March 27, 2007

BUBBLETALK - Post housing crash articles and random musings here

If bubbles are for bathtubs...

What are crashes for?

Post article snippets (use keep it clean, have a good chat.


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Anonymous said...


“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, 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.”

“‘You just lost touch with reality after a while because that’s just how people were living,’ said Mr. Elsayed, 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.’”

“New Century has emerged as a poster child for the lenders that rode that boom to the top and are now in free fall. The company disclosed on Friday that federal prosecutors and securities regulators were investigating stock sales and accounting errors.”

“The latter could jeopardize billions of dollars in financing for the company, which issued $39.4 billion in subprime loans in the first nine months of last year.”

“The three founders of New Century, for example, together made more than $40.5 million in profits from selling shares in the company from 2004 to 2006, according to an analysis by Thomson Financial. They collected millions of dollars more in dividends, salaries, bonuses and perks.”

“It is not known whether the stock sales by the founders are among the sales being examined by federal investigators. Some of the sales occurred on the same day that the executives entered the plans.”

“The founders’ stock also rose in the social circles of southern California, the epicenter of the boom in subprime. Five of the 10 biggest providers of subprime mortgages last year had their headquarters in the region.”

“New Century’s disclosure of the federal investigations on Friday was the most serious in a string of shocks to have rocked the industry in the last three months. Industry officials say they are seeing an exodus of executives and salespeople as companies fold, cut jobs and push out early leaders.”

“‘Everyone has run for the hills,’ said William D. Dallas, whose company, Ownit Mortgage, filed for bankruptcy protection in December after it lost financing from Merrill Lynch and other banks.”

“Many of the problems that have surfaced thus far are not tied to the resetting of rates. Rather, they stem from a sharp and early spike in the default rates among loans issued last year.”

“For example, about 13.8 percent of the loans in a group of mortgages New Century sold to investors in April were behind in payments or in foreclosure by January.”

“For New Century, the early payment defaults pose significant financial problems. In the first nine months of last year, Wall Street banks and investors that it does business with forced it to buy back $469 million in loans it had sold to them, up from $240 million for the same period in 2005.”

“The company was able to sell back about half of those loans at a discount of 26.5 percent. How it handled the remainder, about $227 million, is now under scrutiny.”

“According to accounting rules the company should have valued the loans on its books for what they were worth today, not their previous face value. But it did not.”

“If it had, the company would have seen its earnings fall by about $60 million before taxes, wiping out most of its profit in the third quarter, according to Zach Gast, an analyst at a forensic accounting firm.”

“This is important, because the company’s financing agreements require that it not lose money for any rolling six-month period. On Friday, New Century said it did not expect to make a profit in the six months that ended in December.”

“‘They had losses sitting on their balance sheets,’ Mr. Gast said.”

“‘They walked into a niche industry at a time when everything was lining up perfectly for what they did,’ said W. Scott Simon, a managing director at Pimco Advisors. ‘In 2001, 2002 and 2003 the subprime business was just phenomenally profitable. Home prices kept appreciating and it seemed that no loans ever went bad.’”

Anonymous said...

Sub-prime crash over yet?
Check this place:

» Interest-Only options for either the first 3, 5, or 7 years.
» 100% financing with a 580 FICO.
» First time homebuyers with debt ratios up to 65%
» 90% LTV to $1.5 Million without P.M.I.
» 90% LTV to $1.5 Million without P.M.I.
» 100% 2-4 Unit Refinance up to $800K.
» Sub 500 FICO financing.
» Loan amounts up to $2 Million
» 90% LTV “No-Doc” loans up to $600,000
» 6 month & 1 month LIBOR ARMS which are wonderful short-term housing options
» First in, first to close on any new construction or rehab condominium.
» We can pre-approve entire condominium projects.
» Providing loans in both Illinois and Colorado.


Anonymous said...

New and unsold home inventories surged in January 2007. The housing recession was worsening. People may need to lower home prices to move inventory.

The weakness in housing might spill over into other areas of the market as too much was invested in housing and real estate stocks.

Anonymous said...

Crashes are for trains.

Admin said...

Crashes are for Critics! Many are wondering if the blogosphere is being too mean (I think had this site in mind.) Here's what I think:

Too Mean?
Certainly the bloggers and their commentariat are having a merry 'ol time. The rapidly accelerating meltdown of the American (and soon-to-be international) Housing Bubble turned out to be a global tulip craze on steroids. The bidding wars, the equity withdraw, multi-year double-digit appreciation, massive overbuild – we saw this coming years ago so watching it now unfold is sweet validation. And with the internet it’s twice the pleasure for we get to cheer on in true public fashion. We look toward the galleries and hiss and boo at big media and big finance as they attempt to hide and downplay the bloodbath and their part in it – and we mock our legislators as they grumble and belatedly pretend to care. While down in the pit families are foreclosed upon, marriages collapse, investors go bankrupt, lenders implode, banks take losses (and municipalities and pension funds too), builders and suppliers downsize, laborers, realtors, appraisers and myriad officials and clerks are laid off, left scrambling and are badly reduced. We watch in morbid fascination as all this goes down - some are sued, others are arrested, many are blamed and most all are hurt. Shame on those who mortgaged their children’s future for granite countertops and imperial faucets! And shame on our policy-makers for their treachery and their treasonous abandon of all fiscal prudence! (And sympathy for those who were just doing an honest day’s work trying to feed their families and stay afloat.) In all this there’s more than enough comedy and too much tragedy to go around. So we skewer everyone in the show, all playing their predictable roles in an age-old tale of greed and folly. In the end, we may all be drowning in our tears so we laugh now while we still can.

Anonymous said...

Considering the current real estate environment, if you were starting your career right now, would you still go into real estate? --Alexander Paragios, Bedford, Mass.

the Donald:

"Yes, I would go into real estate. I love it. When I first started out in Manhattan, everyone was saying what a terrible market it was, and if I'd listened to them, I would not be where I am today. There are always opportunities."

michael said...

OT - i have been trying to figure out when the true bottom will be reached.

i have finally figured it out after reading about casey's latest date with his money partner in utah.

the bottom in the housing market will be reached when casey is absolutely disgusted with the mere mention of real estate as an investment.

Stuck in So Pa said...

Interesting article on about the crashing bubble in newspaper real estate ads. They are going down right along with housing.

The reporter wonders if by the time the cycle starts up the slope again, the Internet may have taken over. The real estate section of the local paper might become as obsolete as Realtwhores?

Although newspapers can get by for the next couple of years having a "foreclosure section."
The revenue from that might carry them through!

michael said...

If bubbles are for bathtubs...
Crashes are for dummies.

Flipping is for fast food workers.

And No Money Down is only the best way to leave Las Vegas.

Anonymous said...

Anonymous said...

Regulators eye sub-prime lending
March 6: Federal bank regulators are calling on lenders to exercise caution in making sub-prime loans, including strictly evaluating borrowers' ability to repay them. CNBC's Diana Olick reports.

Jerry said...


Anonymous said...

read that most r.e brokers do not get company health insurance, and as the fact that getting sick(not from financial pressures?} THREATENS SOME OWNERSHIPS, ID ASK HOW DOES HEALTH INSURANCE WORK, as it seems a fair price of medical services is paid, with insurance, and not including the insurance, or the rise in costs of insurance, if one gets sick?! should one hide ones insurance cards from the medical providers??!!

Anonymous said...

I think you all need to go out and buy a new dictionary since none of you seem to know what the word crash means.

This does not look like a crash to me

nor this

corvinus said...

Crashes are for cars.

brokersleaveyoubroke said...

Catherine Reagor
The Arizona Republic
Mar. 7, 2007 12:00 AM

Metropolitan Phoenix home prices have dipped in the past year, but economists say not to expect a freefall of Arizona's housing prices.

Cathy is at it again. If the "experts" say everything is OK it must be so.

Anonymous said...

from Bloomberg:

Anonymous said...

At about 2:00 am Eastern time last night AOL had an article about the subprime problem.

There were quite a few negative comments regarding the mortgage industry.

Lots of AOL banner ads are for the mortgage industry...LOTS.

This morning...10 hours later...I can't find the article.

go figure.

borkafatty said...

Crude rises as supplies sink
Crude and gasoline futures surge after weekly U.S. energy-supply report indicates a surprisingly significant decline.


Boy this here Ass screwing is sure starting to hurt...prepare for $3.00 dollar gas folks...With Stocks down, forclosures and subprime implosion...heck might as well keep taking more from JoeSixPack....pricks!!

Greenspan said...

Greenspan: U.S. Home Sales Hit Bottom

NEW YORK -- A bottom has been hit in the decline of U.S. home sales, said former Federal Reserve Chairman Alan Greenspan on Wednesday.


"inventory recession." said...

NEW YORK -- A bottom has been hit in the decline of U.S. home sales, said former Federal Reserve Chairman Alan Greenspan on Wednesday.

Greenspan was speaking at a trading technology conference in New York. He also said that the U.S. housing sector was experiencing an "inventory recession."

© Reuters 2007.

Anonymous said...

Uncle Al says housing has reached a bottom and another dolt said that the reason the economy did so poorly last month was the weather.

Did they really just blame the economy on the weather? Will Greenspan take his dirt nap already?

corvinus said...

And, meanwhile, the "homeowners" and FBs make their hangman's rope even longer...

Salt Lake Mortgage Guy said...

Casey Serin is leaving real estate and getting a job. If that's not the 7th sign of the apocalypse, I don't know what is.

Area 51 said...

MSM and S&P says subprime in "total meltdown"

“The nation’s subprime lending industry is now in full ‘meltdown’ and its woes are far from over, experts warned yesterday. ‘It’s a total meltdown,’ said Ernest Napier, an analyst with Standard & Poor’s. ‘Everyone had anticipated that the music would stop (on these type of high-risk mortgages). Well, it has.’”

Anonymous said...

Harder hamsters, spin that hamster wheel faster, faster:

"Consumer Credit Up 3.2 Percent in Jan.

WASHINGTON (AP) -- Consumers borrowing increased in January, reflecting an increase in auto loans.

The Federal Reserve reported Wednesday that consumer credit rose at a 3.2 percent annual rate in January, up from December's 2.5 percent increase.

The gain was in line with expectations of analysts who believe faster wage growth would give consumers the confidence to take on more debt.

The category that includes auto loans rose at an annual rate of 4.4 percent in January, up sharply from December's 2.9 percent increase.

However, the category of debt that includes credit cards slowed further in January, rising at a 1.1 percent rate, down from a 1.9 percent increase in December. Credit card debt had surged ahead at a 14.7 percent rate in November.

The increased borrowing pushed total consumer debt up by $6.4 billion to a record $2.41 trillion in January.

The Federal Reserve measure of consumer borrowing does not include mortgages or other loans secured by real estate."

FlyingMonkeyWarrior said...

If bubbles are for bathtubs...

What are crashes for?


couponcutter said...

Keith, stupid question of the week:

"If Baby Boomers are the biggest demographic group and supposedely have so much money from their "wise" investments (like in housing, for instance), how come consumer borrowing is skyrocketing every month?

Common sense tells us that those consumers, who "supposedly" have so much money, would be paying cash for things, and not using credit so much.

This current economic indicator also contradicts those hamsters who argue that the economy and salaries are doing so great. Hey, if workers are making so much money, why are they in an orgy with credit to buy crap from China? After all, people with money don't need to use credit.

jj said...


The bottom is when the mention of Real Estate makes Casey soil himself.

Crashes are for cars-,,2-2007100574,00.html

Anonymous said...
This comment has been removed by a blog administrator.
Anonymous said...

Foreclosures are going to be big business. and Strike Data Deal
Thursday December 21, 9:27 am ET
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BOCA RATON, Fla., Dec. 21 /PRNewswire/ -- today announced that it has been selected as the exclusive foreclosure data provider for's real estate channel.
Visitors can access the listings online at

"Overall, foreclosures are rising throughout the United States, which creates tremendous investment opportunities for homebuyers and investors," said Brad Geisen, president and CEO, "Thanks to this dynamic partnership, we will be able to share these great deals with millions of people.", which also offers preforeclosure, bankruptcy, FSBO, tax lien and Live Auction listings in one convenient location, provides visitors with educational materials and resources to help them make informed purchasing decisions.

Under the agreement, will obtain data from and provide its site visitors with seamless access to America's most comprehensive database of foreclosure listings through an innovative co-brand site creation.

"Essentially, our readers can now search more than 1.2 million real estate listings without ever leaving," said Sean A. McNevin, business development, "We preserve our brand integrity and offer our readers the most reliable and comprehensive selection of residential foreclosures in the country. It's a win-win scenario."

The data from includes property information and in-depth details such as exclusive tax roll information, property photos, as well as seller/listing contact information.

To view the site or to search listings right now visit

Guy Daley said...

Interesting comment by D. R. Horton CEO. Its odd, but if he's trying to cheerlead, this isn't the way to do it. For Chrissake, its not as if there aren't enough examples to copy from.

D.R. Horton erased its gain to end 1 cent lower at $24.55. Tomnitz said closings will likely drop below last year's 53,000. Closings are the final sale of a home. ``I don't want to be too sophisticated here, but 2007 is going to suck, all 12 months of the calendar year,'' D.R. Horton Chief Executive Officer Donald Tomnitz said at a Citigroup Inc. conference in New York. ``Our future is not as bright as what we would like it to be.''

Homebuilders Decline

``It was very odd that a CEO would use a term like that,'' said Joseph Saluzzi, co-founder of Themis Trading LLC in Chatham, New Jersey. ``Maybe they've got some issues over there.''

Homebuilders in S&P indexes, which had climbed as much as 1.5 percent, ended with a 0.3 percent advance.

you never listen anyway said...

Makings of a British bubble, or, Casey has cousins in the UK?

Life after the gold rush?

Going for gold, or for broke

Just before Christmas I interviewed two canny buy-to-let entrepreneurs. They were based in a north Midlands town and started out by providing cheap housing to social services departments looking to re-house troubled and homeless teenagers.

As a wave of immigrants arrived they soon realised there was a far more lucrative market arriving on their doorstep and turned their focus towards buy-to-let rentals to east Europeans. Previously hard-to-let terraced properties in the centre of town soon became goldmines.
Business boomed.
One of the entrepreneurs had just bought a Ferrari and both were moving to palatial homes.
They were the best evidence I have yet come across that the buy-to-let market has become the new property gold rush. A wave of immigration has turned old terraced houses with plenty of bedrooms into moneymaking machines - in the right area, of course.

The question is, how long can this continue? Morgan Stanley's chief economist David Miles, an adviser to Gordon Brown, believes the buy-to-let market will be first to suffer in a downturn and he may well be right.

On the other hand, Phil Jenks, head of mortgage strategy for HBoS, believes that an arrival of 100,000 new economic migrants a year from Eastern Europe will continue to buoy the market for some time. He may be right too. Only time will tell.

Property gold rushes do not last forever.
They eventually come to an end, often crashing spectacularly, leaving victims to be counted.

The mortgage market has been through many gold rushes and each has ended in a similar way. The house price boom of the mid-1980s ended in the negative equity disaster of the early 1990s.

Confidence in the market evaporated.
Houses stopped selling and prices began dropping quickly.
Buyers held on thinking the setback would be temporary but it took five years for a recovery to get under way.

All of this illustrates a fundamental flaw in buy-to-let investing.
Too many amateurs have ignored poor rental yields on the basis that the value of bricks and mortar will always rise.
If they do not make money on the rental, they believe they will make their money when they sell.

These people could get their fingers burned if prices stop rising or even go down, lumbered as they would be with loss-making buildings no one wants to buy.

Lenders and brokers need to do much more to remind these amateur investors of the risks they are taking.

What many part-time punters also forget is that buy-to-let is a business. It is for people who want to manage a long-term property rental business and not for those who want to take a short-term punt on the market.

The entrepreneurs I interviewed were experienced businessmen who knew what they were doing. They spent a minimum on doing up rundown properties and ensured their tenants were able to pay.

I wonder how many part-timers do the same.

I asked my property tycoons where they were putting all the spare cash their business was generating. There is only one place for it, they replied:
the stock market.

Bringing new life to brokers

Mortgage regulation costs have doubled since regulation arrived in 2004, Vertex Financial Services tells us. I doubt many will be surprised.

Despite the increase, the average cost of processing a new mortgage was still only £132 for each case in 2006 and was actually lower than in 2005, according to Vertex.

How that justifies application fees of £1500 or more I do not know. What I do know is that some of the biggest beneficiaries of regulation have not been borrowers, but brokers.

To be fair, borrowers have benefited in many ways. Audit trails have improved, lenders are taking more care over applications, the watchdog is clamping down on bad practice.

All of this is good news, but I am reliably informed by lenders and brokers that mortgage advisers have never had it so good.
Why do I say this? Because mortgage regulation sorted out the wheat from the chaff.

Many mortgage brokers quit the market rather than face regulation. For those who remained, the complexity of factfinds and key facts documents has meant that baffled borrowers have had little choice but to seek professional advice.

Brokers have become invaluable in explaining highly complex forms to borrowers and in answering a myriad of questions. And that is before they scour the market for the right product. The value of brokers is significantly higher than before regulation arrived. Far from killing off the broker sector, as some predicted, regulation has reinvigorated it.

Ideas sprout for Ecology

A booming housing market and growing awareness of green issues would suggest that the Ecology Building Society, set up 25 years ago, would be fighting them off at the door.
Far from it.

Instead, new lending has dropped in the past year.

The Ecology marketing team blames a small advertising budget, poor government support despite the rhetoric of ministers, and a lack of newbuild environmentally-friendly houses - in fact the lack of many newbuild houses at all.

They have been scratching their heads and decided to get their hands dirty, coming up with the novel idea of trialling the now common 0.3 per cent commission to brokers.

I suspect brokers will find green mortgages a bit more interesting in future.

Kevin O'Donnell is a freelance journalist and consultant

Shakster said...

My dispatchers mother-in law (thought it was his mother in earlier thread),according to him tells him the truth about R/E.
She must be because over the last few months the kid has picked-up alot.Now I am partly to blame for converting this kid to an HPer.Not a full fledged HPer yet ,mind you,but I'm doing my best.
I am knowingly converting people ,while his mother in-law is likely trying to help He ,and his wife to get a home without getting ripped. I posed the question to him ,"Your mother in law tells you the reality of real estate right?,He said ,"Oh yeah,she tells us the truth".God that was fun.
Smart Kid,and his mother in law probably knows better than to pull any fast ones on him.HAHAHA.
Clerk,Outed by son in-law.
If she tells him the truth,WTF does she tell all the FBs? But it seems to answere the question.Do Clerks eat their own? Not this one,but she's still a clerk that has a different story for those that matter to her. Let this be a lesson to you FBs,and those new to R/E that will be buying.
Now,what about them R/E brokers?Time to investigate.

Anonymous said...

I thought you might like this one.

Anonymous said...


Anonymous said...

Things are now in motion that cannot be undone!

Anonymous said...

Remember Y2K how about DST?

I hope you Bankers are ready for DST.

Preparing for Daylight Saving Time (DST)changes in 2007

Unless certain updates are applied to your computer, it is possible that the time zone settings for your computer's system clock may be incorrect during this four week period.

How your backend database managing applications?

The U.S. Energy Policy Act of 2005, passed by the U.S. Congress July, 2005, extended Daylight Saving Time (DST) in the U.S. by approximately four weeks. As a result, beginning in 2007, DST will start three weeks earlier on March 11, 2007, and end one week later on November 4, 2007, resulting in a new DST period that is four weeks longer than previously observed. These four weeks are referred to in this article as the "extended DST period".

Anonymous said...

'survival of the fittest'

Is Delta the fittest Subprime Lender?

The company has focused on originating fixed-rate subprime loans in the past few years.

“We have not engaged in originating material amounts of the riskier, esoteric products, such as interest-only adjustable-rate mortgages, 80/20 loans and the ‘as stated’ wage earner 100 percent loan-to-value mortgage. These products have been credited as the leading causes of early payment defaults and increased repurchases throughout the sector. In addition, we did not have to materially change our product offerings or underwriting guidelines. The bottom line is that we have not experienced the negative effects on loan production and profitability that sudden and significant product contraction can cause.”

In a rare positive note during the recent earnings season, Delta Financial Corporation, a Woodbury, NY-based subprime lender, posted positive results for both the fourth quarter and full fiscal year 2006.

Delta reported net income of $8.0 million for the fourth quarter, up 40 percent from the fourth quarter of 2006. Full-year profits jumped to $29.8 million, up $11.8 million from the previous year, the company said.

Anonymous said...

Does Bernanke want to lower interest rate?

Not likely if this is true.

Online Advertised Job Vacancies Show Strength in February.

There were 3,824,200 jobs advertised in February so why did employment reported show a disappointing
job growth of 57,000 jobs in Feberuary?

Total online job ads were 3,824,200 in February, an increase of 682,400 or 22 percent from January, according to The Conference Board Help-Wanted OnLine Data Series™ released today.

The increase this month, which was largely a result of seasonal factors, marks the second highest level in the history of the series, only slightly behind the peak in October 2006.

“February was a strong month in terms of labor demand,” said Gad Levanon, Economist at The Conference Board. “Total advertised vacancies are up 18 percent over February 2006 levels, and consumer confidence, as measured by The Conference Board Consumer Confidence survey, reached a five and one-half year high. Based on this.

Anonymous said...

Option One-- out of 100% loans period

The decision was made to no longer accept any submissions with CLTVs above 95%.


Anonymous said...

Gas Prices Jump Above $3 a Gallon in Some Parts of Calif., Hawaii and May Rise in Other States

Gasoline prices have jumped above $3 a gallon in some parts of California and Hawaii, and may hit that level other parts of the country when the busy summer driving season approaches.

Wailuku, on the Hawaiian island of Maui, currently has the highest average price for a gallon of regular unleaded at about $3.20.

On the mainland, the title goes to San Francisco, where a gallon averages $3.10, a jump of about 34 cents from a month ago but still off the high of $3.36 set in May 2006, according to the AAA Daily Fuel Gauge Report for Wednesday.

The California cities of Santa Barbara, San Luis Obispo and Oakland are also all above $3 a gallon.

Anonymous said...

Zip realty shows over 1 million homes for sale. This is huge as just a week ago we were at 940k

FlyingMonkeyWarrior said...


You once called Casey Serin "The gift that keeps on giving"....well, above is about KC and it is just like watching a train crash.

It is a post from the "Blue Balls" thread by Nicole on

Anonymous said...
This comment has been removed by a blog administrator.
Anonymous said...

Prices are still taking forever to fall in Nortern VA and the DC beltway in general.

Anonymous said...

Credit card debt can be misleading. The number that is reported is the statement value, but what does that mean?

I put on average $10,000 a month on credit cards. Mortgage, car payments, groceries, gas, electric bill, water bill you name and expense and it's on the credit card. I also travel 2-3 times a month and all the travel costs which are reimbursed by my employer are on the card too. I get between 1% and 5% cashback on the card, so it's in my best interest to maximize it's use. Last year I got over $2000 tax free income out of it.

Key is, I pay all balances in full every month. Last time I paid interest on a credit card was in the 90s. But just looking at my statement balances month to month you'd think I'm carrying $10K of debt and never paying any of it off. Far from it. And I know I'm not the only person out there who does this.

Anonymous said...

Seattle home prices up 14% YOY. Condos up 25% YOY. You all were saying something about a crashing housing market....

Puget Sound Business Journal
11:29 AM PST Wednesday, March 7, 2007

Housing prices rose last month, jumping nearly 15 percent from February 2006. The February Northwest Multiple Listing Service (NWMLS) survey of Puget Sound home sales indicated that the median home sale price in King County rose to $393,250, up from $344,950 a year earlier. In all the 19 counties surveyed, the median price last month jumped by 14.41 percent.

Condominium prices in King County kept rising last month, increasing to a median of $285,250 from $228,950 a year earlier, or nearly a 25 percent increase..

Anonymous said...

Just like in California eviro-freaks and Democrats will make real estate go to insane levels in Las Vegas. Thanks Harry Reid. Thanks Sierra Club. And thanks specifically BLM for deciding to hoard all that land to protect some tortoises. I know that's much more important than allowing middle class families the opportunity of owning a reasonably priced home.

Tuesday, March 06, 2007

The supply of land for residential development in the Las Vegas Valley is expected to last only six years at the current rate of building, triggering a call by Gov. Jim Gibbons for the federal government to release more public land in auctions.

A study by real estate consultant RGR Group of Las Vegas showed nearly 36,000 acres of federal and private land available for residential development. Residential developers have used about 5,400 acres annually during the last three years. At that pace, available tracts will dry up by early 2013, RGR said.

"We need to keep the pressure on the federal government to open our federal land for development," Gibbons told members of the housing and real estate industry who attended the event.

Jon Summers, a spokesman for Sen. Harry Reid, D-Nev., said the situation didn't yet make a compelling case for the release of more federal land.

Without more land, real estate prices will soar, Las Vegas housing analyst Dennis Smith said. Builders are having difficulty finding parcels of 10 to 20 acres, and property owners aren't cutting their prices, he said.

"If you don't have any more federal land, how do you expect prices to stabilize?" Smith said in an interview. "We have been talking about this for 10 years, and eventually there is going to be a serious problem with land supply."

In September the BLM said it would allow the market to drive decisions on releasing land, and that it would not sell land when the real estate market is soft.

Currently off limits are the Sloan Canyon National Conservation Area and desert tortoise preserve south of the Las Vegas Valley on the west side of Interstate 15 and the Red Rock Canyon National Conservation Area on the western edge of the valley.

However, those areas, too, likely will be sought by developers if expansion needs continue. But Jane Feldman, conservation chairwoman of the local chapter of the Sierra Club, said developers should focus instead on building on vacant, urban lots.

Anonymous said...

$3 gas in Northern California...YAWN.

I don't know where they get that $3.36 record set in May 2006 either. I went skiing at Mammoth last Memorial Day (ie May 2006). Gas was $4.29. $3 is nothing these days.

Look at the map below. California is an island onto its own in terms of gas prices due to taxation and over-regulation. It's always been like that. The further away from the state you go the cheaper gas gets. This is not news.

Stuck in So Pa said...

I love the term "much needed correction"!
Whenever the market/economy is going to hell in a handbasket, the reigning establishment, be it government or business drags it out and dusts it off. Seen it a lot lately, expect to see it a whole lot more.

Anonymous said...

Does anyone know what happened to the flipper kid Casey's site?

Anonymous said...

Crashes are for symbols

Admin said...

1. How can housing sales have slowed in January because of colder weather, but retail slowed because of warmer weather? Anyone up for it?

2. As for the Brits, when their bubble pops, they'll simply blame the evil Jooos. After all, if they'd just give the poor oppressed PaleoIslamobots what they wanted none of this would've happened.

3. On second thought, they might blame the commercial meat industry: those bad hormones turned us all into mad cows!

4. Or maybe they'll blame the evil
Bush: all that US-caused global warming made them drink too much beer so they didn't know what they were signing.


Anonymous said...

Can anyone show me where prices are going in Orange County, California?

Are you all smoking weed waiting for the next buying cycle and everyone will jump in at the same time?

How many of you are waiting for the bottom? If there is a bottom?

Who is to say there is a bottom?

So what if the subprime market goes to hell. Another future method of lending will be discovered. ARMS have been around a long time. In the late 80's, ARMS were the rage. Everyone recovered eventually. Nothing changes.

What is wrong with being affluent?

We should all celebrate that Kal drove Ferrari to work. He was living the "American Dream."

If you are not rich, you are obviously thinking incorrectly. Who believes in this positive thinking crap?

Oh, yes, It is all in the mind, therefore...

Orange County, California prices are not dropping. What gives? So much calamity is mentioned but prices are staying high? Why is that?

Anonymous said...

Bad mortgages are going to blow up property values all over the place.

Anonymous said...

Brooklyn is up 19% YOY.
Seattle is up 14% YOY.
Today, Missoula, MT is up 11% YOY.

You all keep talking about crashes if you must.

The 2007 Missoula Housing Report released by the Missoula Organization of Realtors Thursday shows the median home price in Missoula continuing to soar—largely driven by the rising cost of land in the metro area.

The median home price within Missoula’s city limits jumped to $205,000 in 2006 compared to $185,000 in 2005. When you add Lolo into that mix, the median home price in 2006 jumps to $206,850 from 2005’s $192,000.

Looking at the records of bare land sales over the past three years, it’s not hard to see from where the majority of that growth stems. In 2003, the median price for a lot in Missoula was $75,900. In 2006, the median price for a lot in Missoula was $95,000—a 25.2 percent increase.

Anonymous said...

OK last one I promise.

To recap:
Brooklyn up 19%. Seattle up 14%. Missoula up 11%. And finally we have all of Canada up 10%. I'll bet there are a few Torontonian HPers who sold in 2005 kicking themselves hard these days, huh boys?

Last Updated: Wednesday, March 7, 2007 | 3:31 PM ET
CBC News

There is no sign of a break in Canadian house construction, sales or prices quite yet, the latest figures show. In a report on Wednesday, Bank of Nova Scotia economist Adrienne Warren called the Canadian market "the rabbit that just keeps on going and going."

Home resales set a record in January and housing starts hit a 29-month high with the assistance of mild weather, Warren said. Prices are good, too, she said. "The trend in national new- and existing-home prices, while off the highs of last spring, is still averaging about 10 per cent year-over-year."

Casey Serin said...

But there are tons of sweet deals out there if you have the talent to find them.

I may be down, but I am not out.

Time to nap and then take a ride over to Jamba Juice for some sweet wheat.

Anonymous said...

Repost request (from way back):

"...the gains are permanent"

Come on - hit me!

sinis said...

Can anyone show me where prices are going in Orange County, California?

Are you all smoking weed waiting for the next buying cycle and everyone will jump in at the same time?

How many of you are waiting for the bottom? If there is a bottom?

Who is to say there is a bottom?

So what if the subprime market goes to hell. Another future method of lending will be discovered. ARMS have been around a long time. In the late 80's, ARMS were the rage. Everyone recovered eventually. Nothing changes.

What is wrong with being affluent?

We should all celebrate that Kal drove Ferrari to work. He was living the "American Dream."

If you are not rich, you are obviously thinking incorrectly. Who believes in this positive thinking crap?

Oh, yes, It is all in the mind, therefore...

Orange County, California prices are not dropping. What gives? So much calamity is mentioned but prices are staying high? Why is that?

March 08, 2007 9:15 PM

Prices are NOT dropping because people still ignorantly think they can sell the house for the same amount Bob down the street sold his for a year or so ago. Just because prices are not dropping does not mean product is moving. I would venture to guess that homes are sitting for longer periods of time YOY than before. The other fact is that people have refied the living shit out of their home and it may NOT be possible for them to sell at a lower price without taking a huge loss. So they sit hoping the market will go up. Very dangerous game if you ask me...

Anonymous said...

Prices have fallen a lot in Miami, especially for condos and again for condos, prices have fallen quite a lot in Phoenix and Las Vegas. Everywhere else, you are looking at less than 5% drops in prices, and in some cases, about 1/3 of the country gains in prices. And this is after a period of 5 years of 10% plus appreciation.

This supposed crash has been going on for 2 years now. OK, try to find a decent house in Orange County for under $600K. Impossible. Reading predictions made here you'd think I could pick something up for $125K by now.

smugbastart2007 said...

"What is wrong with being affluent?"

Another douche bag confusing being genuinely rich and not looking like you are rich either because you rode the housing boom wave by method of cash out or Heloc.

Nothing wrong with aspiring to be rich and getting there. Kal is a just the typical OC mortgage industry fuktard that was in the right place at the right time and thought this gravy train would never end. Dime a dozen. I dont have any sympathy for these assholes.
Signed..smug bastard - a fellow SoCal homeowner (no cash out or Heloc)

Anonymous said...

Keith, this is WHITE HOTTT!!!!!!

Itulip posts "... the BBB tranche of Alt-A Mortgage Backed Securities (MBS) are likely even more mis-priced than for sub-primes back a few months ago. Why? Too much geographic concentration, too many low-doc loans and other fast and loose lending in the group, and–this is the kicker–the ratings agencies allowed what's called "thin subordination," less even than for sub-prime. That means BBB prices for Alt-A can erode even faster than for sub-prime."


smugbastart2007 said...

"try to find a decent house in Orange County for under $600K. Impossible. Reading predictions made here you'd think I could pick something up for $125K by now."

Some people just don't get it. Yes minimum price for an OC home is 600k and thats prob in shitty Garbage Grove or Anacrime.

Long gone are the days of 100k per year appreciation. Yes prices will continue to rise but a normal rate.
THe tipping point will be when the general population selling a home realizes that rpcies wont increase any more, they will drop the prices and a snowball effect,downward drop from there.
Amazing how so many of you still want to see a spectacular dot-com stlye crash!
Chill-az bitches! Your time will come.

Anonymous said...

smugbastart2007 said...

"What is wrong with being affluent?"

Another douche bag confusing being genuinely rich and not looking like you are rich either because you rode the housing boom wave by method of cash out or Heloc.

Nothing wrong with aspiring to be rich and getting there. Kal is a just the typical OC mortgage industry fuktard that was in the right place at the right time


You can say the same thing about 95% of the world's rich...right place right time.

Face it man, you are jealous of the Kals of the world regardless of how they made their money. Wall St money? No good. Mortgage money? No good. Housing money? Hell no. Oil money? Nope, evil. Pharma money? no, no no, drugs companies are evil too. Walmart money? Holy fuck no, as evil as it gets. No matter how someone makes money, for you socialist types there is always something inherently unfair and wrong about it.

Jealousy is so ugly.

Anonymous said...

ong gone are the days of 100k per year appreciation. Yes prices will continue to rise but a normal rate.
THe tipping point will be when the general population selling a home realizes that rpcies wont increase any more, they will drop the prices and a snowball effect


HUH? So prices will continue to increase slowly up until the point where everyone decides prices aren't going to increase anymore and they all decide to sell.

Dude, that makes absolutely no sense whatsoever.

OC Home Owner said...


You can find homes in OC that have dropped dramatically. Usually they are located in less desirable living areas such as Stanton, certain parts of Santa Ana, Orange and Garden Grove. Everywhere else the correction is pretty high due to places like Irvine, Huntington Beach, San Juan Cap, Laguna Nigel, Tustin, Cypress and Los Al all being a little higher than the norm. The drop will look big even though MOST of those sellers would still reap a big profit if they haven't been dumb enough to refi their equity with dumb ARM loans.

I live in Buena Park. Yeah, not exactly Irvine but I got my place in a safe area of the city for way below the asking price. Maybe I overpaid, but then again if the market corrects, I won't lose too much anyway.

You are wrong though, prices are correcting in the OC and the richer communities are feeling it worse than the average locales.

smugbastart2007 said...

"Face it man, you are jealous of the Kals of the world regardless of how they made their money."

No I am not jealous but disgusted at the Kals of the world. Same guys who didnt want to put their dues in and do it the right way by busting their ass like I did (college grad and worked my way up the corp ladder to make over 6figs) instead these lazy asses have spent their lives up to now scheming on the next get rich quick bandwagon to jump on. Always looking for the short cuts to wealth. Same guys that bought into the late night Tom Vu & Carlton SheeAts informercials. When they were younger it was the Amway scams, Primerica, water filters. Now they are get rich in real estate nuthuggers. I have respect for the guy who put in dues and sweat. Absolutely no respect for douche bags like them and you. Mofos were delivering autoparts 3 years ago now they are Mortgage Brokers crying cuz the market is soft. Boo-fucking-hoo. Good night and fuck you.

Anonymous said...

"Tipping point"

It's about supply and demand.

Home prices have gone up so much the average house is unaffordable.

That is, unless, you finance folks with loans they cannot afford.

100% CLTV stated income negativly amortizing ARMs.

The payment is affordable....for a while.

With the subprime meltdown we are witnessing these types of loans being withdrawn from the market. Lenders are actually requiring some kind of down payment or documentation of ability to repay!

Boom, no more buyers, demand drys up and supply increases......

Meanwhile, the subprime homeowner with the 2/28 and 3/27 timebomb ARM will have thier rate reset to 11%+ and come in for some refinace relief.

Guess what? They don't qualify for any loans anymore. Thier subprime lenders are out of business or the minimum credit requirements have increased beyond thier parameters.

They financed at 100% in the first place and they have no equity with which to finance closing costs even if they did qualify for a loan....

Foreclosures continue to increase supply and demand continues to fall....who can buy if there is a down payment requirement and they must prove they cash flow?

Been at this over 20 yrs. Have seen this coming, surprised it has taken this long.

I am very concerned....

Remember "Stagflation"?

Anonymous said...

I've been accused by readers recently and in the past few months of actively wishing for the downfall of others, and/or actively gloating about their misfortune because I want housing prices to fall to more reasonable levels. On the surface, I can see why a reader might misinterpret my position as gloating, but let me explain myself by posing a question.

Why is it wrong to wish for an eventuality that will enable a greater number of people to buy and own homes? Politicians here talk a good game about the housing affordability crisis and yet they refuse to acknowledge the fact that the only way for that crisis to be averted is for home prices to fall. There's no way developers are going to be able to include enough "affordable" housing into their plans to cover the number of San Diegans who need homes.

A little context is important here too. Median home prices have risen about 200 percent in San Diego since the mid-1990s, according to's Rich Toscano who explains the housing bubble in-depth on his blog.

Is 200 percent over 10 years a reasonable return on your investment or is that just awesome luck, and great timing?

200 percent appreciation means there's a lot of room for a free fall. So no, I don't wish for the misfortune of others. I simply question the use of the word misfortune in this situation.


Anonymous said...

`Blind, Relentless Fear'

The credit derivatives market has been whipsawed, with the iTraxx Crossover Index of default swaps on 45 European companies trading as high as 241.5 last week, up from a low last month of 169. Cash bond prices, meantime, have barely budged.

Is the ability of corporate bond values to ignore gyrations in the derivatives market a reflection of the robust health of company balance sheets? Or is it a troublesome indication of ossification in an illiquid market?

Anonymous said...

New Century Board Member Resigns

A board member of New Century Financial Corp., the nation's second largest subprime lender has resigned from the company, according to a Thursday regulatory filing.The resignation of David Einhorn from New Century's board was effective Wednesday. Earlier this month, the Irvine, Calif.-based company disclosed a criminal probe into the trading of its securities, and into the lender's accounting procedures.

According to the Securities and Exchange Commission filing, Einhorn is principal of investment firm Greenlight Capital LLC, which owns 3.5 million shares, or 6.3 percent of New Century's stock.

Anonymous said...

Freddie Mac tightens rules

Freddie Mac, one of the biggest investors in US mortgages, plans to toughen its standards and stop buying certain types of risky loans that have been linked to a high number of delinquencies and defaults.
The decision is the latest sign of the deep problems roiling the subprime mortgage market, which caters to borrowers who could not qualify to buy a house with a conventional loan, including people with blemished credit records.

During the recent housing boom, subprime lenders eager to cash in on the home-buying frenzy relaxed their standards. They allowed borrowers to take out mortgages with low teaser rates that ballooned after the first few years. Now that the higher rates are kicking in, many borrowers are struggling to make their monthly payments, and dozens of small lenders are losing money, shutting down or filing for bankruptcy protection.

Freddie Mac's decision to clamp down on these types of mortgages signals heightened alarm about the course of events. If the damage is not contained, a crippled mortgage industry could destabilize the economy, several economists said.

"This is one of the biggest voices in the mortgage market saying in a very public way that the mortgage and housing markets are very troubled," said Mark Zandi, chief economist at Moody's

Anonymous said...

This country and it's leader, their Hypocracy knows No bounds!

Anonymous said...

"This is going to be a meltdown of unparalleled proportions. Billions will be lost."

At least 25 subprime lenders, which issue mortgages to borrowers with poor credit histories, have exited the business, declared bankruptcy, announced significant losses, or put themselves up for sale. And that's just in the past few months.

Now there's evidence that the pain is spreading to a broad swath of hedge funds, commercial banks, and investment banks that buy, sell, repackage, and invest in risky subprime loans.

Hedge funds, those freewheeling, lightly regulated investment pools, seem particularly vulnerable. BusinessWeek has learned that $700 million Carrington Capital and $3 billion Greenlight Capital may have gotten badly burned because of their intricate dealings with New Century Financial (NEW ), a major subprime lender whose stock has plunged 84% in four weeks amid a Justice Dept. investigations into its accounting. Magnetar Capital, a $4 billion fund formed two years ago, may be on shaky ground, too. The question is, how many others may be suffering?

Among hedge funds, Greenwich's (Conn.) Carrington seems particularly vulnerable. Managed by ex-Citigroup (C ) banker Bruce M. Rose, the fund was launched in 2003 with $25 million in seed money from New Century, which owns about a 35% equity stake. Such an intimate tie between a lender and a hedge fund is highly unusual, say analysts. Carrington specializes in turning subprime mortgages into sophisticated bonds called collateralized debt obligations (CDOs) and selling them to other investors. Not surprisingly, New Century is one of Carrington's biggest suppliers, providing 17% of the loans in a recent deal. Another major supplier is Fremont General, which says it plans to exit the subprime business.

With Carrington on the verge of losing loans from two major providers, the fund, which counts Citigroup as an investor, seems to be in a bind

One clear loser is David Einhorn, manager of hedge fund Greenlight Capital, who made a big, ill-timed gamble on the subprime sector when he fought his way onto New Century's board last March. Greenlight, which regularly posts double-digit annual gains, is down about 2.5% on the year; its stake in New Century, valued at $109 million at the start of the year, has shrunk to $21 million. Einhorn's seat on New Century's board prohibited him from selling even as the lender warned that it would restate most of its 2006 earnings results and said federal prosecutors are investigating its accounting. Einhorn, through a spokeswoman, declined to comment.

Some on Wall Street point out that Magnetar showed bad timing, too, by entering the subprime arena last year just as the underwriting quality of subprime loans began to deteriorate rapidly. For now, Magnetar isn't showing any outward signs of trouble. A person familiar with the fund says it took steps to minimize its exposure to the subprime market, and a Magnetar spokesman says the fund is doing well.

Other hedge funds that have feasted on mortgage-backed securities will be hit hard if rating agencies start downgrading them, as is widely expected.

Anonymous said...

Some hedge funds actually hedged from the start. In July 2005, TPG-Axon, a $7.5 billion hedge fund founded by a former Goldman Sachs trader, Dinakar Singh, invested $100 million in ResMae Financial Corporation, a residential mortgage originator and servicer. In February, ResMae filed for bankruptcy protection. (An affiliate of Citadel Investment Group has since agreed to buy the remains.)

TPG-Axon, however, also bet against the subprime sector to offset its exposure from the Resmae position, said a person briefed on the fund. TPG-Axon funds are up about 6 percent through February.

But the more nuanced tale in the subprime meltdown is that of Scion Capital, a $700 million hedge fund in Cupertino, Calif., founded by a former neurologist, Michael J. Burry. The fund made a smart bet — but one that was early and nearly brought the fund to the brink.

Anonymous said...

Double Down Do or Die

Add hedge funds to the growing number of institutions that have been hammered by the downturn in the nonprime mortgage market.

A number of funds that are invested into nonprime lenders -- either through equity investments or by purchasing bonds issued by the companies -- have reported poor performance during the first nine weeks of the year.

Two hedge funds managed by Second Curve Capital, for example, were down at least 8% each in January and February, after gaining 55% last year. Second Curve has invested in shares of Accredited Home Lenders Holding Co., a nonprime mortgage company.

The downturn, however, has not persuaded Thomas Brown, Second Curve's founder. In fact, Brown may invest more money into nonprime and subprime lenders. Before starting a hedge fund, Brown was generally considered one of the more respected banking analysts on Wall Street.

Anonymous said...

Is it payback time for world's borrowed (Hedge Funds) prosperity?

Everybody was buying stocks. And it's not just stocks. Prices on many types of bonds are sky-high. Despite some areas of falling prices, real estate values are also still near all-time highs across the nation.

What could explain this? The biggest reason is that there is a record amount of cash around the world looking for a home. Investors have money to invest and so they're putting it anywhere and everywhere, bidding up the value of the assets mentioned above and many more.

That should be good, right? A record amount of cash means people are doing well, doesn't it?

Not so fast. It's crucial to understand where so much of this cash is coming from: It's borrowed. At some point, it has to be paid back.

For the last few years, investors worldwide have capitalized on rock-bottom interest rates to finance purchases of stocks, bonds, real estate, commodities and so on. When you buy things, their price goes up. But now it's payback time - literally.

Look at real estate. Over the last few years, it was very easy to borrow money to buy a house or a condo. In many cases, lenders stopped asking borrowers to provide proof of income before financing up to 100 percent of the purchase price of a home. But now, borrowers are discovering it's not so easy to pay a mortgage you can't afford.

A similar dynamic is playing out with stocks and bonds: The borrowing phase is ending and the paying-back phase is beginning.

Just as in real estate, investors have been borrowing record amounts of money to buy stocks and bonds the last few years. In late February, for instance, the New York Stock Exchange reported that money borrowed to buy stock (on "margin") reached an all-time high. With interest rates on yen near zero, hedge funds have been borrowing yen for virtually nothing to buy stocks. With junk-bond yields near all-time lows, leveraged-buyout firms have been borrowing billions to finance the purchase of huge public companies such as hospital owner HCA, commercial real estate company Equity Office Properties Trust, and, just last week, the utility TXU.

What's bringing on the payback period in stocks and bonds? One reason is that the Bank of Japan said last week it will raise interest rates on loans made in yen, forcing many hedge fund investors to sell the stocks they bought with borrowed yen. On the housing front, the implosion of subprime lending can only exacerbate the fall in real estate prices as borrowing to buy homes becomes more difficult. The bottom line is that easy credit to buy stocks, bonds and real estate may be a thing of the past.

When markets are driven up with too much borrowed money, it can set them up for a big fall. One of the key factors that led to the dramatic rise of stocks in 1929 was the explosion of broker loans to buy stock. It got pretty ugly when everyone was forced to pay back those loans over a short period.

We should never forget this lesson of 1929:

Markets that fly high with borrowed money can crash hard.

Anonymous said...

If a major hedge fund were to collapse due to default mortgages, it would affect the stock market and the rest of the economy as well.

Subprime loans have attracted wide attention, and Thursday, Warren Buffett, chairman of Berkshire Hathaway, told shareholders in his annual letter that the slowdown in residential real-estate markets partly stems from weakened lending practices in recent years.

"The 'optional' contracts and 'teaser' rates that have been popular have allowed borrowers to make payments in the early years of their mortgages that fall far short of covering normal interest costs," he said. "But paymentsnotmade add to principal, and borrowers who can't afford normal monthly payments early on are hit later withabove-normalmonthly obligations."

"This is the Scarlett O'Hara scenario: 'I'll think about that tomorrow.' For many home owners, 'tomorrow' has now arrived," Buffett wrote.

Anonymous said...

The cancer spreads...

From Business Week. “The canaries in the coal mine are keeling over fast. After years of easy profits, the $1.3 trillion subprime mortgage industry has taken a violent turn.”

“Now there’s evidence that the pain is spreading to a broad swath of hedge funds, commercial banks, and investment banks that buy, sell, repackage, and invest in risky subprime loans. According to Jim Grant of Grant’s Interest Rate Observer, the market is starting to wake up to the magnitude of the problem, entering what he calls the ‘recognition stage.’”

“Says Terry Wakefield, head of the Wakefield Co., a mortgage industry consulting firm: ‘This is going to be a meltdown of unparalleled proportions. Billions will be lost.’”

“BusinessWeek has learned that $700 million Carrington Capital and $3 billion Greenlight Capital may have gotten badly burned because of their intricate dealings with New Century Financial.”

“Magnetar Capital, a $4 billion hedge fund formed two years ago, may be on shaky ground, too. The question is, how many others may be suffering? ‘This is a very opaque industry, so no one really knows,’ says economist Mark M. Zandi. ‘My guess is that if you look at the top hedge funds, they’re bearing most of the risk.’”

“Among hedge funds, Greenwich (Conn.)’s Carrington seems particularly vulnerable. The fund was launched in 2003 with $25 million in seed money from New Century, which owns about a 35% equity stake. Not surprisingly, New Century is one of Carrington’s biggest suppliers. Another major supplier is Fremont General (FMT), which says it plans to exit the subprime business.”

“Other hedge funds that have feasted on mortgage-backed securities will be hit hard if rating agencies start downgrading them, as is widely expected. That would be likely to send their values plummeting.”

“‘This is indeed a stress scenario,’ says Glenn T. Costello, co-head of the residential MBS Group at Fitch Ratings. Kevin Kanouff, who heads bond surveillance for Clayton Holdings, a consulting firm for institutional investors, adds that ‘hedge funds are getting very nervous about their investments.’”

“The biggest fear is that the trouble will move up the food chain. While subprime loans accounted for 20% of mortgages originated last year, David Liu of UBS estimates that fully 40% of last year’s loans are ’showing a lot of signs of stress.’”

“One clear loser is David Einhorn, manager of hedge fund Greenlight Capital, who made a big, ill-timed gamble on the subprime sector when he fought his way onto New Century’s board last March. Einhorn’s seat on New Century’s board prohibited him from selling.”

From Reuters. “Hedge fund manager David Einhorn quit New Century Financial Corp.’s board late Wednesday. In Thursday’s SEC filing, Greenlight said it had not sold any New Century shares in the previous 60 days, a period in which the shares fell 83 percent.”

Anonymous said...

offered them 125,000 for the white house, did not get a reply, if tshtf, the dam thing dont even produce a crop

Anonymous said...

no reply to the health insurance question, about hiding it from health care providers, in order to get a somewhat fair price (the deductible ?), and not an increase (unlimited?) in premimums!guess it has not threatened enough homeowners.! yet

Anonymous said...

smugbastart2007 said...

"What is wrong with being affluent?"

Another douche bag confusing being genuinely rich and not looking like you are rich either because you rode the housing boom wave by method of cash out or Heloc.

My response, senor douchbagsmugbastart2007, is that you have been smoking too much weed and have an attitude that needs adjustment. Your "I am above it all suckas" is just too much for me right now.

Rich, affluent, having lots of money, etc. What difference does it make on you made it? As long as you made your money legally, that's it. So you have not touched your Heloc, that is commendable. Having the awareness and discipline to keep the Heloc intact is a hard thing to do. I commend you sir. Be cautious on who you call a douchebag, he/she could be your employer. Sir.

Anonymous said...

Hedge Funds And The Real Estate Bubble How Does It Worked?

With BOJ Carpet Bombing Money on every square inches of the world, borrowers are flooded with cash. These cash come in through "Carry Trade"

Economic theory tells us that the carry trade shouldn't even happen. The difference in interest rates between two countries should be equal, adjusted for the rate at which investors expect the low-interest-rate currency (the yen), to rise against the high-interest-rate one (the dollar).

Perversely, the carry trade turned this logic upside down. The more speculators entered into the yen carry trade, the more they sold the yen. This caused the yen to fall, not to rise. Rather than correct the distortions, it only amplified them.

Surprisingly, no one really knows just how big the carry trade is. Official Japanese statistics suggest that for much of 2006 Japan actually had a net inflow of bond investment -- which would imply that the carry trade was a collective figment of the world's financial imagination.

More helpfully, a leading Japanese official last week estimated conservatively that the carry trade was worth between $80 billion and $160 billion.

The carry trade is likely to be many times this size. Few financial institutions actually borrow yen to buy higher-yielding currencies. Hedge funds execute the carry trade through complex financial transactions, such as currency forward swaps. Because these trades are off-balance-sheet transactions, they do not show up in official statistics. A better estimate of the size of the carry trade is the record of net "short" positions in yen futures on the Chicago Mercantile Exchange. This puts the total size of the carry trade as high as $1 trillion.

Hedge funds heavy demand is driving yields down. If hedge funds are helping to keep interest rates low then what happens to the low interest rate.

Sub-prime lenders with cash provided by Hedge Funds push these low rates like a drug dealer pushing crack to a junkie. These low rates encouraged continued buying activity in the housing markets, to the point were practically every speculators is talking about a real estate bubble.

The good thing is that Hedge Funds realize that the housing market has less volatility because it is an illiquid asset, but that can act as a double edge sword. Illiquid asset mean that a speculator has more time to sell, before volatility began to impact the price of a speculator real estate investment. But the longer a speculator waits to sell that real estate investment the harder it will become for that speculator to sell that real estate investment.

In recent years there were many speculators who could not service their debt but the value of the house or land was still high enough to provide adequate collateral; these speculators were given additional credit rather than forced into bankruptcy. But the liquidation of bankrupt speculators is depressing house prices, so that additional speculators are forced into bankruptcy. Once speculators bankruptcies reach saturation it began to affect the Sub-prime lenders. Sub-prime lender had to raise lending standards, which forced more speculators to go into bankrupt; this in turn bankrupted the sub-prime lenders.

When sub-prime lenders bankrupted this take away the buyer's ability to borrow. When the buyers’ ability to borrow is taken away then the growth associated with the last few years of the housing prices run up will become unsupportable.

So it is true that house price are not falling yet, but for speculators who need to back out of their recent real estate deals that is a death warrant, because the danger is that the liquidation of bad loans uncovers other bad loans.

So the risks associated with the explosion of the sub-prime industry in the last couple of weeks, recently telling regulators to keep a vigilant eye on credit standards with regards to their dealings with hedge funds.

The problem is that the increased number of hedge funds means there are many more managers following like strategies. There are a limited number of arbitrage opportunities.

It's not herd mentality so much as everyone is looking for good ideas, and they often come up with the same ideas.

Will Bernanke lower interest rate and weaken the dollar.

Will a weaker Dollar strengen the Yen and cause further Yen "Carry Trade" to unwind?

Well like all Ponzi Pyramid Scheme, the foundation is beganning to crumble.


Anonymous said...

If the housing market continues to decline, it will force the Ben Bernanke to lower the FED Fund rate.

This in turn could weaken the dollar.

Considering that 83 percent of all contracts of the $38 trillion of foreign exchange derivatives have one leg denominated in U.S. dollars, what impact will a weaker dollar have on the derivatives market?

Anonymous said...
This comment has been removed by a blog administrator.
Anonymous said...

Ignoring his party's decision not to further regulate hedge funds, Sen. Charles Grassley (R-Iowa) yesterday introduced legislation that would require the funds to register with the Securities and Exchange Commission.

The proposal was offered as an amendment on an unrelated homeland security bill. It is similar to a law that was struck down last year by a federal appeals court. The registration rule had been in effect for only a few months prior to its repeal.

Grassley, the ranking member of the Senate Finance Committee, said it was up to Congress to consider the legislation following the court decision.

Last month, a working group commissioned by the Bush administration decided that no further regulation of hedge funds is needed. Instead, the group called on hedge funds and investment banks to follow a set of non-binding principles.

Anonymous said...

Buy The Yen Now

If so, the yen-dollar exchange rate could soar. You may recall that in only three days during the crisis surrounding the 1998 crackup of Long-Term Capital ...

Anonymous said...

Countrywide have a total 5,861 REO in the lost of $1,012,740,063.15

according to


bozonian said...

Ok, this is wierd:

The Countrywide website has an foreclosure property listed:

Search for this House: 609 KARENKEN PINES DR, LAKE ARROWHEAD, CA 92352

It shows the price as: $383,900.00

Now, when I use to look up that house:

It shows it just sold (1/27/2007) for: $297,558

Now, is Countrywide trying to make a profit by selling it for 80k more than the last owner defaulted on after only one month? Or did they sell it, take an 80k haircut and haven't removed the listing from their website?

Oh boy. Now we can keep an eye on these guys and their financial shenanigans.

Anonymous said...

Anyone wonder how many banks FDIC can bail out?

The parent of Coast Bank of Florida will post a $17.3 million loss for 2006 as it tries to recover from a major loan crisis.

The company said Friday it has added $21 million to its loan-loss reserve, $14 million of which is tied to 482 loans it made to customers of a defunct home builder.

Anonymous said...

"This country and it's leader, their Hypocracy knows No bounds!"

That's what make America Great!

Now it's time for the rest of the world to join us.

Your welcome said...

Here are the 20 most popular real estate websites as ranked by Hitwise, which tracks the number of visitors each site gets based on a sample of 10 million Internet users., the official site of the National Association of Realtors, is far and away No. 1, with 8.8% market share vs. 3.7% for second-place

Anonymous said...

Clearly, the well is running dry; the housing bubble is hang-gliding into the abyss and there's nothing Fed-master Bernanke can do to save it from its inevitable crash-landing

Anonymous said...

But trains wrecks are train wrecks, even when they occur at a crawl.

Anonymous said...

Is there anything as beautiful as the sound of surprised economists in the springtime?

Anonymous said...

"Job growth weakest in 2 years but ...

Employers added fewer jobs in February, but estimate for January revised higher; unemployment rate drops to 4.5%."

Unemployment is low, times are good. Things are different this time. There is no bubble, bubbles are local anyway, if they exist at all. Housing always goes up. They are not making anymore land.

Anonymous said...

It's not the white McMansion owners who are borrowing subprime loans and defaulting. I wouldn't be betting on too many whites foreclosing. So yes HPers you may very well have the ability to buy foreclosed homes on the cheap if you want to live in the ghetto. But most of your apartments are already in the ghetto so I guess it will all work out well for you...short move and the kids don't have to change schools.

WASHINGTON (Dow Jones) -- African-American and Latino borrowers are paying more than whites for home loans in six areas around the country, a study released Thursday showed.

The report by the California Reinvestment Coalition, Community Reinvestment Association of North Carolina and four other groups said that home loans are more expensive for minorities in Boston, Charlotte, Chicago, Los Angeles, New York City and Rochester, New York.

In all six areas, the report found, African-American borrowers were almost four times more likely to get a higher-cost home loan than white borrowers. In those same six areas, Latino borrowers were also almost four times as likely to get a more expensive loan, the report said.

The report focuses on both prime and subprime lending by Citigroup (C) , Countrywide (CFC) , General Motors Corp. (GM) unit GMAC, HSBC (HBC) , JPMorgan Chase (JPM) , Washington Mutual (WM) and Wells Fargo (WFC) . All those banks originated "a substantial volume" of prime and subprime loans, the report said.

Banks contacted by MarketWatch about the report did not have immediate comment.

Banks should combat discriminatory lending by making all products available to all borrowers, while regulators should examine big banks for fair lending violations, the report said.

Subprime loans have drawn heightened attention from regulators and markets in recent weeks as banks specializing in those products have suffered from the leveling off of housing prices.

The report was released at a Federal Reserve community advisory meeting on Thursday.

Anonymous said...

Just heard a radio commercial for Home Depot. Some woman all excited about buying new carpet and won't have to make a payment until 2070. Then I thought about why a consumer would need financing on carpet. Then it hit me. All recently purchased houses were mc mansions, so 30,000 sq. ft. of carpet can be expensive. One of the many benefits of owning a big house.

Note: I would install the flat panel HD on the wall before the new carpet to avoid getting it dirty.

Anonymous said...


you have way too much free time on your hands. Is that all you people do with your days, check zillow and blogs?

as for the home in question: my guess would be that the sale was countrywide "buying" the home from the loan holder. In some counties that kind of transaction is considered a sale, in some it's not. If that is what the loan value was, that is what the sale price will show. Now if countrywide thinks it's worh $80K more they'll try to sell it for that.

Not everything is a conspiracy.

Anonymous said...

What does it say that RESIDENTIAL real estate investors like Trump and Rich Dad are selling their ideas to sheeple rather than investing - is this NOT a good time to invest?

While I agree that inflation is rising relative to wages and many rates of return, and SMART income producing debt may be better than working in this crazy economy, I do wonder how long it can last. I also think that now is not the time for residential real estate and very many of other overheated markets. I would say start your own company, something you love, and get some of those record corporate profits for yourselves. Other than that, what is left for the average joe? Your thoughts?

Guy Daley said...

New Century is toast so we will move onto news from other lenders.

General Electric Co.'s WMC Mortgage unit, the fifth-biggest U.S. subprime lender, which said today it will curtail lending and fire 20 percent of its staff.

Rising defaults may add more than 500,000 homes to a residential real estate market already beset by slumping prices, New York-based bond research firm CreditSights Inc. said in a March 1 report. (I would like to know how that compares to new home builder production?)

WMC Mortgage has stopped making mortgages without down payments or to borrowers with credit scores below 600, said the Burbank, California lender. It's also cutting 460 workers. WMC last year made $33 billion in new loans, according to industry newsletter Inside B&C Lending.

Shares of Hovnanian Enterprises Inc., the sixth-largest U.S. homebuilder by revenue, slid as much as 6.8 percent after reporting a fiscal first-quarter loss that exceeded analysts' estimates. (Of course you already know what DR Horton's CEO said yesterday)

Subprime mortgage bonds are falling in part because Wall Street dealers are lending less money to managers of collateralized debt obligations that buy the securities, according to investors.

So let me ask you, Are we getting enough clues to see the bigger picture yet??????????????????

Anonymous said...
This comment has been removed by a blog administrator.
Anonymous said...

redoux part 2.

Anonymous said...

the reasoning behind californias proposition 13, and another set of problems

Anonymous said...

Recent trouble in mortgage market fits a surprisingly consistent historical pattern

Recent trouble in the riskiest part of the mortgage market fits a surprisingly consistent historical pattern. The subprime mortgage market—high-risk loans to borrowers with poor credit histories—has expanded rapidly over the last few years, from five percent of all mortgage lending a decade ago to about twenty percent of all mortgage lending today. There are about $1.3 trillion worth of loans outstanding, and over $600 billion worth of new ones were made in 2005 alone.

The reasons for this collapse seem predictable in retrospect. Many subprime mortgages feature adjustable interest rates that (like the promotional introductory rates on some credit cards) start artificially low and ratchet up after an initial honeymoon period. Borrowers may make little if any down payment. As long as the housing market stayed hot and interest rates remained relatively low, borrowers made their payments and lenders pocketed high profits. But today’s subprime borrowers are facing higher interest rates at the same time as a cooling housing market puts downward pressure on the value of their equity. Many are finding themselves unable to make the payments.

Now many subprime mortgage lenders have failed, and others announced they are leaving the business.

Subprime mortgage delinquencies and defaults have gone to unexpectedly high levels with unexpected speed, a lot of computerized credit behavior models notwithstanding. Delinquent home equity loans are rumored to be attracting secondary market bids of from 15 to 25 cents on the dollar.

In addition to the troubles of the lenders, we must consider the driving financial engine of the subprime mortgage boom: securitization of subprime mortgage pools through tranched, senior-subordinated structured bonds, designed and given public credit ratings based on financial models.

The junior tranches of these subprime mortgage-backed securities are highly sensitive to worse-than-expected loan default rates and thus vulnerable to generating heavy losses. Subprime mortgage-backed securities are often themselves pooled into collateralized debt obligations or “CDOs” and further tranched, thus creating subordinated securities that are hyper-leveraged to credit risk.

Analysts are now said to be scrambling to try to figure out who holds these risky investments—where did they go? What will happen to these holders and how will they react as the subprime bust proceeds? These essential questions must put us in mind of Stanton’s Law, formulated by Tom Stanton of Johns Hopkins University:

Anonymous said...

Another Subprime Lender to close it doors on March 15.

Edina-based Maribella is the latest casualty in an industry hit by defaults, housing decline.

Maribella's Edina headquarters are empty now but for three remaining employees. The company officially shuts down March 15, the latest casualty of escalating turmoil in the $1.36 trillion subprime mortgage market as rising defaults, weakening home prices and a get-tough approach by investors hammer the industry.

"I never thought it would get to this," said Mark Kiewiet, Maribella's executive vice president of operations, standing in his office earlier this week. "If we got through the fog, I figured we'd be fine."

"The whole industry has imploded," said Maribella co-founder Keith White.

Anonymous said...

Any advice for a Los Angeles bitter renter....? It just seems like the Bubble is NEVER going to pop here. I am close to giving up hope... I've been waiting...and waiting...and waiting.

Anonymous said...

We're Not Subprime!

After its shares were pummeled along with the subprimes, Impac Mortgage Holdings (NYSE: IMH) took the unusual -- and to my mind, unusually suspicious -- step of issuing a press release that said, in effect: "Remain calm! All is well! We're not a subprime lender!"

Perish the thought! Impac's loans are "Alt-A," a designation which includes stated income loans, commonly called "liar" loans.

Personally, I don't buy Impac's feel-good story. Part of my skepticism stems from whispered scuttlebutt. I've gotten email from some loan officers (not Impac's, mind you) warning of impending doom in the stated-income loan market. Even big banks, so the claim goes, are booking huge percentages of liar loans.

One correspondent asked me a very good rhetorical question: "Why do people with good credit scores need stated income loans?" The answer, he believed, was that fudging income numbers was the only way to qualify to buy as much house as they wanted. What happens when people who can't afford the house they're in see an ARM reset?

Anonymous said...

Impac Lending Group were giving alt-A training two years ago and now look what is happening in the alt-A business.

Lenders are continuing to pursue the Alt-A sector, called "one of the last bastions of profitability."

GMAC Residential Funding Corp. (GMAC-RFC), a Minneapolis-based wholly owned subsidiary of Residential Capital Corp., has introduced new income documentation programs, including no ratio, stated income/stated asset, no income/no assets and no doc products.

Chase Home Finance, Iselin, N.J., has added alternative documentation options to its amortizing and interest-only adjustable-rate mortgage products.

Offers Alt-A training

In an effort to capture more Alt-A product, Impac Lending Group (ILG), Newport Beach, Calif., has stepped up training for brokers and loan officers. ILG, a wholly owned subsidiary of Impac Mortgage Holdings Inc., has partnered with to offer free, half-day training sessions called "How to Make a Fortune in the Alt-A Market."

Open to both beginning and advanced brokers and loan officers, the program will provide "real nuts and bolts mortgage training" that will help them close more loans, says Don Currie, senior vice president and director of national sales for ILG. Although the sessions are open to all brokers and loan officers, ILG believes it will benefit from greater loan volume from class participants.

"If it helps brokers generate more loans, they'll give us a shot," Currie says. "If we help them, they'll reciprocate."

Participants can also get accreditation credit with the California Department of Real Estate, he says, adding that processors, often hoping to become loan officers, may also be interested in the sessions.

"When brokers leave that class, they are able to close more loans," Currie says. "A lot of brokers go to seminars and are disappointed that they're selling something. None of that happens at our seminars."

As other markets, such as the subprime and refinance sectors, continue to constrict, brokers are becoming hungrier for business.

"The Alt-A market is an exploding area," Currie says. "While other areas, like subprime and refinance, are constricting, Alt-A is still one of the last bastions of profitability."

Many are confused about Alt-A, he says. Unlike subprime borrowers, Alt-A customers have good credit, but either can't or won't document their income or assets. ILG's typical borrower has a credit score of 690 to 700, puts 10% down, and most, 75%, complete stated-income loans. "Half of them can't or won't tell us where their down payment came from," Currie says.

"The beauty of Alt-A is you're dealing with a very high level of customer," he says, adding that the company requires established credit. "That does mitigate risk."

Planned to be ongoing, the Alt-A classes are getting underway this week, with sessions in Miami and Phoenix. Sessions are also planned for such cities as San Francisco, San Diego and Palm Beach, Fla., in January and February.

Anonymous said...

Zack interview with Countrywide and Freddie Mac

Question: You’ve commented on the sub-prime market several times this year already. What’s your opinion on the subject at this point?

The sub-prime sector of the mortgage market is an absolute mess, and it looks like some of the damage is spreading to the Alt-A and Prime sectors of the market. Recently, Countrywide (CFC), the largest independent mortgage firm, announced that delinquencies in its prime mortgage portfolio are running at 2.93%, almost double the 1.57% it was seeing a year ago.

Question: But aren’t ARMs supposed to protect the buyer – at least in the short-term – from defaulting due to high interest payments?

Yes, and this is part of what’s so troubling. Every single one of those loans I just talked about is still just charging the introductory teaser rate. Most ARMs are structured as either 2/28 or 3/27’s, meaning that it is a 30-year mortgage where for the first two or three years, the interest rate is fixed at a very low rate, then starts adjusting every six months, with the rate rising by 100 or 200 basis points every six months. These mortgages typically also have repayment penalties which last beyond the start of the resets.

Now we are seeing lots of people who are simply not repaying shortly after moving in while their rates are still low. Meanwhile, about $1 trillion of these 2/28’s and 3/27’s which were issued in 2004 and 2005 are starting to reset in 2007. Now, not all, or even most, of those 2/28’s are sub-prime. Still, even if you have a solid FICO score, it hurts to see your mortgage payment go up by 30 or 40% over the course of a few years.

Question: We are seeing mortgage lenders beginning to change their tune, though, aren’t we?

Lenders would often qualify borrowers on the ability to pay at the original teaser rate, not on the basis of what the eventual monthly payment would be. Only recently has this begun to change. For example, Freddie Mac (FRE), the huge GSE [Government-Sponsored Enterprise] which helps support the mortgage market, recently announced that as of September 1, 2007 it would only buy mortgages which were qualified based on the fully indexed rate, not on the initial teaser rate. In other words, the horses are galloping off into the sunset, and Freddie has announced its intention to close the barn door in six months.

Question: Realistically, then, what kind of fallout from all of this should we anticipate?

Generally, for defaults and foreclosures to happen, two things must occur. First, the borrower has to run out of the ability or willingness to repay. Second, the value of the house must be below the amount of the mortgage. If it isn’t, the borrower will simply refinance or sell the house. Thus the boom in housing prices that we saw in the first half of the decade masked the potential for default.

As a result, sub-prime mortgages were perceived as less risky than they truly were. This lowered the interest rate on them and drew more people into them. The sentiment at the time was, “Buy a house now, or forever be priced out of the market.” These incremental new home buyers helped fuel the whole market. Homes generally work as a chain. Buyers of low-end starter houses allow the sellers of these houses to move up to tract houses, which in turn allows the sellers of the tract houses to sell and move into McMansions.

The implosion of the sub-prime market threatens to break the chain at the low end. As things stand today, if you have less-than-stellar credit (i.e. a FICO score of over 640) it is very difficult to get a mortgage, either for a new purchase or to refinance.

Anonymous said...

Investors need to understand a hedge fund's exposure to leverage before making financial decisions, Federal Reserve Board Governor Susan Bies said on Friday.

"We really need to understand hedge funds' long-term exposure," said Bies, who was speaking at the Charlotte Branch Enterprise Risk Management Conference.

Bies also stressed the importance of transparency when dealing with hedge funds

Anonymous said...

Who is going to ask their boss for a cost of living raise?

Will higher salary pressure lead to INFLATION?

Will higher inflationary expectation will drive up interest rate?

Strong demand for corn from ethanol plants is driving up the cost of livestock and will raise prices for beef, pork and chicken, the Agriculture Department said Friday.

Meat and poultry production will fall as producers face higher feed costs (Meat and poultry will cost you more), the department said in its monthly crop report.

Ethanol fuel, which is blended with gasoline, is consuming 20 percent of last year's corn crop and is expected to gobble up more than 25 percent of this year's crop.

Anonymous said...

FORTRESS INV GP seems to have taken a big hit today.

Last year Fortress brought Subprime Centex.

Was Centex for $575 million a good buy for Fortress Inv?

Anonymous said...

Videos below show that Bush has arrived in Brazil to "talk about ethanol":

Nice to see how we are welcome around the world. Good job, Republicans!

couponcutter said...

Hey, Keith! You might do something out of this video. Enjoy.:)

FlyingMonkeyWarrior said...

What We Are.
youtube short.

couponcutter said...

"But most of your apartments are already in the ghetto so I guess it will all work out well for you"

Speak for yourself, my little leveraged-to the wazoo-hamster. I rent an oceanfront condo, which costs $460k to buy right now. I rent it for only $900, including a/c (how's your electric bill?), cable tv, valet parking, private beach, tennis courts, sauna, pool, jacuzzi, amazing gym (no need to pay for those expensive contracts), ocean view, etc. Regarding distance from work, it's a short 8 minutes drive across a causeway with breathtaking views. Lots of hamsters moving out of my building because they were trying to flip or bought at peak, which got them into a financial funk that costs around $4k per month for a similar unit. Since I didn't go to a nice B-School to be stupid, I sold my property at peak, and now enjoy huge savings. I jog on the beach every morning, kite surf often on weekend, bring "the ladies" to get a tan. How's that pathetic and expensive exurb life doing for you, hamsters? Keep on spinning that wheel hard and watching Kudlow, Cramer, Fox News, and Tony guys are geniuses!

Anonymous said...

Ladies and gentlemen:



Death Spiral / No Bull Interview
I had an interesting interview today with Dave Donhoff at No Bull Mortgage regarding the implosion of New Century Financial and subprime lenders in general. Before checking in with Donhoff here is some recent news on the Death Spiral at New Century.

Several analysts agreed Monday that New Century Financial Corp., one of the nation's largest subprime mortgage lenders, likely faces liquidation or bankruptcy following revelations that it's under criminal investigation and in violation of debt covenants with several lenders.

"New Century is more likely to enter the death spiral we had feared, as filing delays, financial difficulties, likely restricted liquidity and regulatory/criminal investigations could conspire to limit its options outside of bankruptcy," Merrill Lynch analysts wrote early Monday.

New Century's shares were down more than 69% at $4.53 in afternoon trades Monday, after dropping in Friday's session as well. Analysts at Jefferies & Co. also said the company has moved into worst-case scenario territory with its Friday filing. They cut their rating on the shares to underperform from hold.

"New Century's situation is not unlike the 'Prisoners Dilemma.' If the majority of lenders stand pat, they can mitigate losses. However, if they believe that other lenders will pull their lines, those first to act will be best served," Jefferies analysts told clients.
Let's see. Now that New Century Finance has plunged a 69% on March 5th alone and is now down a "mere" 86.21% since February 8th, Jefferies finally managed to dredge up the nerve to cut their rating to "underperform" from "hold".

Here is a tip to Jefferies: When doing downgrades like this, try and do it when no news agency is looking. The way you did it makes you look silly. The point being someone may just start wondering about all of your other recommendations.

Then again, isn't everyone supposed to know that "hold" really means "sell"? But if so, then what exactly what do "underperform" and "sell" mean? While everyone is pondering that, inquiring minds are wondering: If a criminal investigation and an 86% plunge does not generate a sell recommendation, exactly what will? Note: 86% is from the February high to the downgrade by Jefferies. NEW plunged an additional 25% today bringing the total decline to roughly 88% .

No Bull Interview

What prompted my call to Dave Donhoff was his post on The Market Traders.

Mortgage Implode is only showing registered LENDERS.
BROKERAGES going tits-up are probably 10-15 to every individual lender.
BLOOD in the streets EVERYWHERE.

A phone conversation revealed that 10-15 is an extremely conservative estimate. There are no national statistics available and depending on how one classifies "brokerages" (e.g. the number of firms vs. the number of branches vs. the average individual running his business on his PC, the number could be as high as 100-1 or even 500-1.

The reason there is "blood everywhere" is that mortgages are being returned (sold back) not just to lenders from securitizations gone bad, but lenders are in turn forcing the re-purchase of those mortgages back to brokers in record numbers as well. A typical contract between a brokerage firm and a lender might stipulate that new loans must stay current for at least 90 days or they must be repurchased by the originating brokerage. On Alt-A or subprime loans the length of time might be as long as 6 months.

Now that delinquencies are rising everywhere, brokerage firms simply have not been prepared for the forced repurchases of loans. Donhoff noted that each lender's wholesale relationship contract is different as "stay current" timeframe requirements are negotiated between lenders and brokerages. The larger warehouse banks (e.g. Merrill Lynch, or Lehman) that provide the funding for retail banks like OwnIt, MLN, AmeriQuest, etc, have even stiffer requirements within their contracts.

Once a certain threshold of 90 day late pays is hit, contract stipulations might require reserve requirements that the retail banks can not meet. "The situation is not unlike a margin call" said Donhoff. "Unless reserve requirements are immediately met, new loan funding is shut off and the retail mortgage bank is forced out of business."

I asked Dave Donhoff how he was doing personally. Donhoff replied that he has a "ten year record of no mortgage buy-backs and no foreclosures". Perhaps that can be expected from someone who steers people away from risky loans and will not accept stated income loans if he thinks the applicant was exaggerating. Nonetheless Donhoff said "I was lucky. A few close calls over the years were all worked out."

I find it interesting that many small brokerage firms had to put up personal guarantees in the form of bonding and/or pledged personal assets. That means owners of those companies are personally liable above and beyond corporate liability. Looking ahead, there is potential for another wave of litigation over these blow-ups as the larger players start targeting some of those who not too long ago were riding high in their Ferraris. It's a death spiral on multiple fronts.

Mike Shedlock / Mish

Professor said...

Friends, the US economy officially dipped into recession in Feb. The sum of growth of retail, mfg., and construction payroll employment turned negative for Feb. for the first time since the last recession (and every preceding recession since the late '30s); this follows the contraction yoy of real fixed private investment in Q4 '06.

Gov't payroll growth is converging with private sector growth, which is consistent with the onset of recessions.

Production leads consumption/investment, that is, consumer spending and financial services lag a contraction in the goods producing sectors.

Forget what Bernanke, Chow, Cramer, Paulsen, et al., are saying, the US economy has fallen into recession; don't take my word for it; look at the data yourselves; mark it down: US recession began in Q4 '06 or Q1 '07. The Fed will cut rates before the first half is over.

Eventually the equity market whackos will catch on and start hitting their sell buttons at the same time. It's time to exit Dodge, folks.

The subprime implosion is spreading to the second-tier lenders, and hedge funds levered up via slicing and dicing tranches in the MBS/CMO market are getting their deserving heads handed to them and looking to liquidate, but there are few county-party takers with the liquidity or testicles to stand with the panicked sellers; it's looking mighty ugly.

There are now dozens of mortgage broker offices closing around the country, with literally thousands of people a week being fired.

If one were privy to the direct and indirect liabilities/risks faced by the second-tier lenders and regional lenders from this meltdown, one would have a hard time sleeping at night; it's going to be bad. If you work at or own shares in banks such as Umpqua, WaMu, Key, US Bank, Wells, etc., well, you've been warned in no uncertain terms.

CA, AZ, FL, NV, WA, OR, MA, and the industrial Midwest are set to experience the worst economic contraction since the Great Depression in the next 2-7 years.

As a result, China/Asia is about to experience Asian Crisis II and a hard landing. You don't want to be in, doing business, or investing in China when the Chinese leadership panics and cracks down violently in the face of the hundreds of millions of Chinese rioting for water and rice.

"Globalization" and friendly diplomatic and trade relations with China will soon be history, as China suffers the worst recessions/depressions since the 1930s-40s, resulting in China turning inward with rising suspicion of and violence against westerners/foreigners.

US and Japanese firms, as a result of China's turn inward, will be pulling out en masse in the years ahead, with the US$ and US Treasuries benefitting from flight to safety and quality.

Finally, year 8 of the secular bear market begins next week, which historically aligns with 1891-92, 1907, 1937, and 1973 in the US, and 1997 in Japan. On average, secular bear markets experience 2 30%+ bear markets during the period of years 8-9 to years 12-14. The cyclical bull market from '03 is quite likely over.

Don't say you were not warned, friends! Take appropriate actions to weather the storm.

Good luck! We're all going to need lots of it!!!

Anonymous said...

Newt Gingrich admitted to having an affair today while he was going after Bill Clinton for his Monica excursion. Newt wants to run as the Christian right's candidate for '08. But wait, in the interest in being fair and balanced, Jesse Jackson counceled Bill Clinton while bangin' his secretary...

FlyingMonkeyWarrior said...

this is for borka and butch.

FlyingMonkeyWarrior said...

Now that delinquencies are rising everywhere, brokerage firms simply have not been prepared for the forced repurchases of loans.
Sounds like Casey Serin and the Fed bank.

Anonymous said...

Just bought a high end Italian sports car, with Italian tyres!

Dago through mud,

Dago through snow,

and when Dago flat Dago WOP WOP WOP

FlyingMonkeyWarrior said...

Well this is a little local surprise because there is no bubble in houston.

Finding a mortgage getting tougher

09:04 PM CST on Tuesday, March 6, 2007

By Chau Nguyen / 11 News

There’s a change in the Houston area housing market. You can hardly drive a city block without spotting a home for sale or some new construction, but getting into those homes is now much harder.

It’s not because of fewer buyers, but instead fewer banks willing to take the risk.

That could mean the recent housing boom might become a bust for some lenders.

For all the work it will take for James Tudmon to fix up this house. The hardest job has been helping him buy it.

“Our clients are not being approved. They're not being approved,” complained Realtor T.J. Jackson.

In this case Tudmon is a sub-prime borrower, meaning someone with a low credit rating and high debt burdens.

Jackson said in the past, banks readily approved home loans applications for people in Tudmond’s situation.

But with the recent rise in foreclosures by sub-prime borrowers the U.S. Department of Treasury reports at least 20 major lenders have stopped offering home loans to borrowers with lower credit ratings.

Jackson says, that's hurting everyone.

“We don't know what's to come, everything is based on your credit and I'm not making light of credit. (It) should be good but not everyone can help that,” she said.

“The 100 percent financing just won’t be a reality for them,” said Matt Frings.

Frings is in the mortgage lending business. In the last few weeks, he's seen minimum credit scores for sub prime borrowers go from 580 to as high as 640. Meaning, if they don't have at least 640, Frings is being forced to turn down application after application.

“It hurts everybody for them to be, to be not be able to be financed,” said Frings

James Tudmon is one of the lucky ones, he got a loan despite his credit score.
“And I can imagine what people after me (are) going to go through just to get that one to two percent higher financing that they need,” said Tudmon. “I mean it's just going to be difficult.”


Mort said...


Those monkeys don't got wings in that there video.

FlyingMonkeyWarrior said...

Dear Keith,

You are posted on Steve Quails World, which is endorsed by Art Bell, who says "Steve Quails Worlds, it's a Blast". Art Bell is one of radios greats and and and (wow) The Mogambo, Angriest Guy in Economics is one of the anchors. I must say I have been a fan of both sights since the 1994 and I ma impressed. Congrats!!!!!!!!
Here is the link and a copy of the front page.
Infidel Woman


Racing Toward Armageddon
The Militarization of Outer Space
Jews Are Told to Leave Now
George Bush's Samson Option
'Before This Is Over, You Might See Calls for His Impeachment.'
Total Information Awareness is Back
Webb: No Funds For Iran Attack Without Congressional Approval
A Key Summit and Russia's Hour of Decision
New US Bomb Could Jumpstart Nuclear Arms Race
Perspectives: 'Sudden Jihad Syndrome' - A Reason to Carry Firearms for Self-Defense
Officers Outgunned on U.S. Border
Pastor Strangelove - Promotes Invading Iran to Hasten Rapture
Big-City Murders Jump More Than 10 Pct.
Mercury Contamination of Fish Warrants Worldwide Public Warning
Gold Timers' Despair
Change in the Houston Area Housing Market
Virgin Coconut Oil and Viruses
Vaccine Officials Knew About MMR Risks
Water Shortages Threaten Over a Million as Yangtze Water Level Dips
Global Disaster Bill Declines in 2006: Swiss Re
The Federal Reserve Will End in Bank Failure
The Housing Crash Blog with an Attitude Problem

FlyingMonkeyWarrior said...

From Steve Quails World, Okay, I am done night night.

Fed chief wants to tighten up mortgage giants

March 7, 2007
WASHINGTON - Federal Reserve Chairman Ben Bernanke urged Congress yesterday to bolster regulation of mortgage giants Fannie Mae and Freddie Mac, and suggested limiting their massive holdings to guard against any danger their debt poses to the overall economy.

He has previously supported efforts to pare the two mortgage companies' huge portfolios. This time, however, he was a bit more specific and recommended that their holdings might be linked to a "measurable public purpose, such as the promotion of affordable housing." The Fed chief's suggestion was contained in remarks delivered via satellite to a bankers meeting in Hawaii.

His remarks come as worries about risky mortgages are making investors jittery. Those fears contributed to last week's worldwide stock meltdown, when the Dow Jones industrials suffered a gut-wrenching 416-point plunge.

Lenders to subprime borrowers - people with blemished credit histories - have been battered. Rising interest rates and weak home prices have made it increasingly difficult for these borrowers, especially those with adjustable-rate mortgages, to keep up with their mortgage payments. Delinquencies and foreclosures in the subprime mortgage market are spiking.

Against this backdrop, Bernanke said he wanted to be clear that by suggesting the change in Fannie Mae's and Freddie Mac's portfolio holdings, he was not advocating a change in the exposure of the mortgage giants' subprime loans.

Last week, Freddie Mac announced that it would no longer buy certain risky, subprime mortgages.

Fannie Mae is the No. 1 U.S. buyer of home mortgages; its rival, Freddie Mac, ranks as the second-largest buyer.

Both companies, which also are referred to as government-sponsored enterprises, were created by Congress to inject money into the mortgage market by buying home loans from banks and other lenders. They bundle the mortgages into securities for sale on Wall Street. Both have been scarred by accounting scandals.

Anonymous said...

Which is worse:

1) "“The FBI report said research indicates that 80 percent of mortgage fraud nationwide ‘involves collaboration or collusion by industry insiders.’”"


2) Stealing from a crook?

“Carolyn Sandberg, a broker with Home Real Estate in Westminster, said she ran into a case of what she considers mortgage fraud when an elderly couple she was representing were buying a house. Their loan was going to rise almost immediately from slightly more than 6 percent to more than 9 percent.”

“‘I stopped the deal three days before the closing’ and put them in touch with a reputable mortgage lender, she said. ‘The (original) lender went nuts,’ she said. ‘He was probably calling me 10 to 14 times a day.’”

Anonymous said...

Countrywide Financial Corp, the largest U.S. mortgage lender, on Friday told its brokers to stop offering borrowers the option of no-money-down home loans.

"Please get in any deals over 95 LTV (loan-to-value) today!" Countrywide said late on Friday in an urgent e-mail to brokers. "Countrywide BC will no longer be offering any 100 LTV products as of Monday, March 12."

Anonymous said...

I rent an oceanfront condo, which costs $460k to buy right now. I rent it for only $900, including a/c (how's your electric bill?), cable tv, valet parking, private beach, tennis courts, sauna, pool, jacuzzi, amazing gym (no need to pay for those expensive contracts), ocean view, etc.

You are so, so , full of shit. If you are going to lie at least make it somewhat beliavable.

Here's what you get for $900 on the beach in San Diego. A shithole.

Here's what $900 gets you in Miami on the beach. Shithole would be too kind ot describe this place.

Here is what $995 gets you in Tampa on the beach. I think dump is the right word

And oh my god look at the wonderful ghetto abode you can have for $965 in Orange County oh boy it's 'walking distance'to Long Beach!!!

Anonymous said...

ECC Capital Corp., which originates and invests in residential mortgage loans, said Friday it expects to ask the Securities and Exchange Commission for a 15-day extension for filing its full-year 2006 financial report to account for the sale of its mortgage banking operations.

The company closed on the sale of the division to Bear Stearns last month. ECC also sold about $1.2 billion in loans to Bear Stearns, but said the purchase price was less than originally anticipated.

ECC has received or expects to receive an additional approximately $3.5 million in proceeds based on adjustments to the acquisition price.

The company also said it may have to delay the timing of its distribution of 49 cents per share to at least the third or fourth quarters due to subprime mortgage conditions, the release of additional holdbacks and reserves from loan sales and cash flows from residual interests in securitizations.


Mort said...

"Countrywide BC will no longer be offering any 100 LTV products as of Monday, March 12."

That's why you need a friendly appraiser and a straw buyer. Nothing will change.

Anonymous said...

say it again, redoux 2, held that n.y property for 14 years that would not sell at a quarter of its tax assessed value, glad ? to have sold it at a third of its tax assessed value, in order to stop paying tax, that equaled 18% of its "fair" market value, every year, or the reasoning behind calis proposition 13, from the "great Vampire" state n.y

Anonymous said...

Great! The gain in home ownership for THE PAST 4 OR 5 YEARS WAS ALL SMOKE & MIRRORS!!!!!!!!!!

“Rising mortgage defaults by subprime borrowers may add more than 500,000 homes to a residential real estate market already beset by slumping prices.”

“‘We estimate that the effect of looser lending standards could translate into another 533,000 homes coming onto the market as borrowers default — an unwelcome phenomenon given the existing supply surplus,’ Sarah Rowin and Frank Lee of bond research firm CreditSights wrote.”

“‘Not only do we have a lot of supply in the new home market, the existing homes are sitting much longer on the market,’ said Edie Ousley, a spokeswoman for the Florida Home Builders Association. ‘That increases competition for a new home to sell.’”

“‘Probably the gain in home ownership over the last four, five years, is almost entirely due to looser lending standards,’ said James Fielding, a homebuilding credit analyst at Standard & Poor’s in New York.”

“Fielding said the number of new homes on the market also is understated because when a customer cancels a home contract that house does not go back into the inventory of unsold houses. ‘There’s a lot more shadow inventory out there,’ Fielding said. ‘It’s just a quirk of the statistics. They never get recaptured.’

Anonymous said...

in n.y the taxes increase, it seems by a compound 10% a year, for the local politicians attempts to "help" the community, or seemingly control others money and properties, and help themselves, horsesheets

Anonymous said...

Are land-use regulations to blame for the lack of affordable housing?

land-use regulation has always seemed to me to be a necessary inconvenience. Without it, developers would build anywhere and everywhere without paying for the roads, schools and hospitals our communities need. But the argument that land-use regulations (especially those that slap high fees on developers and prevent building on huge swaths of land) made building more expensive also seemed like a no-brainer. Limiting the land that developers could build on would naturally make the price of developable land that much more higher, and the upshot would be more expensive housing.

In addition to limiting the available land, regulations can cause delays and require additional planning and administration, which also can drive up the price of building.

One need only extrapolate to understand that the developers undertaking multi-unit projects with complex zoning issues, planning fees and organized neighborhood opposition face substantially increased costs.

But was it really so simple? Was land-use regulation really the thing between the Bay Area and a wealth of affordable housing? Could it be that the Bay Area housing crisis existed not because everyone in the world wanted to live here -- but because we wouldn't let developers build enough housing to keep up with the demand?

"The reality is that the San Francisco Bay Area has some of the most draconian land-use restrictions in the entire nation, and it's artificially inflated the cost of developable land." He mentioned one recent project in which developers in Livermore were being charged a fee of $50,000 per house in a 300-home development. He noted that in Texas or Florida homes were a fraction of the price of similar ones in the Bay Area.

Anonymous said...

In addition to tougher land use rules, the ability to get sub-prime mortgages for their borrowers will start effecting new home builders quarterly earning.

Falling profits at U.S. home builders will make it harder for the companies to reduce long-term debt, and as debt levels rise relative to their earnings, credit spreads and ratings may come under pressure.

"Excess unsold home inventory, a skittish consumer and falling prices continue to hurt builder operating performance," said Chris Brown, investment grade credit analyst at Bank of America in New York.

"We believe the market is still underestimating the potential negative impact to industry credit ratios of the sales slowdown," Brown said. "We have not yet seen the worst with respect to industry credit quality."

The average spreads of five-year default swaps on investment grade builders is around 70 basis points, or $70,000 per year for five years to insure $10 million in debt, compared with 103 basis points last October.

Home builders spreads are trading tight relative to the credit derivative index of high volatility credits, which are mainly rated "BBB," and is currently trading around 79 basis points.

Moody's Investors Service said in January that a worse-than-expected housing slump has left home builders with less cash flow to cover debt interest, and some ratings could be cut if that trend continues.

Cash flow is the key to reducing debt and interest expense, but companies have had a harder time boosting cash flow than in previous downturns, Moody's said.

Gimme Credit analyst Kathleen Shanley also said in a report on D.R. Horton, the largest U.S. home builder, that tighter lending standards arising from an increase in delinquencies by subprime borrowers may also hurt earnings.

"We believe the new regime of tighter lending standards will pressure sales results in 2007, delaying the recovery in new home sales," she wrote in a report on Wednesday.

Anonymous said...

New Home Builders is suing Manteca for Land-use decisions.

MANTECA — A builders advocacy group is suing the city for what it claims was an excessive increase in development fees approved by the City Council in August.

The lawsuit filed Friday, March 2, in San Joaquin Superior Court tries to reverse the council’s decision to raise one of many fees levied on new development from $350 to $4,702 per home.

The “facilities fee,” as the city calls it, is supposed to make builders responsible for the cost of new public buildings — such as libraries, fire stations and police stations — that serve the homes they build.

The Building Industry Association of the Delta’s executive director, Kevin Sharrar, said his group was still negotiating with the city about the fee. If it didn’t sue now, however, it would forever lose its chance to take the issue before a judge, because of the legal time limits for suing against city legislation.

Negotiations with the city had not reached an impasse, Sharrar said, but he wanted to preserve the association’s right to sue just in case.

Anonymous said...

The bottom line is Cities needs new home builders just as much as new home builders need the Cities.

The survive of both depends on their cooperation.

Everyone knows that new home builders can not meet new home buyers demands of lower prices and more incentives.

New home builders depends on earning to survive.

If Cities need affordable housing to prevent big corporations from relocating then they must work with the new home builders to lighten up on tough lands-use policy.

New-home buyers facing an uncertain market and nervous about purchasing a house that might end up falling in value are demanding more incentives and price cuts from home builders.

Hovnanian Enterprises Inc., which saw its stock trade lower Friday after cutting its full-year outlook, has been offering more incentives to anxious buyers but it may not be enough, said one Wall Street analyst.

The Red Bank, N.J., home builder swung to a fiscal first-quarter loss on charges related to operations in Florida, one of the nation's hardest-hit markets. Yet before charges, the company delivered net income of 20 cents a share.
The lowered 2007 outlook despite better first-quarter results above forecasts "suggests to us that buyers' response to higher incentives early in the quarter did not meet management's expectations," wrote Banc of America Securities analyst Daniel Oppenheim in a research note Friday.

"We think higher incentives may be necessary to boost sales during the spring season," he added. However this is something that new home builders can not keep on doing without hurting their bottom line.

Investors and analysts are keeping close tabs on how the important spring selling season progresses to get a feel for whether a rebound is in the cards for 2007. They're also trying to get a handle on whether home builders will be impacted by pain in the subprime mortgage market.

As of September, about 77% of home builders were offering some sort of sales incentive in response to rising home inventories, compared with 58% a year earlier, according to the National Association of Home Builders.

"Builders continue to use both price and nonprice incentives to bolster sales and reduce inventory,"

Anonymous said...

Remember the 80's when the Japanese brought up America, well now it is the Chinese turn.

China’s foreign exchange regulators are considering allowing individuals to convert their yuan holdings into foreign currencies to directly invest in overseas markets, state press reported on Friday.

Regulators have received calls to allow individuals to buy foreign currency and invest the money overseas by themselves, the China Daily reported, citing Hu Xiaolian, director of the State Administration of Foreign Exchange (SAFE).

Currently Chinese individuals can only buy investment products provided by banks and fund management firms if they want to invest abroad under a Qualified Domestic Institutional Investor (QDII) scheme.

Ha noted that in short-term it would be more feasible to first allow QDII products to invest in stocks or stock mutual funds abroad so that mainland investors could get familiar with the overseas markets over time.

“It’s a good option to start with H-shares (Chinese companies listed in HK) and then expand the scope to other overseas markets,” Ha added.

Anonymous said...

Markets recover

Magically everything got off to a wobbly levelling off by Tuesday – March 6, 2007 – due to a significant weakening in the yen exchange rate by more than 1% reversing the previous weeks' strengthening of almost 7% against the US dollar. By Wednesday, the global equities markets had recovered to find their own levels.

Yen in reverse

To move the yen into reverse gear by more than 1% in a day is not easily done and bore evidence of a Bank of Japan (BOJ) move, thus calming the jittery “carry-traders” who made imprudent borrowings and investments.

The world must thank the BOJ for staving off a prolonged equities meltdown and possibly a global equities disaster – impoverishing millions of investors and reducing confidence in the workings of markets.

US Treasury Secretary

Henry Paulson, the US Treasury Secretary, was just a week before the global market collapse all charged up prior to his departure for China to demand an immediate and significant yuan appreciation to bail out the US trade deficit and ameliorate employment problems at home. That was simplistic economics.

The constant US harping coupled with the rising yen and yuan interest rates coalesced into sudden changed perceptions by “Yen-Yuan Carry Traders” into Chinese equities, which then triggered the Shanghai collapse.

That was followed very quickly by yen-US dollar carry trades which were invested in sub-prime mortgage papers.

The fact that the “carry traders” had borrowed the yen heavily for the US subprime mortgage market meant that sudden and immediate reversals of forex rates would also harm US citizenry interests.

That stopped Paulson in his tracks.

Chinese reserves

Fortunately for the US, a huge block of Chinese reserves was recycled on a government-to-government basis by buying into US Treasuries. There was less pronounced panic arising from the strengthening yen versus the yuan as it is still pegged to the US dollar.

Paulson in Beijing

When Paulson landed in Beijing on March 8, the tune was different. There was no public stricturing of China's forex policy. Instead he urged the Chinese to develop a more balanced economy and hasten the modernisation of its financial system to bring benefits to its hardworking population.

So Paulson was learning fast that the easy way out of meddling with seismic forex changes was enpasse in this era.

China had in the past week appealed for non-communist help to narrow its rich-poor gap. So quite obviously, US calls were already noted.

How can a communist system adopt capitalist methods so quickly? Guaranteed collapse would be the outcome.

The carry trades

“Carry trades” have developed into a global mechanism for global capital allocation. This means sudden forex changes to correct trade imbalances is now limited in scope and can be contained by central banks.

The BOJ had acted responsibly and quickly enough to curb the tide of global financial panic and destruction. The use of political pressure on matters financial is clearly limited.

Trade deficits and world wars

Past world wars were triggered largely by trade imbalances. The evolution of the “gold standard” to correct trade imbalances ended in 1972.

The de facto global US dollar reserve currency replacing the gold standard worked with limitations for the past 35 years.

The build-up of huge forex reserves by exporting countries has posed new challenges. The world is at an early stage of adopting the US dollar, euro and yen combination as global reserve currencies. New ways must evolve to restore global growth and greater equity markets stability.

Anonymous said...

Has the all clear been given and will foreign investors start pulling their money out of the US Treasury and get back into the world stock markets?

US labour market not as bad as it looks?

Recent talk about possible recession in the US may have spooked the Americans, but do they really have to worry about their prospects, especially when it comes to employment?

US non-farm payrolls in February increased a paltry 97,000, in line with market expectations of a 100,000 rise, and is due to a steep drop in construction payrolls (likely due in part to winter storms last month), which offset strength in the service sector.

Even though this growth in jobs last month was the slowest pace in two years, the unemployment rate fell and hourly wages posted a strong gain, suggesting that the US economy remains in relatively good shape despite the recent string of weak data.

Anonymous said...

Will European investors pull out of Collateralized Debt Obligations?

European investors are discovering that they unwittingly exposed themselves to the U.S. housing bust by buying collateralized debt obligations that included repackaged American subprime mortgage loans.

Investors are realizing they may own more exposure to subprime-mortgage-loan pools than they thought.

That exposure is surfacing because of the way fixed-income investments can be layered. Banks sell asset-backed securities, known as ABS, backed by mortgages to investors. The ABS can ultimately end up in complex structures called collateralized debt obligations, or CDOs.

Institutional investors invest in CDOs, sometimes not realizing they have subprime mortgages in them.

"There are European investors who until a few weeks ago did not know an awful lot about what subprime was who are realizing that they actually have exposure through some of their CDOs," said Citigroup credit strategist Hans Lorenzen.

"I've spoken to one investor who said that their portfolio had exposure to subprime and they just knew that it had some American ABS exposure. They hadn't gone through enough detail" of their investment to realize they owned loans to Americans with spotty credit records.

Because derivatives trading is relatively unregulated and exceedingly complex, no one really knows how exposed European investors (or big American players like Goldman Sachs or Citigroup) are to the subprime mess.

It's also true, as the New York Times reports today, that if you were smart enough to bet on a housing bust coming true, you are making good money now off of subprime misfortune.

Maybe risk has been sufficiently spread around and hedged in so many different directions that for every loser there will be a winner and it will all balance out in the end. That would be nice, for the global economy.

Anonymous said...

Is the Market Panic Over?

Yes and no. No, because you can never tell what additional macroeconomic problems will crop up. Yes because CDOs [Collateralized Debt Obligations] are still getting funded.

I have a saying that bubbles only pop when cash flow is insufficient to finance them. Well, the riskiest part of the debt markets, CDO equity, still has willing participants. That indicates that it is not bubble-pop time yet, and that has positive implications for the junk debt and equity markets. Party on!


Anonymous said...

“Carolyn Sandberg, a broker with Home Real Estate in Westminster, said she ran into a case of what she considers mortgage fraud when an elderly couple she was representing were buying a house. Their loan was going to rise almost immediately from slightly more than 6 percent to more than 9 percent.”

“‘I stopped the deal three days before the closing’ and put them in touch with a reputable mortgage lender, she said. ‘The (original) lender went nuts,’ she said. ‘He was probably calling me 10 to 14 times a day.’”

Carolyn Sandberg gets a hero of the week nod.

FlyingMonkeyWarrior said...

You are so, so , full of shit. If you are going to lie at least make it somewhat beliavable.
Dear anon,
Did you check the beach front rent in Baja Mexifornina? Bet they are afforadable. te he

oh, never mind.

FlyingMonkeyWarrior said...

I've got your Washington DC Protest
March right here, Keith.

Or 50% off your Halloween Costumes this year.

Remember November the 4th.

March 8, 2007

Calling all “V”s to Washington
March 30th at 3 PM

Stand In Support Of Our Petitions for Redress

Over the past two months, We The People Foundation has circulated two new Petitions for Redress of Grievances, one pertaining to the government’s failure to stop illegal immigration and one regarding the impending, and unconstitutional, “North American Union.”

Many of you have signed these Petitions online and forwarded news about them to friends, family and associates.
These new Petitioners have now joined the untold thousands of Americans that have already signed our previous Petitions regarding constitutional violations arising from the Iraq War Resolution, the Patriot Act, the Federal Reserve System and the Income Tax.

On (or about) March 15 these new Petitions for Redress, along with our previous Petitions, will be formally served upon every member of Congress, the President and other officials of the U.S. Government.

Each package will contain a transmittal letter, the Petitions for Redress of Grievance (along with their respective constituent signatures) and an informational CD-ROM containing copies of the legal pleadings from the landmark Right-to-Petition lawsuit, Law Review articles establishing the nature of the Right to Petition and other supporting materials. The lawsuit appeal is currently awaiting the decision of the U.S. Court of Appeals in Washington.

The constituent transmittal letter respectfully demands that the elected and appointed officials formally respond to the Petitions in writing or meet with representatives of the People across from the White House at Lafayette Park at 3 PM on Friday, March 30th.

It’s Time To Demand Redress

We need ALL of you to come to Washington and show the government that We the People will not be ignored, our Petitions for Redress must be answered, and meaningful Redress MUST be secured.

Please consider participating in this important Right to Petition event
even if you have no plans to attend the Give Me Liberty 2007 conference.

All participants are asked to arrive at Lafayette Park between 2 and 2:30 pm on the 30th. The event starts at 3:00 PM. The assembled Petitioners will form up in rows and columns and will wait up to one hour in silent vigil for representatives of the Government to appear and inform the Petitioners when they can expect to receive a formal response to the Petitions for Redress of Grievances.

This is a silent vigil. All participants need to direct any and all questions and inquiries from the press to Bob Schulz, Chairman of We the People Foundation.

“V” Costumes
All participants are strongly encouraged, although NOT required, to appear in a “V” costume.

As we explained in previous communications, the “V” mask is a means of enjoying anonymity and is an expression of the fear the People are experiencing in publicly resisting government despotism and abuse.

We have made arrangements with a wholesale operation to obtain full “V” costumes for $55 (shipping included). You can have it shipped to your location or you can pick it up at the GML 2007 conference.

This is for the FULL standard “V” costume including gloves, hat and wig, etc. Many have already purchased the full costume (+ shipping) for approximately $100 retail. This is a significant savings.
Dear HPers, here is the interactive link;


FlyingMonkeyWarrior said...

AND DO NOT SAY I didn't Tell You about this last year. But no, you trolls had a field day of FMW ridicule.

She Lift's Bull Horn to Mouth, "Bring it on Trolls".


China creating company to invest US$1 trillion reserves
The Associated Press
Published: March 9, 2007

BEIJING: China is creating an investment company to make more profitable use of its US$1 trillion in foreign currency reserves, the finance minister said Friday, in a move that could change the flow of billions of dollars in global markets.

Finance Minister Jin Renqing gave no details of how the Cabinet-level company might invest the reserves, which are believed to be mostly in safe but low-yielding U.S. Treasury bonds. He also did not say what portion of the reserves might be channeled through the company or when it would start to operate.

"We can achieve more profit from the investments," Jin said at a news conference. "We are now preparing the organization of this new corporation."

Analysts have speculated for some time that China would create an investment company, and officials have said repeatedly they want to make better use of the country's reserves.

Economists have suggested Beijing might allocate as much as US$200-400 billion (€150-300 billion) to the new company, which in a single move could create one of the world's richest investment funds.
Today in Business
Airbus has worst year ever, dragging down results at EADS
China to invest its foreign currency reserves
U.S. issues caution on anemia drugs
<A HREF="" TARGET="_blank"><IMG SRC="" WIDTH="170" HEIGHT="60" ALT="Click here..." BORDER="0"></a>

"They want to be more aggressive than what they do with current reserves," said economist Mingchun Sun at Lehman Brothers in Hong Kong.

"They could invest in higher-yield products — stocks, corporate bonds, maybe even commodities," Sun said. "Basically, the returns would be higher because the risk is higher."

Jin said Beijing would try to learn from the experience of other governments. He cited the example of Singapore's Temasek Holdings, which manages 129 billion Singapore dollars (US$89 billion; €65 billion) in government pension funds and other assets.

Temasek owns stakes in Singapore Airlines and Singapore Telecom, as well as in banks, real estate, shipping, energy and other industries in India, China, South Korea and elsewhere.

Spokespeople for Jin's ministry and the central bank and foreign currency regulator declined to give any other details.

A shift in China's investment strategy could change its purchases of Treasuries, affecting a market that Washington relies on to help finance multibillion-dollar budget deficits.

But Sun said that with the reserves growing by as much as US$20 billion a month, Beijing could afford to keep buying U.S. government bonds while also channeling billions into new investments.

U.S. Treasury Secretary Henry Paulson, in an interview this week on the U.S. television network ABC, rejected suggestions that changes in Chinese bond purchases could affect the United States.

Paulson said Beijing's entire holdings represent the equivalent of less than a single day's trading in Treasuries on global bond markets.

Chinese economists and media reports have suggested China might adopt more unusual investment approaches, ranging from stockpiling oil and other raw materials to spending more on social programs in order to encourage Chinese consumers to spend more and reduce dependence on exports.

The growth in China's reserves is driven by the rapid growth of its exports, which brings in dollars, euros and other foreign currency, and by the billions of investment dollars being poured into the country.

The surge in money flooding in from abroad forces the central bank to drain billions of dollars from the economy every month by selling bonds in order to reduce inflationary pressures.

The composition of China's foreign currency reserves is a secret. But economists believe that as much as 75 percent is believed to be in U.S. dollar-denominated instruments, mostly Treasuries, with the rest in euros and a small amount in yen.

Stephen Green, chief economist at Standard Chartered Bank in Shanghai, calculated that last year the central bank made a US$29 billion profit on its Treasury holdings after paying interest on its own bonds and other expenses.

But even that represents a return of less than 3 percent on the US$1 trillion in holdings.

By contrast, Singapore's Temasek says it has averaged an 18 percent annual return since it was created in 1974.

Link here:

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Anonymous said...


Investors are fleeing on concerns of a possible bankruptcy.

Lenders may now find themselves holding deeds to homes in a flat real estate market as risky borrowers are overwhelmed by mortgage payments that ballooned when tempting teaser rates expired.

Anonymous said...

Robert Toll is guessing.

First he said if lower cancellation rate persists then inventory could go down then he added higher cancellation rate may persists in the future so inventory my go back up, NICE guess, got both way covered!

So share holders pay him to guess. Any two years old kid could do that.

Luxury home builder Toll Brothers said on Wednesday it could "burn off" its inventory in many markets in four or five months if its lower cancellation rate persists, suggesting the weak U.S. housing market may be at a bottom.

"I would guess, and that's all it is, it would be another four or five months before you finally burn off inventory in most of the markets," Robert Toll, chief executive and chairman, said at Citigroup's Global Industrial Manufacturing Conference.

The cancellation rate may rise because it tends to go up at the end of the quarter, he added.

FlyingMonkeyWarrior said...

U.S. Heading For Financial Trouble?

"I would argue that the most serious threat to the United States is not someone hiding in a cave in Afghanistan or Pakistan but our own fiscal irresponsibility," Walker tells Kroft.

David Walker is a prudent man and a highly respected public official. As comptroller general of the United States he runs he Government Accountability Office, the GAO, which audits the government's books and serves as the investigative arm of the U.S. Congress. He has more than 3,000 employees, a budget of a half a billion dollars, and a message he considers urgent.

"I'm going to show you some numbers…they’re all big and they’re all bad," he says.

So bad, that Walker has given up on elected officials and taken his message directly to taxpayers and opinion makers, hoping to shape the debate in the next presidential election.

"You know the American people, I tell you, we've been to 13 cities outside of Washington with the fiscal wake up tour. They are absolutely starved for two things: the truth, and leadership," Walker says.


Anonymous said...

The current train wreck unfolding in the sub-prime lending sector provides a good preview as to what will happen to the entire credit-financed bubble economy when the funding dries up.

Contrary to the self-serving rhetoric of Wall Street and housing industry shills, the entire mortgage sector is not insulated from sub- prime.

In fact, sub-prime is just the tip of the credit iceberg. Beneath the surface lie similar problems in Alt-A and prime loans, where borrowers also relied on adjustable rate mortgages to purchase over-priced homes that they could not otherwise afford.

With the sub-prime market drying up, most first-time home buyers will be unable to buy.

Without those "starter-home" buyers, the trade-up buyers (most of whom have the ability to make down-payments and are therefore considered "prime borrowers") will be unable to sell their existing homes, and hence unable to trade up.

This brings down the entire house of cards. Home prices must collapse, affecting all homeowners, regardless of their credit ratings.

Anonymous said...

The future survive of home builder depends on keeping their cost low.

Home Builders should just write off their over-hang mistake and focus on their future earning. Instead of reporting bad news so that analysts will lower their earning expectation.

Sure it is easier for an CEO to look good when they can beat a lower earning expectation, but to a share holders that would be a certain death.

Instead, home builders need to focus on working with local cities regulators on reasonable Land-Use programs to reduce their cost.

While an uncertain housing market anxiously monitors the spring selling season for hints of a turnaround, home-builder chief executives are keeping a close eye on their costs and the overhang of unsold homes on the market.

"The key to the analysis of where home builders are is the amount of speculative inventory still remaining on the market," said Robert Toll, CEO of luxury builder Toll Brothers, during a Webcast at a Citigroup-sponsored conference Wednesday.

In response to slower sales, D.R. Horton CEO Donald Tomnitz said since the market's top, the company has reduced its homes under construction by 35 percent. It has cut the number of lots owned and optioned by roughly 25 percent since the end of March 2006, he said.

In one of the conference's more memorable quotes, the CEO also said he expects 2007 to "suck" for home builders with the market not recovering

Anonymous said...

Makes you kind of wonder what is Ocwen's game plan in wanting to continue to invest in the subprime market.

Ocwen Financial Corporation today announced that it has obtained definitive commitments from affiliates of Angelo, Gordon & Co., Metalmark Capital, LLC and other lead investors to form and capitalize a new business, Ocwen Structured Investments, LLC OSI will invest in the lower tranches and residuals of residential mortgage-backed securities, related mortgage servicing rights, ABX Index Protection and other similar assets.

Ocwen's Chairman and CEO, William C. Erbey, said, ``In the current environment of rising mortgage delinquencies, our new venture presents an exciting opportunity to leverage our superior loss mitigation capabilities and knowledge of collateral to generate attractive returns for the investment partners.''

Anonymous said...

Poor, Poor, Poor foreign investors just when you think it can not get any worst for you.

Mortgage Investors are being sued.

Will the recent collapsed of Sub-Prime lenders bring on more misery to Mortgage Invetors. Don't cash that check yet, you might have to give it back.

Two years after the collapse of Philadelphia mortgage lender American Business Financial Services Inc., hundreds of people who have been waiting for payment from a bankruptcy court are being sued instead.

In January, the court-appointed trustee charged with recovering money for American Business Financial's creditors filed lawsuits against 370 of the 26,000 people who bought unsecured debt from the lender, which went out of business not long after filing for bankruptcy in January 2005.

For noteholders like Stanley Strumsky, getting hit with a $35,000 lawsuit just when he had come to terms with losing over $100,000 revived a sense of being caught in a system where the rules are working in reverse, to punish the innocent.

"I thought I was getting over it and I wasn't thinking much about it and now this happens," Strumsky said. The filing of the lawsuit, he said, was "unbelievable."

Brought under the Bankruptcy Code's "preference" section, the suits are an effort to force those people to return money they collected in the 90 days before American Business Financial filed for bankruptcy.

Noteholders who managed to badger American Business Financial to cough up unpaid interest or pay off over-matured debt are being asked to return the money to a bankruptcy case that so far has paid nobody but lawyers and Wall Street lenders.

"It's totally legitimate that they were owed the money," said Joseph Steinfeld, a partner with ASK Financial of Minneapolis, the specialty firm hired to handle the American Business Financial preference actions.

"But it's no different than any creditor who calls up and through pressure or whatever gets paid when others don't."

Anonymous said...

Pawlenty proposes legislation to Strengthen mortgage regulation in Minnesota

Saint Paul - Mortgage fraud would become a specific crime under a proposal announced today by Governor Tim Pawlenty and Commerce Commissioner Glenn Wilson. The legislation would reform how the mortgage origination industry is licensed and regulated in Minnesota. Additional reforms include minimum net worth requirements for mortgage licensees and new training for mortgage loan officers.

"Mortgage fraud has become more pervasive and sophisticated and regulators need new tools to detect and deter these crimes," Governor Pawlenty said. "This package of reforms will help us get ahead of mortgage fraud in Minnesota and prevent Minnesota families from losing their homes or fortunes."

In an effort to give regulators more options to deter illegal behavior, mortgage fraud would become a specific crime in Minnesota law. Currently mortgage fraud cases are prosecuted using other statutes such as mail fraud or money laundering.

The new mortgage regulation legislation would also require each mortgage originator licensee to be a Minnesota corporation or other business entity and meet minimum net worth or bond requirements.

The bill would also authorize the Department of Commerce to periodically examine mortgage companies and charge them for the examinations, similar to the examinations regularly conducted in the banking and insurance fields.

The Department's 2005 legislation required mortgage companies to perform background checks on their loan officers and this year's proposal would strengthen that law by requiring them to maintain a perpetual roster of loan officers and providing the list to the Department of Commerce on demand. In addition, all loan officers would be required to take 16 hours of educational training.

"This package of reforms will help us get ahead of mortgage fraud in Minnesota and help prevent future Minnesota families from losing their homes or fortunes," said Sen. Linda Scheid, chief author of the bill and Chair of the Senate Commerce and Consumer Protection Committee.

"Prosecutors are doing all they can with the tools they have," said Rep. Joe Atkins, Chair of the House Commerce & Labor Committee. "Let's give them the tools they need to stop these unsavory lenders from cheating hard working Minnesotans."

Anonymous said...

Is it safe to buy an unfunded collateralized debt obligation to protect you MBS investment?

Is there enough safety in a senior tranche to protect a junior tranche, are the associated risk of the two tranches truly opposite?

Synthetic Asset-Backed Security

In early 2006 the Structured Finance group at Calyon in London sought to arrange a synthetic, partially unfunded collateralized debt obligation (CDO) to transfer the risk of a $1.3 billion portfolio of residential and commercial mortgage backed securities, CDOs and other asset-backed securities. The portfolio would consist primarily of investment grade securities, with a portfolio average rating of BBB+. The composition of the portfolio is illustrated in the figure below, and in the tables that follow. Based on these features, the Calyon team wished to structure a synthetic asset-backed security with a substantial super-senior tranche in the form of a credit default swap. After discussions with two of the major rating agencies, the team had concluded that the funded part could be in the form of four rated tranches with the following percentages of credit enhancement: AAA, 20% paying Libor+0.45%; AA, 14% paying Libor+0.70%; A, 8% paying Libor+1.10%, and BBB, 5% paying Libor+1.40%.

Now they needed to work on the super-senior tranche, for which 28%CE would be needed. This would cost an estimated 5 basis points per annum. Next they could show the balance sheet of the SPV. Eligible investments for Orion would be AA+ rated floating rate assets (paying approximately Libor flat). They also wished to draw a diagram of the overall structure, identifying payment flows between Calyon and Orion, and to itemize credit events and settlement terms.

Anonymous said...

Can Synthetics CDO creat a failout like what happened to Parmalat in 2003?

This year is proving anything but sweet for investors in Europe’s structured credit markets. Although rating agencies have reported more upgrades than downgrades compared with this time in 2003, investors that put their money in European synthetic collateralized debt obligations (CDOs) are feeling particularly dissatisfied.

Losses stemming from the default of Italian dairy group Parmalat on December 26, 2003 have mainly been tied to synthetic investment grade deals – not least since these structures account for most of the CDOs done in Europe. But subsequent jitters, for example those caused by recent accounting scares at Rhodia and Adecco, have also given European CDO investors more food for thought. (90 percent of all the European CDOs – private and public – rated by Standard & Poor’s in 2003 were synthetic, mostly investment grade synthetics.)

Parmalat, which fit the bill for large cap and food sector picks, was trading relatively high for its rating last year. And as David Peacock, co-head of structured credit at Cheyne Capital Management in London points out, the desperate search for yields also meant people became less discriminating in constructing investment grade portfolios. Investors that went for static rather than managed synthetic CDOs, he says, were more likely to get hit since such structures are designed to look for the highest spread for the rating.

Mort said...

Central Oklahoma, dozens of subdivisions, filled with new spec houses, some in the middle of nowhere. Here is a small sample:

3300 Valley Brook
3304 Valley Brook
3308 Valley Brook
3312 Valley Brook

2129 Valley Hollow
2200 Valley Hollow
2304 Valley Hollow
3216 Valley Hollow
3217 Valley Hollow
3309 Valley Hollow
3313 Valley Hollow
3317 Valley Hollow
3320 Valley Hollow
3409 Valley Hollow
3424 Valley Hollow

3204 Valley Meadow
3216 Valley Meadow
3224 Valley Meadow
3312 Valley Meadow
3316 Valley Meadow
3309 Valley Meadow

That is for just three streets, in one division, all over $200k. There are so many unsold new houses around here in the 200k - 1.2 million range, I kid you not. Some are out in the middle of nowhere. They will never clear all this inventory, and yet they keep building. When is the banker going to call these builder's loans?

W.C. Varones said...

The New York Times' Gretchen Morgenson belatedly discovers the mortgage problem:

Anonymous said...

The Worst Is Far From Over!

Peter Schiff

With today's relatively benign jobs report coming in close to the consensus forecast and with the stock market comfortably above Monday's low, most on Wall Street are breathing a sigh of relief. The popular position is that last week's turmoil was simply a speed bump on the road to greater prosperity, and that a recession and a bear market are low probability events. As you may imagine, I beg to differ.

Despite the rebound, the technical and psychological damage to the stock market is major, and the odds that the carnage is over are slim. A more likely scenario is that the bear market rally that began for U.S. stocks in October of 2002 has ended, and a new leg down in this long-term bear market has begun. As for the likelihood of recession, not only does it seem to be highly probable, but it is more of an outright certainty. With the construction industry shedding 62,000 jobs last month (the most in sixteen years), it is clear that housing is already in recession! The major question is when the overall recession will begin: the second half of '07 or early '08?

The current train wreck unfolding in the sub-prime lending sector provides a good preview as to what will happen to the entire credit-financed bubble economy when the funding dries up. Contrary to the self-serving rhetoric of Wall Street and housing industry shills, the entire mortgage sector is not insulated from sub- prime. In fact, sub-prime is just the tip of the credit iceberg. Beneath the surface lie similar problems in Alt-A and prime loans, where borrowers also relied on adjustable rate mortgages to purchase over-priced homes that they could not otherwise afford.

With the sub-prime market drying up, most first-time home buyers will be unable to buy. Without those 'starter-home" buyers, the trade-up buyers (most of whom have the ability to make down-payments and are therefore considered "prime borrowers") will be unable to sell their existing homes, and hence unable to trade up. This brings down the entire house of cards. Home prices must collapse, affecting all homeowners, regardless of their credit ratings.

How can anyone ignore last week's announcement by Freddie Mac that they would no longer buy loans where there is a "high likelihood" that borrowers cannot meet their monthly payments and which are "highly vulnerable to foreclosure." Talk about closing the barn door after the horse! This is tantamount to an admission that Freddie Mac formerly bought loans knowing full well that they would likely end in default!

When asked on CNBC why the agency had waited so long to impose tougher standards, the head of Freddie Mac explained that when home prices were rising, Freddie Mac did not think it wise to prevent sub-prime borrowers from profiting from the boom. In other words, since people were making piles of money by making bad bets on real estate prices, Freddie Mac did not want to turn down the action. So even though they knew speculative buyers were lying about their incomes and assets in order to purchase houses they could not afford, Freddie Mac did not want to rain on everyone's parade. So instead of acting responsibly, they simply kept the party going, held their noses, and bought the loans anyway. Unbelievable!!!

Since 70% plus of the U.S. economy is based on consumer and mortgage credit, how can we possible avoid a recession if that well runs dry? Since home equity has been the principal asset collateralizing that credit, how can consumers keep borrowing and spending when housing prices fall? I heard one commentator on CNBC claim that the U.S. economy was in great shape except for housing. To me that's like a doctor telling a patient that he is in great health, except for the javelin sticking out of his chest. If housing is going down, there is no way on earth the entire economy does not get caught in its undertow.

March 9, 2007

Anonymous said...

Are CDOs [Collateralized Debt Obligations] still getting funded or are they just Synthetic CDOs made to appear as if investors are still funding CDOs?

Subprime Mortgage Bonds Extend Drop as Dealers Cut CDO Funding

Subprime mortgage bonds are falling in part because Wall Street dealers are lending less money to managers of collateralized debt obligations that buy the securities, according to investors.

``The dealers were caught off guard by the speed of the collapse and were still trying to aggressively'' encourage the creation of new CDOs before pulling back, said Peter Schendel, who helps manage $100 million in asset- and mortgage-backed bonds at hedge fund Good Hill Partners LP in Westport, Connecticut.

The drop in demand caused yields on subprime mortgage bonds with the lowest investment-grade ratings to double to 8 percentage points over benchmark rates last month, according to New York-based Lehman Brothers Holdings Inc. The rates consumers with bad credit pay on home loans fluctuate with the yield that bond investors demand to own securities backed by the mortgages.

Anonymous said...

The imploding mortgage market has seen its fair share of spin, too. With subprime lending collapsing fast, anyone linked to that business is running for cover.

Economist Nouriel Roubini says some banks might be downplaying their involvement in loans to individuals with shaky credit. He believes that many banks engaged in "highly cosmetic accounting" in how they actually defined subprime candidates - meaning that they gave loans to individuals with credit scores that were technically subprime, but didn't count them as such. Therefore, their exposure for now seems limited.

In addition, the increased use of creative loans - such as adjustable-rate, interest-only or piggyback - across the spectrum of all mortgages broadens the potential fallout from the industry's meltdown.

"Garbage is garbage, whatever you name it," said Roubini, a professor of economics at New York University's Leonard N. Stern School of Business and chairman of the consulting firm Roubini Global Economics.

That's something to consider when listening to what Countrywide Financial Corp.'s CFO had to say this week. He discussed on Tuesday why its lending business - which includes about 9 percent in subprime loans - has lasting power compared with others that just focused on loans to individuals with shaky credit.

"We're a top-conditioned athlete," Countrywide CFO Eric Sieracki said at an investor conference.

But the Calabasas, Calif.-based company isn't entirely protected either. According to a recent securities filing, 19 percent of its subprime mortgage loans were late in 2006. That's up from 15.2 percent at the end of 2005 and 11.3 percent at the end of 2004.

The mortgage lender also said that payments were at least 30 days late on 2.93 percent of the prime home-equity loans it services, up from 1.57 percent a year ago and 0.8 percent in 2004. It also said that it originated $40.5 billion in subprime mortgages in 2006, four times the $9.4 billion in 2002.

Anonymous said...

FMF Capital Group Ltd., a lender of mortgages to higher-risk borrowers in the United States, has decided to wind down its business because of the “severe” deterioration in the U.S. market.

The Toronto-listed company announced late Friday it has decided to conduct an orderly wind-down of the business of its main U.S. operating unit, FMF Capital LLC.

“This decision by the company was made as a result of the continuing rapid and severe deterioration of the U.S. nonprime mortgage industry and other factors affecting its overall non-prime mortgage business,” FMF said.

The company had tried to sell the business as part of a strategic review but its “efforts did not result in any viable alternative.” FMF said.

Earlier this week, the Toronto Stock Exchange said FMF Capital will be delisted in early April for failing to meet listing requirements of Canada's major stock exchange.


FlyingMonkeyWarrior said...

WOW, no China is dumping 1 trillion US dollars Flamers???????

Anonymous said...

Expect the Fed Funds rate to up signifiantly this year, not down. You heard it here first.

Anonymous said...

Last September, Merrill Lynch paid $1.3 billion to buy First Frnaklin Financial, a home lender in San Jose, California. At the time, Merrill said it expected First Franklin to add to its earnings in 2007. Now analysts expect Merrill to take a large loss on the purchase.

Indeed, on Feb. 28, as the first fiscal quarter ended for many big investment banks, Wall Street buzzed with speculation that the firms had slashed the value of their numerous mortgage holdings, recording significant losses.


striker said...

600 million reasons to worry.

striker said...

Anonymous said...

Remember those "CASH BACK" checks you wrote for your realtors in 2004, 2005, and 2006, because they did not have time to write them.

Guess what the IRS and FBI have not forgotten either they are just back logged because you made too many of them.

Jill M. Lehn, who pleaded guilty to one count of wire fraud and one count of money laundering in U.S. District Court in Minneapolis in December, tells all in a four-page article she wrote for the magazine due out March 1.

The article details her misdeeds while working as a closing agent at First Advantage Title Co.'s Burnsville office, which has since closed.

"It's a very hard lesson," Lehn told the Pioneer Press, adding that real estate "has been my whole life."

Lehn, 39, has admitted to preparing fraudulent documents in more than 60 real estate transactions between December 2004 and August 2006 where home values had been inflated.

She puts a human face on what authorities and industry professionals describe as a near epidemic of fraud that has plagued the mortgage industry in recent years, helping fuel surging foreclosures.

Lehn said she had nothing to do with inflating the home values, but was responsible for dispersing some $3 million in extra money concealed from lenders, by cutting checks to buyers and sellers.

The checks averaged about $40,000, she said. According to her plea agreement, the buyers knew in each case that they were signing fraudulent documents she had prepared, in order to get the pay out.

Both Lehn and a co-defendant are cooperating with the IRS, which started the case and is heading an investigation that industry professionals said they expect to result in several more arrests.

"We want to make sure the message gets out that IRS Criminal Investigation is taking a close look at abuses in this area," said Special Agent Janet Oakes in the St. Paul office.

The Minnesota Department of Commerce on Tuesday permanently revoked Lehn's real estate and notary licenses, barring her from working in the state. Lehn said she's staying home now to care for her baby and set her life straight.

She wrote the article, she said, to warn other professionals about the schemes and to advocate for change. She said she deeply regrets what she did.

"It's something I did as a favor to people that has come back to bite me in ways I never imagined," Lehn said.. "I foolishly said yes once and opened up that pathway."

Lehn said she clearly recalls the first instance, about three years ago. A particular loan officer requested a favor, she said, to get a homebuyer extra cash back to improve the property.

Lehn told the Pioneer Press that her Minnetonka-based employer did not play an active role in the fraud, but that she thinks they knew it was occurring.

"Do I believe they had a knowledge? Yes," Lehn said.

The owner of First Advantage Title Co. was out of the country on vacation Wednesday, an employee said, and not reachable for comment.

One of Lehn's clients, Isadore Stewart, a real estate investor who lives in Bloomington, has also pleaded guilty in the scheme.

Stewart pleaded guilty to one count of wire fraud in relation to three properties he purchased at inflated prices last year, including one house in St. Paul's Frogtown neighborhood.

Sentencing dates have not been set for Lehn and Stewart. Lehn faces up to 71 months in prison and $100,000 in fines, according to her plea agreement.

Stewart faces up to 33 months in prison and $60,000 in fines, according to his plea agreement.

Anonymous said...

Today the FBI and the Mortgage Bankers Association ( MBA ) entered into an agreement to combat Mortgage Fraud.

The FBI and the MBA will make available a Mortgage Fraud Warning Notice as a proactive means of educating consumers and mortgage-lending professionals of the penalties and consequences of this criminal activity.

The Federal Bureau of Investigation (FBI) has launched a plan to fight mortgage fraud. There are two types of mortgage fraud. The first is fraud for property where a buyer may lie about his or her income or debt or other information to buy a home. This accounts for about 20 percent of the mortgage fraud, according to the FBI.

The second type of fraud is for profit. There are numerous methods used to scam lenders including property flipping, fake identities, straw buyers, equity skimming and falsified appraisals. Property flipping involves property that is bought and sold several times to increase the value using appraisals. After a succession of sales the loan goes into default and the buyer disappears.

FlyingMonkeyWarrior said...

30-day Countdown to War

Bob Moriarty
Mar 11, 2007

We are almost certainly in the last days of a countdown to nuclear war. Israel has made plans to attack Iran in a war of aggression, which will probably begin with some staged attack such as the attack on the Liberty in 1967.

Bush and the Gang of Fools in Washington will be part of it; we don't have two carrier groups in the Middle East to support tourism. When it happens, kiss the dollar and the United States of America goodbye. If you don't own gold now, buy some fairly soon. My experience as a combat intelligence officer tells me the attack will be in the next month.

On the 8th of March Israel issued the following warning.

"• 5. Updated Travel Warnings
Israel's National Security Council Counter-Terrorism Division presents the following updated travel warnings for Israelis traveling abroad. It is advised that travelers should avoid visiting and leave the area as soon as possible in the following high to very high-threat countries: Algeria, Afghanistan, Chechnya, (southern Russia) Djibouti, Egypt, (especially the Sinai peninsula), Jordan, Indonesia, Iran, Iraq, Kashmir (northern India), Lebanon Malaysia, Mindanao, (southern Philippines) Northern Nigeria, Pakistan, Saudi Arabia, Somalia Southern Thailand, Syria & Yemen. Travelers should postpone non-essential travel to: Bangladesh, Bangkok, Libya, Oman, Nigeria & southeastern Turkey (borders with Iraq and Iran). Travelers in general, should avoid visiting the following countries: Bahrain, Chad, Kenya, Kuwait, Morocco, Qatar, Tunisia. Israeli citizens are called upon to be especially cautious when visiting: Philippines, Turkey, Thailand, & Uzbekistan. (Sources: National Security Council Counter-Terrorism Division, GPO)."

Israel is the most hated country in the world today for their war crimes and they are about to magnify the problem 1000 fold. I cannot predict the negative things which will happen as a result of another illegal and immoral war but dropping nuclear weapons on a non-nuclear state which poses no threat to either the US or Israel is going to open Pandora's box as no war crime in history ever tried.

One of the results I can guarantee is that the US dollar is going to be destroyed. It's no great shakes predicting that. Hell, even the Comptroller General of the United States is running around telling as many people as will listen (about 14 in total, I reckon) that the United States is bankrupt. Between a two-trillion-dollar-losing war in Iraq, a balance of payments totally out of control and the Gang of Fools in Washington, you can pretty much kiss the dollar goodbye the day the attack begins. And don't think for a minute I'm talking about strictly the Republican fools in Washington. By their actions, or better yet, lack of action, the Democrats have proven since the last election that they can be just as corrupt and ignorant as the neo-Nazi Republicans.

The American people clearly voted against the illegal war in Iraq and against the policies of this all too corrupt administration. Guess how thrilled the voters are going to be when they wake up one morning soon to $200 a barrel oil and find out just how much freedom they have left. (Hint, it rhymes with NONE)

Israel knows what their intentions are and it's no accident that they are warning their citizens to stay out or to get out of almost 40 countries immediately. As hated as they are today, Israel and the United States are about to commit the most foolish and self-destructive act of war in history. I have more time in the chow hall in combat than all of this administration combined and I can assure you that we are going to lose. It won't talk six months as it did with Iraq, we will know almost at once.

It wasn't Hitler who paid the greatest price for the war crimes he committed; it was the German people. And today it will be the citizens of Israel and the United States who will pay the ultimate price for what is no more than cold-blooded murder of millions. The butcher's bill will be paid.

Bob Moriarty
President: 321gold

321gold Ltd

Mort said...

Another blog tracking sub-primes lenders in trouble, his count is 50+.

FlyingMonkeyWarrior said...

Syria ready with bio-terror if U.S. hits Iran
Damascus reportedly hiding WMD among commercial pharmaceuticals
Posted: March 5, 2007
1:00 a.m. Eastern

By Jerome R. Corsi
© 2007

Jill Bellamy-Dekker

An American biodefense analyst living in Europe says if the U.S. invades Iran to halt its nuclear ambitions, Syria is ready to respond with weapons of mass destruction – specifically biological weapons.

"Syria is positioned to launch a biological attack on Israel or Europe should the U.S. attack Iran," Jill Bellamy-Dekker told WND. "The Syrians are embedding their biological weapons program into their commercial pharmaceuticals business and their veterinary vaccine-research facilities. The intelligence service oversees Syria's 'bio-farm' program and the Ministry of Defense is well interfaced into the effort."

Bellamy-Decker currently directs the Public Health Preparedness program for the European Homeland Security Association under the French High Committee for Civil Defense.

She anticipates a variation of smallpox is the biological agent Syria would utilize.

"The Syrians are also working on orthopox viruses that are related to smallpox," Bellamy-Decker said, "and it's a good way to get around international treaties against offensive biological weapons development. They work on camelpox as a cover for smallpox."

According to the Center for Infectious Disease Research & Policy (CIDRAP) at the University of Minnesota, camelpox is a virus closely related to smallpox, that causes a "severe and economically important disease in camels," but rarely, if ever, causes the disease in humans.

FlyingMonkeyWarrior said...

Just connecting the dots on
what's up outside of Housing and China.
Infidel Woman
aka FMW

Anonymous said...

Take BNC for instance...since they are backed by Lehman Bros, they dont have to sell to anyone. They fund the loan and hold the this correct or am I missing something?

people don't sell loans just because they can't find a better alternative. it's an option, just like portfoliong a loan is.

i personally think the best bet is to do both. no matter what the salesmen tell you about "well, we portfolio everything, so we make all the rules" or "we sell everything off so we're able to fund more and we make fast money."

neither of the above are true. plus, don't confuse true bulk selling with securitizing, and don't confuse selling a loan with selling the servicing. there's a lot of different ways to split up mortgages and make money.

however, no matter what you do, there's no safe way to write bad loans. you can even do what New Century used to do and sell the loans to yourself and then right down the amount that yourself paid yourself as a profit (??).

you can do what you like for now, but you can't write bad loans and get away with it for too long. eventually, the bottom falls out.


Anonymous said...

The Worst is Far from Over!

The current train wreck unfolding in the sub-prime lending sector provides a good preview as to what will happen to the entire credit-financed bubble economy when the funding dries up.

Contrary to the self-serving rhetoric of Wall Street and housing industry shills, the entire mortgage sector is not insulated from sub- prime.

In fact, sub-prime is just the tip of the credit iceberg. Beneath the surface lie similar problems in Alt-A and prime loans, where borrowers also relied on adjustable rate mortgages to purchase over-priced homes that they could not otherwise afford.

With the sub-prime market drying up, most first-time home buyers will be unable to buy.

Without those "starter-home" buyers, the trade-up buyers (most of whom have the ability to make down-payments and are therefore considered "prime borrowers") will be unable to sell their existing homes, and hence unable to trade up.

This brings down the entire house of cards. Home prices must collapse, affecting all homeowners, regardless of their credit ratings.

How can anyone ignore last week's announcement by Freddie Mac that they would no longer buy loans where there is a "high likelihood" that borrowers cannot meet their monthly payments and which are "highly vulnerable to foreclosure."

Talk about closing the barn door after the horse! This is tantamount to an admission that Freddie Mac formerly bought loans knowing full well that they would likely end in default!

When asked on CNBC why the agency had waited so long to impose tougher standards, the head of Freddie Mac explained that when home prices were rising, Freddie Mac did not think it wise to prevent sub-prime borrowers from profiting from the boom.

In other words, since people were making piles of money by making bad bets on real estate prices, Freddie Mac did not want to turn down the action. So even though they knew speculative buyers were lying about their incomes and assets in order to purchase houses they could not afford, Freddie Mac did not want to rain on everyone's parade.

So instead of acting responsibly, they simply kept the party going, held their noses, and bought the loans anyway. Unbelievable!!!

Since 70% plus of the U.S. economy is based on consumer spending, how can we possibly avoid a recession if the credit well financing much of it runs dry? Since home equity has been the principal asset collateralizing that credit, how can consumers keep borrowing and spending when housing prices fall? I heard one commentator on CNBC claim that the U.S. economy was in great shape except for housing.

To me that's like a doctor telling a patient that he is in great health, except for the javelin sticking out of his chest. If housing is going down, there is no way on earth the entire economy does not get caught in its undertow.

Anonymous said...

Latest count of major US mortgage lenders that have croaked since late 2006:

36 lenders have now gone kaput

Anonymous said...

The Damage has been done to the Financial Markets as Volatility Soars and The Carry Trade Unwinds

A week ago, I had notified my subscribers that I suspected a general market collapse that could take gold down with it, Gold being sold to cover margins and what not.

Anonymous said...

Countrywide Insiders Sold $288M in Stock

Amid the meltdown in the subprime sector, insiders at Countrywide Financial Corp. -- including chairman and chief executive Angelo Mozilo -- have sold 7.8 million shares over the past six months, according to figures compiled by Thomson Financial.

Based on an average share price of $37, that means insiders -- officers and directors alike -- have unloaded $288 million worth of stock. Since March 1, Mr. Mozilo has exercised options, selling 186,000 shares at a market price of $6.77 million. According to the Quarterly Data Report, Countrywide is the nation's largest subprime servicer, and third-largest funder.

Countrywide recently disclosed that $22 billion, or 19%, of its subprime receivables are in some form of delinquency. Its shares now trade at $4 above its 52-week low. Its high is $45.


Anonymous said...

A book by former U.S. Treasury Undersecretary John Taylor proves that the Bush administration went along as Japan tried to hold down the value of the yen, hurting American manufacturers.

In ``Global Financial Warriors,'' published in January, Taylor writes that he acquiesced as Japan sold yen to buy dollars in 2002 and 2003 to help the world's second-largest economy pull out of a decade of anemic growth. The action held down the value of the yen, making Japanese products cheaper on world markets.

``I did not object, as Treasury might have in the past, but I repeated our own views about the merits of keeping intervention at a minimum,'' Taylor, who was at the Treasury from 2001 through early 2005, writes.

Lawmakers, picking up on complaints of Detroit-based General Motors Corp. and other automakers, say Taylor's revelation shows how the U.S. allowed Japan's exporters to get an unfair advantage that they say is still being felt. Their complaints may trigger renewed U.S. pressure on Japan to strengthen the yen.

``This administration decided to help Japan, but this is something that directly hurts our auto industry,'' Democratic Senator Debbie Stabenow of Michigan, said yesterday, referring to Taylor's book. Not only did Japan weaken its currency, ``But we knew it at the time,'' she said.

Anonymous said...

Hedge funds might get out of U.S. subprime business.

European investors including UK hedge funds may drop U.S. subprime mortgage investments given a lack of transparency and mispricing of risk, two business professors said on Thursday.

Joseph Mason, a professor at Drexel University's LeBow School of Business, said investors in Europe besieged by news of surging mortgage delinquencies are "rethinking their decisions" to invest in subprime debt or shares of subprime lenders.

"A lot of UK hedge funds aren't sure what they are holding now," Mason said on a conference call hosted by the Hudson Institute, a Washington, D.C.-based political and economic research group.

Mason, joined by Oliver Arentz of Germany's University of Cologne, said the investors -- like many Wall Street banks -- aren't discussing the issue publicly because they don't want to call attention to themselves. They also don't want to mislead or be perceived as "industry shrills," he said.

European investors are concerned that debt securities they hold are more exposed to losses than the current ratings suggest, he said. Making matters worse is that Europeans lack understanding of details of the U.S. mortgage market key to the subprime sector, such as loan mitigation policies and "piggyback seconds," he said.

Piggyback seconds are second-lien loans taken out simultaneously with first-lien mortgages. Together, the loans often finance 100 percent of the home, increasing the risk to the investor.

Arentz said the unfolding story of subprime mortgages in the United States will create a chilling effect on mortgage-backed securities markets in Europe and on European Union efforts to boost cross-border competition. He didn't quantify the exposure of European investors but said some are looking for a way out.

"It's safe to say we will see fewer Europeans investing in MBS in the future," he said.


Anonymous said...

Cry not for mortgage lenders

At a sentencing hearing last week, Puller received one year and Ingram received two years in prison for their separate roles as straw buyers in a massive mortgage fraud scheme in Aurora.

Puller and Ingram are among seven defendants accused of taking $2.1 million out of 17 phony home sales, mostly in the Villas at Cherry Creek, a gated community bordering Cherry Creek State Park.

The scheme began with Ronald Fontenot and Torrence James, who met in federal prison and became mortgage brokers once released. Puller and Ingram were among their dupes paid to pose as buyers and sign bogus documents.

Among the lenders they defrauded was New Century Financial, whose stock has been in a free fall. As the Irvine, Calif.-based company cranked out loans across the country, its stock hit $66 a share in December 2004. On Friday, New Century's stock closed at $3.21. The previous Friday, New Century disclosed that federal prosecutors and securities regulators were investigating accounting errors and stock sales at the company.

New Century's three founders made more than $40.5 million selling stock from 2004 to 2006, according to a report in The New York Times last week.

Another subprime market leader, Countrywide Financial, recently reported that 19 percent of its subprime loans were more than 30 days delinquent. That's nearly one out of five going bad. The company also said it made $41 billion worth of subprime mortgages last year and $46 billion in 2005.

Before news of Countrywide's widening subprime delinquencies broke, its CEO, Angelo Mozilo, sold $140 million in stock over the past 14 months, The Wall Street Journal reported last week. Mozilo, who co-founded the company 38 years ago, defended a 19 percent delinquency rate.

The founders, who sold millions worth of their stock, do not seem punished to me. Meanwhile, the real losers are shareholders who didn't sell their stock.

Anonymous said...

The strength of the yen and possible turbulence in the U.S. mortgage market will likely be the main concerns of emerging debt investors this week, as high-yielding bonds try to consolidate their recent recovery.

The Japanese currency is right now the main source of uncertainty: should it keep erasing recent gains, short-term investors who take advantage of the carry trade may feel comfortable to fully return to the market, analysts say.

If the yen starts strengthening again, however, it could become too expensive for investors to keep borrowing on the safe currency in order to invest in high-yielding assets.

Turbulence stemming from the U.S. subprime mortgage market could also curb the performance of emerging bonds this week.

"I think the U.S. mortgage markets, in particular the subprime mortgage market, will be a major source of noise into the U.S. environment and I think that should trickle through into Latin America," IDEAglobal's Alvarez said.

Emerging markets investors should also pay some attention to U.S. economic data, like retail sales on Tuesday and consumer inflation on Friday, to make sure the world's largest economy remains slowing down in a paced way, without spikes in inflation.

Anonymous said...

Hedge Funds Look For Sub-Prime Talent

Firms, including Halcyon Asset Management, Guggenheim Partners, Petra Capital and Black River Asset Management, are said to be scoping synthetic mortgage-backed securities structurers and traders because they believe the market is ripe for bargain-hunting sub-prime MBS.

Anonymous said...

Oh yeah, its the evil jooos and evil americans that are the source of the world's problems. Puhleezz - you're so, how you say, French. Why don't you just roll over and play dead so the Islamobots can do you up the ass while the Russians smile and watch. Like little girls, you're easily fooled as you can't see the predator behind the sweet (but sickly) smile. As Americans you should be proud and take it as a badge of honor that the world hates you. Its nothing to be ashamed of. The world is amoral, doesn't know its head from its ass and never did.

Anonymous said...

Saw some video on NBC News of a street thug punching a 101 yr old woman in the head repeatedly to steal her purse and all $33 within. As disturbing as it was, it seems exactly what these mortgage brokers were up to.

Anonymous said...

Good articla about those that bought at the top and are ticked that builders are giving deep dicounts to move dead inventory

Anonymous said...

Anonymous said...
This comment has been removed by a blog administrator.
Guy Daley said...

Okay, the lenders are cutting off people with bad credit records but I can see where this is going.

If you pay your paperboy, three months running, you will get a FICO of 750 which of course will entitle you to a no down payment loan on a $500K McMansion.

The only answer is to inflate credit scores. After all, how can you deny people that breed first, save later, the chance at a house. What about the CHILDREN?!!!!

Anonymous said...

The PPT could be a little more discrete. Getting in the market at the same time, usually around 2 PM, calls a lot of attention. But then, the sheeple and crooks don't give a damn anyways...

Gee, market positive after a headline like this:

"NEW YORK (CNN) -- Embattled mortgage lender New Century Financial Corp. warned Monday of a series of serious financial problems that cast its future in doubt - and cast a pall over much of the nation's financial sector."

Everything is rigged in this country: media, stock market, economic indicators, housing, White House, Congress, Senate, elections, contracts in Iraq and Katrina, immigration, man on the moon, 9-11, and the list goes on and on...

And we, Americans, still have the audacity to call others as "Third World Countries". Yeah, right...the difference is that here we make corruption, deception, and fraud legal.

Anonymous said...

"As Americans you should be proud and take it as a badge of honor that the world hates you."

Karl Rove loves sheeple like you. No wonder this country is going down fast...with voters brainwashed like that...amazing!

Guy Daley said...

Still advertising cash backs on Craiglist. Check it out!!!

Preconstruction Investing Opportunity with 57k cash back

How long before everyone is aware this is fraudulent or close to it?

Anonymous said...

Novastar Financial Stocks pause on subprime news

NEW YORK (AP) - Stocks showed little movement Monday as further cracks
appeared in the subprime lending sector, stirring concerns that a blowup among
companies making loans to consumers with poor credit will spill over into other
A warning from New Century Financial Corp. early Monday about its financial
woes overshadowed merger news, which often gives a boost to enthusiasm on Wall
The renewed concerns about subprime lenders follow a relatively successful
week on Wall Street. Stocks etched out gains last week U.S. and overseas markets
managed to regain some sense of stability following a sharp pullback that began
Feb. 27. Even amid the gains seen last week, however, concerns about subprime
lenders weighed on investors.
"We've had fairly flat trading given the continuing meltdown in New
Century," said Frederic Dickson, market strategist and director of retail
research at D.A. Davidson & Co. "The market appears to have handled this latest
piece of news in a fairly decent and orderly way, almost as if had anticipated
it happening at the end of last week."
In early afternoon trading, the Dow Jones industrial average rose 17.87, or
0.15 percent, to 12,293.87.
Broader stock indicators were mixed. The Standard & Poor's 500 index fell
0.05, or less than 0.01 percent, to 1,402.80, and the Nasdaq composite index
rose 6.40, or 0.27 percent, to 2,393.95.
Monday's trading resembled that of much of the last eight months, a period
marked by low volatility. Many sessions since the worldwide selloff last month
have seen choppiness as investors hunted for signs of where the market was
headed. Monday's trading could perhaps reflect indecision rather than a sense
that Wall Street had regained its footing. Stocks traded in a narrow range
Monday as investors made small bets ahead of economic data due this week on
retail sales and inflation and as brokerages prepare to announce earnings.
Bonds rose amid the concerns about subprime lenders; the yield on the
benchmark 10-year Treasury note falling to 4.55 percent from 4.59 percent late
Friday. The dollar was mixed against other major currencies, while gold prices
Light, sweet crude fell 88 cents to $59.17 per barrel on the New York
Mercantile Exchange. The New York Stock Exchange said it was reviewing the
listing status of the shares.
In corporate news, New Century warned in a filing with the Securities and
Exchange Commission that all its lenders had cut off short-term funding or
announced plans to do so after the subprime mortgage lender wasn't able to make
payments. New Century, which relies on short-term borrowings to finance mortgage
loan originations and purchases, said it would need about $8.4 billion should it
be forced to repurchase all outstanding mortgage loans. The company said it
doesn't have sufficient liquidity to meet its obligations for repurchasing
Trading in New Century shares remained halted with news pending, as it had
been before the opening bell. The New York Stock Exchange said it is reviewing
the listing status of New Century shares.
Other subprime lenders fell sharply. Fremont General fell 86 cents, or 10.7
percent, to $7.17, while Novastar Financial Inc. fell 67 cents, or 12.8 percent,
to $4.57.
Homebuilders also fell in part amid concerns that tightening credit
standards will make it harder for consumers with smaller incomes to purchase
homes. Hovnanian Enterprises Inc. fell $1.27, or 4.3 percent to $28.07, while
Pulte Homes Inc. fell $1.24, or 4.3 percent, to $27.52.
Companies that profit from home renovations also slipped. Home Depot Inc.,
one of the 30 stocks that make up the Dow industrials, fell 52 cents to $38.15,
while Loew's Companies Inc. fell 8 cents to $32.26.
Investors have grown uneasy about the subprime market amid fresh concerns
about the ability of some homeowners with spotty credit to continue to make
mortgage payments. Many of the mortgages came with low teaser rates and a
cooling housing market has made it more difficult for people to extract cash
from equity in their homes by refinancing.
Amid the din over subprime lenders, buyout news offered some support for
stocks. Word that private-equity company Kohlberg Kravis Roberts & Co. struck a
deal to acquire Dollar General Corp. for about $6.87 billion sent the discount
retailer sharply higher. Dollar General jumped $4.40, or 26.2 percent, to $21.18
-- well past the stock's 52 week high of $18.32.
As often occurs when a company announces an acquisition, Schering-Plough
Inc. fell 21 cents to $23.64 after agreeing to purchase the Organon BioSciences
BV pharmaceuticals business of Akzo Nobel NV, the Dutch maker of chemicals and
coatings, for $14.5 billion. Akzo rose $9.87, or 16.2 percent, to $70.68.
UnitedHealth Group Inc., the health insurer, announced plans to acquire
health care services provider Sierra Health Services Inc. for about $2.6
billion. Sierra Health rose $5.67, or 15.8 percent, to $41.57, while
UnitedHealth advanced 33 cents to $53.33.
Boeing Co., a component of the Dow industrials, said Kuwait-based Alafco
Aviation Lease and Finance Co. agreed to purchase 18 airplanes with a list value
of $2.26 billion. The deal includes 12 787-8 Dreamliner airplanes and six
737-800s. Boeing rose $1.32 to $90.83.
Procter & Gamble Co., the consumer products company, said it struck a deal
to sell its Western European tissue and towel business to SCA, which makes paper
and other products, for about $671.9 million. P&G, also a Dow component,
advanced 19 cents to $62.35.
Advancing issues outnumbered decliners by about 9 to 7 on the NYSE, where
volume came to 788.6 million shares.
The Russell 2000 index of smaller companies rose 0.95, or 0.12 percent, to
Overseas, Japan's Nikkei stock average rose 0.75 percent, Hong Kong's Hang
Seng index added 1.61 percent and the Shanghai Composite Index added 0.58
percent. Britain's FTSE 100 closed down 0.19 percent, Germany's DAX index fell
0.02 percent, and France's CAC-40 fell 0.75 percent.

Anonymous said...

I can't wait to see the rise in housefires to claim the insurance money. Even the banks might get in on that. Then maybe a crash in the insurance industry?

Anonymous said...

If a rising tide lifts all ships, what about a tsunami?

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