‘Decline In Profitability’ For Subprime Funders
Paul Muolo had this insiders report from NMN. “Investment banking firms increasingly are buying notable stakes in publicly traded subprime firms. For instance, Deutsche Bank, until recently owned 7.2% in Accredited Home Lenders. It no longer owns all that stock in Accredited, though. What happened? Good question.”
“Meanwhile, it appears subprime funders originated north of $720 billion in 2005, a record. If that number holds subprime now accounts for about 26% of all loans funded.”
“Another earnings report and yet another disclosure about competition and pricing pressures. This time around it’s NetBank. In its 2Q press release the mortgage lender disclosed that its conforming and nonconforming mortgage units reported pretax losses of $7 million and $10.8 million, respectively, noting, ‘The decline in profitability within both channels was due mainly to competitive margin pressure, not production volumes.’”
“The Senate Finance Committee issued a statement saying its chairman, Sen. Chuck Grassley, R-Iowa, is reviewing whether government-chartered companies Fannie Mae and Freddie Mac may have abused the special tax status of their charitable foundations by using them ‘and other charitable contributions to skirt’ campaign-finance and lobbying laws.”
And the sell-off continues for Novastar Financial Inc.
The Paypal account now has the verification that some readers were waiting on. Thanks!
Sharp bounce up on HBs and CFC. Anyone know why?
short squeeze, perhaps?
Remember, those declines in profitability include phantom income; all the unpaid interest that accumulates under “pick your payment” options are reported as current reciepts. Remember, these are people that call “loses” “declines in profitability.”
Yup…
Eventually something is going to have to give. These companies will not keep operating at a loss. They will eventually have to raise rates…you can’t ‘buy the market’ forever.
For a long time there the fed was raising rates, but most companies were keeping rates low to remain ‘competitive’. Even if the fed stops raising, I think rates could continue to rise a bit so that companies can make a profit.
SoCalMtgGuy
Another F—-D Borrower
FB FORUMS
For a long time there the fed was raising rates, but most companies were keeping rates low to remain ‘competitive’. Even if the fed stops raising, I think rates could continue to rise a bit so that companies can make a profit.
This is a very interesting AND important question. I think we can compare this to the telecom bust. As liquidity was injected into the system, competition rose and margins declined. What will happen now? Will we have a glut of liquidity (i.e. “lending capacity”) like we have a glut of telecom capacity, or will rising rates take such good care of lenders that irrationality will go away and everyone will behave and make profit…within…say… 12-24 months after the crash?
Sharp bounce? It’s called trading. It can’t be frothy and confusing if it falls straight down.
It’s just that “PPT” thing. They all move together.
Thanks, Get Stucco!
I see evidence of a “change in regime” showing up on those HB stock charts since Bernanke took over at the Fed, in the sense of much less evidence of perfectly correlated large upward moves in all HB stock prices at the same time. My guess is that he has substituted methadone for the heroin of govt intervention to which Fed-watching speculators have become addicted, and plans to gradually wean the markets off methadone over the next couple of years. Consequently, the air is gradually leaving the HB stock price balloon…
P.S. The long bond still gets full PPT protection; otherwise the WSJ would feel compelled to present a careful analysis of the implications of an inverted yield curve …
http://tinyurl.com/aemkc
Sorry, I had to post this…it is a creative song…you must think of Margaritaville by Jimmy Buffet when you read this, the new words fit perfect into the melody…without further lecturing…enjoy:
Towin’ my Chevy
From the back levee
My credit is now such a mess
But it was a fun time
With bottles of French wine
The Corvette is now repossessed
Wastin’ away again in Margaritaville
Searching for my lost window pane
Some people claim that Katrina’s to blame
But I know it’s all Greenspan’s fault
I don’t know the reason
That condos were screamin’
I’ve nothin’ to show for 800k
The condo’s now empty
My loan’s still a plenty
And how it got financed I haven’t a clue
Wastin’ away again in Margaritaville
Searching for my lost window pane
Some people claim that Katrina’s to blame
But I know it could be my fault
I blew out my credit
But how did they let it
Get purchased without insurance
It seemed like a steal
They said it’s a deal
It’s now yours for a song and a dance
Wastin’ away again in Margaritaville
Searching for my lost window pane
Some people claim that Katrina’s to blame
But I know it’s my own damn fault
LOL!
Off topic but Google News keeps me updated on the mainstream media’s view on the bubble. They’ve been mostly anti-bubble in the past but today two new articles appeared.
MSN: Notes from a Housing Bubble Bust
Big Bang Theory: Housing Bubble meets pin
Re: the article, “MSN: Notes from a Housing Bubble Bust”. It’s written by Bill Fleckenstein, and he’s been a housing bear for ages. In fact, he’s written a number of bubble-busting articles that MSN has printed all year long. I highly recommend you browse through the archives on MSN for his “Contrarian Chronicles”.
Speaking of GOOG, I am wondering whether it is possible for corporations to compete in the Winter Olympics? The reason I ask is that it looks like GOOG might have a shot at the gold metal in the downhill competition. Today’s WSJ article, which showed just how much of this high-risk stock’s recent earnings came in the form of interest income (the kind you can make in super-safe short-term Treasury bills), will probably add a bit of warp speed to the downhill slide.
http://tinyurl.com/dtemw
Fascinating story about the fragility of municipalities. Sort of off topic, but with the coming upheaval in real estate one has to wonder how the social effects of a collapsing real estate market will manifest themselves. I was in fifth grade when all this was going on in NYC and have no recollection of the events. And even if I did, I surely would not, at the tender age of 10, have any appreciation for the significance of the social strains heaped on what many call the greatest city in the world. The story illustrates the complete lack of awareness by just about everbody with respect to the vulnerabilitiesa major city faces and how close things came to the edge. Fast forward 25 years and I doubt you can say the municipal unions can exert the same kind of pressure, but that’s not to say that vulnerabilities still don’t exist. What about the bubble areas? What will be the effects of massive “wealth” elimination in places like NYC, OC and SFO?
http://www.americanheritage.com/places/articles/web/20060213-new-york-city-disaster-edward-i-koch-strikes.shtml
eleimination of gov unions-now that’s worth a cheer
flat,
Personally, I think gov unions are the only thing holding up the middle class at this point. That being said, NOTHING is immune to the housing bubble bust, least of all unions, IMHO. You would not believe (ok, maybe you would) how much the local govts are relying on their new “income” levels. They are spending like crazy, and nobody seems to question the viability of the housing market and resultant property tax receipts. I keep asking people I know in muni govt what their plans are if the bubble bursts. Needless to say, these govt planners often own homes in the local area, and are cheerleaders for the cities they work in. They are as ignorant as the rest of the masses. They insist prices will not fall or will only fall 5-10% before quickly rebounding in a year or so.
**Everybody** is going to suffer in this one.
Good luck on that one– Arnold took on the big gvt unions in CA and the unions won, hands down. CA: Home of the grossly overpaid gvt workers and platinum-plated gvt pensions.