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March 06, 2007
BUBBLETALK: New thread to talk about the housing crash and lending meltdown
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«Oldest ‹Older 201 – 350 of 350Warren Buffett said on Thursday the U.S. economy may not enjoy a "soft landing" because Americans are taking on too much debt
http://www.reuters.com/
article/bondsNews/
idUSN0135985020070302
another one bites the dust:
“Ivanhoe Mortgage, a $2 billion-a-year conventional/government lender based in Orlando, Fla., has closed its doors, according to industry officials familiar with the company.”
GMAC's subprime mortgages a threat to GM
GMAC Financial Services -- has to the business of making mortgage loans to people with weak credit or heavy debt burdens.
The entire mortgage industry is feeling the pressure from slowing home sales, intensifying competition and rising past-due loans. Higher delinquencies on subprime mortgages -- in large part due to a sharp deterioration of underwriting standards last year -- have in recent months forced a slew of lenders, big and small, to set aside more capital for potential loan losses.
In many cases, lenders have also been forced to write down the value of their mortgage securities. Many analysts say GMAC's home-lending unit, Residential Capital LLC, known as ResCap, is not immune to the industry stress. The unit is heavily involved in the subprime mortgage business -- making and investing in such loans itself and providing funds to other mortgage originators.
http://www.businessweek.com
/ap/financialnews/
D8NJKJBG1.htm
And now horses being thrown in? Why hasn't Casey tried that?!?
Cindy Infiesto, is trying to sell her 6,300-square-foot, all-concrete Alva house on 7.5 acres with a seven-stall horse barn and a putting green.”
“Infiesto, a real estate broker with the Florida Real Estate Store, is motivated to sell, with a property tax bill of more than $13,000 this year and skyrocketing insurance rates. But at $1.4 million, no dice.”
“‘I’m desperate to sell my house,’ she said. ‘I’ll even throw in the horses,’ she said with a chuckle.”
ABX subprime mortgage index up on short-covering
The ABX derivatives index rallied sharply on Thursday despite sagging U.S. stocks as traders unwound bets that the index would deteriorate, locking in profits.
"I suspect it is a technical bid (short covering) with the profits going to pay for losses in other markets," Peter DiMartino, ABS strategist at RBS Greenwich Capital, said.
A trader said: "There's a lot of short-covering going on, because I think the perception is that (the ABX) was significantly oversold."
ABX 2006-2 "BBB-minus" index, which contains subprime mortgage asset-backed security issues from the first half of 2006, was trading at least 4 points higher at 70 to 74 compared with 66.23 on Wednesday, according to UBS Securities.
Promised funding to top-10 subprime lender Ameriquest Mortgage from Citigroup Inc. helped fuel short-covering, said David Liu, an analyst at UBS in New York.
The bid by one of the world's biggest financial institutions is helping to relieve concerns that more lenders will go bankrupt, a move that would deepen losses to bondholders, he said.
The ABX index is used by investors to bet against the subprime industry or hedge their subprime mortgage risks.
Hedge fund managers and other players who have long expressed a bearish view on the U.S. subprime mortgage sector by buying ABX protection may now be selling to lock in profits, the trader said.
http://today.reuters.com/
news/articleinvesting.aspx?
type=bondsNews&storyID=2007-03-01T184443Z_01_N01339816
_RTRIDST_0_ASSETBACKEDS-
ABX-UPDATE-2.XML
A stronger Yen means weaker US Dollar
The yen headed for the biggest weekly advance against the dollar in more than 14 months as investors unwound wagers on a decline in the Japanese currency following a rout of U.S. stocks and emerging markets.
Japan's yen is also poised for the best week since June 2005 versus the euro. Investors exited trades in which they borrowed yen to buy higher-yielding assets elsewhere, in a practice known as the carry trade, after a slump in Chinese stocks led to a global sell-off.
``People are moving out of riskier assets,'' said Christian Dupont, a senior currency trader at Societe Generale SA in Montreal. ``Carry trade is the first to suffer.''
http://www.bloomberg.com/
apps/news?
pid=email_en&refer=
home&sid=aEczt91GcKyY
Big Subprime Investors bonds rated as Junk
Goldman Sachs Group Inc., Merrill Lynch & Co. and Morgan Stanley, which earned a record $24.5 billion in 2006, suddenly have become so speculative that their own traders are valuing the three biggest securities firms as barely more creditworthy than junk bonds.
Traders of credit derivatives are more alarmed than stock and bond investors that a slowdown in housing and the global equity market rout have hurt the firms. Merrill since 2005 has financed two mortgage lenders that subsequently failed and purchased a third, First Franklin Financial Corp., for $1.3 billion.
``These guys have made a lot of money securitizing mortgages over the years in a mortgage boom time,'' said Richard Hofmann, an analyst at bond research firm CreditSights Inc. in New York. ``The question now is what is the exposure to credit risk and what are the potential revenue headwinds if they're not able to keep that securitization machine humming along.''
Credit-default swaps on the debt of Goldman, the world's biggest securities firm, have risen to $32,775 per $10 million in bonds, up from $21,500 at the start of the year, according to prices compiled by London-based CMA Datavision. The price touched $35,000 on Feb. 28, the highest since June 2005.
Spokesmen and spokeswomen for Goldman, Lehman, Merrill and Morgan Stanley declined to comment.
http://www.bloomberg.com/
apps/news?pid=20601087&sid
=aASkUO0LGIh8&refer=
worldwide
US SWAPS-Spreads widen as bonds rally on safe-haven bid, as market eyes subprime debt
U.S. interest rate swap
spreads widened on Thursday as U.S. Treasury yields eased modestly, steadying after Tuesday's dramatic widening of swap spreads when global equities prices fell and a consequent safety bid pushed bond prices higher and yields lower.
Hong Kong shares drop for a 5th straight session on regional decline
Hong Kong-listed Chinese stocks H shares also underperformed sharply, with the H-share index fell 2.9 percent while the H-share financial subindex lost 3.3 percent.
The Hong Kong market tracked the decline in mainland China, where the the Shanghai Composite Index ended down 2.9 percent.
Traders said the market will stay volatile in the near term. Investors will also be cautious ahead of potential introduction of further credit tightening measures by Beijing during Chinese People's Political Consultative Conference this weekend, followed by the annual session of the National People's Congress.
http://www.iht.com/articles
/ap/2007/03/01/business/
AS-FIN-MKT-Hong-Kong-
Markets.php
China B-shares close lower, tracking A-share falls - UPDATE
SHANGHAI (XFN-ASIA) - B-shares in Shanghai and Shenzhen closed lower, tracking A-share falls, with blue chips losing ground, dealers said.
The Shanghai B-share Index was down 6.03 points at 172.32 on turnover of 777.76 mln usd and the Shenzhen B-share Index was down 4.48 points at 489.75 on turnover of 625.81 mln hkd.
'The hard currency markets followed the renewed correction in their A-share peers, with blue chips under pressure from continued profit-taking,' a Shanghai analyst said.
http://www.forbes.com/
markets/feeds/afx/2007/03/
01/afx3474573.html
Like I said many times before, it's all manipulated:
"NEW YORK (Reuters) -- The U.S. government on Thursday charged 13 people, including employees at major Wall Street banks, with securities fraud, wire fraud, bribery and other charges in what authorities are calling one of the most pervasive insider trading rings in years.
Michael Garcia, U.S. attorney for the Southern District of New York, said the insider trading schemes involved a UBS (Charts) Securities executive who is accused of selling information about upcoming analyst upgrades and downgrades and a former Morgan Stanley (Charts) attorney accused of giving out information about mergers and acquisitions.
Prosecutors said that two brokers at Assent LLC found out about the scheme involving the UBS executive and blackmailed some of the people involved.
In addition, prosecutors charged that a Banc of America Securities representative allocated shares of initial public offerings and secondary offerings to a hedge fund, Q Capital, for cash kickbacks.
Also on Thursday, the Securities and Exchange Commission charged 11 people and three companies in a civil suit related to the insider trading schemes."
The Danes are out in front on the squatter riots that could soon sweep the U.S. once foreclosures really begin to ramp up.
From the BBC: Danish police expect more clashes (http://tinyurl.com/2gurtw)
"Police in Denmark are braced for more violence after the eviction of squatters from a youth centre in the capital Copenhagen.
At least 217 people were arrested on Thursday after clashes at the Youth House (Ungdomshuset) building in the Noerrebro district.
Protesters threw cobblestones at police and set makeshift barricades on fire."
"California Eqity Locusts"
I love it. They were all over us in Tucson for several years. Worse in Phoenix. Hadn't heard the term before, though.
Another one, Franklin Financial, kaput on the implode-o-meter. Up to 28 now.
Striker and Anons, thank you so much! The videos were especially helpful, I was finally able to more fully grasp the larger picture.
Just wanted to gloat, the bloodhound blog has lost its posters. There are “no comments” all over the board and 5 to 13 comments max on his opines. I would say or it would appear Swan’s traffic is down commiserate with credibility, in my opinion.
you win, keith. (:
from housing-watch.com
San Diego: Inventory 0.4% lower today than a year ago and 24% lower than 6 months ago. Price is down a whopping 3.3% from last year.
How is that happening? What happened to the tens of thousands of foreclosures and investors dumping their properties for pennies on the dollar? What happened to the 70% price drops that were coming?
Just wonderin...
Desperate times require desperate measures, at the cost of taxpayers, of course. Don't you just love this administration?
"When Bank of America said it was testing a new credit card available to customers who may be undocumented immigrants, the reaction was predictably harsh.
But Bank of America isn't the first to offer such a card: Citigroup said it has done so for years, and Wells Fargo says it's thinking about it. The cards are merely the latest progression for an industry that has spent millions to attract customers in the country's growing Latino community -- and among the estimated 12 million undocumented immigrants living in the United States.
They also reflect a fact faced by every retail business in the United States. While they can't legally employ undocumented workers, they are few, if any, restrictions on welcoming them as customers."
BLOOMBERG:
17:59 *FREMONT SAYS IT HAS ENTERED INTO TALKS WITH VARIOUS PARTIES
17:58 *FREMONT GENERAL TO EXIT SUB-PRIME RESIDENTIAL REAL ESTATE
17:58 Fremont General Corporation to Exit Sub-Prime Residential Real
17:58 *FREMONT GENERAL HIRES CREDIT SUISSE TO SELL SUBPRIME BUSINESS
17:58 *FREMONT GENERAL SAYS IT RECEIVED FDIC ORDER ON FEB. 27
17:46 Fremont to Quit Subprime Lending; New Century Discloses Probe
17:38 *FREMONT GENERAL IN TALKS TO SELL SUBPRIME BUSINESS :FMT US
17:34 *CORRECT: FREMONT SAYS IT WILL HAVE VOLUNTARY FDIC AGREEMENT
17:34 *CORRECT: FREMONT SUBMITS TO FDIC CEASE AND DESIST ORDER
17:33 *ORDER CITES LOANS THAT DIDN'T CONSIDER ABILITY TO REPAY:FMT US
17:31 *ORDER CITES OPERATING WITH INADEQUATE CAPITAL :FMT US
17:29 *ORDER CITES OPERATING WITH LARGE VOLUME OF POOR QUALITY LOANS
17:27 *FREMONT GENERAL IN TALKS TO SELL SUBPRIME BUSINESS :F
17:27 *FREMONT GENERAL WILL SHUT SUBPRIME LENDING UNIT :F
Fremont shuts down subprime, New Century breaches debt covenants with funders, New Century under criminal probes by the state of California and the NYSE for irregular trading, 30 lenders imploded and NEW+Ameriquest on the "ailing" list, over at the Implode-O-Meter.
Holy CARP Batman! The gubbermint is shutting down companies like the SEC shut down trading in 2001.
Please note: Timing is same as year 2000 stock crash : MARCH
Why? I think due to enormous gains from previous year (1999 this time its 2006) there is much pressure to cash in one reason being to pay taxes - tax time = crash time after a boom.
- guns, ammo, gold
Way to go Warren.
Man that guy is good. After 473% of sub prime lenders have collapsed he has the foresight to say we might not have a soft landing. Does he have ESP or something?
Man, what a genius!
NEW is on sale my broker says Wall Street is the only place people run from a sale. That I should buy all the NEW I can even if on margin. He must know something he's got a bunch of acronym's after his name.
Imagine tongue kissing that gutter mouth blowfly!
Just heard a commercial on the radio about buying a home. No company specifically just a general realtor commercial. The typical points covered in the commercial were; why waste all that money on renting when we could just buy, interest rates are low by historical standards, and the feeling of compassion etc...
I was always under the impression that if business was so brisk and selling itself, there was really no need to advertise. With this commercial and among other things, it appears to me the initial stages of desperation are setting in.
Aaron,
I sent the
implode-o-meter link to several friends, including this blog. Your article on iTulip was the first I read about the subprime crisis. You are doing a great service - way to go.
It would be interesting to see it plotted over time. Also, the meter needs some method of calibration, such as the total number of similar lenders, numbers of lenders failed in past years, or something. I know that's more work for you - just playing with the idea.
Anonymous said...
from housing-watch.com
"San Diego: Inventory 0.4% lower today than a year ago and 24% lower than 6 months ago. Price is down a whopping 3.3% from last year.
"How is that happening? What happened to the tens of thousands of foreclosures and investors dumping their properties for pennies on the dollar? What happened to the 70% price drops that were coming?
Just wonderin..."
What a retard. People pull houses off the market, then relist them: that's how the numbers fall. They're so in debt, they can't lower their prices, because they'd have to make up the difference to their lenders as soon as the properties sold. The only thing they can do is wait for foreclosure.
You must be a real estate agent or somebody trying flip crappy condos.
All the for sale by owner dumps don't even get counted in these so called statistics. Troll go eat somewhere else.
Dear Keith,
Stop by Greg Swan Dives sight and you will see that he has posted the
Glengarry Glen Ross
short from u- tube, or from here.
Begs the question: Has the great writer run out of ideas or is he trying to get his traffic back up and he knows HP rocks?
For 'all' have sinned and fall short of the Glory of God!
Bloody Chopsticks Stuck in Our Back
As for the Chinese their engineered 9% drop demonstrated that if they decided to thump their fingers on our (USA's)head, our markets would react violently and they did. This was not just a computer glitch. They were able to dump some of our Treasury debt at a huge profit during that stock market decline because they knew that our programmed trading system would liquidate stocks and automatically purchase U.S. government bonds. The Chinese were able to dump a lot of our debt and the true numbers of what they sold will not be known for months.
March 2, 2007
by John Galt
blowfly will be your interrogator. he'll be juiced by his collapsing real estate empire of exurb stucco shacks saddled with no doc neg am mortgages going south.
Here is a perfect example of a Housing ATM machine consumer.
The house was originally purchased for 118,400 in Feb 1998 per Domania.
Here is the link to his Craigslist Ad...make sure to take note of what his loan balance is now.
http://tinyurl.com/2feayu
Hot off the press from China...
uh-oh.
http://english.people.com.cn/200703/03/eng20070303_353983.html
EUROPE’s biggest bank, HSBC, is to write off $11 billion to cover mounting losses in its troubled American offshoot
CLSA Asia Pacific flashed out a dire warning on HSBC Holdings, urging investors to sell the stock ahead of its results announcement Monday as the research firm expects the banking conglomerate's shares to fall a further 15.69 percent within 12 months.
Some analysts warn of HSBC's impact on the Hang Seng Index and the trading atmosphere in the stock market, as the London-based group has the second heaviest weighting on the index.
http://www.thestandard.com.
hk/news_detail.asp?
pp_cat=2&art_id=39342&sid=
12483688&con_type=1
FDIC gave Fremont a cease-and-desist order.
The FDIC said Fremont failed to make proper allowances for its "large volume of poor quality loans" and operated with inadequate capital. The regulator said Fremont had increased defaults by selling loans with low "teaser" rates without verifying whether borrowers could afford the eventual full payments.
The FDIC also criticized Fremont loans that it said would have to be refinanced repeatedly to avoid foreclosure, and loans at or above 100% of the home's value.
Fremont said it expected to agree to a cease-and-desist order from the FDIC that would severely restrict its control over the sub-prime business. It said it would report a loss because of increased provisions for bad loans, but hadn't yet determined the size of the deficit.
http://www.latimes.com/
business/la-fi-loans3
mar03,1,4146026.story?
coll=la-headlines-
business&ctrack=1&cset=true
To: John Galt
Maybe you are onto something
As for the Chinese their engineered 9% drop demonstrated that if they decided to thump their fingers on our (USA's)head, our markets would react violently and they did. This was not just a computer glitch. They were able to dump some of our Treasury debt at a huge profit during that stock market decline because they knew that our programmed trading system would liquidate stocks and automatically purchase U.S. government bonds. The Chinese were able to dump a lot of our debt and the true numbers of what they sold will not be known for months.
"The Chinese markets is driven by speculation about the government's intentions. If you want to invest in Chinese stocks, don't waste time figuring out what companies will be profitable or what sectors of the economy will grow. Just figure out what the government wants and what the government will do."
"At least a casino has some rules. The Chinese stock market has no rules. I hate this market. It's controlled by the government. It can't be a fair game if the referee is also one of the players."
The Shanghai meltdown should hardly come as a surprise. Playing the stock markets has become China's favourite form of institutionalized gambling, attracting droves of novice investors looking for a way to cash in on the country's economic promise.
The problem is, the markets are still riven by corruption, lax governance practices, and deeply troubled companies. Fundamentals are largely ignored in favour of rumours and wild speculation -- so much so that investors have been known to bid up the price of a company's stock when it reports bad news.
All of which begs the question: If China's markets are such a fickle bellwether of the country's fortunes, why did stock exchanges from New York to Toronto get so easily spooked, staging their own gut-wrenching nosedives?
http://www.globeinvestor.
com/servlet/story/
GAM.20070303.RCOVER03/
GIStory/
Did you notice that every time Treasury Secretary Henry Paulson plans to make a trip to China, the global markets seem to be very volatile ahead of his meeting, but calms down afterward?
Treasury Secretary Henry Paulson is ready to leave for his third trip to China in less than seven months in office,
"We're dissatisfied with the speed with which China is appreciating its currency, the value of which is not market determined, and with China's intellectual property protections," Paulson said.
http://www.chinapost.com.tw
/news/archives/business/
200733/103713.htm
Wednesday’s stock market sell-off “underscores the exposure of our economy to economic developments in countries like China. As we have been running trade and budget deficits, they have been buying our debt and in essence becoming our banker.”
Time to 'get tough' on China?
In her recent speech to the Democratic National Committee Clinton told the story of one of her New York constituents who approached her complaining of loss of manufacturing jobs and asked, “Why can't we get tough on China?”
Clinton’s reply: “How do you get tough on your banker?"
She argued in her letter to Paulson and Bernanke that Congress and the president had to “ensure foreign governments don't own too much of our public debt."
She warned in her letter to Paulson and Bernanke that “if China or Japan made a decision to decrease their massive holdings of U.S. dollars, there could be a currency crisis and the U.S. would have to raise interest rates and invite conditions for a recession.”
http://www.msnbc.msn.com/
id/17403964/
Wells Fargo has more problem then just subprime loans.
Wells Fargo Mutual Fund Investors Urged by Gutride Safier LLP to Come Forward to Protect Their Rights in Class Action Kickback Suit
In response to a tentative ruling this week by a San Francisco federal judge, lawyers today urged all investors in any Wells Fargo mutual fund (a.k.a. Wells Fargo Advantage Fund) to come forward immediately to protect their rights.
The suit concerns Wells Fargo's alleged practice of using investor assets to pay kickbacks to brokers who recommended its mutual funds. A federal securities lawsuit seeks to recover money for the investors.
Federal Judge William Alsup reiterated his approval of the lawsuit, which has been pending against all Wells Fargo mutual funds since November 2005, but tentatively limited the suit Monday to only six mutual funds owned by the plaintiffs. If the ruling becomes final, investors in the other approximately 96 Wells Fargo mutual funds might be excluded from the case.
Court-appointed lead counsel for the investors, Gutride Safier LLP, urges investors in all Wells Fargo mutual funds to come forward immediately to preserve their rights.
http://www.marketwire.com/
mw/release_html_b1?
release_id=221555
Whistle-blowers Program
How to Legally make money on "Cash Back on Mortgage deal"
IRS Targets Down-Payment-Assistance Scams; Seller-Funded Programs Do Not Qualify As Tax Exempt
http://www.irs.gov/newsroom
/article/0,,id=
156675,00.html
The Internal Revenue Service estimates that the difference between what Americans owe in federal taxes and what they actually pay is about $345 billion annually.
In an effort to close this huge "tax gap," Congress and President Bush in December enacted a measure designed to give people more motivation to tattle on dishonest employers, employees, co-workers, acquaintances and former spouses.
But the enhanced incentives -- in the form of higher cash rewards to those who blow the whistle on tax cheats -- will go only to those informants who provide specific, useful information.
"Evidence and analysis is what we are looking for, rather than hearsay and speculation," said Stephen A. Whitlock, director of the IRS' new Whistleblower Office. "People who come in with hearsay, speculation and a motive tend to be less reliable. This shouldn't be about personal vindictiveness." That said, people with the goods on a tax cheat are going to be offered "significant rewards to come forward," Whitlock added.
It is worth mentioning that the IRS has had a tax-fraud hotline for years. The phone number remains (800) 829-0433 and now is answered by the Whistleblower Office.
Rewards were granted, but they were relatively few, as were the amounts of money recovered. In 2005, for example, 169 whistle-blowers were awarded $7.6 million -- about 8 percent of the $93.7 million the government collected as a result of the tips.
The new law doubles the maximum reward to 30 percent of the total recovered, now including interest as well as tax and penalties.
The more helpful the information, the higher the reward. Those who have allegations but little evidence can get a reward of 1 percent to 10 percent of the amount recovered.
But if the IRS discovers a big tax fraud (one involving at least $2 million in lost revenue) based on specific information provided, especially documents, the informant would get 15 percent to 30 percent of the amount collected.
http://www.nj.com/business/
ledger/index.ssf?/base/
business-5/
117272915274610.xml&
coll=1
Lesson Learn on the Subprime and ALT-A Mortgage ponzi scheme
Proposal:
A Federal Senate Bill similar to Arizona Senate Bill 1221 needs to be introduced. This SB #### will strength the language of 814 False Statements (18 U.S.C. § 1014).
http://www.usdoj.gov/usao/
eousa/foia_reading_room/
usam/title9/crm00814.htm
Section 1014 of Title 18, United States Code, covers the knowing making of false statements or willfully overvaluing any property or security for the purpose of influencing in any way the action of the enumerated agencies and organizations.
Currently IRS is targeting Down-Payment-Assistance Scams. IRS Revenue Ruling 2006-27 stats that Seller-Funded Programs Do Not Qualify As Tax Exempt. However ruling 2006-27 has proven that it does little to stop “Cash Back” program.
Revenue Ruling 2006-27 will be published in Internal Revenue Bulletin 2006-21, dated May 22, 2006.
http://www.irs.gov/newsroom
/article/
0,,id=156675,00.html
Although, California has legislature on “Cash Back”, it leads the Nation with the number of Subprime and ALT-A mortgages. This reinforce that a National Senate Bill need to be pass.
California Civil Code (commencing at Section 1102).
Section III Disclosures Required when Financing Real Property
B. Seller Financing Disclosure Statement
The disclosure statement is to include comprehensive information about the financing, cautions applicable to certain types of financing, and suggestions of procedures that are intended to protect the parties during the term of the financing. The disclosures include:
• Information as to whether the buyer is to receive any “cash back” from the sale, including the amount, source, and purpose of the cash refund.
(CAL. CIV. § 2956 et. seq.; 12 U.S.C. § 1701x – THE HOUSING AND COMMUNITY DEVELOPMENT ACT OF 1987)
http://www.dre.ca.gov/
disclosures.htm
Arizona Senate Bill 1221
A. A person commits residential mortgage fraud if, with the intent to defraud, the person does any of the following:
1. Knowingly makes any deliberate misstatement, misrepresentation or omission during the mortgage lending process that is relied on by a mortgage lender, borrower or other party to the mortgage lending process.
2. Knowingly uses or facilitates the use of any deliberate misstatement, misrepresentation or omission during the mortgage lending process that is relied on by a mortgage lender, borrower or other party to the mortgage lending process.
3. Receives any proceeds or other monies in connection with a residential mortgage that the person knows resulted from a violation of paragraph 1 or 2 of this subsection.
4. Files or causes to be filed with the office of the county recorder of any county of this state any residential mortgage loan document that the person knows to contain a deliberate misstatement, misrepresentation or omission.
B. An offense involving residential mortgage fraud shall not be based solely on information that is lawfully disclosed under federal disclosure laws, regulations and interpretations related to the mortgage lending process.
C. A person who violates this section is guilty of a class 4 felony, except that a person who engages or participates in a pattern of residential mortgage fraud or who conspires to engage or participate in a pattern of residential mortgage fraud is guilty of a class 2 felony.
D. For the purposes of this section:
1. "Mortgage lending process" means the process through which a person seeks or obtains a residential mortgage loan including solicitation, application, origination, negotiation of terms, third-party provider services, underwriting, signing, closing and funding of the loan.
2. "Pattern of residential mortgage fraud" means one or more misstatements, misrepresentations or omissions that are made during the mortgage lending process, that involve two or more residential properties and that have the same or similar intents, results, accomplices, victims or methods of commission or are otherwise interrelated by distinguishing characteristics.
3. "Residential mortgage loan" means a loan or agreement to extend credit to a person that is secured by a deed to secure debt, security deed, mortgage, security interest, deed of trust or other document representing a security interest or lien on any interest in one-to-four family residential property and includes the renewal or refinancing of any loan.
http://ralphroberts.
realblogging.com/
default.asp?item=239166
This Class 4 felony would be punishable by 1 1/2 to three years in prison; Class 2, four to 10 years.
Let see if Paulson and Bernanke can pull a rabbit out of the hat on this current fall of the US Dollar
http://quotes.ino.com/
chart/?s=NYBOT_DX
Study Says Home Prices Continue Slowdown
The figures released by the Office of Federal Housing Enterprise Oversight, the agency that oversees the big mortgage-finance companies Fannie Mae and Freddie Mac, provided yet another indication of the slowdown in the once-booming housing market.
--California saw quarterly rates of increase that were negative in 21 of the 26 cities ranked as metropolitan areas.
http://biz.yahoo.com/ap/
070301/
home_prices.html?.v=3
Who will be next to fall?
Two other California lenders, Impac Mortgage Holdings Inc. and Accredited Home Lenders Holding Co., said today they won't be able to file their financial reports on time. Shares of both tumbled.
http://www.bloomberg.com/
apps/news?pid=20601087&
sid=ahOvmhYLtOP4&refer=home
Accredited Home Lending site will be offline for maintenance
http://www.accredhome.com/
If you're a Washington Mutual Inc. (WM)shareholder, or thinking about becoming one, this is the most important thing you should know (page 27 of the 10-K):
(5) Capitalized interest recognized in earnings that resulted from negative amortization within the Option ARM portfolio totaled $1.07 billion, $292 million, and $19 million for the years ended December 31, 2006, 2005 and 2004.
If you don't know what this means, what they're disclosing is that one billion dollars of their reported "earnings" for 2006 was nothing more than Option ARM borrowers racking up larger mortgage balances by paying the bare minimum payment. Of course, the reason they're doing that is they can't afford to make the higher payment -- they took out the Option ARM in the first place. WM gets to legally book this negative amortization as earnings based on the assumption that these in-over-their-heads borrowers are going to somehow find the means to pay it all back when their payments eventually reset to the fully-amortizing rate. Of course, most of them won't. They don't make enough money to afford their homes with anything *but* a neg-am loan. So they'll drop the keys off and walk away.
What should be really frightening to WM shareholders is the rate of growth in the neg-am "earnings". It went from $19 million in 2004 to $1.07 BILLION two years later! In fact, it more than tripled from 05 to 06. What's the number going to be for 07? Will it triple again? Will WM actually book $3 billion in phantom earnings? If you, as a prudent investor, adjust off these bogus earnings (and treat accrued neg-am as just another loan), then WM's earnings for 06 would be $2.5 billion for 06 vs. $2.8 billion for 04. Their true net income is actually declining and their balance sheet risk has dramatically increased over the last 2 years.
http://messages.finance.
yahoo.com/Stocks_%28A_to_
Z%29/Stocks_W/threadview?
m=tm&bn=19978&tid=69743&
mid=69743&tof=1&frt=2
Maybe off topic - Re: Al Gore
Although global warming is real, Al Gore IS A HYPOCRITE. I have no kids and I don't really care about the world anymore (I used to). The elites (Dems/Republicans alike) are f*ing the country. So who cares in the end. I have no children - let the world burn.
Today's San Francisco Chronic:
High-risk borrowers risk default
Housing market braces for possible blow from rise in subprime mortgage foreclosures
http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/03/04/BUG1NODSKP1.DTL
Regards,
W.C. Varones
wcvarones.blogspot.com
America's housing market is not recovering as quickly as some had hoped
Shanghai market on worries about economic overheating; concerns over lower-grade or sub-prime borrowing in the US.
Alan Greenspan. But by last Thursday he had qualified his remarks. "It is possible," he declared, "we can get a US recession towards the end of this year, but I don't think it's probable...
Things look reasonably good in the short run for the US and the world."
"Things", however, include growing worries over the quality of America's $1.2 trillion of 'sub-prime loans' (lending to borrowers considered a greater credit risk) and mid-level or 'Alt-A' loans between prime and sub-prime. Sub-prime loans account for 24% of all US mortgage loans, and Alt-A for roughly 16% (a category that has exploded from $85bn in 2003 to a record $400bn).
The concern is over a sharp rise in defaults in these categories as interest rates have risen. The incidence of loan delinquency - arrears of 60 days or more - has risen to 2.4% in the Alt-A market, while in the sub-prime market this portion has soared to 10.5%.
http://business.scotsman.
com/index.cfm?id=340542007
PROBLEMS in the subprime loan market have been front-page news for weeks, with a total of 30 major mortgage lenders going belly up since December.
It should come as no surprise that the distress is spreading beyond the subprime market to "Alt-A" loans, according to Andy Laperriere, managing director at the ISI Group in Washington.
"The risky characteristics of Alt-A loans are eerily similar to subprime loans and are likely to experience larger- than-expected losses," Laperriere writes in a Feb. 26 report to clients.
Alt-A loans (alt is short for alternative) are made to borrowers with a prime credit rating who for some reason don't want to provide full documentation on income or assets. (Alt-A loans are not to be confused with Alt-B, which are made to subprime borrowers who are willing to document their financials.)
Data from First AmericanLoanPerformance, a mortgage research firm in San Francisco, bear out Laperriere's suspicions.
The more recent Alt-A adjustable rate mortgages —those originated in the 12 months through December — are performing worse than loans of similar age in recent years.
The 3.1 percent delinquency rate for the 12 months ended December is the worst since 2000, according to Mark Carrington, director of analytical sales and support at the company.
Imprudent lending
http://www.insidebayarea.
com/business/ci_5354655
An article in the Wall Street Journal yesterday noted that the plunge in stocks raised the possibility that investors were becoming increasingly “risk averse”—a development that “could have big consequences for the US and world economies.”
“In recent years, investors have poured money into risky investments from subprime mortgages and emerging-market debt to Chinese stocks. In the process, they have accepted ever-narrower returns or ‘risk premiums’. That has helped distressed companies avoid bankruptcy, financed a record leveraged buyout spree, fuelled surging profits on Wall Street, enabled poor countries to finance domestic spending and even made insurance easier for consumers to obtain,” the newspaper noted.
But now that process, fuelled by increased liquidity, may be coming to an end. One indication is that problems in the US subprime mortgage market—loans made to borrowers with low credit ratings—appear to be spreading. According to the Wall Street Journal, default rates on so-called Alt-A mortgages, considered less risky than subprimes, are starting to increase. Last year Alt-As accounted for 16 percent of new mortgages and subprimes 24 per cent.
http://www.wsws.org/
articles/2007/mar2007/
stoc-m02.shtml
Countrywide sees jump in non-prime AKA alt-A delinquencies.
Countrywide Financial Corp., the largest U.S. mortgage lender, said Thursday that 19 percent of the non-prime loans it collects payments for are delinquent.
Loans to non-prime borrowers make up about 9 percent of Countrywide's $1.3 trillion servicing portfolio, or the mortgage loans for which Countrywide collects payments on behalf of the loans' owners, the company said in an annual regulatory filing.
Delinquencies, or late payments, in the non-prime (alt-A) servicing portfolio rose to 19 percent from 16.9 percent in the third quarter, and 15.2 percent at the end of the 2005.
Countrywide said non-prime (alt-A) loans made to riskier borrowers, such as those with poor credit histories or inadequate documentation, are not performing as well.
http://money.cnn.com/2007/
03/01/real_estate/
countrywide_financial.reut/
index.htm?postversion=
2007030113
Remember this article from 2005, for some alt-A borrowers who took the risk the past is coming back to bite them.
Yo, yo, yo. Americans' mortgage choices are getting riskier and riskier. A few minutes ago the Mortgage Bankers Association announced the results of a survey of borrowers from the first half of 2005. (A little old, but I guess it takes awhile to compile the numbers.)
Ordinary ARM loans, which are riskier than fixed-rate loans, apparently aren't risky enough for many borrowers. The MBA says that their market share fell from 46% in the second half of 2004 to 36% in the first half of 2005. Why? Partly, it seems, because more people chose option ARMs. Those, of course, are specialty ARMs that give you the option to pay even less than the monthly interest you owe. The unpaid interest gets added onto your principal (negative amortization). Option ARMs climbed from 17% to 23% of first-mortgage originations.
Then there are alt-A loans--the ones you get when you don't submit all the documentation that would be required to qualify for a straight loan. Those are usually chosen by people who have unsteady sources of income--or simply have too little documented income to qualify for a straight loan for the house they want to buy.
http://www.businessweek.com
/the_thread/hotproperty/
archives/2005/10/
more_option_arm.html
Option ARM Mortgage.
Deeper into the fine print, one would find an additional culprit: the surge of home mortgage delinquencies and foreclosures for homeowners who took out sub prime or “exotic” mortgages during the six year housing boom that preceded 2005.
Frequently qualifying the borrower on the “introductory” payment, sub prime loans were extremely attractive to first-time homeowners and borrowers who would otherwise not qualify to buy a home at the fully indexed interest rate on the note. These loans were being touted by lenders as an opportunity that would otherwise be missed by prospective homeowners.
Buyers who focused on the attractive monthly payment of the Option Adjustable Rate Mortgage (Option ARM) at the time of purchase are now realizing other less attractive aspects of the loan, including increased payments and potential erosion of their home equity.
Simply described, the Option ARM provides the homeowner with a selection each month of one of three monthly payments. Using as an example the loan amount of $500,000 at 7.4 percent, each month the borrower would have a choice of (1) the minimum payment of $1,608, (2) the interest only payment of $3,083 or (3) the fully amortized payment for a 30 year loan of $3,461.
Should the borrower, perhaps in difficult economic times, select to pay the minimum payment, the difference of $1,853 (fully indexed payment less the minimum payment) becomes a “deferred interest” amount and will be added to the principal balance of the outstanding debt.
www.napavalleyregister.com/
articles/2007/03/03/
columnists/charles_bogue/
doc45e901e154a94917431493.
txt
Lenders loosened underwriting standards in recent years to maintain origination volumes in a slowing housing market.
But the poor quality of loans made in 2005 and 2006 is now coming home to roost, forcing nearly 30 subprime lenders to close their doors in recent months.
Many lenders have already tightened their criteria following a sharp rise in payment problems with subprime and slightly less risky "alt-A" mortgages that has triggered a sell-off that some worry could spread more widely in the $8,000bn mortgage market and beyond (option ARM).
http://news.moneycentral.
msn.com/provider/
providerarticle.aspx?
feed=FT&Date=20070304&ID=
6566065
Agencies Seek Comment on Subprime Mortgage Lending Statement
The federal financial regulatory agencies today issued for comment a proposed Statement on Subprime Mortgage Lending to address certain risks and emerging issues relating to subprime1 mortgage lending practices, specifically, particular adjustable-rate mortgage (ARM) lending products.
The proposal addresses concerns that subprime borrowers may not fully understand the risks and consequences of obtaining these products, and that the products may pose an elevated credit risk to financial institutions.
In particular, the proposed guidance focuses on loans that involve repayment terms that exceed the borrower's ability to service the debt without refinancing or selling the property.
The statement specifies that an institution's analysis of a borrower's repayment capacity should include an evaluation of the borrower's ability to repay the debt by its final maturity at the fully indexed rate, assuming a fully amortizing repayment schedule.
The statement also underscores that communications with consumers should provide clear and balanced information about the relative benefits and risks of the products.
If adopted, this statement would complement the 2006 Interagency Guidance on Nontraditional Mortgage Product Risks, which did not specifically address the risks of these ARM products.
The agencies request comment on all aspects of the proposed statement and are particularly interested in public comment about whether:
1) these arrangements always present inappropriate risks to institutions and consumers, or the extent to which they can be appropriate under some circumstances;
2) the proposed statement would unduly restrict existing subprime borrowers' ability to refinance their loans;
3) other forms of credit are available that would not present the risk of payment shock;
4) the principles of the proposed statement should be applied beyond the subprime ARM market; and
5) an institution's limiting of prepayment penalties to the initial fixed-rate period would assist consumers by providing them sufficient time to assess and act on their mortgage needs.
http://www.fdic.gov/news/
news/press/2007/
pr07018.html
With so many States having Anti-Predatory lending law why are so many Subprime, alt-A, option ARM wholesale companies failing?
Perhaps many of these laws do not have long jail time attached to them.
Anti-Predatory Lending Laws Around the Country
States with Anti-Predatory Lending Laws that Provide Varying Levels of Protection:
California,
Georgia,
North Carolina,
New York,
New Jersey,
New Mexico,
Arkansas
States With Laws Designed Primarily to Preempt Local Consumer Protections:
Pennsylvania,
Florida,
Colorado,
Ohio,
Maryland,
Michigan.
States with Anti-Predatory Lending Regulations That Provide Varying Levels of Protection:
Illinois,
Massachusetts,
City Laws That Restrict Predatory Lending:
Oakland, Calif.
Los Angeles, Calif.
New York, N.Y.
Washington, D.C.
Philadelphia, Penn.
Cleveland, Ohio
Dayton, Ohio
Detroit, Mich.
States With Bills Pending That Would Restrict Predatory Lending:
Arizona,
Massachusetts,
Rhode Island,
South Carolina,
Kentucky,
Tennessee.
http://www.acorn.org/
index.php?id=736
Lesson Learn on the Subprime and ALT-A Mortgage ponzi scheme
Proposal:
A Federal Senate Bill similar to Arizona Senate Bill 1221 needs to be introduced. This SB #### will strength the language of 814 False Statements (18 U.S.C. § 1014).
Questions: Dr. Dave: In April, a federal judge blocked my state (Maryland) from enforcing state consumer protection laws against a bank. Don’t states have the right to regulate banks?
Anwser: Historically, Congress has established minimum standards for banking regulations. States have been allowed to enact additional rules and higher standards, particularly with regard to consumer protection. Over the past 15 years, however, the federal government has allowed banks to skirt state laws, and used its authority to overturn dozens of state consumer protection laws.
The United States has a “dual banking system”. Banks can choose whether to be state-chartered and thus regulated by state banking agencies or federally chartered and thus overseen by the Office of the Controller of the Currency.
http://www.newrules.org/
drdave/17-banking.html
Why is U.S. Treasury Secretary Henry Paulson all of a sudden back pedding?
First U.S. Treasury Secretary Paulson said
"We're dissatisfied with the speed with which China is appreciating its currency, the value of which is not market determined, and with China's intellectual property protections,"
http://www.chinapost.com.tw
/news/archives/business/
200733/103713.htm
Then U.S. Treasury Secretary Paulson said
"I would say that our relationship with China is multifaceted and it's a very important relationship for the U.S. And I don't believe we need to make China an enemy,"
"I think China is - this relationship is an important relationship, and the economic relationship is an important part of the overall relationship,"
"And if we manage that relationship properly on a long-term basis, and if we manage the relationship - the overall relationship - with China properly, it's going to benefit both of our countries for a long time to come,"
http://news.xinhuanet.com/
english/2007-03/05/
content_5799799.htm
If true this is MAJOR, MAJOR news!
Fremont Investment & Loan Shut Down By FDIC.
ml-implode said 31 lenders have now gone kaput.
http://ml-implode.com/
"Anonymous said...
Maybe off topic - Re: Al Gore
..... I have no children - let the world burn."
Amen to that brother(or sister)! This whole damn planet needs to go to Hell for a good long while!
Unfortunately, those who most deserve to fry will still be sitting pretty! Oh well, who said life was fair!
Domestic Bank Wholesale Lending of Rhode Island.
Due to the current extreme market turmoil, we have temporarily suspended acceptance of loan applications in our wholesale lending division. Authorized personnel can log in below. We apologize for the inconvenience.
The closing probably had nothing to due with the new Predatory Lending Law that Rhode Island just pass in Dec 2006.
http://www.domesticasap.com
Predatory Lending
Rhode Island passed Section 1203 in 2003. Section 1203 initiated the creation of a research group that’s function was to discover ways to protect consumers from predatory lending. The committee consisted of eleven people, and no more than two were allowed to be from the same political party.
http://www.mortgage-
info.us/rhodeisland.htm
Just when people wised up and left the dot.com IPO of the 1998 to 2001 years, an new IPO industry pop up to replace it.
With easy money pumped in by Alan Greenspan the Mortgage companies became that new dotCOM IPO of the 2004 to 2006 years.
As we watch the new dotCOM companies pump more subprime, alt-A, and option ARM mortgage to cover up for their past mistakes how will this fiasco unfold?
Will Ben Bernanke have the discipline to raise interest rate like Paul Volker or will Ben Bernanke fold his cards like Alan Greenspan and lead this Country to the 21 century Great Depression?
Lending laws are easy to get around. Just move your HQ to another state. I speak first hand. The bank I work for moved their "HQ" 10 miles across state lines even though 99.9% of their administrative offices are still in the origional location.
I want to laugh when I get pulled over for speeding and the cops say - is this your current address? Name one super wealthy person or big company who plays by the rules on their state of origion or jurisdiction for any given matter.
If Treasury Secretary Henry Paulson believe that foreign holdings of U.S. government debt pose no threat to the economy then why don't he pressure BOJ to raise rate.
Treasury Secretary Henry Paulson said foreign holdings of U.S. government debt pose no threat to the economy, countering comments made by leading Democrats including Senator Hillary Clinton.
http://www.bloomberg.com/
apps/news?pid=20601087&sid
=aywf.ZeM9qn0&refer=home
POOR Jean Claude Trichet. All his Gallic huffing and puffing about "one way bets" (Froggo for the carry trade) was just so much hot air at the G-7 in Essen. Central bank intervention? Not if Hank Paulson or the Bank of Japan can it help it so the path of least resistance seems destined to sandbag the yen.
The blowout in both Hong Kong H and Shanghai/Shenzen A shares came as no surprise.
It is obvious that the mandarins of Beijing did not want a Tokyo / Net shares bubble scenario on the eve of the Party Congress and the Summer Olympics.
Hence the Peoples Bank of China reserves ratio squeeze on the banking system, the NPC Vice Chairman in Dubai's bearish statements, the ban on new mutual fund issuance bank salary loans to fund stock punting.
But Chinese macro is just fine as long as Goldilocks is alive and kicking and Hu Jintao is now the sole Big Daddy of the party now that the Shanghai Politburo boss's wings got clipped. I would not go bull China until the People's Congress finishes its plenary session in March.
www.pressreleasenetwork.com
/newsletter/
nlfin_view.phtml?nl_id=207
Bank Of Japan low interest rate gives the Yen a 20 percent advantage, so why don't Treasury Secretary Henry Paulson force BOJ to raise rate?
Members of Congress and advocacy groups question if Toyota is unfairly benefiting at the expense of U.S. automakers, who face large health care and retiree costs that they say are exacerbated by Japan's currency practices. The weak yen puts domestics at a price disadvantage of several thousand dollars per vehicle, they argue.
In a letter last month to Treasury Secretary Henry Paulson, four House Democrats said the weakened yen had allowed Japanese automakers to increase their exports to the United States by more than 30 percent in 2006.
"A yen that's 20 percent undervalued is giving an incentive to gush exports out of Japan and flood this market," said Stephen Collins, president of the Automotive Trade Policy Council, which represents Detroit automakers.
Rep. Sander Levin, D-Mich., who leads the trade panel of the House Ways and Means Committee, plans to hold hearings on the undervalued yen and said he was considering legislation to address the inequities.
"The auto industry can't set trade policy," Levin said. "Government needs to be a partner and its been a silent partner."
Last week drop in Asia Stock market was forecast back in Feb 21.
Stock Market Bubbles Brewing in Shanghai, Tokyo, and London
Bank of Japan hikes loan rate to 0.50%, “Too Little, Too Late”
With the yen’s trade weighted value against a basket of foreign currencies sinking to a 21-year low, and Tokyo gold climbing to a 21-year high, the Bank of Japan was backed into a corner, and voted 8-1 to hike its overnight loan rate a quarter-point to 0.50%, its highest level in a decade.
But the Euro remains resilient, rebounding from a low of 156.25-yen, before climbing to 158.70-yen after the BoJ rate hike.
Japan’s interest rates are still be far below the 5.25% fed funds rate in the United States, and next month, the ECB is expected to hike its repo rate to 3.75% while the Bank of England could boost its base rate 5.50%, keeping the yen weak.
By dumping the yen after the BoJ rate hike to 0.50%, traders ruled that the central bank’s action was “too little, too late” to reverse its long term trend. The BoJ must face a thicket of political wrangling with Tokyo warlords, before it can raise rates again.
www.marketoracle.co.uk/
Article375.html
Whether this last selloff may have been a bit preemptive and overdone, or if it still has a little way to go, the fact that there was a rapid decline in stocks last week illustrates the fear that underlies the markets.
Still, the economy is weaving through a minefield that could explode at any moment, turning this week's relatively tame financial event into something far more sinister.
The second half of last month's lower yield prediction was buoyant stock markets. Despite the Fed's forecast for the overall economy, Standard and Poor's is projecting weaker corporate earnings in 2007, which keeps the bulls relying on a rate cut that the Fed is hard pressed to deliver with the dollar under constant pressure and inflation less than contained.
Even if the Fed did cut rates as early as May, current mortgage rates are not keeping pace with the decline in bond yields, meaning that the lower interest rates are not yet benefiting home buyers and may not be enough to prevent further defaults on existing mortgages.
Consumer confidence is already slipping, and, after the latest selloff, might not recover in time for a robust buying season in housing markets this spring.
Without a significant recovery in stocks and/or housing, consumer spending will begin a spiral downward that could possibly take the whole economy with it.
While plenty of economists continue to scoff at the idea of a by-the-books recession, the “r” word is at least now back in the lexicon and a legitimate topic of conversation, a sign that even optimists believe things could always get worse before they get better.
www.marketoracle.co.uk/
Article455.html
Commerce Bancorp Inc, New Jersey's largest bank, on Friday said it will delay filing its 2006 annual report, and may restate earnings downward for 2004, 2005 and 2006.
The disclosure comes on top of a probe by the Federal Reserve and the Office of the Comptroller of the Currency into transactions involving the Cherry Hill, New Jersey company, its officers and directors, and related parties. Commerce has 428 branches, mainly in the New York City and Philadelphia regions.
What has dogged this stock have been clouds of suspicion over governance practices, as well as shortfalls in earnings because of the interest-rate environment.
http://www.reuters.com/
article/
governmentFilingsNews/
idUSN0246062620070302
Ultimately, it all goes back to underwriting standards, or a lack of underwriting standards.
Secret email...
Big Down day on Friday, a major ****** [redacted] is making a announcement that will send shivers down the spine of Wall Street.
FMT!!!! THE SECRET IS OUT!
But it was Monday instead of Fri big deal - that was the announcement. Come get me SEC.......like your not in the know.
After Hours: 7.13 Down 1.58 (18.14%) as of 7:59pm ET on 03/02/07
Commerce Bancorp Inc. which has $45 billion in assets said Friday it has been granted a 15-day extension for filing its 2006 annual report with the Securities and Exchange Commission
How much exposure does Commerce Bancorp Inc have in the Subprime, alt-A, and option-ARM business?
Commerce Bancorp loans program:
Fixed Rate Mortgages
Jumbo Mortgages
First-Step Mortgages
Adjustable Rate Mortgages
Alternative Programs
Reverse Mortgages
http://bank.commerceonline.
com/personal_banking/
Residential_mortgage.cfm
The New Century case is of particular concern because of fears that trouble in the subprime business could spread into prime mortgages, causing pain for many more lenders.
Shares of New Century were down 25% in after-hours trading Friday.
Eleven big banks along with an activist hedge fund manager could be left holding an empty bag after New Century Financial disclosed a criminal probe into the trading of its securities in the days before an earnings restatement last month.
The probe, by the U.S. Attorney for the Central District of California, is also looking at the subprime lender's accounting.
The company said six of its 11 lenders have granted it waivers for certain terms of their loan agreements, but it's not clear whether the remaining five would provide waivers.
In addition to the lenders, which aren't disclosed in Friday's filing, New Century has attracted the investments of several big Wall Street firms. One, hedge fund activist David Einhorn, has taken a 6.3% stake in the last year though his Greenlight Capital investment firm.
Banks with substantial stakes in New Century include: Morgan Stanley, with 5.45% reported as of Dec. 31, 2006; Goldman Sachs, with 4.76%; State Street, with 3.8%; and Citigroup, with 3.5%.
The New York State Teachers Retirement System held a 3.6% stake as of the end of last year.
http://www.forbes.com/2007/
03/04/new-century-subprime-
biz-cx_lm_
0304subprime.html?
partner=yahootix
Maxed out no problem, Citigroup Eases Rules on Credit Cards
If you think stock markets were the only ones that went haywire this week, look again:
The dollar fell sharply, especially against the yen ... Treasury bonds soared, with the long bond gaining almost a point and a half on February 27 alone ... and gold prices swung all over the place.
In other words, volatility went off the charts in almost every market.
What single force links all this action? What little (or big!) beast could possibly be behind so many seemingly disparate market moves?
A Cheap-Money Monster
From the Bank of Japan
Stocks, bonds, high-risk mortgages, and commercial real estate have all climbed, in varying degrees, thanks to a combination of things, including reckless central bank policies and a complete disregard for risk by many professional investors.
But one big stimulant behind the runs we’ve seen in many of the world’s investments is simple — money. I’m talking about pure, unadulterated liquidity. It’s been growing by leaps and bounds here in the U.S. as well as overseas.
Who’s the biggest culprit when it comes to doling out cheap funds? Well, the Bank of Japan certainly belongs on any short-list. The BOJ has kept its short-term interest rates extremely low — near 0% — for a long period of time. And it’s been flooding its domestic economy with liquidity.
Here’s the important thing — all that excess liquidity didn’t just encourage Japanese borrowing and spending. Instead, it gushed all over the rest of the world, unleashing a force called the yen carry trade.
http://howestreet.com/
articles/index.php?
article_id=3809
Jittery markets propel derivatives exchanges to record volume.
Start watching EURODOLLAR futures, when volatility goes off the charts.
Blood bath in the Asian markets again
CME, the world's largest and most diverse derivatives exchange, today announced February volume averaged 6.0 million contracts per day, up 27 percent from February 2006.
CME Eurodollar futures volume averaged a record 2.4 million contracts per day, up 36 percent from
February 2006
http://www.prnewswire.com/
cgi-bin/stories.pl?
ACCT=104&STORY=/www/story/
03-01-2007/0004537446&
EDATE=
The big US derivatives exchanges all reached record trading volumes Wednesday as investors sought to hedge risk against equity markets which saw their sharpest single day fall in four years.
The Chicago Mercantile Exchange recorded daily volume of 13.7 million futures and options traded, a 25% increase on its previous high, with a notional value of $8 trillion. CME set records in Eurodollar futures, equity options and CME S&P 500 options.
http://www.financialnews-
us.com/?page=
ushome&contentid=1047292226
For the few honest Subprime and alt-A lenders who committed many mistakes, at least they have an excuse: they operate within guidelines laid down by the regulators.
These few honest Subprime and alt-A lenders job is to compete, not to worry about the soundness of the system.
These few Subprime and alt-A lenders excuse are valid in the sense that as long as there is no fraud involved, the authorities will, in fact, bail them out if they get into difficulties.
However, there too many examples of fraud. So why should the authorities bail the great many of these fraudulent Subprime and alt-A lenders out?
Tougher lending standards are not enough, instead a Federal Senate Bill similar to Arizona Senate Bill 1221 needs to be introduced. This SB #### will strength the language of 814 False Statements (18 U.S.C. § 1014).
http://www.usdoj.gov/usao/
eousa/foia_reading_room/
usam/title9/crm00814.htm
Section 1014 of Title 18, United States Code, covers the knowing making of false statements or willfully overvaluing any property or security for the purpose of influencing in any way the action of the enumerated agencies and organizations.
Currently IRS is targeting Down-Payment-Assistance Scams. IRS Revenue Ruling 2006-27 stats that Seller-Funded Programs Do Not Qualify As Tax Exempt.
However ruling 2006-27 has proven that it does little to stop “Cash Back” program.
Revenue Ruling 2006-27 will be published in Internal Revenue Bulletin 2006-21, dated May 22, 2006.
http://www.irs.gov/
newsroom/article/
0,,id=156675,00.html
Although, California has legislature on “Cash Back”, it leads the Nation with the number of Subprime and ALT-A mortgages. This reinforce that a National Senate Bill need to be pass.
California Civil Code (commencing at Section 1102).
Section III Disclosures Required when Financing Real Property
B. Seller Financing Disclosure Statement
The disclosure statement is to include comprehensive information about the financing, cautions applicable to certain types of financing, and suggestions of procedures that are intended to protect the parties during the term of the financing. The disclosures include:
• Information as to whether the buyer is to receive any “cash back” from the sale, including the amount, source, and purpose of the cash refund.
(CAL. CIV. § 2956 et. seq.; 12 U.S.C. § 1701x – THE HOUSING AND COMMUNITY DEVELOPMENT ACT OF 1987)
http://www.dre.ca.gov/
disclosures.htm
"China didn't trigger global stocks rout" Shang Fulin, chairman of the China Securities Regulatory Commission said. "Worries about defaults on poor-quality mortgages later drove U.S. share prices sharply lower"
China's stock market is too small and has too little foreign participation to be blamed for triggering last week's rout in global share prices, the country's securities regulator said on Monday.
"China's stock market right now is relatively small and not very globalised. So it's not possible for it to have such an impact," Shang Fulin, chairman of the China Securities Regulatory Commission (CSRC), told reporters.
http://biz.yahoo.com/rb/
070304/china_markets_
regulator.html?.v=1
"It looks like a downward spiral is going on,"
The yen surged across the board on Monday, striking a three-month high against the dollar as another wave of investors rushed to reverse bets against the Japanese currency with the market still anxious over tumbling global stock markets.
The yen's sharp rally against major currencies has stoked investor nervousness and exacerbated a pull-back from riskier assets that drove the Nikkei average <.N225> down more than 3 percent on Monday
Traders said Monday's sell-off of currencies versus the yen was triggered partly by the Chicago Mercantile Exchange's announcement on Friday that it was raising the minimum amount of money required to trade yen futures due to higher market volatility.
Traders also cited hedge funds that base their trades on computer models as heavy sellers, helping drive sterling down as much as 2 percent against the yen and other currencies down more than 1 percent.
http://yahoo.reuters.com/
news/articlehybrid.aspx?
storyID=urn:newsml:reuters.
com:20070305:MTFH13213_2007
-03-05_05-46-
24_T296770&type=comktNews&r
pc=44
Shares of New Century Financial Corp. plunged before the opening bell after the subprime lender said on Friday it faces a criminal probe. New Century shares fell 62 percent in electronic composite trading. Problems in the subprime market have added to concerns about equities.
What can one say about Orange County, California. New homes everywhere. Expensive new homes. Currently, three new projects. In Irvine and Tustin, California. Some advantages of these $1mil homes.
1. New and not out of the 70's
2. Over 2500 SQ FT. Yes, you can see into your neighbors bedrooms.
3. Surrounded by several freeways and main streets, traffic beyond your wildest dreams
4. Congestion abounds on all streets. That far off distance of traffic noise does sometimes sound like the ocean.
5. In one complex, in Tustin, California, the complex is off of two of the busiest freeways in California. The 5 and the 55 freeways. Eight foot walls separate you and four lanes of fast driving angry California drivers. You are 1/2 a mile from a major freeway.
6. In Irvine, you have the fresh smell of exhaust from where two toll roads meet. Wait till the Great Park is built.
7. In Orange County, the traffic is as bad as it is in Queens, NY. Wonderful sunny Orange County, California.
8. Then again, why not overleverage yourself because according to one of the "holy" books, the end times are coming. So why not throw caution to the wind and overextend yourself to the limit. Jesus will be here with angels soon.
9. Quality of Life is terrible here. Then why are the homes so expensive? Because you are fed a bed of lies. It is all lies. The key thing in Orange County California is not to love thy neighbor.
It is to cut your neighbor off on the highway and screw them.
10. Orange County is now the 2nd most expensive place to live in the country. Why? Because Real Estate agents here are incredible sales people who will sell you your own crap for $50.
11. Some of these new homes will house some of the angriest Asian population I've seen in awhile. Does anyone speak English anymore? Welcome to Orange County, California. The land of the enchanted born again Asian Mexican Persian American who cuts you off on the road when they have a deal to attend to. Usually drive a large MB or Lexus.
http://tinyurl.com/3djm5a
More than 500,000 property listings that currently reside on the Century 21, Coldwell Banker, and ERA brand Web sites will appear on Google and Trulia.com search engines
Greg Swan is Fat.
ha ha ha ha
In case anyone is interested in what the Housing bubble is doing to HBSC Bank.
http://marketplace.publicradio.org/shows/2007/03/05/AM200703055.html
So you want "FREE" health care provided by the government do you? Here is an article from the Times online about life in the British "FREE" system that Keith so desperately wants to impose on Americans:
March 05, 2007
Scott Burgess
Tom and Donna (not their real names) are professional shamen. They teach classes in shamanism at a “foundation”, where you can learn “soul retrieval healing”, help the dead “continue their journey into the Hereafter”, and investigate “the Fairy Kingdom”.
These soul retrievers and Fairy Kingdom investigators also work for the NHS — where, according to Tom’s foundation profile, they “use complementary therapies to help those with mental health difficulties”.
We’ve just learnt that some hospitals are removing every third light bulb to save money, and that nurses are being paid half the minimum wage — or being asked to work for nothing — at others.
That’s how bad the financial crisis has become. Meanwhile, the National Health Service is employing shaman fairy enthusiasts as psychological counsellors, enthusiastically providing treatments invented by “an ordained minister and a personal performance coach” who thinks tapping your body can cure diabetes, promoting dowsers and crystal healers and spending vast amounts on therapies that can’t be scientifically supported.
Uhm thanks but no thanks. Call me old fashioned but I think I'll stick to being treated by MDs.
Greg Swan is Fat.
ha ha ha ha
What is it about Realtors and their decades old glamor puss photos?
CNN asks: Subprime woes: How far, how wide?
http://money.cnn.com/2007/03/05/news/economy/subprime/?postversion=2007030516
They are asking this now?!
Well, Keith is a socialist, a loser who failed in life, can't even afford a house, and has made an international ass out of himself for being so bitter!
He should move to England.
Oops, already has.
One of things that I find so odd about discussing this subject is the hostility directed at those of us who prefer to be cautious.
I belong to an all female blog (it just turned out that way-no discrimation was actively persued or planned).
The anger shocks and saddens me. I honestly feel I am just trying to be helpful yet find myself angering so many.
I wonder if HPs have found words that others do not find "judgemental, holier-than-thou and just obnoxious" when describing concerns about this issue.
I honestly do not have those feelings ...but apparently it does not come through.
Any thoughts?
New Century is 1 of many to come
New Century, made news because of their size, but few reporters have their eye on the ball. NovaStar’s stock also took a hit and may soon join the "many" sub prime lenders who have already gone bankrupt. This problem began 14 months ago and will continue through 2007.
Who’s watching the store? NO ONE! It starts with government accountability – the OCC and MBA not only support aggressive lending tactics but they look the other way when consumers are ripped off
Who is watching out for the consumer? NO ONE in big business. Aggressive marketing tactics allow consumers' data to be available to anyone who will pay. Trans Union will even sell your name the day your credit is run, it’s called trigger data. What would consumers say about that?
Ads on TV and radio that make claims that are completely untrue lure unsuspecting people into a liars den. Then the sales person lies through their teeth to sell a loan that has no benefit to the consumer ultimately stripping the consumers equity and rewarding the Loan Agent with a fat commission. The industry that helped generate all those new homeowners (and our equity) has destroyed itself with greed.
Once the loan in originated – disclosure is weak at best. Consumers have no way to get the real facts about the loan they just initiated because they never get to see the rate they qualify for. They are beholden to the sales person.
For the truth about lending (with no fraudulent pop up ads pushing a $250,000 mortgage for $619/M) go to www.howtotorial.com it's time consumers know the truth!
Of the People
By The People
For The People
JPC are you saying there should be more government regulations to protect the consumer?
Late last week, federal financial regulatory agencies including the Board of Directors of the Federal Reserve, the FDIC, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision issued proposed guidance covering subprime mortgage lending.
The guidance targets adjustable rate subprime loans, and according to regulators, addresses concerns that subprime borrowers may not fully understand the risks and consequences of obtaining adjustable-rate products. Regulators said they were also concerned that subprime ARMs may pose an elevated credit risk to financial institutions.
Under the proposed guidance, an institution’s analysis of a borrower’s repayment capacity should include an evaluation of the borrower’s ability to repay the debt by its final maturity at the fully indexed rate, assuming a fully amortizing repayment schedule.
http://www.housingwire.com/
2007/03/05/suggested-
guidance-for-subprime-
lending-draws-applause-
debate/
Downgrades Fremont Debt Again, Points to Burgeoning Problems
Fitch Ratings said today that it has further downgraded troubled Fremont General’s debt ratings, after already once downgrading the company’s debt on March 1. Fitch’s actions included downgrading Fremont’s Long-Term Issuer Default Rating (IDR) to ‘CCC’ from ‘B+’; Short-Term Issuer to ‘C’ from ‘B’; Long-Term senior debt to ‘CC’ from ‘B’; and Individual to ‘E’ from ‘D’.
Fitch said its rating actions reflect Fremont’s recent regulatory filing disclosing that its primary operating subsidiaries will enter into a formal cease and desist order (C&D) with the Federal Deposit Insurance Corporation.
The order criticized a number of Fremont’s practices, including violations of Section 23B pertaining to transactions between affiliates, as reported by Housing Wire last week.
In discussing potential hurdles for the troubled lender, Fitch said it believes that Fremont’s financial flexibility will weaken further and that the prospects for receiving a reasonable value for the subprime business are low.
http://www.housingwire.com/
2007/03/05/fitch-
downgrades-fremont-debt-
again-points-to-burgeoning-
problems/
Accredited, Impac Delay Earnings
San Diego, Calif.-based Accredited Home Lenders (NASDAQ:LEND) and Irvine, Calif.-based Impac Mortgage Holdings (NYSE:IMH) each missed filing deadlines with the SEC last week, with both companies saying they would need more time to prepare their fourth quarter and year-end financial results.
The news of delays comes as other lenders, including Fremont General and New Century, also missed filing deadlines last week due to what many industry insiders have characterized as “fatal” problems at each company.
http://www.housingwire.com/
2007/03/05/accredited-
impac-delay-earnings/
Black Monday is a Day to remember according to this posters on brokeroutpost
As I sit here felling like I just watched a train wreck, I am trying to comprehend everything we just witnessed. This is my 12th year in real estate so I can tell you it will be fine in the end, but wow what a day.
Email after Email from lenders telling us of their guild line changes, and the layoffs, this is a lot to take in. So wont you join me and raise your glass to the end of a great ride, and the beginning of a better one.
http://forum.brokeroutpost.
com/loans/forum/2/99884.htm
The yen-buying spree is reportedly being bolstered by speculative currency traders, seeking to take advantage of the unraveling carry trades.
These opportunistic investors are gobbling up yen now in hopes of selling them at higher prices later.
Meanwhile, the rising value of the Japanese currency is forcing investors who were short the yen to cover their positions, creating even more demand.
“Near term, I would not try to buy the dollar against the yen, it’s like trying to catch a knife, it’s a risky bet,” Bryson said.
The yen’s run against the dollar is expected to continue until strong economic data from the United States convinces investors that the country is not falling into recession, as Alan Greenspan hinted at last week.
Rising concern over subprime mortgages and a floundering housing market has heightened risk adversion. “There’s hysteria over subprime mortgages and fear that it will rise up in the credit chain,” T.J. Marta, fixed income strategist with RBC Financial Group said.
http://www.forbes.com/
home_asia/markets/2007/
03/05/asia-equities-yen-
markets-
cx_jc_er_0305markets02.html
REGULATIONS TO LITTLE TO LATE, BUT COMES ELECTION TIME IT IS BETTER LATE THEN NEVER.
RECENT aggressive lending to US home buyers with weak credit histories is attracting mounting official scrutiny, with at least two lenders facing federal probes or restrictions on their operations.
A group of US financial regulators is also proposing new guidelines that would clamp down on "subprime" mortgage lending practices, amid concerns that stretched borrowers have not fully understood the risks involved.
Many lenders have already tightened their criteria following a sharp rise in payment problems, with subprime and slightly less risky "alt-A" mortgages triggering a sell-off that some worry could spread more widely in the $US8 trillion ($10.3 trillion) mortgage market and beyond.
http://www.theaustralian.
news.com.au/story/
0,20867,21329214-
36375,00.html
The new dot-COM what new dot-COM, do you mean the one that the REGULATORS missed.
Yeah Babe! “We made so much money you couldn’t believe it. And you didn’t have to do anything. You just had to show up.”
REGULATIONS who needs REGULATIONS when you can drive a red convertible Ferrari to work and live off the poor and minority homeowners.
Even in affluent Orange County, Calif., the growing wealth of executives and brokers in the booming mortgage industry was hard to miss.
For Kal Elsayed, a former executive at New Century Financial, a large lender based in Irvine, driving a red convertible Ferrari to work at a company that provided home loans to people with low incomes and weak credit might have appeared ostentatious, he now acknowledges.
But, he says, that was nothing compared with the private jets that executives at other companies had.
“You just lost touch with reality after a while because that’s just how people were living,”
said Mr. Elsayed, 42, who spent nine years at New Century before leaving to start his own mortgage firm in 2005.
“We made so much money you couldn’t believe it. And you didn’t have to do anything. You just had to show up.”
Just as the technology boom of the late 1990s turned twenty-something programmers into dot-com billionaires, and leveraged buyouts a decade earlier turned Wall Street bankers into Masters of the Universe, the explosive growth in subprime lending turned mortgage bankers and brokers into multimillionaires seemingly overnight.
Now an escalating crisis in the market, which seemed to reach a new crescendo late last week, is threatening a wide band of people.
Foremost are the poor and minority homeowners who used easy credit to buy houses that are turning out to be too expensive for them now that mortgage rates are going up, but the pain is also being felt widely throughout the business world.
http://www.nytimes.com/
2007/03/05/business/
05lender.html?_r=4&hp&oref=
slogin&oref=slogin&ref=
patrick.net&oref=
slogin&oref=slogin
Foremost are the poor and minority homeowners who used easy credit to buy houses that are turning out to be too expensive for them now that mortgage rates are going up, but the pain is also being felt widely throughout the business world.
Oh give me a fucking break. What, poor and minority members can't read a contract? They can't figure out that a $500K home on $11 an hour is a little fucked up? They can't figure out that the A in ARM means Adjustable as in your payment will double or triple? Is the NY Times implying minorities and the poor are dare I say STUPID?
Typical of the NY Times though. It's like that old joke:
Scientists discover that a meteor will crash into earth and kill everyone within 48 hrs. NY Times hedline the next day:
"METEOR TO CRASH INTO EARTH: WOMEN AND MINORITIES HURT MOST"
The poor and minorities were as greedy as the rich and WASPy and they can all kiss my ass.
Unless FirstFed Financial needs a place to hide some their bad loans ResMae Mortgage Corp purchased by its parent company does not seems to make sense.
FirstFed Financial who belong to Citadel Investment Group dropped
(7.51%) yesterday trading.
Did anybody else notice FirstFed Financial 2006 "earnings" were less than the negative amortization on the loans!
For those of you who don't understand "generally accepted accounting procedures" (GAAP), negative amortization is counted as REVENUE!!!
In other words, it ain't pretty in FEDville
http://messages.finance.
yahoo.com/Stocks_%28A_to_Z%
29/Stocks_F/threadview?
m=tm&bn=6754&tid=828&mid=
828&tof=1&frt=2
FirstFed Financial Shares Drop on Lower January Loan Figures. FirstFed Financial monthly release showed linked month loan originations down 11 percent, and a 64 percent decline in year-over-year originations.
Although FirstFed Financial had a 64 percent decline in year-over-year originations, it recently received an "outperform" rating on the company, mainly because it is not part of the subprime mortgage lending market that has been decimated this month on Wall Street.
http://biz.yahoo.com/ap/
070223/firstfed_financial_
mover.html?.v=1
So why does Citadel Investment Group a $13.4 billion hedge fund based in Chicago, Illinois, founded by billionaire trader Kenneth C. Griffin want to buy ResMae Mortgage Corp. (a failing Subprime mortgage lending company) for about $180 million?
http://www.bloomberg.com/
apps/news?
pid=email_en&refer=home&sid
=ahVuOntGP2wE
FirstFed Financial Breaks Down To A 5 1/2 Month Low
FirstFed Financial has collapsed in the past month on well above average volume and dipped below it's 200 and 50 day moving averages.
The stock has made some attempts to climb back however, today FED continues to collapse.
Shares are at 5 1/2 month low trading down by $2.70 at $54.01.
FirstFed Financial stock shares are currently accelerating further south and are taking out the lows of the day as volume is increasing.
http://www.tradingmarkets.
com/.site/news/STOCK%
20ALERT/503947/
FirstFed Financial Soon-To-Be Sub-Prime Lender?
Option-ARM, Option-ARM, Option-ARM, Option-ARM
In the fourth quarter, mortgage originations plummeted by 66.8%, to $365 million—one of the steepest declines among all lenders. Cash from operating activities dropped into the red in the third quarter (the most recent data available), falling from $49 million in 2005 to negative $77.1 million a year later. Meanwhile, the number of problem loans more than quadrupled last year.
FirstFed's foundation could crack even further. The biggest problem: Its mortgage portfolio is packed with risky loans known as option ARMS. These adjustable-rate mortgages allow borrowers to make smaller monthly payments than they would normally owe by deferring the principal and adding the difference back to the balance. That may make a house more affordable at first. But when the balance hits a certain level, payments often jump significantly, and borrowers can run into major financial trouble.
FirstFed potentially faces darker days than peers who play in the same niche. For one thing, all of FirstFed's mortgages are for homes in California, where prices have cratered and foreclosures have skyrocketed. Also, 80% of its loans have little or no documentation to prove the borrower's income or assets, according to a recent company presentation. The bank uses credit scores to screen for elite borrowers.
But skeptics are starting to question the quality of FirstFed's earnings. The bulk of FirstFed's income is derived from noncash earnings, largely from the deferred principal on its option ARMs. That so-called negative amortization constituted $223.9 million, or 68.4%, of the bank's income before taxes in 2006, compared with 1.3% in 2004. In essence, FirstFed is booking profits on money it hasn't collected.
The fear is that the bank will never collect, given the high delinquency and foreclosure rates in California. Says Frederick Cannon, managing director at Keefe, Bruyette & Woods Inc.: "The bearish view is that all the earnings are coming from money they didn't get yet."
FirstFed admits the environment is tougher today, but says its borrowers have stellar credit and can afford to keep up with the option ARMs' rising payments.
http://financial.
seekingalpha.com/article/
26306
Are banks with option-ARM next to fall?
First Subprime then alt-A what's next option-ARM?
The danger is that the liquidation of bad loans uncovers other bad loans.
FirstFed Financial has problems with option-ARM.
Countrywide cuts back on pay-option, ARM loan funding
http://www.inman.com/
inmannews.aspx?ID=62147
Paid several Millions for ResMae and hide several Billions for FirstFed Financial all in a days work.
Did the REGULATORS fall a sleep on this deal?
ResMae sale to Citadel approved by U.S. court
http://today.reuters.com/
news/articleinvesting.aspx?
view=CN&storyID=2007-03-
05T232221Z_01_N05307548_RTR
IDST_0_CITADEL-
RESMAE.XML&rpc=66&type=qcna
Citadel LP Discloses 5.3% Stake in FirstFed Financial (FED)
In a 13G filing on FirstFed Financial Corp. (NYSE: FED) after the close yesterday, Citadel LP disclosed an 5.3% stake (884.7 shares) in the company.
This is up from the 245K share stake the firm disclosed in a quarterly filing with regulators.
FirstFed Financial is the parent company of First Federal Bank of California. First Federal Bank of California.
http://www.streetinsider.
com/13Gs/
Citadel+LP+Discloses+5.3%
25+Stake+in+FirstFed+
Financial+
(FED)/1311187.html
32 lenders have now gone kaput
Latest count of major US mortgage lenders that have croaked since late 2006.
http://ml-implode.com/
Worried IMF calls for rate rise
The International Monetary Fund has urged the Bank of England to raise interest rates to 5.5pc, amid fresh evidence of growing wage inflation, a growing property market bubble and a booming economy.
Its warning coincided with new figures from Incomes Data Services showing three quarters of all pay deals agreed in January were above 3pc, taking wage inflation to a fresh nine-year high.
The IMF laid out in its wide-ranging report on Britain's economy many of the reasons why the country has boomed over the past decade.
http://www.telegraph.co.uk/
money/main.jhtml?
xml=/money/2007/03/06/
cnimf06.xml
Maybe IMF sees something Paulson and Bernanke don't see.
Th US Dollar going down.
http://quotes.ino.com/
chart/?s=NYBOT_DX
As Housing Goes Bust, Lenders Become Predators?
Congress is gearing up for hearings on predatory lending, the latest chapter in its long history of barn-door-closings on already-departed horses.
Just some background in case anyone hasn't picked up a U.S. newspaper in the last month. The subprime lending market is in trouble as borrowers who are, by definition, poor credit risks live up to their reputation.
Delinquency rates on these risky home loans are rising, subprime lenders are going belly up at an alarming rate, criminal probes of some lenders are under way (the trial lawyers must be salivating at the prospect of a whole new class of class-action suits), and front-page stories are proliferating almost as fast as you can get a no-money-down, no-questions- asked mortgage.
Make that as fast as you could have gotten a loan, before the regulatory agencies got wind of the trouble.
http://www.bloomberg.com/
apps/news?pid=20601039&sid
=aQKw_vL7cuLQ&refer=
columnist_baum
Fundamental flaw evident in judging risk
So uniform through space and time are the responses of economic policymakers to any bit of financial turbulence these days that one can only assume they come from some sort of global government textbook.
However bad the decline in equity prices, however large the volatility in currency, credit or commodity markets, Treasury secretaries, finance ministers and chancellors of the exchequer all reach for the same scripted mantra: “The economic fundamentals are sound.”
The textbook has certainly been well thumbed in the past week. Billions may have been wiped off the value of shares, gyrating currency markets may have bloodied investors from Tokyo to New York, but government officials have sounded as upbeat as the Black Knight in Monty Python and the Holy Grail after his limbs and his torso had been hacked away: “Just a flesh wound,” the head still shouts defiantly. “Nothing to worry about.”
At the weekend Henry Paulson, the US Treasury Secretary, took up the soothing words of Ben Bernanke, the Federal Reserve chairman from last week, insisting all was fine.
http://business.timesonline
.co.uk/tol/business/
columnists/
article1475242.ece
Come election Year Remember the Slogan
"Give to the Rich take from the Poor"
Yeah Babe! “We made so much money you couldn’t believe it. And you didn’t have to do anything. You just had to show up.”
REGULATIONS who needs REGULATIONS when you can drive a red convertible Ferrari to work and live off the poor and minority homeowners.
NO REGULATIONS NEEDED NOW.
It's unbelievable to me that regulators have the gall to come out with this now. Were they not in on the little jokes about the products that mortgage banks and brokers were selling? The so-called "liar loans"? Appraisal fraud? Have they not caught any of the "housing bubble" packages on Bubblevision in the past several years, detailing the degradation of credit requirements, the 103% LTV loans, any of this?
Did they not hear the thousands of radio ads or see the thousands of television ads enticing buyers to "get more house" for their money using interest-only and other negative amortization products?
http://www.fool.com/
investing/small-
cap/2007/03/05/better-
catch-that-cow.aspx
When will Greenspan make up his mind already?
Greenspan Sees `One-Third Probability' of Recession This Year
Former Federal Reserve Chairman Alan Greenspan said there's a ``one-third probability'' of a U.S. recession this year and that the current expansion won't have the staying power of its decade-long predecessor.
``We are in the sixth year of a recovery; imbalances can emerge as a result,'' Greenspan, 81, said in an interview yesterday at his office in downtown Washington. ``Ten-year recoveries have been part of a much broader global phenomenon. The historically normal business cycle is much shorter'' and is likely to be this time, he added.
http://www.bloomberg.com/
apps/news?pid=20601083&sid
=asTgvtVwBMeg&refer=
currency
Anyone think that Florida or Texas are going to be plausible investments for the 07 season? Or is everyone sitting this one out?
Good job assuring Foriegn MBS investors that the Federal Reserve will print more US Dollars as a last resort in order to bail out the US government- chartered companies.
Freddie Mac in push to assure investors
"Those that are investing in our securities don't need to worry about the direction of the US housing market because that's what the government- sponsored Freddie Mac handles," said Freddie Mac executive vice president of investments and capital markets Patricia Cook. "We take that credit risk out of their investment decision."
Freddie Mac is a US government- chartered company owned by stockholders. It was created by Congress to increase mortgage finance to expand US home ownership.
Though the securities issued and guaranteed by the agency are not backed in full faith and credit by the US government, Freddie Mac has a line of credit with the US Treasury, so credit markets consider its securities to be nearly equivalent to government issues.
Won't that crash the already weak US Dollar?
Give us 775,000 Hong Kong Dollar today and we give you $100,000 worth of US MBS. Eventhrough we guarantee you will get $100,000 plus 4.5% interest, you might only get 10,000 Hong Kong Dollar back when you convert it after we failed.
http://www.thestandard.com.
hk/news_detail.asp?
pp_cat=1&art_id=39412&sid=1
2504599&con_type=1
The world's central bankers have a message for investors stung by the past week's roller-coaster ride in financial markets: Don't count on us to bail you out with easier credit.
In other words they will not print more money.
Federal Reserve Chairman Ben S. Bernanke, European Central Bank council member Axel Weber and Bank of Japan policy maker Atsushi Mizuno are signaling that they still see inflation as a greater risk.
http://www.bloomberg.com/
apps/news?pid=20601109&sid
=aMVNzPQh4_wo&refer=home
Go home there is no bubble and no need for this blog.
You know who is at it again, he has a book coming out. Here's a quote from the article:
It looks like we've bottomed out. [link]
Stock market celebrates today despite news likes this:
By Rex Nutting, MarketWatch
Last Update: 10:28 AM ET Mar 6, 2007
WASHINGTON (MarketWatch) -- Demand for U.S.-made manufactured goods dropped 5.6% in January, the largest decline since July 2000, the Commerce Department reported Tuesday. A 60% plunge orders for new civilian aircraft led the decline, but most industrial sectors saw falling demand in January.
Orders for core capital equipment -- the kinds of goods businesses invest in so they can produce other goods and services -- fell 6.3%, the biggest decline in three years. Core capital equipment orders exclude defense goods and civilian aircraft. Read the full government report.
I don't give a shit what Greedspin says, I think there is a 100% chance of a recession. I think the people in MI, IN and OH would agree with me.
The stock market is going to take a slow, methodical stairstep down. I see low 11,000s by end of year.
This is the BEST blog.
Damn it!
Back in the bubble lunacy of early 1990's re bubble had no place to vent and expose the reic propaganda...
Keep up the fantastic work!!!!!!!!!!!!!!!!!!!!!!!!
Interesting post on the UK personal debt situation, which is currently the worst in Europe. Unsurprisingly, it is a mostly related to a massive housing bubble.
http://economicdespair.blogspot.com
to the poster quoted below: please explain how it will work (i am not doubting you; i am just ignorant of the process)
Paid several Millions for ResMae and hide several Billions for FirstFed Financial all in a days work.
Did the REGULATORS fall a sleep on this deal?
ResMae sale to Citadel approved by U.S. court
http://today.reuters.com/
news/articleinvesting.aspx?
view=CN&storyID=2007-03-
05T232221Z_01_N05307548_RTR
IDST_0_CITADEL-
RESMAE.XML&rpc=66&type=qcna
Pit said:
WASHINGTON (MarketWatch) - A gauge of future home buying declined in January, the National Association of Realtors said Tuesday. The pending home sales index fell 4.1% in January after a 4.5% rise in December. The index is down 8.9% in the past year. David Lereah, chief economist for the realtors' group, said he detected "an underlying pattern of stabilization in the housing market." He noted that the pending home sale index has recovered from a low in October. Lereah said unusual weather this winter might distort the picture of the housing market for several months, "but a modest recovery is likely
Liareah is funny :-)
in my area sales are crashing ,only few suckers buying flips or foreclosures.
02-2007 sold 19 $264,000.00
01-2007 sold 52 $229,000.00
02-2006 sold 74 $257,000.00
01-2006 sold 101 $256,000.00
Pit,
Are you joking? Price in 02/07 is higher than 02/06. How is that crashing?
Anonymous said...
Pit,
Are you joking? Price in 02/07 is higher than 02/06. How is that crashing?
introduce yourself before posting stupid RE shill comment.
19 homes sold in whole month down from 74 last year and that is not crash?
Let say you are Realtor in make 6 % proffit on sale ...
In 02/06 you made 1.14 Mill
In 02 / 07 you made 0.3 Mill
If that is fine with you you are smoking something very good.
Pit
Ivanhoe Mortgage Closes Doors
Ivanhoe Mortgage, a $2 billion-a-year conventional/government lender based in Orlando, Fla., has closed its doors, according to industry officials familiar with the company. As of MortgageWire's deadline, company executives could not be reached for comment. A year ago Ivanhoe merged with nondepository Central Pacific Mortgage, Folsom, Calif., which recently agreed to sell its wholesale division to TMSF Holdings, Los Angeles. It is not known whether Ivanhoe is part of that transaction. (It does not appear to be.) CPM is headed by former Mortgage Bankers Association chief John Courson. Officials at CPM and TMSF could not be reached for comment. On Ivanhoe's website there was no notice of its closure.
http://www.clientrelations.info/
archives/industry_view/index.php
Anono-pussy said..
"Price in 02/07 is higher than 02/06. How is that crashing?"
Let's clarify the facts for this douchebag shall we?
A) Yes, prices have risen 'slightly' since last year's prices. And I emphasize slightly.
Gee, no more 100k gain in 1 year. Red flag maybe??
B) Home sales are WAY DOWN compared to last years.
So the crash in home sales is on baby!! That will lead to a drop in prices. Get it???
Suck it and suck it good.
The Swami thinks that the times they are a heading for a disaster. ll of the Swami's clients with 2/28 mortgages that are adjusting this year are in deep doodoo.
The Swami says, "don't buy a home unless you can afford the mortgage payment after the teaser rate period. There is no guarantee that you will be able to refinance.
(reposting; somehow this ended up in the wrong forum)
Hot off the implode-o-meter: NovaStar securitization a wash; company loses money on offloading 95% of the $1.9bln bundle; retains the riskiest 5%.
Let's do the math, kids. 5% of $1.9bln is $95 mln. NovaStar's net income in 2005 was $132mln. Assume just 20% of impairments on that retained pool of nuclear waste, and you've got a $19mln hit to the bottom line, or 14% of 2005's take.
And of course, 2006 earnings could prove much worse, 2007 certainly will be, and the impairments to that nuclear waste pool could be even larger than 20% within a few years.
Some crash in Los Angeles. Prices up $13,000 in the past month and inventory down 17% past 6 months.
http://housing-watch.com/regionview.aspx
?city=Los-Angeles
Spin that one away renters.
Merrill Lynch North American Economist David Rosenberg said the following regarding recent data in the housing market:
The housing sector is the quintessential leading indicator of the economy, which must be why the Conference Board includes permits as one of the 10 components that make up the "official" leading economic indicator (LEI) index and why mortgage purchase applications go into the ECRI growth index. While a case can be made that today's housing report offered a sign that we have finally hit a capitulation state in this bear market in residential real estate, this is only the case with respect to "starts."
With completions running more than 30% ahead of housing starts, we believe that the worst of the decline in overall residential construction, employment and housing-related manufacturing output is actually still ahead of us. The lag between the trough in starts and the trough in completions tends to be nine months long, and it is during this phase that we can expect a significant slowing in growth, a rising unemployment rate and a sustained bullish tone in the Treasury market.
Some Crah in LA,
Easy--you don;t get it do you.
First, inventory is reduced as a result of people taking houses off of the market.
Second, price up after a month does not a trend make. See number of sales and histroic price distribution. If a few people buy houses in say Brentwood it drives up the price is sales down in the Valley.
God, what a moron.
Anon 10:54
Please go to foreclosure.com. Los Angeles currently has 104,386 homes being forelosed. Maybe you should get a hold of these folks and tell them the median price is up and inventories are down. Further you might ask them why they don't just sell there home for a profit because the median price is up!
There is more going on in residential real estate than the statisics are showing. Don't be like TCDL.
http://www.financialsense.com/editorials/au/2007/0305.html
WHY HOUSING FIGURES TO BE A DRAG
ON THE U.S. ECONOMY FOR A LONG TIME TO COME
by Thomas P. Au, CFA
Quote:
the rise in housing prices during the 100 years between 1896 and 1996 basically tracked inflation. So adjusting for inflation, his index was 100 in 1896 and about 100 in 1996, with only a brief dip into the 60s during the 1930s and a rebound since.
But between 1996 and 2006,
house prices doubled in real terms from around 100 to almost 200 in 10 years.
It’s interesting to note that this parabolic rise closely tracks the rise in home equity extraction, via securitization, home equity loans, and related products such as interest only-and negative amortization mortgages. Perhaps the best analysis and graphics regarding this phenomenon was put out by Paul Kasriel of Northern Trust in 2005,
showing essentially zero equity extraction prior to 1996, with essentially all of it having come since then.
Why did this happen recently, and not at some other time in American history?
Previously, a house had just been a place to live in, as well as a store of value.
The advantage to homeowning, over renting, was that home equity, built up over a professional lifetime, was at least portable, whereas rent payments were not.
That is, the sixtyish owner of a house paid up over thirty years could sell it and presumably buy an equivalent home in a retirement community in warmer weather, or else purchase a smaller home somewhere, and live off the difference in values, whereas a renter would have nothing to show for decades of paying rent.
But even real estate investors such as owners of apartments formerly bought them as they would bonds or TIPs (Treasury Inflation Protected Securities), primarily for rents, and maybe some inflation protection, rather than (real) capital gains.
Until recently, therefore, rental properties would almost always “cash flow” (be priced to allow rents to more than cover the cost of mortgage payments and maintenance expenses).
But the securitization of housing made it possible to treat it as an investment, because homeowners could readily borrow against it in times of need.
Since it “always” went up
(at least since the 1930s, which everyone has forgotten and almost no one thinks will happen again),
this was not an imprudent thing to do, went the argument. The cycle reinforced itself, as genuinely greater liquidity reduced the “cap rates” (relative to rents) on homes,
pushing up house prices at a faster rate than inflation.
Then the sudden availability of housing-related credit made it possible for homeowners to ratchet up consumption by monetizing the newly-created equity.
Once housing acquired these desirable investment features, it seemingly could be priced as a risk-free investment, a point (wrongly) made regarding stocks by the authors of “Dow 36,000” in the year 2000.
A similar thing happened to stocks in the 1920s. Prior to that time, they had been bought primarily for income, like low-grade bonds, as companies typically paid out 60%-70% of their earnings in dividends (as utilities still do), reinvesting less than half. While present, capital gains mostly matched inflation, as was the case with housing until 1996.
The transition from owning stocks for income to buying stocks for real capital gains was a challenging experience that created a bunch of excesses, including 10% margin requirements, that brought about the 1929-1932 stock market crash that also took down housing values by nearly 50% (versus a decline of nearly 90% for Dow stocks).
Although the resulting creation of the SEC eliminated those particular excesses,
a similar thing may have happened in housing today, with 0% down, “low doc” loans, for some 40% of new buyers and 25% of all buyers, even (until recently) subprime borrowers.
This could quite possibly produce a similar result in both the housing and the stock markets.
So where does all this leave the consumer?
Well, today, the average family income is something like $40,000 a year (using round numbers) and the average house price is more like $240,000, versus a trend-line value of $120,000.
The old rule of thumb was that a family could afford a house worth 3 times its income, meaning that a family with income of $40,000 a year could afford a hypothetical average house costing a trendline $120,000. This would consist of a down payment of perhaps $20,000 and a mortgage for 2.5 times income, or $100,000.
But when the average house actually costs about $240,000, or 6 times the average family income (which is a more suitable ratio for a Japanese person who can borrow at a 2% rate), that’s when an average American’s problems begin.
With no money down, supporting a house of that cost on a $40,000 income will leave precious little money for other needs.
And if the “New Economy” metrics no longer hold up and the value of the average American house mean reverts to its trendline $120,000 (adjusted for inflation), the average U.S. homeowner will have taken a huge capital loss
that will be a spending-
and lifestyle-
crimping event for some decades to come.
Under such circumstances, “rent and invest the difference” (to paraphrase term life insurance advocate A.L. Williams), would have been the smarter thing for consumers to do.
And lenders should have felt the same way, which would have enabled them to avoid the mess they’re now in.
Liberalism is truly a 'Mental Disorder'!
Option Adjustable Rate Mortgage
Buyers who focused on the attractive monthly payment of the Option Adjustable Rate Mortgage (Option ARM) at the time of purchase are now realizing other less attractive aspects of the loan, including increased payments and potential erosion of their home equity.
Simply described, the Option ARM provides the homeowner with a selection each month of one of three monthly payments.
Using as an example the loan amount of $500,000 at 7.4 percent, each month the borrower would have a choice of
(1) the minimum payment of $1,608,
(2) the interest only payment of $3,083 or
(3) the fully amortized payment for a 30 year loan of $3,461.
Should the borrower, perhaps in difficult economic times, select to pay the minimum payment, the difference of $1,853 (fully indexed payment less the minimum payment) becomes a “deferred interest” amount and will be added to the principal balance of the outstanding debt.
The reverse of building equity in your home, this negative amortization loan may grow in size over time and in fact erode the gain that is being made by appreciation.
Concerned about future foreclosures, Freddie Mac, the second largest provider of home loans in the United States, has stated that effective Sept. 1, they will limit their purchase of high risk home mortgages where borrowers have not qualified at a fully indexed rate.
Simply stated, their goal is “to help ensure that future borrowers have the income necessary to afford their homes.”
According to the Center for Responsible Lending “analysts expect payment shock to be a growing concern. As of September 2005, about 80 percent of all sub prime home loans were adjustable rate mortgages.”
In the next two years, homeowners can expect increased monthly payments on $600 billion of subprime mortgages, according to the Center.
http://www.napavalleyregister.com/
articles/2007/03/03/columnists/
charles_bogue/
doc45e901e154a94917431493.txt
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