April 10, 2007

The coming meltdown in the "Casey Serin loan portfolio" (called "Alt-A" or "Liar's Loans" by others)

Nobody in the market wants to buy the Alt-A Liar's Loan crap anymore, at least not for face value, knowing these loans won't be getting paid back either, just like the subprime cancer. "No doc"? "State your own income"? Come on, who were we trying to kid. Alt-A, which I'll now call the "Casey Serin loan portfolio", is crap.


IndyMac, the nation's #1 "Alt-A" or "Liar's Loan" issuer, will be in a heap of trouble as they're stuck now holding the hot potato, and their business model goes kaput as the credit wheel tightens. Now if the CEO would come out and come clean, versus cheerleading his stock, he might still have a chance to avoid jailtime. Might.

His peer, American Home Mortgage, came clean yesterday, wiping 18% off their stock. It's NDE's time in the sun soon. It's only a question of when. (note, I'm happily short NDE, and might be doubling up today)

Mortgage Market Dries Up For American Home

The turmoil that has plagued the U.S. mortgage market so far this year got a little worse on Monday, when lender American Home Mortgage said it was having trouble selling loans on the secondary market, forcing it to slash its earnings estimates for the first quarter and for the year.
American Home Mortgage shares tumbled $4.64, or 18.0%, to $21.20.

Chief Executive Michael Strauss blamed problems in the secondary securitization market. Lenders like AHM bundle their loans into securities that are then sold to investors.

"During March, conditions in the secondary mortgage and mortgage securities markets changed sharply" said Strauss. "In particular, these markets were characterized by far few buyers offering materially lower prices."

James Ackor, an analyst at RBC Capital Markets, said the AHM developments were disappointing and that the difficulty with sales on the secondary market will probably linger.

"We are now expecting adverse market conditions to persist indefinitely" wrote Ackor in a client note.

About one-tenth of AHM originated loans are Alt-A's, which are made to borrowers with decent credit but with limited documentation. About 8.6% of the loans AHM holds for investment are Alt-A's.

21 comments:

Anonymous said...

``If we have a continued house-price decline, Alt-A will be more affected'' than subprime mortgages, said Howard Hill, a managing director in Springfield, Massachusetts at Babson Capital Management LLC. Hill said Alt-A lenders were more likely to combine low documentation and low down payments, and more likely to have extended mortgages to speculators, while offering less protection for bondholders.

Layers

Such layering of risks is ``two to four times as common in Alt-A deals as in subprime deals,'' Hill said. His unit of MassMutual Financial Group manages about $30 billion of mortgage- and asset-backed bonds, and Hill also oversees investments in the stocks of mortgage-lending REITs, including American Home and Kansas City, Missouri-based NovaStar Financial Inc.

Some Alt-A loans require no down payment or proof of income, and they're often used to buy a second home or rental unit as well as speculation. Also falling into the category are interest- only loans and ``option'' adjustable-rate mortgages, whose minimum payments can fail to cover the interest owed.

keith said...

Shares of mortgage banks catering to Alt-A borrowers sank. American Home Mortgage Investment's stock fell $4.32, or 16.7 percent, to $21.53 on the New York Stock Exchange. In 2006, American Home Mortgage issued $5.24 billion in Alt-A loans, or 8.9 percent of total loan volume.

IndyMac Bancorp Inc., which generated $70.2 billion in Alt-A loans in 2006 representing 78 percent of total volume, fell 67 cents, or 2.1 percent, to $31.13 on the Big Board.

Anonymous said...

Subprime crisis shines light on mortgage brokers

http://tinyurl.com/29sf3r

SAN FRANCISCO (MarketWatch) -- The subprime mortgage crisis has re-ignited scrutiny of the industry and people who broker home loans, with some critics arguing that hidden fees and other dubious practices have contributed to the surge in delinquencies.
The main problem is that, counter to common perception, mortgage brokers do not represent the borrowers who pay them for advice. Instead, they are more like independent salespeople who are often paid as much by the lenders offering loans as the borrowers.
A controversial fee called a Yield Spread Premium, which is paid by the lender to the broker, has come in for particular criticism and is the subject of a class-action lawsuit against NovaStar Financial (NFI : novastar finl inc com
News , chart , profile , more
Last: 5.12-0.19-3.58%

4:15am 04/10/2007

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NFI5.12, -0.19, -3.6%) , one of the largest subprime mortgage originators. The case is set to go to trial in May.
Subprime mortgages are sold to home buyers with lower credit scores. This corner of the home loan business has been hit hard as borrowing costs climbed and the housing market cooled. In January, more than 14% of subprime mortgages were at least 60 days delinquent, almost double the rate a year earlier, according to real estate data specialist First American Loan Performance.
As the housing market boomed, mortgage brokers' influence grew as they became involved in arranging the majority of home loans. Now the broking business should bare some of the blame for the ensuing crisis, say critics, including some who are brokers themselves.
"We all have some culpability," said Steve Heideman, a mortgage broker who heads an organization dedicated to improving disclosure in the business. "The problems and abuses are happening because brokers see it as their right to make as much money as they can on a loan."

tmaioli said...

The earth is trembling - this is going to make Pompeii look like a dusting of snow.

Anonymous said...

casey serin was at suze orman show last sunday, asking suze for some advice.

suze said - don't try to be creative, forget the "short sale" and the wheeling and dealing, but instead file a bankruptcy and move on with your life.

keith said...

NDE down another 4% today...

Shawn said...

I thought Alt-A and "Liar's loans" were two different things. Alt-A loans are mortgages that allow different payment options, usually low or no interest for the first few years, and "Liar's Loans" were stated income loans, where instead of providing W2's or paystubs, you sign a paper claiming how much money you make with no verification.

Am I wrong?

brokersleaveyoubroke said...

I thought Alt-A and "Liar's loans" were two different things

Alt-A are loans made to borrowers who fall between prime and subprime. They can be any type of loan. Prime, Alt-A and subprime are not a type of loan, they are indications of the credit rating of the borrower. An Alt-A "liars loan" is just made to someone with a better credit rating then a subprime liars loan.

buzz saw said...

Casey deleted my latest hate mail.

Anonymous said...

well mtg buyers finally asked one tough question can they pay the loan back?

what a friggen disgrace.

Casey's CPA said...

Now that Casey has corporate credit his problems are over.

After his IPO Casey will be richer than all you "loosers"...

SoldAtThePeak said...

No, alt-a's also went to prime credit borrowers who were taking out riskier loans.

Agent #777 said...

I am jealous. I tried to short NDE last week, but was told that there were no shares available for shorting.

keith said...

don't short stocks - do options. NDE is available

Man, I wish I had the balls to pick up more puts. But the market is so corrupt, I'm happy with my 1000 shares (via puts)

They HAVE to announce soon that the market for Alt-A's has dried up - in other words they can't sell the cancer on like they were used to. Even if they don't come clean about the default rate.

Anonymous said...

Casey Serin is ABC 'Nightline's' feature story on Wednesday, April 11th. Don't miss it!

Anonymous said...

Keith do you have a secret crush on this guy? That's the only possible explanation I see for your obsession with him.

Not that there's anything wrong with it.

Anonymous said...

Please drop your Casey obsession, the only reason his blog even got any traffic is from your posts/direct link. So unless your on the in for book deal, stop.

April 12th, 2007
It’s Official: Foreclosure Book Coming
With my experience trying to stop foreclosure and all the exposure on my foreclosure story - it’s only natural.

Yes, the time has come for me to write a foreclosure book! The funding, the team and the connections are all coming together. I’ve been blessed with this opportunity to turn my “failure” into a success and help a lot of people in the process.

Can’t share any more at this point. But sign-up for my mailing list and be the first to hear major announcements.

By the way, look for me on ABC News tonight (unless it gets rescheduled again).

Anonymous said...

I'm not worried about Casey getting royalties because he'll never finish the book. He doesn't open his mail, pay his rent, or read contracts before signing. (I admit it's possible a publisher would hire a ghost writer and just pay Casey for putting his photo on the cover.) Also, remember that phrases like "It's official" have a different meaning to Casey than to the rest of us.

Anonymous said...

Well... let me tell you, Casey has more drama filled 9 lives than any crazy cat you can imagine.

His ABC 'Nightline' Feature piece ran this evening. Re-scheduled from it's previous April 11th air-date to a FAR MORE APPROPRIATE Friday the 13th air-date.

Kudos to ABC for choosing a much more appropriate iconic date!

Anyway, if you think he had a lot of attention before, imagine NOW that virtually MILLIONS have now seen him on one of the most watched television tabloid new-shows in America!

Me thinks his most convoluted circus show of an existence is now set to ratchet up by a BIG factor!

OMG!

Anonymous said...

IndyMac's CEO is an abusive little tyrant that reminds me of Napoleon. He has created a culture of abusive management, exemplefied by the married team in charge of the wholesale loan division (Minier/Sillman). CEO Mike Perry once threatened, in a company-wide email, that he wanted to punch employees in the face who were smoking in front of the building because he had to walk past them. These people feel they have so much power, are so much better than other people, and are beyond reproach.....commmmmmme onnnnnnn KARMAaaaaaaaaaa! They need a dose of reality and to be responsible for harm to employees, borrowers, and stockholders.

Soem Dood said...

RE: Casey Serin:

Some similarly business-minded folks from the old country also run into tough times, due to their own innovative ideas for creating wealth, just like Casey:

Uzbekistani immigrants await discussion of entrepreneurial methods