February 21, 2007

FLASH: Novastar blows up - the latest subprime casualty. So when does Countrywide pre-announce it's disaster?


The race to jail between insider sellers Bob Toll and Angelo Mozilo seemed to be neck and neck, but I'd bet more on Mozilo today, as not a word yet from Countrywide about their impending disaster and write-down. I guess they're still adding up the carnage.

The loans ain't gettin' paid back folks. Massive mortgage fraud, flaky flippers and plummeting prices have destroyed anyone playing in the subprime pool.

Fannie and Freddie know it too. And we're talking TRILLIONS when it comes to those impending disasters.

Here's the latest dot-subprime to predictably blow up. Now there's blood in the streets, and we're just starting...

(disclosure - I'm gleefully short CFC and LEND at time of writing, and sure wish I was short 'em all)

NovaStar Flames Out

Shares of NovaStar Financial plummeted 26% after the real estate investment trust became the latest casualty of rising problems in the subprime mortgage market.

The Kansas City, Mo., mortgage lender reported a loss of $14.4 million, or 39 cents a share, compared with a profit of $26.4 million, or 84 cents a share, a year earlier.

"The credit performance of our portfolio, and specifically our 2006 originators, deteriorated during the fourth quarter, resulting in impairments on mortgage securities and additional loss provisions for loans held-in-portfolio in the REIT," says Scott Hartman, NovaStar's CEO. "Also, our gains upon securitization were reduced during the quarter because of lower whole loan prices. Furthermore, during the fourth quarter, we experienced a greater level of loan repurchase requests due to early payment defaults than we have historically."

The news comes just two weeks after shares in NovaStar rival New Century blew up after the company warned it was experiencing similar problems.

31 comments:

bozonian said...

Hahahahaha! LOL! Dude!

Come on, be nice, in this case it's only 200,000,000 dollars of equity that just vaporized. New Century lost 500,000,000

200 million here, 500 million there, pretty soon that adds up to some real money.

I'm glad I bought some March 40 puts on Countryslide today. Tomorrow will be harvest day.

There is a lot of stupid money out there that refuses to believe the crash is coming. For all the rest of us, there is shorting stocks and put options.

Woo hoo!

Back to my ratty, smelly couch I found in a dumpster to eat my renter's dinner off a cable spool table.

P.S. Notice the insider trading at Countrywide: http://finance.yahoo.com/q/it?s=CFC

Mozilo is selling 116,000 shares and others are selling too.

Get as many cookies out of the cookie jar before you get caught I always say.

Anonymous said...

the amounts of money involved in this are staggering

GreedKills said...

My favorite part where they said that they expect to see little if any taxable income through 2011.

Oh...and Countrywide...their still around for a bit I think...Paul Allen just broke ground last week on a New Condo...financing provided through Countrywide.

Anonymous said...

This when the market hit another record high, come on folks move along, there's no bubble here. Oh, and the blood on the streets hmmm... that's nothing, move along, go buy something.

Butch said...

Be careful with Countrywide. They are going to be deemed "too big to fail".

Remember that CFC is one of the "Old Boyz Club" of primary securities dealers, which gives them a direct line to the Fed to dump some of those collapsing MBS.

Also, please keep in mind the rumors that CFC might be absorbed by Bank of America (another "too big to fail" member), so there is another avenue of bailout.

Finally, I have been perusing the FDIC site regarding the previous real estate bubble and bust of the late 80's/early 90's and I can tell you the government response will be massive, just as it was then via the RTC. visit this link to get a feel for the lengths the government will go to mop up the mess.

Not that we aren't facing major pain and trillions lost, but that it won't happen in a linear fasion and some of the major players (CFC) will be bailed out.

The link:

http://www.fdic.gov/bank/historical/managing/Chron/index.html

tmaioli said...

Everyone is building wealth - what bubble?

Anonymous said...

"i love the smelll of napalm in the morning!"

michael said...

mortgage back securities (for some stupid reason) are qualified REIT assets.

that means they count as real estate assets when the REIT performs its test to validate its REIT status with the IRS.

alot of the mortgage REITs bought these MBS to manage their REIT status.

a large write down in the value may jepordize that status which would suck hind tit.

although the write downs could be for GAAP purposes only and therefore not impact the asset test (which may be performed on a tax/historical cost basis).

David said...

David Lereah’s Condo Investment Goes Bust

http://tinyurl.com/25anlb

David Lereah Watch

borkafatty said...

This is great...good to see the greedy pricks getting their asses handed to them for all the corruption in this industry. Nice to sit by Idle with no debt and see this all unfold.

Anonymous said...

Paul Allen is a fool. What's he ever done?

On the other hand HP renters, now there is a group that knows things about making money.

Anonymous said...

Rents are falling huh? Apartments can be had for $500 a month huh?

Not in Ventura County:
http://tinyurl.com/ytxp4d
Even renting has become unaffordable for some. The average rent for a two-bedroom apartment last year rose 6.1 percent to $1,523 per month

Not in Los Angeles:
http://tinyurl.com/2v7dpq
Mr. Horn said he had noticed lately that “while the sales market has slowed the demand for leases has gotten higher,” this sometimes creates bidding wars. A house in the west side of Los Angeles that was recently listed for rent at $30,000 a month is now being leased for $50,000, because several people were interested in it.

Not in Phoenix:
http://tinyurl.com/3cm9rv
The average price for an apartment in the Valley is about $785 per month. That's up more than 5 percent.


NAHHH must be all MSN/NAR/David Lereah lies.

Never mind.

Dr Housing Bubble said...

And another one bites the dust. Isn't it obvious that subprime lenders are going to take it on the chin this year? Besides that, even those with "prime" mortgages will take hits because they have co-mingled loans in the secondary market making otherwise good loans bad.

It'll be an interesting 2007.

Dr. Housing Bubble

Anonymous said...

"Despite the sobering statistics, economists said the market is slowing in a systematic way, and there is little fear that the bottom will fall out, as it did in the early 1990s when prices went into a tailspin."

and

"Sales are down, but they aren't down a dramatic number."

"Every market needs a breather,"


http://tinyurl.com/39w5z5

joey said...

I couple of small US companies folding won't add up to much. There are trillions of liquidity out there. Can't get it here? Get it from asia. Nothing major will happen until something big internationally happens.It's still way to easy to get a mortgage for any major crisis to happen. By the way, I've been here this housing doom scenario since 2003.

Anonymous said...

Watch these Subprime Bust videos !!!

Real Estate and REIC investors were warned few months ago !!!

I Love Broadband over PowerLine said...

Gold is up... $684.5/oz today !!!

Honica jewinski said...

Damn it, when is this crash gonna happen where I live. I'm sick and tired of renting this lakefront condo, and this is after only a few months. So what if I netted a $28,000 gain off the sale of my 3000 sq ft house. I don't know if it was worth it! If I could buy back in at what I bought the last one in june of 05 for, I'd do it in a heartbeat! Even if I lost a few thousand over the next five years it'd be worth it.

Out at the peak said...

Scottrade:
CFC SELL SHORT 150 LIMIT $42.01 REJECTED: NO SHARES AVAILABLE TO SHORT - PLEASE CO

:(

Anonymous said...

Cascading defaults from the butterfly effect of many Casey Serins througout the land

From the flutter of but a few velvety wings, comes a soft whisper across the sand

Many mortgage moths join the fray to beat their tiny and over burdened wings

And the whisper grows to a gust from the mortgage moth hordes - what wickedness this wind brings?

hairy scrotum said...

Countrywide insiders are scrableing to hide their deceptive business practices.I have inside knowledge that sh@t is going to hit the fan real soon.There are thousands of casey serins starting to come to the surface.

Anonymous said...

Corporate cash holdings are at record levels. There is enough liquidity out there that a few subprime mortgage lenders going bust won't even make a ripple in the big picture.

From BW:

Corporate America is sitting on a huge pile of cash. The nonfinancial companies in the Standard & Poor's (MHP ) 500-stock index have amassed a record $637 billion, according to S&P equity analyst Howard Silverblatt.

Justin said...

Just a few questions:
If corporate America is sitting such a large amount of cash:
Then why are so many downsizing?
Why are so many using two sets of books, one for the IRS and one for the shareholders? (all legal under GAAP Generally Accepted Accounting Practices, just like Enron)
Why are so few paying decent dividends?

Again, just a few questions I have, nothing more.

Anonymous said...

Cash and earnings will always be at a record due to inflation. The minimum wage is at record highs. That must mean that the minimum wage workers are rolling in cash now.

Anonymous said...

I don't care if CFC is bailed out, as long as:

1) They first crash to 20.00/share so my puts are real profitable

2) My taxes don't pay for the bail out

3) House prices return to sanity.

Anonymous said...

Then why are so many downsizing?
Why are so many using two sets of books, one for the IRS and one for the shareholders? (all legal under GAAP Generally Accepted Accounting Practices, just like Enron)
Why are so few paying decent dividends?


Here we go again, it's all a conspiracy. Doofus, the reason some companies are laying off workers is because those workers - almost always in the US - are expensive and unproductive. If I as a CEO have the option of paying $50 an hour to a lazy American or $10 an hour to a hard working Chinese, guess which option I'll take? And what do you think will happe to that saved $40?....think hard now, realy hard now...YES...it will be CASH ON HAND!!

As for dividends...take an accounting class and learn why dividends are not such a good idea for most companies.

Anonymous said...

Notice that the big subprime lenders are offering high yeild CD's. Just like before the S&L crisis.

LauraVella said...

Notice that the big subprime lenders are offering high yeild CD's. Just like before the S&L crisis.

Trying to increase their cash positions? It will take alot of $$$ to off-set those bad loans

It's tempting, but I would stay away.

Anonymous said...

I think the companies are sitting on all the cash because they know its going to get a whole lot more valuable.

Credit contraction => reduced money supply => deflation

Banks get loans paid back with more "expensive" dollars. But I think they got too greedy on subprime stuff.

That being said I think we are seeing a macro short-term financial philosophy that is evident in both buyers and sellers of debt. Is it time for a painful paradigm change?

chris g said...

First New Century, then Novastar, and then maybe Countrywide. I'm taking a bet that Fremont will eventually have problems.

First it was subprime. Alt-A (with all of those option ARM borrowers) is going to be next. Option ARM implosion will likely crest in 2008. FirstFed Financial (ticker symbol FED) has about 80% of their loans as negative amortization. Almost all of their taxable income is phantom income because the unpaid interest on the negative amortization (difference between the interest-only payment and what the borrowers pay) is inexplicably recorded as income according to GAAP, even though it hasn't been paid yet.

polly permabull said...

All is well, all is well. There's no need to panic. Your NEW and NFI shares and dividends are just undergoing a healthy correction