March 09, 2007

That's gotta suck: Take out a toxic loan, figure you can refi when it adjusts, subprime melts down, now you're stuck

You can just hear the corrupt commission-hungry unregulated no-morals mortgage broker telling his sucker (oops, "client") to go ahead and take out the toxic no-down, no-doc, teaser-rate loan (with the massive hidden payoff fee), because the sucker (oops, "client") could just come back in a couple of years when the toxic loan was due to reset and refi.

Well, things change my friends. And now that sucker (oops, "client") is stuck like a pig in a poke, unable to refi because the funny money window is closed as subprime lenders go belly-up and Alt-A melts down.

Check out this USA Today cover story, with a mention of little Casey Serin as well...

Homeowners Stuck As Lenders Cinch Standards

Edward Booker is one of nearly 3 million homeowners with adjustable-rate mortgages who've had trouble paying their bills. And, like Booker, many of them won't be able to refinance their loans once the interest rates start rising. At that point, they'll have to tighten their belts, sell their homes or lose them through foreclosure.

This month, the mortgage payment on Booker's Chicago home rose $200, to about $1,300. It'll go up again in September. He wants to refinance, but he fell behind on payments after his wife died of cancer in 2005, so no lender wants to take the risk.

I'm just trying to hold onto my house until I can figure out something else to do," says Booker, 58, a former rail-car inspector who's on disability.

Since the start of the year, more lenders have been shutting their doors to people such as Booker, just as those homeowners' interest rates are rising. They're slashing the "Bad credit? No problem" types of loan programs, known as subprime, that helped fuel the housing boom. And they're raising the bar for homeowners and first-time buyers to qualify for new loans.

"It will be a very severe correction (in the subprime market), and I think it will last anywhere from six to 12 months, during which many of the lenders who have operated in this market will gradually get pushed out of business," says Chris Flanagan, a managing director for JPMorgan.

The Center for Responsible Lending projects that 2.2 million homeowners with subprime loans will lose their homes.

Experts say there's plenty of blame to go around. During the real estate boom, lenders began offering an array of loans to borrowers with poor credit histories. They let many borrowers finance 100% of the purchase price, often asking for little or no proof of income or assets. Last year, 43% of loans required little or no documentation of the borrower's finances, according to First American LoanPerformance. These "stated-income" loans have earned the nickname "liar loans."

Some borrowers, meantime, contracted real estate fever and took out loans they didn't fully understand or stretched their budgets too thin. Some lied about their income on their loan applications, sometimes with a wink or a little help from their broker on a stated-income loan.

Casey Serin is a classic case. Serin, a Sacramento website designer who was profiled in USA TODAY in October, has admitted that he lied on his loan applications to buy eight houses in four states as investments. He hoped to flip them for a quick profit, but he made too many newbie mistakes. He sold three of the homes, the lenders foreclosed on two, and he's still trying to sell the remaining three.


Scott Ritter said...

Don't worry the next mis-direction is coming sheeple.

Former UN inspector sees war with Iran

Laconia Citizen - Laconia,NH,USA

"We are going to war against Iran," said Ritter.

"I'm sure of this. Congress has given the green light. The public is continuing to be ignorant. ..."

housing atm guy said...

I am PISSED that my free housing ATM money has been turned off!

David said...

Keith wrote " funny money window is closed"

The funny money is still available. It is just somewhat harder to get and
costs more interest.

Anonymous said...

Its the Ownership Society.

Brought to you by USA Today, GWB and Casey Serin.

Anonymous said...

"Whatever future developments may prove to be, my best guess is that the US will continue to maintain a fa├žade of Constitutional government and drift along until financial bankruptcy overtakes it." Chalmers Johnson, "Empire V. Democracy: Why Nemesis is at our Door"

Anonymous said...

The world is at a crossroads and everyone who can fog a mirror knows it.

Anonymous said...

Red flags are going up everywhere.

Anonymous said...

wake up before it’s too late

Stuck in So Pa said...

Ahh, that nice, gentle, soft sounding, so proper word "correction" again!

I wonder at what point in the MSM's mind this boondoggle leaves "correction" and goes into "sliding into the ninth pit of economic and financial hell"?

Spin and denial.

Anonymous said...

two words: fuhgeddabout it

Anonymous said...

Katie Couric has'nt said anything about a bubble..... this blog is wasting my time.....I should be reading about Britney Spears.

David said...

Realtor Membership Drops Significantly

Anonymous said...

QWEEF; the Casey story is getting sooooooo old, please find something new to talk about

3% drop is not a crash said...

Hey weren't all the illegals supposed to go home by now since construction was supposedly dead? Sorry Minutemen, it ain't happenin'

Business Journal of Phoenix
March 9, 2007

Latinos make up 13.6 percent of the U.S. employment population, but accounted for 36.7 percent of 2006 U.S. employment growth, according to a study from the Pew Hispanic Center.

Most of the jobs Hispanic workers landed were in the construction industry, despite a slowdown in the housing market nationally and in major metros such as Phoenix, Las Vegas and Southern California. In fact, two out of every three new U.S. construction jobs went to Hispanic workers, according to the Washington, D.C. organization. "They benefited from strong employment growth in the industry even as the housing market endured a year-long slump," the report said.

Hispanic employment increased by almost 1 million from 2005 to 2006, with foreign-born Latinos who arrived since 2000 responsible for about 24 percent of the total U.S. employment increase.

brokersleaveyoubroke said...

But, but if a record number of Americans own houses, including 2.2 million who can't afford those houses, and the easy money has dried up, who is going to buy all the empty new houses and start the recovery that all the cheerleaders keep telling us about? Millions of houses are headed into foreclosure yet the NAR says we've already hit bottom. Nobody wants to admit the party is over.

Tony said...

"He hoped to flip them for a quick profit, but he made too many newbie mistakes. He sold three of the homes, the lenders foreclosed on two, and he's still trying to sell the remaining three."

Um, short sale...

I Love Broadband over PowerLine said...

Hovnanian Takes a Hit
By Nicholas Yulico Staff Reporter
3/9/2007 10:19 AM EST

Hovnanian Enterprises (HOV) swung to a first-quarter loss, as expected, but the homebuilder also cut its fiscal-year guidance and said it can't yet call a bottom to the housing decline.

Shares were trading down $1.37, or 4.5%, to $29.23.

Late Thursday, the builder reported a loss of $57.3 million, or 91 cents a share, for the quarter ended Jan. 31. A year earlier, Hovnanian recorded a profit of $81.4 million, or $1.25 a share.

The latest quarter's results included $93 million in charges related to the company's Fort Myers-Coral operation in Florida, which Hovnanian attributed to a continued decline in sales pace, weak market conditions and increasing cancellation rates during the quarter

Total revenue for the period fell 8.8% to $1.2 billion.

"Most of our markets have begun to show signs of stabilization, but we are not yet confident that we have found the bottom of this housing slowdown," Ara Hovnanian, the company's CEO, said in a statement.

The builder lowered its 2007 EPS forecast to $1.10 to $1.50, excluding the first-quarter charges, from its previous guidance of $1.50 to $2. After charges, the projection amounts to fiscal 2007 results ranging from break-even to earnings of 40 cents a share.

Bank of America analyst Daniel Oppenheim wrote in a research note that the lowered guidance suggests that buyers' response to Hovnanian's sales incentives in the quarter didn't meet management's expectations.

"We think higher incentives may be necessary to boost sales during the Spring season," he wrote.

Hovnanian's first-quarter net new-home orders fell 23% to 2,570 contracts. In February, however, orders rose 2.6%.

Oppenheim noted that the increase means the company is on track to best his estimate for a 10.7% order decline in the second quarter. The sales rise, though, could have been the result of heavy incentives.

"We think February orders were aided by aggressive incentives to move cancelled homes, especially in Ft. Myers," Oppenheim said.

Anonymous said...

how's life going for everyone in the basement apartment today?

Anonymous said...

Hey what happened this week? Wasn't the dow supposed to drop 1000? Instead it's up 300 for the week. What's the deal?

Must be that darned PPT at work again.

Anonymous said...

I used to to work with this older guy, 50-sometihng. We called him Grandpa Grumpus since he was always so pissed off at the world. He was the kind of guy who would win a $100 million dollars and only concentrate on the fact that he he had to pay $40 million in taxes. The glass wasn't half empty, it didn't even exist in his mind.

Every little thing was the end of the world with him. A meeting would start 5 minutes late, oh man the meeting is runied. He'd see that a storm was coming, he'd start freaking out that his house would flood (never did in 4 years I knew him). And of course he'd see that an investment of his was down 2% for the day he'd start talking about eating cat food in retirement and not in a ha-ha kind of way but seriously and then mention it over and over throughout the day.

This is how I see HP. A collection of Grandpa Grumpuses with absolutely no perspective on anything, where any sign of a storm means a flood. Well sometimes it does flood after a storm, usually it doesn't. And when it does, the water recedes, you clean up and on you go.

And just like Grandpa Grumpus was great entertainment, so is HP and that's why I keep coming back.

PS: how's that gold you all bought last week at $690 doing these days?

olives said...

You obviously equate being "realistic" with being "grumpy".

I suppose then being overly-optimistic at the time about the economy would equate with "naive".

Batman said...

to Anon 5:36

Yeah, bought YRI at 5 bucks a share a year and a half ago and now its at 16. Boy I sure feel stupid buying gold stocks Einstein.

Could you please post more pathetic rants for our amusement? Sometimes it's good to know that all the morons are not just Fox TV show hosts. Thanks for your 2 cents worth (soon to be worth 1 cent based on the investing strategies you're bragging about).

Anonymous said...

batman, I posted that 5:36...WTF are you talking about, what investment strategies did I mention? I asked how's that gold you bought at $690 doing? Gold is at $650 right now. I suppose that's a good strategy, buy high sell low.

Oh and I think you mean fox news, not fox tv smartypants. If you're going to insult a network pick the right one for crying out loud. Or do you have something against The Simpsons and The OC as well...those are fox tv shows as opposed to O'Reilly which is on fox news. see the difference now?

Granpa Grumpus would feel right at home here. Look out GG, I heard the forecast is calling for rain, better check on that flood insurance, ya never know.

Anonymous said...
This comment has been removed by a blog administrator.
Anonymous said...

This month, the mortgage payment on Booker's Chicago home rose $200, to about $1,300. It'll go up again in September. He wants to refinance, but he fell behind on payments after his wife died of cancer in 2005, so no lender wants to take the risk.

BWA HA HA HA!! His wife died of cancer. What a loser. Let's all laugh at him BWA HA HA HA HA!!

You people are sick and twisted fucks laughing at someone's misery like that.

buy_high_sell_low said...

Gotta love the comment "trying to hang onto my home"

My home? surely he really means the banks home

anon#1111 said...
This comment has been removed by a blog administrator.
buy_high_sell_low said...

batman said:

"Yeah, bought YRI at 5 bucks a share a year and a half ago and now its at 16. Boy I sure feel stupid buying gold stocks Einstein."

And I bought GG 6 months ago at just under 30 and now it is below 25! but I bought my house 15 years ago and I am up 300%, boy do I feel stupid buying a home.

It is all about timing batman. there were a lot of posts a week or so ago saying now is the time to buy gold. That is what Einstein was talking about, not a year and a half ago.

Anonymous said...

olives said...

You obviously equate being "realistic" with being "grumpy".

I suppose then being overly-optimistic at the time about the economy would equate with "naive".


90% drops in home prices, $3000 gold, $1 million dollar bills, 90% of the population dying off, a secret group of people buying stocks.

All things I've read on this blog.

That is not "realistic". That is crazy people talking.

Anonymous said...

Check out the potential rate increases coming this year!!! Holy smokes!!!
MARCH 19, 2007


Under The Fed's Hammer

Who Will Get Shredded?


Under The Fed's Hammer
How Fed rate hikes have turned into a regressive tax on weak borrowers

The crash in subprime lending has put Federal Reserve Chairman Ben S. Bernanke in an awkward position. In past business cycles, when the Fed raised interest rates, the impact was democratic: Companies large and small had to pay more to borrow, and so did most households. Everyone suffered.

This time around, though, most borrowers have been able to escape the Fed's interest-rate hammer. As the Fed has boosted short-term rates by more than four percentage points since 2004--the biggest move since the early 1980s--corporations and households with good credit have easily switched to long-term loans, where rates have barely budged over the past three years. "A prime borrower has options," says Robert Moulton, president of Americana Mortgage Group Inc., a Manhasset (N.Y.) mortgage broker.

Which leaves one group of Americans to absorb the brunt of tight money: families with poor credit. These typically low- to moderate-income families have always relied heavily on short-term borrowing. But they are even more vulnerable today because so many of them bought homes during the boom using subprime adjustable-rate mortgage loans (ARMs) tied to short-term interest rates. As rates have gone up, loan payments are beginning to skyrocket.

The numbers involved are enormous. About $265 billion worth of subprime loans are scheduled to have their rates adjusted upward in 2007, estimates analyst Michael Youngblood of Friedman, Billings, Ramsey & Co. (FBR ) in Arlington, Va. And because money for subprime loans has dried up in recent weeks, it's going to be far harder for these borrowers to refinance. The result: Many stretched homeowners may soon be paying 11% or 12% on their mortgages, while everyone else can get 30-year fixed-rate loans at a little over 6%. That's the plight of Pamela G., a blind mother of three in Golden Valley, Minn., who is a medical transcriptionist. Her monthly payment just jumped to $2,544 from $2,088 and is headed higher. "Unfortunately," she says, "the gal did not overly explain to me that once the three years [of the teaser rate] were done, the rate would boot way up."

In effect, monetary policy is turning into a regressive tax, putting the Fed and Bernanke in a bind: If he holds rates at current levels without regard to the impact on subprime borrowers, foreclosure rates over the coming year could approach recession levels. On the other hand, if the Fed starts lowering rates to spare subprime borrowers from default, it risks letting inflation accelerate, which would harm everyone.

Most economists argue that the economy is healthy enough to withstand the problems in subprime. That's partly because the Fed's 17 rate increases have had a relatively narrow impact. Today only 28% of nonfinancial corporate debt is tied to short-term rates, much lower than in the past. Interest payments on corporate debt have risen only by $30 billion since 2004--a pittance when profits have leapt by more than $300 billion.

Similarly, families with better credit have been able to escape the short-term squeeze by switching to fixed-rate mortgages. Take the case of a hypothetical prime borrower who took out an ARM loan two years ago and saw the rate reset after one year. The starting rate was about 4%; it would have gone up to about 7.5%. But instead of absorbing the near-doubling of the rate, this prime borrower could refinance into a 30-year fixed-rate loan at a bit over 6%. In other words, an increase of five percentage points in the Fed funds rate translated into only a two percentage-point increase in long-term rates for the homeowner.

Nor have car buyers been hit hard by the rate increases, even though the auto sector was a key channel for monetary policy in the past. According to data from the Fed, the interest rate on banks' car loans has increased by only 1.5 percentage points since 2004.

Homeowners with subprime loans aren't as lucky. Few seem to have understood their exposure to Fed rate policy when they took out their mortgages. The most popular are hybrids whose rates stay fixed for two years, then adjust periodically over the next 28 years based on a set percentage over a short-term benchmark such as the London Interbank Offered Rate (LIBOR). Opponents call them "exploding" loans because the rates stay artificially low during the two-year teaser period, then leap. In the industry, they're known as 2/28s.

The 2/28s now coming up for their first reset were made in early 2005. It seems crazy now, but when the loans were made, nobody worried much about the reset. That's because, historically, 70% or 80% of two-year hybrids were paid off in the first two years. Rising home values would reduce the loan-to-value ratio, qualifying the borrowers to refinance at lower rates. Or they would repair their credit and get a better loan. Or they would sell and move. Battling for market share, lenders didn't worry much about long-term consequences of lax lending.

But home values today are flat or falling. What's worse for many subprime borrowers, the escape route of refinancing at long-term rates is pretty much sealed off. The reason is simple: They can't qualify for a 30-year fixed-rate loan. Bloodied subprime lenders have belatedly tightened their lending standards. What's more, the rate on a fixed subprime loan is around 8.75%, which is higher than the teaser rate they've been paying. Sure, that's less than what they will soon be paying for their ARM, but they would have to apply to get a new fixed-rate loan and most couldn't demonstrate the ability to pay 8.75%. "They're going to be forced to stay with the adjusting portion of the loan," says Brian A. Simon, senior vice-president of Freedom Mortgage Corp. in Mount Laurel, N.J. "It's going to be a real challenge to a lot of borrowers."

Regulators allowed this problem to develop and only now are cracking down. On Mar. 2, five of them, including the Fed and the Federal Deposit Insurance Corp., came out for the seemingly obvious: requiring lenders to go by the uncapped interest rate--not just the teaser rate--in evaluating borrowers' ability to pay. But such tough rules will only worsen the squeeze on borrowers who need to refinance.

How big is the hit from rate jumps? A typical subprime loan might have been issued in early 2005 at 7% or so. Today, with its teaser expiring, that loan might be resetting to 10%, which is the most it's allowed to go up at one time. But the next time the loan resets--in six months or a year--the rate will go up again, based on the loan's contractual margin over LIBOR. So even if short-term rates stay where they are, ARM loans will approach 12% in the next year or so. That's way out of reach of most subprime borrowers.

For the Fed, the key question is whether the stress on subprime borrowers spreads to the rest of the financial system. So far, it really hasn't: Prime mortgage rates have actually been falling. So chances are the Fed will stay hawkish on inflation in spite of the harm to weak borrowers. Says Mark Gertler, a New York University economist: "I don't think the Fed is going to base monetary policy on distributional considerations. Once the Fed loses its focus on maintaining price stability, all hell could break loose." For many poor homeowners, it already has.

Anonymous said...

New Century says they've stopped taking new bidness. You'd think an announcement like that would push stocks down hard, especially financials.

trading day's almost over and DOW's up and financials are down but barely noticable declines.

You must have been living on the moon for the past few weeks not to know what's going on in the mortgage area. When USA Today reports it, you know it's mainstream. So my only conclusion is that stocks have already priced in the mortgage meltdown and events like New Century going under will be more or less ignored from now on.


stuckinthecity said...

good article. so many "victims"...

stuckinthecity said...
This comment has been removed by a blog administrator.
Area 51 said...

"3% Drop..." thanks at least for putting a name other than "anonymous".
Answer: they'll all go on a crime spree.

"anonymous- Grandpa Grumpus"
You don't buy gold unless we face inflation. What we are facing now in a DEFLATIONARY environment. You buy BONDS silly......gub-ment's got supreme tax-power and big printing presses. Let's see you do better than that!

the real peyton manning said...

The funny money isn't all gone yet. I wonder how many stupid a$$es will run to the lenders to lock in that option arm before they're not available anymore.

FlyingMonkeyWarrior said...

This is how I see HP. A collection of Grandpa Grumpuses with absolutely no perspective on anything, where any sign of a storm means a flood. Well sometimes it does flood after a storm, usually it doesn't. And when it does, the water recedes, you clean up and on you go.
Well the polyannas were at home eating their dinner when the Nazis raided. They did not listen. The GrandPa Grumps were the ones that snuck out in the middle of the night and escaped.
Just sayin.
Know your enemy and better safe than sorry. But choose Happy.

Grandpa Grumpus said...

Bah! F-U I AM EATING Cat food in my retirement, once a week I splurge on the canned stuff but daily its the dry friskies and meow mix.

Hey I know why hispanic employment in construction is going up even though contruction employment is going down. Do the math. White guys are not be hired/being let go.

Lets face it, white guys only get hired as last resort during booms (in construction). They cost more and are generally a seedy lower class guy probably on meth. Mixicans are cheaper and are the hard working go gettum type of guy from mexico.

sorry white guys u cost too much go back to UAW job at GM.

Anonymous said...

You Target-loving welfare trailer trash will be in for a world of hurt when the ARMs reset and put the hammer on your thick skull. Maybe Fat Bastard Ted Kennedy will hand you a few welfare checks

Anonymous said...

FBs are just digging a deeper hole. They can't borrow themselves out of this one.

Insights: Economics
Weakening housing mkt leads to rising debt burdens
The ratio of mortgage debt to home values hit another record high.
Friday, March 09, 2007By Dean Baker

The quarterly Flow of Funds data from the Federal Reserve Board show that homeowners are taking on mortgage debt far more rapidly than their homes are appreciating in value. Homeowners increased their mortgage debt at a 6.4 percent annual rate in the 4th quarter, adding debt at an annual rate of $594.4 billion, down from the $775.2 billion annual rate in the 3rd quarter. This debt includes both money to purchase houses and money borrowed against existing homes. However, home values appreciated at just a 4.4 percent annual rate in the quarter.

As a result, the ratio of equity to home value is falling sharply. At the end of the fourth quarter of 2006, the ratio of equity to home value stood at 53.1 percent, down from 54.3 percent at the end of 2005. By contrast, it stood at 57.9 percent as recently as 2000, and was close to 70 percent until the nineties.

This drop in homeowners' equity raises concerns about the retirement security of the baby boom generation. Most of the baby boom generation is near retirement and has few assets outside of their homes. The Fed's most recent Survey of Consumer Finance showed that 53 percent of the age cohort from 45 to 54 had less than $54,000 in financial assets (including defined contribution pensions) in 2004. If workers in this age group are to have any substantial source of income in their retirement years, other than Social Security, they will have to rely on equity in their home. If weak house prices reduce equity even further for this group, it will be difficult for them to save enough in their remaining working years to offset the loss.

The loss of equity also raises short-term issues for the economy. The distribution of equity among homeowners is hugely skewed, with close to one-third of all homeowners having paid off their mortgages. This implies that the vast majority of homeowners have relatively little equity in their homes and some already have negative equity. Many of these homeowners will be losing their ability to borrow further against their homes, especially if continued weakness in the housing market causes house prices to actually fall.

The recent flood of borrowing against home equity has driven consumption since the 2001 recession. This borrowing drove the savings rate into negative territory for the first time since the depression. Through the sixties, seventies, and eighties, the savings rate had averaged close to 10 percent. If the savings rate were to move back just half way to its historic level, this would imply a loss of $600 billion in annual consumption. In fact, since virtually all of the baby boom generation is in its peak saving years, the savings rate should be higher than normal.

The Flow of Funds data may actually understate the increase in debt burdens, since it likely misses some of the price declines that have taken place in the housing market. The data on house prices are taken from Office of Federal Housing Enterprise Oversight's House Price Index (HPI). This index excludes the majority of homes in the most inflated markets because the mortgages issues are not conformable for agency mortgage pools. The index would also miss seller concessions that don't appear in the contracted price, such as paying points towards closing or including repairs and renovations as part of a sale. For this reason, it is likely that home prices have not risen as much as the HPI data show, and may even be falling.

Even with the published data, it is clear that many homeowners are hitting their borrowing limits. This will likely constrain consumption in the months ahead, especially if house prices start to fall in the next few quarters. This process can be self-reinforcing: as more homeowners find themselves with negative equity, it is likely to push the foreclosure rate higher. This will lead to more distress sales, which will put further downward pressure on prices.

Dean Baker is Co-Director of the Center for Economic and Policy Research in Washington, D.C.

Anonymous said...

ou Target-loving welfare trailer trash will be in for a world of hurt when the ARMs reset and put the hammer on your thick skull. Maybe Fat Bastard Ted Kennedy will hand you a few welfare checks

Holy shit now you fucknuts hate Target too? I thought in the mad hate of walmart, Target always stood above for you liberal pussies.

Guess not.

Anonymous said...

The mortgage market is shutting up tighter than a clam. Soon folks won't be able to get approved for anything close to what pushed prices up before. This will take these folks out of the market, and by June 1st, everyone will be in freak mode.

I have an ARM said...

I got an ARM at 4.5% in 2002 fixed for 5 years. It will adjust later this year. The highest the rate can go in any one year is 2% with a 9% lifetime max. So if it adjusts to 6.5% my payment will ncrease by $279, all tax deductible of course since it is all extra interest payment. Gee I guess it's time to file for bankruptcy, huh?

Or maybe I'll barely even notice. In 2002 I made $68K a year. Today I make $106K. In 2002 I was single, today I'm married and my wife makes $48K a year. So I think we'll be able to swing an extra $270 a month given an extra $86K a year income, what do you all think?

Or maybe I'll refi into a 6% fixed and not even worry about it. But that costs money and I don't know if it's worth it since we might move soon.

The home was purchased for $299,000. Zillow's price today $437,500 and that's pretty accurate as 2 homes on my street very closely matching mine sold for $431,00 and $428,000 in the past 2 months. No cash-outs, no refis, no helocs and $224,000 left on the mortgage.

Sorry to burst the bubble renters, not everyone is hurting like you think.

Anonymous said...

D.H. Horton Inc.'s CEO Donald J. Tomnitz said what most others in the housing business wouldn't when he proclaimed on Wednesday that 2007 "is going to suck, all 12 months of the calendar year."

His blunt assessment contrasted with much of the spin that has been coming from lenders, realtors, trade groups, home builders and others in recent months. There haven't been many straight shooters discussing the housing and mortgage market collapse.

That's why Tomnitz's quote resonated throughout the financial world. Plain and simple, he told it like it is, at least from his point of view.

In his presentation to an investor conference, Tomnitz said new home prices will continue to decline this year as builders try to sell the glut of houses currently available. His firm is unlikely to get more pricing power until 2008, he said.

Horton, the nation's largest homebuilder by the number of homes sold, is currently building 26,000 houses, down 35 percent from its peak of 40,000. Tomnitz said that further cuts are coming.

The Fort Worth, Texas-based company's fourth-quarter earnings plunged by almost two-thirds from a year earlier to $109.7 million, and a profit retreat of similar size is expected in the first quarter as well.

His sugarless comments stood out because others haven't been so forthcoming.

Anonymous said...

What about the fact that some of these people who can't refinance out of their toxic loan will go off the deep end . When nutcakes are stuck they do strange things .

Are the odds higher that a sub-prime borrower might also be a nut cake . Do people who can't manage money have a screw missing to begin with? Nobody told these bad credit people that the funny money might not be available when they needed to avoid the adjusted up payment .Nobody ever told them that they will never qualify for a fix note ,(even if they did have equity ). Why did the real estate clerks put these people on this roller-coster ride that is going to mess them up for years ? Why did the real estate people play on the greed and fears of these below par borrowers ? Why did they push the dumb borrowers buttons and make them buy real estate .Why didn't they just drag out the business for 10 years into the future instead of dreaming up loans for borrowers so they could get more business now ? We know the answer.

I say to the real estate clerks and mortgage creeps ....You better look out for nuts that are looking for pay back .

Anonymous said...

Please don't bring up Ted Kennedy

I just ate!

borkafatty said...

Could umm! someone get me a glass of water...I'm uhh! Kinda dry over here.

Anonymous said...

You don't bring up Ted Kennedy,

and I won't bring up my lunch!

Anonymous said...

Mortgage lender Fremont General Corp. disclosed Friday it was unable to estimate the cost of selling its subprime mortgage loan business, adding there is no guarantee of finding a buyer for the troubled unit.

Federal bank regulators on Wednesday ordered Fremont General to tighten its loan policies to avoid future losses from defaults by borrowers, the first move by federal regulators against an institution related to the recent turmoil in the market for subprime mortgages - higher-interest loans for people with poor credit records.

The Federal Deposit Insurance Corp. found the bank was making subprime mortgage loans without having the proper criteria for assessing borrowers' ability to repay, and that it was marketing and making the loans "in a way that substantially increased the likelihood of borrower default or other loss to the bank."

Anonymous said...


that's all fine and good except for the fact that Feb foreclosures were 6.5% lower than Dec foreclosures nationwide.

According to, a California-based publisher of foreclosure property information, foreclosures dropped 3.4 percent nationally from January to February's total of 106,074. That figure marked a 6.5 percent decrease from December.

"The foreclosure numbers finally are beginning to reflect the stabilization in housing markets that we've been talking about for the last few months," said Alexis McGee, president of

Anonymous said...

Treasury prices plunge after job report

U.S. Treasury prices were sharply lower Friday following a report that showed job growth in the U.S. is still healthy, knocking the unemployment rate a touch lower and taking steam out of investor expectations for a cut in interest rates.

Anonymous said...

tax assessed at 500.000 but cant sell for a dozen years at 150,000, been there done that, with property taxes increasing at 10% a year without valuation increase?, thats a view from a former n.y homeboy. vote with your feet, and dont bring your flipper profit ideas with you, to increase the locals tax, or no where to run!

Anonymous said...

"Sorry to burst the bubble renters, not everyone is hurting like you think."

Just the fact you made 68k and bought a 299k home on an ARM says shitloads about your financial responsibility. Let's be honest and say an ARM was the only way your sorry ass was going to afford that home. Then you got lucky to find a wife that made a whopping 48k. BTW what fucking decent money making household DOESN'T make about 150k a year. Sorry to burst your bubble, but thats average peanuts...skippy. Go boast somewhere else.

Signed ..a fellow home-debtor on the renters side. Renters, I got your back bitches!

Anonymous said...

Somebody needs to make W clean up his mess, put his toys away and got to bed with no dinner.

This is getting out of hand.

Anonymous said...

I expect the meltdown in the U.S. economy isn't going to be a great depression type deal, however, we'll turn into a sort of post modern Europe with an essentially Socialist Government paying lip service to the constitution like we do now.

Oh, you think we actually follow the Constitution?

How about this one:

Section. 10. No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.

Something about only gold and silver being money in there? Last I checked paper isn't gold.

Allright, back to drinking warm beer on the smelly, ratty, renter sofa I found in a dumpster.

Anonymous said...

Bend over for a correction.

Anonymous said...

I'm not looking forward to having to compete in the job market with a desperate mortgage holder willing to work 3 jobs for low wages just to make his nut.

Anonymous said...

Cramer is finally getting what I've been saying all along.

The Financials are going to report next week and get crushed. They may report good quarters but their guidance is going to have to be, um, dismal to say the least. Just check on on who are the largest shareholders in the failing mortgage lenders? You got it, Wall Street investment banks.

Ooops. All those geniuses at Goldman Sachs, who got the million dollar bonuses last year somehow didn't realize that people couldn't afford the loans they were underwriting.

Damn, I could have done a better job for only 100,000 dollar bonus.

Anonymous said...

Don't expect the truth out of CEOs and Analysts.

First of all, if a CEO is too negative, he'll get sued by stockholders for making the stock go down. He has to be bland at the conference call.

Don't expect Analysts to say anything which would make you take your money out of the stock market. That's how they make their salaries!


FlyingMonkeyWarrior said...

Bend over for a correction.

Anonymous said...

"The foreclosure numbers finally are beginning to reflect the stabilization in housing markets that we've been talking about for the last few months," said Alexis McGee, president of

Foreclosures, much like real estate or stock prices, ebb and flow over time. After May 2008 will we really see if the market stabilized or not.

Well sometimes it does flood after a storm, usually it doesn't. And when it does, the water recedes, you clean up and on you go.

I guess you mean just like Katrina.

Did you ever wonder WHY gramps was so grunpy in the first place?
Was he a child of the Great Depression or did he lose his shirt on Wall street in the sixties or seventies? Bad things in one's youth color one's perception later on in life.