March 30, 2007

Bear Stearns and IndyMac say Alt-A (liar's loans) won't have trouble. HousingPANIC says they will. Who you gonna bet on?

Remember the scenes in Titanic when the captain and crew assured passengers that all would be well?

We all know how that one ended, and many of us know how the Liars Loan Debacle will end too.

You cannot lend money carelessly to anyone who can smoke a mirror (Casey Serin), with no proof of income, no proof they can pay the money back and no proof they didn't take out multiple other liar's loans concurrently.

Oh, I correct that. Yes, in today's environment, you CAN lend money out carelessly to anyone. And that's why the mother of all meltdowns is underway.

Note, I'm short IndyMac (NDE), far and away the biggest issuer of liar's loans, via an October put.

Bear Stearns, IndyMac Say Subprime Woes Won't Spread

March 29 (Bloomberg) -- Bear Stearns Cos., the biggest U.S. underwriter of mortgage-backed bonds, said the surge of defaults in subprime home loans won't spread to other parts of the mortgage market, and IndyMac Bancorp Inc. said losses from more creditworthy customers are far below industry averages.

Lending 100 percent of the home value, not verifying borrowers' income and lower credit scores caused U.S. subprime defaults to rise, said Tom Marano, head of Bear Stearns' mortgage business, in a New York meeting with investors today. Only 7 percent of Alt-A mortgages, another low-documentation loan that's drawn scrutiny, combine all three risk factors, he said.

Shares of companies that offer less-risky mortgages including IndyMac Bancorp have fallen this year partly because investors were concerned Alt-A loans may go sour. Regulators including Federal Reserve Chairman Ben Bernanke said they don't see any ``spillover'' of defaults into safer mortgages, and IndyMac said today the industry's loss rate on Alt-A is one- seventeenth the level of subprime loans.

``The contagion isn't that big a problem,'' Marano said. ``I don't see the risk as being that significant at this point.''


Anonymous said...

Hawaii is just starting to see leaks in the seams. The subprime and alt-a aren't even issues here yet. It is still the opening act here. Plenty of articles about how Hawaii is immunized from the meltdown.

bozonian said...

I just want to slap these people silly and tell them to wake up.

I hope investors sue the f*ck out of them when they do collapse. These statements they are making are obviously, um, shall we put it politely, overoptimistic.

I'm short heavy on NDE for the April puts. I may lose out. However, I see absolutely NO upside to the housing market. It's all bad news coming down the pike. It's just going to take one day of bad "ALT-A" news and the next tier of mortage lenders is going to take the Long Walk, the trip to Davy Jone's Locker, the Final Curtain.

The best I can see is a long, slow, agonizing death rattle. Notice the short spikes up in lender stock every morning followed by mostly decaying value during the rest of the day. It looks like someone is trying to "prime" the market early on, trying to make everyone think that "this is the day the lenders will recover" but it doesn't go. You can crank the engine all day long. There's no gas in the tank.

These companies and stocks have no future.

Anonymous said...

When companies spend this much time and effort trying to manage their stock price versus managing their company, you know it's in trouble

Remember TASER?

Anonymous said...

I bet Casey's liar's loans are with IndyMac

GrandInquisitor said...

3 things.

1) The MSM is completely f*cking up the term "liar loan." I read an article where they inferred that the liar was the bank giving the loan! The liar is the jerkoff who lied about his income. Wow, let the spin begin.

2) I read another article that congressman in Ohio and NJ are already trying to pass legislation to raise tax dollars to bail out homeowners in foreclosure. I knew this would happen. The prudent savers of America are going to bail out a guy who is living in a 3,500 sq foot home. If this happens I'm moving to Canada.

3) Some idiots are still stuck in the denial phase. I'm not kidding. People who bought in 2003 think they are "safe" and that prices can't drop to that level.

Jeff in Florida said...

Here is one right in my own neighborhood:






Purchased 4-05-06 for $359,000
80/20 (100% Financing) through Countrywide. 6.5% 5/25 Adjustable Rate

Notice the plaintiff list "Alt-A" Securities Mortgage Trust.

This person most likely had to lie about thier income to make the bank believe that they could afford $2500 plus for a mortgage on Jacksonville Florida salaries.
This is probably the tip of the iceburg depending on how widespread this is with KB/Countrywide.

Anonymous said...

Mortgage crisis
Million-dollar homes get hit.

Watch video:

Anonymous said...

Anyone else noticed that "at this point." is at the end of every sentence about how we are fine?

Anonymous said...

"If this happens I'm moving to Canada."

If they pass either immigration "reform" or foreclosure assistance, I am out, too.

But where to go. Canada taxes the hell out of one, has tons of immigrants itself, and it is cold.

Anonymous said...

Depends on which Alt-A loans you're referring to. They are not bad loan products when used PROPERLY. They were designed for people who are self employed and need to state their income. Same is true about the neg am. The pick-a-payment loan is ideal for those with inconsistent monthly income. And If I remember correctly, an Alt A loans requires the borrower to show 3mo+ reserves. For lack of reserves, many of those with good credit ended up with a subprime loan which didn't require any.
I left the mortgage industry last year and I can tell you that ALOT of stataed income loans were made to salaried people. Those will be blowing up for sure.

CTRL-ALT-DEL said...

Bear Stearns was the one that upgraded NEW two days before it dropped from $16 to $4. They were also saying all is well back then.

As far as Alt-A, they accounted for over 20% of loans taken out in 2006. Do you think 20% of mortgagees are self-employed? They were allowing salaried and wage earners to file Alt-A apps. Even the true business owners who did Alt-A lied about their income.

dagg said...

this coming from the same company that upgraded New Century before it collapsed. just too funny.

chris g said...

They mentioned that only 7% of Alt-A combined low credit scores, dial-an-income, and 100% financing. Well, dial-an-income was 80% of all Alt-A mortgages so that's not good. I don't know about the 100% financing but I wouldn't be surprised if at least half of the Alt-A's were financed the whole amount (after all, even if you have some money for a down payment, why would you do that if you can finance the whole damn thing?) Then the only thing left is the credit score. The average credit score for Alt-A depends on the lender, but I've seen it as low as 660 and as high as 717.

Look, I don't care what your credit score is if you don't have the money, OK? If you thought you were going to flip a house and you got stuck, you're probably screwed, period. I don't care if your credit score is in the stratosphere...if you don't have the money, that's it! Three months that's gonna help you, especially when the rate resets and you can't refinance. You'll lose the house AND your reserves, and also lose that sweet credit score.

Anonymous said...

I bought January puts on NDE. I'M WITH YOU 100% KEITH!!!

Just wait till LA / OC area noses down and starts falling at 0.5% per month, just like Boston did last year. NDE iz screwed.