage operated, whether all documentation behind mortgages was legitimate, and whether the company began to cut corners as the mortgage market began to collapse.”
This is just the tip of the iceberg. There are many more just like this one and many individuals will be caught as they each record is investigated..
“‘Fewer contracts were being written because of mortgage- availability issues,’ said Lawrence Yun, a senior economist at the real estate agents group.
Sounds like the housing bear just dumped a big load on the NAR cheerleaders and their lead chearleader Yun. Time to invest in the toilet paper companies!
Txchic,
Any chance the LEND merger with private equity Lone Star might fall through? They extended it once, were suing each other, and we’ll know 5 Oct if they extend it again. As things get tighter, I wonder if the run up in LEND to the agreement price was just a way for them to game the market and when they cancel the deal make some $$$ on the way down.
Thought about buying some options on them on the cheap with the biggest probability that they will just be worthless, but if the deal falls through they might be a huge return.
CCC
“With nearly $700 billion in ARMs in negative equity facing interest-rate resets, ‘depending on how much lenders can ultimately recover, this implies (bank) losses will be more like $210 billion to $346 billion,’ she said. ‘And that’s assuming the situation doesn’t get worse.’”
It sounds like an awful lot of helicopter drops of liquidity will be needed going forward.
“Mr. Gissinger sought to reassure employees about sticking with the company in the transcript: ‘I’ve made a lot of people rich or richer who have joined me on my past crusades. Please trust the same holds true here.’”
Wasn’t Countrywide the same company that gave bonuses if they talked a fixed rate buyer into an ARM. Weren’t they the ones that didn’t use all a persons records just so they wouldn’t qualify for a lower, better rate. So now he’s telling everyone to stick with him & he’ll make them rich, just like before, when they pulled all that shady crap. What a sleeze. Anyone now who takes a mortgage with Countrywide is nuts. I wouldn’t trust them to loan me money to build a doghouse.
I’m tired of waiting for sanity to return. I’m seeing new houses coming on the market with asking prices well above 2005’s! I feel like I should just stop reading about RE for like a year but frankly, I’m semi-obsessed.
Ben- You’ve come up with some great post titles over the years, but “Credit Hit Parade” has got to be one of the best!
NPR’s “Marketplace” reported today that Greenspan has opined that the worst of the subprime debacle is now behind us.
Wasn’t he just saying completely the opposite a week or two ago when pumping his book on TV?
Ah, Deutsche Bank- how I miss 31 West 52.
Here is the thing to listen for on CNBC when you know we are close to bottom, from the 2002 Dot-com bottom on the floor of DB’s Global Markets unit- the hedge funds will just “stop picking up the phones”. That is the Margin call/capitulation buzzword that you want to listen for.
I remember the DB ABS team 30-deep sharing the 31 West Boardroom conference table after 9/11. They must be having a rough time these days. Herr Ackermann came around to thank everyone- bet he wishes he left everything to Rolf Breuer.
Lurking since early ‘05, this site has saved me a fortune. Anyone still have thehousingbubble.blogspot.com bookmarked? libertysoup.com (Ben’s temp backup site)?
After reading the quotes at the beginning of this thread, I’m beginning to think that maybe a lot of the top brass in this country really are clueless about the economy. I know that’s a stretch to say on this site but as time goes on, I’m beginning to think that this whole problem is 20% greed and 80% stupid. If that is the case, we don’t have a housing crisis or an energy crisis in the USA, we have a credibility crisis. For the last decade I’ve noticed where more and more Americans (including your so-called independent thinkers) are becoming more delusional in their perceptions of the world. Two years ago people thought I was crazy to call for 50%+ drops in RE, even the RE bulls. Guess what, it’s happening. I’d expect to see in most parts of the USA a catastrophic drop in RE values. Why? We have a credibility crisis. The only reason that the Dow keeps going up and nothing has come apart yet is simply because most people are in LaLa land. I’m thinking this $300 billion being quoted for bank losses is just the tip of the iceberg. More like in the $3 - 7 trillion for initial losses. After that, who knows what’s next. $300 billion is about $1000 per person, and some people may notice that kind of loss in the economy. When the credibility disappears in the USA, look out, it’s time for Endgame. Do you really think the US government passed the Patriot Act to set up a dictatorship or to catch terrorists? Not really. That and all of the draconian laws set up in the last generation are for damage control. As for what Endgame is, all I can say is take a look around you. Turn off the TV and the Internet and really look. Good luck.
Stinkhole? LOL. I’ve seen worse.