September 10, 2007

FLASH: Toxic lender Washington Mutual sees "perfect storm" in housing, expects home prices to keep falling in most markets, billions in WM losses


The perfect storm. Surprising for bank CEOs and sheeple. Fully expected and predicted by HP'ers. Note - I'm short WM... They did call them "liar's loans" for a reason ya know...

NEW YORK, Sept 10 (Reuters) - Washington Mutual Inc., the largest U.S. savings and loan, may set aside $500 million more than it had previously forecast for loan losses in 2007, amid what Chief Executive Kerry Killinger called a "near perfect storm" in U.S. housing.

The Seattle-based thrift had in July projected setting aside $1.5 billion to $1.7 billion for loan losses.

Speaking at a Lehman Brothers Inc. financial services conference, Killinger said the housing market is struggling with stagnant home prices, rising borrowing costs, tighter underwriting standards, and tough capital markets conditions.

"Most housing markets appear to be weakening, to us," he said. "We would not be surprised to see declines in housing prices in many regions of the country ... for the next few quarters."

33 comments:

Metroplexual said...

Good thing the CD I have with them matures at the end of this month.

Anonymous said...

SUZAAAAANNNNNNNNNEE!!!!!!!!!!!!!

Anonymous said...

()
()
()
()
()
I was in Orlando over the weekend for a friend's wedding. I spent 2 years working in Orlando, during the boom, 2004 and 2005.

Thurs and Friday night I went out downtown visting some of the old hangouts. I was shocked how dead it was. I'm talking 10:00 on a Friday and bars were 1/2 empty. Same bars that 2-3 years ago would have been packed 5 deep.

Looks like the heloc money ran aout and those $12 Martinis aren't all that appealing anymore.

Anonymous said...

Weakening? I would say the local market in Brown County has collapsed.

Anonymous said...

Well they won't be using my million to cover their losses. I bailed on them last week. Now funds are distributed in three other banks.

Anonymous said...

Questions?

1. How many ARM's are indexed to the LIBOR?

2. How will a fed funds rate cut help ARM's indexed to LIBOR?

3. Why don't the talking heads review this topic?

LauraV said...

I went into the San Leandro,CA WAMU branch on Saturday and noticed all the signage for home loans have disappeared. Two new "HAND WRITTEN" signs in the loan area said: "Loan review and Payment"


What the heck?!

Anonymous said...

He (WAMU Rep) nevertheless said Washington Mutual is well positioned to take advantage of market conditions.

Didn't Orangzilo say the same thing earlier this year about CFC being in a position to take advantage of the weakening market?

Ron said...

Bah, WAMU can blow me. I work with all kinds of banks and credit unions and I deal with the biggest and some of the smallest. These ass clowns blew me off, their whole we are just like you and not a stuffy bank is BS. They are worse than Wells Fargo, Deutsch, who are both customers of mine. It is funny the other side of the business you get to see, companies you think are going to be laid back and cool, are harder to work with than Halliburton like REI....bunch of ass clowns as well. WAMU gets what they deserve, that deceptive company can f off.

Anonymous said...

Shades of 9-11? ONE BILLION IN PUT OPTIONS!!!!!!!
http://www.homelandsecurityus.com/Options082907

Approximately one billion dolars has been 'bet' that the S&P Index is going to collapse by 50% within three weeks. Yes, no.....what

RiperDurian said...

"... for the next few quarters."

Make that a ten dollar roll of quarters.

Anonymous said...

Anonymous said...
Shades of 9-11? ONE BILLION IN PUT OPTIONS!!!!!!!
http://www.homelandsecurityus.com/Options082907

Approximately one billion dolars has been 'bet' that the S&P Index is going to collapse by 50% within three weeks. Yes, no.....what

****************
$1B is nothing as far as puts go. This is nothing but a scare tactic from a security firm.

Anonymous said...

Anonymous said...
Shades of 9-11? ONE BILLION IN PUT OPTIONS!!!!!!!
http://www.homelandsecurityus.com/Options082907

Approximately one billion dolars has been 'bet' that the S&P Index is going to collapse by 50% within three weeks. Yes, no.....what

September 10, 2007 5:20 PM

Is this BS?

Batman said...

Re: anon 5:20 pm

Well if there is a billion in shorts on the S&P for the 21st, wouldn't that goose the put/call ratio data that comes out? I've heard many'a doomsayer prediction about specific days the entire financial world was going to go Tango-Uniform. Seems more likely a slow grinding ride into the grave is more likely a la DJIA from 1929-1933.

Anonymous said...

can someone explain "heloc money" and Alt-A loans.

I understand the overall collapse of the real estate market but I havent followed all the jargon.

Thanks

Anonymous said...

Only the "Next couple of quarters?"
LMAO!
I like WAMU though. They sent me a whole bunch of gift certificates for taking their nice credit cards.
Seems that the company they sub contracted their credit card "recrutment" work to, never bothered to cross-check for duplication. Must have been paid by the head, so they didn't care. I didn't ether.

Anonymous said...

Housing Market Slump Forces Couple To Open Brothel

http://wcbstv.com/topstories/local_story_252232548.html

http://tinyurl.com/27tgg8

Anonymous said...

NO BAILOUT

Anonymous said...

OMG we are in a depression everyone

Apple Sells 1 Millionth IPhone, Nearly a Month Ahead of Schedule

NEW YORK (AP) -- Apple Inc. sold its millionth iPhone on Sunday, just 74 days after the combination cell phone-iPod went on sale and less than a week after its price was cut by a third.

Apple previously said it expected to hit the million-sold mark by the end of September.

Monday's announcement sent Apple shares up $2.94, or 2.2 percent to $134.71.

Ron said...

LoL! The iPhone guy is back!!!

foreclose_me said...

That link didn't say ALL the puts were betting a -50%, just some of them.

If there is anything to this, I would imagine it is betting on some rough days in the next two weeks, as a lot of commercial paper is due.

Anonymous said...

I understand the overall collapse of the real estate market but I havent followed all the jargon.

HELOC - home equity line of credit

Alt-A - a loan/borrower that's notch above sub-prime, but still below prime

ARM - Adjustable Rate Mortgage

IO - Interest-Only loan

Neg Am - Negative Amortization loan (your loan balance grows if you only make the minium payment)

No-Doc - loan where you don't have to provide proof of your income, assets, or ability to repay the loan.

LIBOR - London Inter-Bank interest rate (to which many ARMs are tied)

PITI - Principle, Interest, (real-estate) Taxes & Insurance, the monthly amount you must pay to stay in a house with a mortgage.

DTI - Debt-To-Income ratio, a measure of your monthly debt load versus your income.

Upside-down - person owes more on the house than it's now worth

Short sale - when a property is sold for less than the outstanding loan amount by agreement with the lender, and the lender eats the loss

1099C - statement you get from your lender after a short sale showing their loss as "income" to you (on which you must pay tax)

REO - Property owned by the lender (foreclosed upon).

REIC - Real-Estate Industrial Complex, a take-off on Ike's warning about the so-called Military-Industrial complex.

Anonymous said...

I have a sister in Minnesota who's husband used their home as an ATM. They are divorcing and my sister is expecting $50K equity.

They bought the home for $150K and now the mortgage debt on that same home is $236,500.00.

I didnt have the heart to tell her that no bank would add another $50K to an already over leveraged POS home.

How crazy is the population?

Anonymous said...

Countrywide Financial (CFC - Cramer's Take - Stockpickr - Rating) isn't the only big bank threatened by the deepening real estate crisis.

An analysis of the largest 20 banks and thrifts by TheStreet.com Ratings shows that four institutions are under-reserved for possible credit losses, a red flag as the economy slows and mortgage defaults rise.

Perhaps more troubling, the numbers show that one of those institutions -- Washington Mutual (WM - Cramer's Take - Stockpickr - Rating) -- could join Countrywide in facing serious liquidity problems as worries about the housing and mortgage markets multiply. Meanwhile, another big lender, National City (NCC - Cramer's Take - Stockpickr - Rating), could see its earnings and dividend come under pressure as a result of its low reserve levels.

Neither Washington Mutual nor National City immediately returned calls seeking comment. But the findings come as investors confront a rising tide of bad news in the U.S. credit markets. Foreclosures nearly doubled last month from a year ago, RealtyTrac reported Tuesday. Shares in bank and brokerage stocks have dropped sharply this summer. Countrywide alone has shed $13 billion in market value this year.

With the financial sector under increasing stress, TheStreet.com Ratings checked two key ratios to measure the strength of big banks' balance sheets: loan-loss reserves as a percentage of nonperforming loans, and nonperforming assets as a proportion of core capital and reserves.

http://www.thestreet.com/s/is-wamu-the-next-countrywide/newsanalysis/ratings/10375529.html?puc=_googlen?cm_ven=GOOGLEN&cm_cat=FREE&cm_ite=NA

Lost Cause said...

I am bringing marshmallows to this meltdown.

Anonymous said...

The market is expecting a rate cut, and performing as such. Hate to think when it is not forthcoming,watching the exit

grilled ham and cheese said...

1 million people could afford to spend $499 on a new APPLE i-Phone on their credit card.

299 million could not.

That's: 1/300ths of the US population. A very small percent.

As the greatest economic bush-co blunder collapse of the US economy unfolds, 1 out of 300 citizens will remain wealthy, while 299 out of 300 will be near cashless and credit poor.

Anonymous said...

Anonymous said...
OMG we are in a depression everyone

Apple Sells 1 Millionth IPhone, Nearly a Month Ahead of Schedule

NEW YORK (AP) -- Apple Inc. sold its millionth iPhone on Sunday, just 74 days after the combination cell phone-iPod went on sale and less than a week after its price was cut by a third.

Apple previously said it expected to hit the million-sold mark by the end of September.

Monday's announcement sent Apple shares up $2.94, or 2.2 percent to $134.71.

September 10, 2007 7:03 PM

So what's your point? in 1928-29 the must have item then was an automobile which enjoyed historical highs before the crash & depression. Furthermore, from wikipedia's Great Depression article you'll see it was also a bit of a slow motion train wreck:

Lurching downward
The Great Depression was not a sudden total collapse. The stock market turned upward in early 1930, returning to early 1929 levels by April, though still almost 30 percent below of peak in September 1929.[2] Together government and business actually spent more in the first half of 1930 than in the corresponding period of the previous year. But consumers, many of whom had suffered severe losses in the stock market the prior year, cut back their expenditures by ten percent, and a severe drought ravaged the agricultural heartland of the USA beginning in the summer of 1930.

In the spring of 1930, credit was ample and available at low rates, but people were reluctant to add new debt by borrowing. By May 1930, auto sales had declined to below the levels of 1928. Prices in general began to decline, but wages held steady in 1930, then began to drop in 1931. Conditions were worst in farming areas where commodity prices plunged, and in mining and logging areas where unemployment was high and there were few other jobs. The decline in the American economy was the motor that pulled down most other countries at first, then internal weaknesses or strengths in each country made conditions worse or better. By late in 1930, a steady decline set in which reached bottom by March 1933.

FYI - in 1928-29 a new car cost about the same as an iPhone

k.w. - southern ca. said...

It's really unfortunate how complex getting into a house has now become - so many "fingers in the pie" now, it's really pathetic.

Will this change significantly after all this mess in housing? -- I seriously doubt it, but some change is definitely required.

I remember my parents telling me how they dealt with the previous owner directly, and took at a loan for a mortgage no more than twice my father's salary at that time.
He paid of the house, and had plenty of time to take us 3 kids on nice 2-3 week vacations each year for several years, without the hassle of making reservations in advance by 6 or more months.

We need to revamp the *entire* housing industry so that we can get back to housing that makes sense for everyone.

Anonymous said...

I told everyone the mail for Washington Mutual/Providian was being returned to sender (for months) no secret to the folks who work it everyday. I heard from a coworker his wife who works as a loan officer or whatever her job is that processes loans, was told to get ready for "problems" weeks ago. I told everyone and so far no one has seen it but me (it was on Bloomberg news why did they only show it once) that Wash. Mutual was laying of 1200 employees. Even the Implode-O-Meter dropped it off the role of ailing lenders. I know people who have accounts with Washington Mutual to be careful, they told me I didn't know what I was talking about. Okay. I will never ever say I told you so to their faces. I hope they don't have more than 100,000 but we are working stiffs so I doubt it. But you never know.

hendry said...

Apple sold a million phones? How many millions of Model T's did Ford sell during the Great Depression? I guess the Great Depression didn't really happen.

Anonymous said...

I work in a credit union, and IMHO all of the major depository banks will survive. They have too much gravy income that will keep them afloat.

WAMU, B of A, and Wells all have certain operations that are obscenely profitable. Each one of them owns check cashing/payday lending affiliates, they all have credit card portfolios that generate more fee than interest income, they've all migrated almost completely to automated service and foreign call centers, and they all offer "courtesy pay" type overdrafting at $35-a-pop or more. These type of operations tend to be MORE profitable during an economic downturn.

How many HPers have had a direct deposit post 3 days late, used their debit card over the long holiday weekend, and racked up over $100 in fees? Believe me, these schisters know the game.

Anonymous said...

Questions?

1. How many ARM's are indexed to the LIBOR?

About half the loans originated are. The COFI Index is another index as well. LIBOR has been rising of late because banks, which set LIBOR, know trouble lies ahead, and are demanding a higher return for the risk of lending to other banks. When the Fed lowers the rate, it may allow for another option of financing for the troubled banks. Therefore, LIBOR may drop because banks have another option to go to borrow and the rate will decrease as demand lessens.

2. How will a fed funds rate cut help ARM's indexed to LIBOR?

It will not. LIBOR may go down, but when these loans adjust, they are also adjusting from and Interest Only option. Therefore, the borrowers interest rate rises, and now you have to begin to pay principal too. In addition the loan now amortizes over only 27 or 25 years and not 30.

3. Why don't the talking heads review this topic?

Mostly because it is a moot point. Especially for people with Option Arm Loans. These loans were set at artificially low rates for the first 2 or 3 years. Now they will go to LIBOR plus a margin, roughly most will reset to about 10%. If you were paying 4% and Interest Only at that, a 1/2% drop in your reset rate is meaningless, you're not going to make your payments.

Lastly, we are more likely in trouble not because of faulty mortgage loans, but because the banks have sponsored heavily leaveraged conduits. These are off balance sheet obligations that soon may rear their ugly heads.