April 02, 2007

M&T Announces That the Alt-A (Liar's Loan) Meltdown Has Now Begun. Goodbye IndyMac

Supply, meet Demand...


M&T, a big Alt-A lender, admitted the obvious today, that the buyer pool for their Alt-A garbage has dried up, and they're stuck holding the bag.

The BIG Alt-A player, IndyMac, with 70% of their portfolio made up of this cancer, was out pumping their stock last week, trying to make people believe that since they don't have big subprime exposure, all would be fine with their stock and their Alt-A garbage.

Watch for criminal indictments soon at IndyMac I'd say after this stock manipulation effort. Their lead lawyer resigned last week - hmmm... wonder why?

(Note - I'm gleefully short NDE at time of writing)

M&T Shares Fall After Bank Reports Weak Bids on Alt-A Mortgages

Shares of M&T Bank Corp., the western New York bank partly owned by Warren Buffett's Berkshire Hathaway Inc., fell the most since 1998 after saying low bids for Alt-A mortgages it planned to sell will cut earnings by $7 million.

The stock tumbled $9.18, or 7.9 percent, to $106.65 at 10:30 a.m. in New York Stock Exchange composite trading.

Shares of mortgage lenders have tumbled this year as defaults on subprime loans rose to four-year highs. Companies that offer less-risky Alt-A mortgages including IndyMac Bancorp Inc. and Impac Mortgage Holdings Inc. say investors are mistaking them for subprime lenders and unfairly punishing their shares.

40 comments:

JAFO said...

No IndyMac and Impac, there is no mistake. You made questionable loans to too many risky borrowers and now there is a price to pay. Welcome to reality.

JAFO

Mark in San Diego said...

Link to a Washington Post Article on Michigan that pulls all dots together - Manufacturing dead - decline of living standards - wages down, and mortgage crisis. . .thanks to Bullnotbull.com. . .

http://tinyurl.com/ytehx7

Anonymous said...

Its official: New Century declares bankruptcy chapter 11.

Money go poof. All the poor banks who bought the mortgage backed securities cannot get all the money back.

Better hope the banks did not use your bubble sitter nest egg to buy these bad loans.

rip van winkle's snooze button said...

finally saw the Enron movie over the weekend, The Smartest Guys in the Room.

Enron's mark-to-market accounting treatment of revenue sounds a lot like these banks that write these option ARMs and IOs and then claim the full interest when that money is not getting paid back.

Anonymous said...

LIKE THE ATTITUDE HERE.

BOOOOOOOOOOOOOYAAAAAAAAAAA

Bob

showmenouns said...

The loans M&T planned to sell didn't attract the offers the bank expected at auction.

I'm surprised Kieth didn't step up and start buying :)

Anonymous said...

I'm not seeing the M&T announcement that the Alt-A meltdown has now begun - can you please point me to the headline? I do see the M&T announcement that:

"At a recent auction of Alt-A loans, fewer bids than normal were received and pricing was lower than expected, M&T said.

The bank said it didn't sell the loans because management believes the value of its Alt-A mortgages is greater than the amount implied by the few bidders in the market".

This does not imply any mortgage buy-backs as as happened in the sub prime arena.

Im failing to see any signs of any melt-down? Show me where in the Alt-A space because of repurchases.....

Anonymous said...

O God this is starting to look like the "perfect storm".

Mark in San Diego said...

Herb Greenberg just on CNBC about Alt A - Today is Alt - A day. . .the American sheeple will learn a new word tomorrow - the MSN just learnt (Financial Times spelling) it today. . .isn't it wonderful to gloat!!. . .I am unapologetic about this - "Pigs in Finery" as my South Carolina Aunt used to say about people who lived beyond their means. . .all those people who bought million dollar houses and condos thought they were rich. . .while the rest of us toiled away and save one dollar at a time.

Anonymous said...

Stock will be under 99 by end of week

Anonymous said...

"Everyone in the subprime sector this year is going to lose money,"

Damn it! I just got my gold jacket too........

Bank Officer said...

MTB (M&T BANK CORP)
105.63 -10.20 (-8.81%) Apr 2 1:59pm ET

Man I'm shorting a lot these days.........Hoooyhaaaa

Mark in San Diego said...

SouthStar just went kaput!. . .Implode A Meter can't even keep up. . .just getting updates from Marketwatch. . .what a day, what a day!!. . .

Anonymous said...

"supply, meet demand"

You could also use the phrase

"greed, meet fear"

Smug Bastard

GreedKills said...

sweet...let the fall of the empire commence.

Anonymous said...

WHERE are the bodies buried?

This is the question that has been hanging over the financial world ever since turmoil erupted in the US sub-prime mortgage sector.

Congress said...

After ARM resets.....

Borrower to lender:
'I hate you to infinity.'

Lender to borrower:
'I hate you to infinity plus one.'

George Bush:
'Kids, Kids, stop it, I will decide and my help is another 100B for the war effort.

Anonymous said...

April 2nd: National Alt-A Day.

keith said...

It's fun to know the future, isn't it HP'ers?

It's fun to read analysts say "we were surprised the subprime meltdown has spread", when we knew for certain it had and would.

And it's fun to be short NDE and KBH right now. Wish I hadn't covered my CFC, but 200% was good enough there.

irrationalcomplacency said...

Sounds like a good reason for the market to rally.

Anonymous said...

Here in bublicious Los Angeles more expensive homes are coming on the market for the summer. This is now getting really interesting.

Anonymous said...

save another dollar today!!!!!! and next week its worth 82 cents moron???????????

Anonymous said...

Even if the banks are eventually proved correct that their Alt-A mortgages are not as bad as the secondary market thinks, then it's still a problem.

Why? Because they need the cash from selling loans in order so they can go out and make more and increase earnings.

In effect holding onto the loans turns them more into a mortgage REIT involuntarily, without the tax advantages.

They have to take on more market risk in interest and credit rather than the more reliable fee and origination income.

If they wanted that, then they wouldn't have tried to sell off the loans like usual.

So fewer new loans will be made, home buyers/refinancers will have fewer options, transaction volumes decrease, and prices will drop.

That puts more pressure on homeowners, and you know what happens now.

Anonymous said...

Mortgage Woes Spread Up Credit Ladder

Regional Bank Reports Mortgage Deterioration Spreading Upward Onto Next Rung of Credit Ladder


NEW YORK (AP) -- The deterioration of the market for mortgage debt at the bottom of the credit ladder may be climbing up to the next rung.

M&T Bank Corp., a Buffalo, N.Y.-based regional bank, said in a Friday regulatory filing that it is having trouble selling some of its loans.

It's not unusual to hear a subprime mortgage lender -- or a mortgage bank that caters to borrowers with bad credit -- complain that investors don't want to buy its loans. What's unusual is that M&T Bank is not a subprime mortgage lender.

Shares of M&

frenzy said...

You think our problems in the U S of A are bad? Take a look at this article about the credit bubble in Russia:

http://tinyurl.com/2xz7px

The Russian equivalent of M3 has increased over 40% in the past year!

Anonymous said...

There is a home in Las Vegas for sale at $119 per sq ft on craigslist. It's a foreclosure.

Homes in the immediate hood are listed for $185 an up.

If and when any of those homes will sell I'd love to see the appraiser justify why a $119/sq ft neighboring home is worth $185/ sq ft.

Anonymous said...

There has to be some trueth to this.

As banks fail, mortgage defaults and real estate foreclosures skyrocket, the credit rating systems will face extinction
Marlla Guthrie
Apr. 1, 2007

The guy who tells you that he watches a number between 500 and 800 will soon disappear. As banks fail, mortgage defaults and real estate foreclosures skyrocket, the credit rating systems will face extinction. The financial meltdown will create legislation that will crack down on monitoring individual and corporate credit ratings.

As people lose their jobs, homes and declare bankruptcies in hundreds of millions all over the world, they will refuse to get sucked in by the credit rating based loans through credit cards, home equity loans and other loans.

This 1929-39 all over again. A generation is ready to become financially conservative. This is exactly what happened in 1929-39. For decades people refuse to get into debt again after losing all they had during the great depression.

As people refuse to buy on credit and take ruthless loans, the credit monitoring systems will become irrelevant. The legislation will be introduced to restrict predatory lending and sucking common people into financial slavery.

Anonymous said...

There are going to be so many huge homes on the market for cheap!!! The problem with big homes is they are alot of work/money just to maintain.


Housing market enters season of reckoning
Latest bleak news could freeze sales in traditionally strong spring months
Bleak housing market news threatens to weigh on already drooping home prices, a factor that could undermine potential sales.

Updated: 2:34 p.m. PT April 1, 2007
SAN FRANCISCO - Springtime usually means good times in the housing industry, but this year it’s threatening to become a grim season of reckoning.

Signs of a sobering slowdown emerged throughout March, ranging from gloomy forecasts among homebuilders to a growing number of high-risk borrowers struggling to make payments on exotic mortgages they probably couldn’t afford in the first place.

The latest flare came this week as Lennar Corp., one of the nation’s largest homebuilders, reported a 73 percent drop in its first-quarter profit and warned that its results for the remainder of the year won’t live up to previous expectations.

The bleak news threatens to weigh on already drooping home prices, a factor that could undermine potential sales: prospective sellers may hold off on selling in hopes of a turnaround, while prospective buyers may procrastinate in hopes of getting an even better deal later in the year.

The additional dent in home sales could further undermine the overall economy, eroding demand for home furnishings and materials for renovations.

Reflecting the worries about the growing threat to the overall economy, economist Steven Cochrane says the risk of recession beginning later this year are increasing. He estimates there is a 25 percent chance of a recession within six months, up from 20 percent in February.

“Things seem to be snowballing very quickly,” said Cochrane, a senior economist with Moody’s Economy.com. “It’s going to be a weak spring.”

Investors on the Chicago Mercantile Exchange are turning more pessimistic too. A housing futures index tracking 10 major U.S. cities is now projecting January 2008 prices in those markets will be down 5.1 percent from early 2007. At the end of February, the same futures index put together by Tradition Financial Services had forecast a 3.7 percent drop.

“This isn’t going to be over in a year,” predicted Yale University economics professor Robert Shiller, who helped create the housing index. “Housing prices could be declining for years and years.”

Other veteran market observers are more sanguine.

“We don’t think the market is in that bad of shape,” said John Karevoll, an industry analyst for DataQuick Information Systems. “It’s just not in as good shape as it was two years ago.”

Some real estate markets are holding up remarkably well. In Southern California, for instance, a mid-priced home sold for a record high of $495,000 in February, a 5 percent increase from the previous year, according to DataQuick. Although the numbers haven’t been crunched yet, Karevoll believes Southern California home prices reached another new high during March.

Anonymous said...


say investors are mistaking them for subprime lenders and unfairly punishing their shares.



Boohoo. The marketplace is unfeeling but not unfair.

whitetower said...

I think the following graph is the big elephant under the rug. In two years, long After the sub-prime ARM and alt-A ARM implosion is over, the real implosion begins -- that of the prime ARMs, in other words, the ARM resets of high-FICO, low-risk debtors who bought waaay too much house.

The numbers are staggering.

www.smugmug.com/photos/136440158-O.png

Bourbon Straight said...

I always loved the name: M&T bank.
I posted this some where 6 years ago.
M&T, take out the &:= MT
Spell it out:Empty.
6 years ago I was called a racist.
WMD1964.…..tick tick tick…..

Steve the Dog said...

"The bank said it didn't sell the loans because management believes the value of its Alt-A mortgages is greater than the amount implied by the few bidders in the market".

Very, very true.

Bid: 35(on the dollar)
Management: they're worth at least 40, so we keep the riches.

Cool. loss of 60.

Steve the Dog

woof.

Anonymous said...

Whitetower - Great post! Analysts, armchair or otherwise, can pontificate all they want, but the graph says it all!

Anonymous said...

Do you think the county is strong enough to handle what we all know is coming. I remember my Grandfather telling me what it was like in during the first Depression. I guess on the bright side Americans will not have to worry about being so fat. I personally do not think things will hold together this time around that is why I bought a gun recently; on credit I figure I will never have to pay back the money when this whole thing collapses. Man I hope I am not right!

Anonymous said...

Do you think the county is strong enough to handle what we all know is coming. I remember my Grandfather telling me what it was like in during the first Depression. I guess on the bright side Americans will not have to worry about being so fat. I personally do not think things will hold together this time around that is why I bought a gun recently; on credit I figure I will never have to pay back the money when this whole thing collapses. Man I hope I am not right!

Anonymous said...

I saw a sign yesterday that said:

"Know God, Know Peace.
No God, No Peace."

In REALITY, it should say:

"Know Bush, know war.
No Bush, no war."

Lake Michigan, USA

Anonymous said...

Report: Subprime woes to drag housing in ’07
'The problem in the subprime area is just the tip of the iceberg'

http://www.msnbc.msn.com/id/17903104/

Updated: 12:18 p.m. ET April 2, 2007

LOS ANGELES - The subprime mortgage implosion will take even more steam out of the already slowing real estate market this year and beyond, according to a new economic report.

More than two dozen subprime lenders have shut down in recent months and others are scrambling to stay in business as a spike in defaults caused by borrowers unable to make payments has rocked the mortgage industry.

Now, as lenders tighten credit standards, the housing market will likely see further declines in price and output, senior economist David Shulman wrote in the quarterly Anderson Report to be released Monday by the University of California, Los Angeles.


“We suspect the problem in the subprime area is just the tip of the iceberg for the mortgage market as a whole,” Shulman wrote. “For all practical purposes, the subprime market is in the process of shutting down.”

A tougher credit environment will limit the number of first-time home buyers entering the market and make it tougher for others to refinance their subprime loans before they face a default or foreclosure.

Shulman expects housing starts to hit 1.33 million units this year, down from a previous forecast of 1.48 million units.

“For a housing market that has already witnessed housing starts decline by 36 percent, this is not good news,” he wrote.


Still, he does not forecast a recession but only a softening of the economy.

He expects growth in the nation’s gross domestic product to range from 1.7 percent to 2.5 percent through the first nine months of the year, and to average 3.25 percent next year.

The nation’s unemployment rate will tick up from February’s 4.5 percent to 5 percent by the third quarter before beginning a gradual decline, Shulman wrote.

Dave said...

That graph is very interesting, Whitetower. Just when it appears that the worst of the ARM resets are over in Spring '09, the second half of the knockout punch will arrive in the form of not only prime ARMs, but a huge amount of Agency ARMs (Fannie Mae, Freddie Mac ...) plus those crazy Option ARMs.

Anonymous said...

totally amazing fiscal morass filled with suckers, ?????? been had comming and going!!!!

Anonymous said...

the last laugh could be a real doozy, unless it comes with a bullet