April 26, 2007

Today's the Day! Will Liar's Loan Alt-A kings Countrywide and IndyMac (finally) come clean?

Or will their insider-trading stock-pumping CEO's continue with the deception on their way to Ken Lay / Bernie Ebbers / Dennis Kozlowski fates?

Oh, how the screw turns... This story is playing out like a great Greek tragedy, wouldn't you say?

My guess today is more deception. I don't think they'll tell the market what's really going on with their Alt-A portfolio until after it's really hit the fan.

For you wonks out there, try to jump on the conference calls and report back here. That's where the real fireworks should be.

(Note I'm short NDE, not short CFC at the moment)


keith said...


S&P More Than Doubles Alt A Mortgage Bonds It May Cut (Update1)

April 25 (Bloomberg) -- Standard & Poor's said it may lower ratings on bonds from 11 different securitizations of home loans made last year, more than doubling the number of its warnings on bonds of so-called Alt A mortgages. S&P said it's considering the move amid higher-than-anticipated delinquencies.

Six of the bonds, with $23.4 million in balances, were composed of Alt A mortgages, which are loans considered a credit level above subprime and are made to people with generally good credit histories who opt for atypical underwriting or terms. Four were backed by second mortgages, and two were of subprime loans, to consumers with poor credit or high debt, S&P said.

Issuers of the Alt A securities were trusts used by New York-based Bear Stearns Cos., the top underwriter of mortgage bonds; Charlotte, North Carolina-based Bank of America Corp., the largest U.S. bank by assets; and Calabasas, California-based Countrywide Financial Corp., the largest home lender.


Anonymous said...


Did you pick up in the fact that Indymac is now the #2 independent mortgage lender in America in the article you've got linked to your post's title. Isn't it a bit ironic to move up in the ranks of something because the former place holder went bankrupt?!! LOL. Its like the reality soup nazi line in Seinfeld, "NEXT!!" No more lies for you, get out and go to bankruptcy court.

Anonymous said...

I wish we knew Enron was going to blow up before it did

Anonymous said...

Dude's orange

Anonymous said...

It's gonna take another quarter or two for these two to own up to the Alt-A mess

Anonymous said...

Indymac Warns on Q2 Results
Thursday April 26, 8:45 am ET
Indymac Forecasts Disappointing 2Q Profit but Suggests Turnaround

PASADENA, Calif. (AP) -- Indymac Bancorp Inc., the second-biggest independent U.S. mortgage lender, said Thursday it expects its second-quarter performance to be similar to the first quarter, an outlook that missed Wall Street's expectations.

Anonymous said...

Countrywide profit falls
Thursday April 26, 8:08 am ET

NEW YORK (Reuters) - Countrywide Financial Corp. (NYSE:CFC - News), the largest U.S. mortgage lender, on Thursday said first-quarter profit fell, hurt by pressures on the housing and subprime lending markets.
Net income for the Calabasas, California-based company fell to $434 million, or 72 cents per share, from $684 million, or $1.10, a year earlier.

Anonymous said...

UPDATE 2-IndyMac profit slides, sees no mortgage 'doomsday'

IndyMac, which is also one of the largest U.S. savings and loans, specializes in "Alt-A," or "Alternative-A" mortgages, which fall between "prime" and "subprime" loans in quality.

That sector has suffered as rising defaults among subprime borrowers prompted fears of a "contagion" that might spread to lenders that make higher-quality loans, and has made it tougher to sell loans to investors.

IndyMac shares closed Wednesday at $30.97 on the New York Stock Exchange. They have fallen 31 percent this year, while the KBW Mortgage Finance Index <.MFX> is down just 6 percent.

Last week, IndyMac said it raised its minimum borrowing standards, and cut back on lending to people with lower "FICO credit scores or who cannot fully document income or assets.

"Some are predicting a 'doomsday scenario' for the housing and mortgage markets," Perry said. "Although we believe this to be unlikely, if that were to occur, our financial performance could worsen materially from what we are currently forecasting."

Anonymous said...

One thing I noticed about the Indy Mac 10-Q was their earnings for 'Financial Freedom' went from 8mm to 28mm in a year. Over half of their earnings were from this. 'Financial Freedeon' is their reverse mortgage business. I'm not sure exactly how reverse mortgages work for the bank, but if they have a lot of RE holdings as a result of this, I'll bet the value is being overstated.

CountryWide had its holdings of 'Subprime interest-only securities' grow from $3.7bb to just under $15bb in a year. Almost 3x. They are saddled with $15bb of subprime interest only securities. I wonder how much they are really worth?

All in all, if you read between the lines, I think both reports are terrible. I think things are going to get much worse at both banks. I mean thrifts. They'll probably only go up 2% today on the bad news.

Mort said...

Mr. Suntan Man has friends in high places. It doesn't matter how bad CFC crashes. He will end up ambassador to something or other, ala Raines.

Anonymous said...

>> Dude's orange

CONGRATS! Quote of the day!

JAFO said...

"Some are predicting a 'doomsday scenario' for the housing and mortgage markets," Perry said. "Although we believe this to be unlikely, if that were to occur, our financial performance could worsen materially from what we are currently forecasting."

Yes, I would imagine that your financial performance could "worsen materially" in a housing meltdown. In a similiar vein, I believe that my health could "worsen materially" if I drank a gallon of bleach.


Margaritas ante porcos. said...

The inevitable is yet to happen.

Anonymous said...

Let's not forget that lenders report the full interest income on a loan even though only a small percent of the loan is collected. I don't believe the numbers will accurately report earnings. They are still hoping people will be able to refi out of the toxic loans. Meanwhile the gallows are being made ready.

Anonymous said...


Anonymous said...

"Some are predicting a 'doomsday scenario' for the housing and mortgage markets," Perry said. "Although we believe this to be unlikely, if that were to occur, our financial performance could worsen materially from what we are currently forecasting."

Wow, interesting that he's actually admitting it to be a possibility, rather than the blanket approach of "deny, deny, deny", painting a rosy picture. It's almost as if he's hedging his statement, covering his bet in case it happens....

shtove said...

Don't know if anyone has linked this blogger yet:
Superb caustic analysis of Bronzillo (the dude with the tan) and his buddies at Countrywide.

Justin said...

re: Dude's orange

Kinda like an Oompa Loompa?


Only in this insane market could such bad reports come out and these stocks SURGE.

Anonymous said...

Hey Keith genius:

NDE up over 3% today.

Nice work on that short! You got crushed on Home Depot in January, now you're getting crushed on NDE... Maybe you should stay away from investing and stick to something you understand. Whatever that is.

- Mr. Long Housing

Anonymous said...

Indymac total non-performing assets up 214% compared to the same quarter last year.

Foreclosed assets up 291% compared to the same quarter last year.

Loan repurchases up from $15mil in Q1 2006 to $214mil Q1 2007 a 1394% increase.

WTF is the stock going up for?

Anonymous said...

Indymac stock up over 3% today.
Shorting is a dangerous game.

Anonymous said...

IndyMac + 5% today, Keith.

Really weird

Natural Eyebrows said...

"Dude's orange."

I love it.

starve the beast said...

What's up with that Mozilo guy's skin?

Anonymous said...

Mr. Suntan Man will take over from Wolfoblitz as chairman of the World Bank.

Anonymous said...



Anonymous said...

The Fed will print more funny-money to prop them up. Hopefully the Fed doesn't run out of green ink or paper.

People will either lose their homes or end up being forced to pay $500K for that $170K house they got screwed on.

Either way, the big institutions will get cash and the subprime borrowers will get evicted. The abundant supply will force prices down, which will be nothing more than a paper loss for the rest of the homeowners.

Anonymous said...

Keith asks if Indy will 'come clean'. I believe the truth is....Indy doesn't know 'the truth' at this moment...which in and of itself, is very scary. How can you reasonably predict the fate of Alt-A loans, when you have so little information?
Interesting times, no?

Anonymous said...

>Weak GDP Report Pressures Wall Street.

Yeah, for about 10 minutes before the rally starts again.

Anonymous said...

President George W. Bush's job performance is currently viewed positively by only 28 percent of U.S. adults, the lowest since he took office, according to the latest Harris Interactive poll.

Anonymous said...

How do they handle foreclosures on their balance sheet and income statement?

IF they take possession of a house, they'll just "assume' that they can sell it for the loan amount. So no income effect at all!

No 'bad debt expense' for the current mortgages they hold which may cost them something in the future.

Just assume everything will work out and no need to take write downs etc.

Anonymous said...

Homebuilders May Break Loan Covenants, Moody's Says (Update1)

By Mark Pittman

April 26 (Bloomberg) -- U.S. homebuilders are in jeopardy of violating their lending agreements in coming months because of a drop in sales, according to Moody's Investors Service.

More than half, or 11, of the 21 builders that Moody's rates failed to generate more cash than they spent in 2006, analyst Joseph Snider in New York said in a report today. Homebuilders often have to promise banks that they will have twice as much operating revenue as interest expenses over a given time or the bank can demand immediate repayment of a loan, Snider said.

The homebuilders' situation is especially dire because cash flows usually turn positive during a slump as they cut back on starts and sell existing inventory, according to the analyst. The housing market is so weak that homebuilders haven't been able to cut their inventories, leading many to ask their bankers for so- called covenant relief, Snider said in an interview. Ratings may also be in jeopardy, he said.

``The next year or so for them is going to be pretty grim,'' Snider said. Some of the requests being asked of lenders are to relax rules that govern the amount of cash flow they must have in relation to interest expense.

The Commerce Department yesterday said new homes sales totaled 858,000 in March. Sales were expected to be 890,000, according to the median of 71 projections in a Bloomberg News survey of economists. The number of homes for sale in February reached 8.1 months of inventory, the highest in 16 years.

Shrinking Market

Bloomfield Hills, Michigan-based Pulte Homes Inc., Atlanta- based Beazer Homes USA Inc. and Calabasas, California-based Ryland Group Inc. this week reported quarterly losses as the deteriorating housing market forced them to write down the value of property and abandon land purchases.

Moody's figures the housing market has been shrinking for the past year and a half and the ratings company has taken 16 negative rating actions on homebuilders since mid-2006.

``More will undoubtedly follow,'' Snider said in the report.

The outlook for Pulte's credit rating was lowered to ``negative'' from ``stable'' today. The move reflected Pulte's weak operating performance, its inability to generate positive cash flows and the expectation that compliance with its current interest coverage covenant may become problematic in the latter part of 2007, Moody's said. Its Baa3 rating, the lowest level of investment grade, wasn't changed.


Pulte was one of three investment-grade companies generating negative cash flow for the previous 12 months at the end of the year, Snider said. The other two are Dallas-based Centex Corp. and Toll Brothers Inc. in Horsham, Pennsylvania.

Speculative-grade companies losing cash at the end of 2006 were: Red Bank, New Jersey-based Hovnanian Enterprises Inc.; Standard Pacific Corp. in Irvine, California; Technical Olympic USA Inc. of Hollywood, Florida; M/I Homes Inc. in Columbus, Ohio; WCI Communities Inc. in Bonita Springs, Florida; Reston, Virginia-based Stanley-Martin Communities LLC; William Lyon Homes Inc. in Newport Beach, California; and Meritage Homes Corp. of Scottsdale, Arizona.

Debt sold by junk-rated homebuilders returned about 1.46 percent this year, compared with a 3.95 percent for high-yield, high-risk bonds on average, according to Merrill Lynch & Co. index data, and a 13.7 percent drop for the Standard & Poor's 500 Homebuilders Index of share prices, which includes Fort Worth, Texas-based DR Horton Inc., Pulte and Centex.


Meritage Chief Executive Officer Steven Hilton said in a statement yesterday that ``we are encouraged by some early signs of stabilization.'' While Meritage reported an 81 percent drop in profit in the first quarter amid weak demand, Meritage forecast 2007 profit that exceeded analysts' estimates and said its cancellation rate improved.

The S&P 500 Homebuilders Index rose as much as 4 percent, the biggest gain since January, following the comments.

Housing Starts Drop

Houses started by U.S. homebuilders will fall to a 10-year low in 2007, according to the National Association of Home Builders, which released the forecast at a housing conference they sponsored today in Washington. Single-family housing starts will decline to 1.16 million this year, the lowest since 1.13 million in 1997.

``The failure of a strong spring selling season to materialize, the unraveling of the subprime mortgage market, and the weakening of the alternative-A, or Alt-A, market will also carry a significant toll,'' Snider said in his report.

Alt A mortgages represent loans that are considered a credit level above subprime, and are made to people with generally good credit histories who opt for atypical underwriting or loan terms.

Housing is unlikely to show any signs of stabilization until 2008 at the earliest, Snider said, ``given the oversupply of homes for sale, their diminished affordability, declining prices, excess land inventory, and weak consumer sentiment.''

To contact the reporter on this story: Mark Pittman in New York at mpittman@bloomberg.net .

Last Updated: April 26, 2007 16:18 EDT

Anonymous said...

A Dork and a wax museum statue!

Anonymous said...

One needs color the other could ease up on the bronzing foam!!

Anonymous said...

Who's the "leather" face guy pictured on the right?

He reminds me of old Joe Piscapo's impression of Frank Sinatra back during the 1980's.

Anonymous said...

I work for a broke dick developer (very small in So cal) struggling to sell homes and struggling to pay subcontractors and overhead. They tricked Indymac into thinking they had met the covenant requirements by taking loan draws and not paying them out (aka their operating capital as far as Indymac is concerned). This homebuilder will go dark for months as they haven't started any more phases of homes and have subcontractors filing and perfecting liens...FILING AND PERFECTING...Frustrated about the unethical behavior I contacted Indymac who scoffed my anonymous allegations and legit and valid proof- the breach of covenant should have called the loan due but Indymac doesn't seem to give a shit that the homebuilder committed fraud and showed their operating capital with THEIR LOAN DRAWS...how stupid are they??? Not stupid at all apparently - why call loans due and demand that the homebuilders live up to the contractual obligations of the loan? I mean, when the market turns (hardy har har)these major builders MAY not come back to Indymac for their lending needs and there is really no need to alarm stockholders - yet... I bet Indymac's stockholders would give a shit about continuing to lend to big black fraud committing holes.... fraud in itself...fraud begets fraud...