As housing prices suffer "sudden, severe and deep" depreciation, "ENRON 2.0" Countrywide Mortgage predictably melts down

Great expose on Countrywide (I'm short CFC) - one of the leading causes of the Late Great Housing Bubble, and soon to be one of the biggest victims (goodbye 61,000...).

Also, isn't it funny that Countrywide is crashing because, as they say, home prices are "depreciating like never before", with "sudden, severe and deep" depreciation, yet the reported median price is supposedly down just slightly?

In other words, Countrywide is now telling you what's really happening out there (now that Orangelo has sold his shares). The NAR and the US Government are not.

Countrywide's message of confidence turned to crisis - CEO forecast the lender would 'shine' as the industry changed. Later, he said the firm knew the bubble would burst.

A year ago, Countrywide Financial Corp. Chairman and Chief Executive Angelo R. Mozilo was boasting that the looming shakeout in home prices and hike in mortgage interest rates would usher in a period of remarkable prosperity for his company.

"I have 53 years of experience. . . and this is nothing compared to 25% prime and 17.5% mortgage rates and 10% unemployment," he told a conference of bond investors last September, pooh-poohing the effect of rising rates.

"This is when we shine," he said, calling Calabasas-based Countrywide "an industry leader" and "a role model to others in terms of responsible lending."

Today, the picture looks much different. Countrywide's financial reports and recent comments by Mozilo and other executives show that the company, the nation's largest mortgage lender, has been less a role model in the home-loan market than a prisoner of competitive trends.

The tone of executives' comments has gone from complacent to almost apocalyptic.

"We are experiencing home price depreciation almost like never before, with the exception of the Great Depression," Mozilo said in a July 24 conference call with securities analysts.The company's traditional frames of reference for the performance of its loan portfolio, he added, may no longer be "a fair comparison in light of what is happening to real estate values."

But the "sudden and severe and deep deterioration" in home values has thrown many borrowers into delinquency because homeowners with little or no equity have been unable to refinance their mortgages to reduce their rates.

Since Ben Bernanke didn't see the housing bubble smack dab in the middle of it, what makes you think he sees the crash?

Supposedly, unless he was lying, Bernanke, the smartest guy in the room, didn't see the housing bubble. Guess he never found his way over to HousingPANIC or any of the other bubble blogs. Or ever read Manias, Panics and Crashes.

Hell, even bubble-creator Greenspan just thought we had some "froth". He he he he he.

So if Mr. Smarty Pants didn't see the bubble, rest assured HP'ers that he doesn't see the crash. I swear, we are run by monkeys. Here's Ben from October 2005:

Bernanke: There's No Housing Bubble to Go Bust
Fed Nominee Has Said 'Cooling' Won't Hurt

Ben S. Bernanke does not think the national housing boom is a bubble that is about to burst, he indicated to Congress last week, just a few days before President Bush nominated him to become the next chairman of the Federal Reserve.

U.S. house prices have risen by nearly 25 percent over the past two years, noted Bernanke, currently chairman of the president's Council of Economic Advisers, in testimony to Congress's Joint Economic Committee. But these increases, he said, "largely reflect strong economic fundamentals," such as strong growth in jobs, incomes and the number of new households.

"House prices are unlikely to continue rising at current rates," said Bernanke, who served on the Fed board from 2002 until June. However, he added, "a moderate cooling in the housing market, should one occur, would not be inconsistent with the economy continuing to grow at or near its potential next year."

Greenspan has said recently that he sees no national bubble in home prices, but rather "froth" in some local markets.

TIME Magazine FINALLY allows a housing crash article into their fine magazine (chuckle chuckle): "The value of our homes is collapsing"

I still can't believe these yahoos at TIME haven't put the housing crash or current debt crisis on their cover yet. Even from a business perspective, since the housing crash effects nearly every person in America, seems like they'd want to sell a few magazines.

But like the NAR, I think TIME is run by monkeys.

Anyway, here's their first article on the housing crash, kinda, since it's listed as "commentary". Hey, it's a first step. Anyone want to guess when we finally get the cover?

Your House Is Worth Less? Good

The last time we had this feeling of financial vertigo was when the Internet bubble popped seven years ago. But this is much worse: the value of our homes is collapsing. For generations, rising home prices have been central to our general sense of well-being.

So why is the real estate collapse a good thing?

First, because the collapse of any financial bubble can be interpreted as a morality play: greed gets its comeuppance. Subprime mortgages play the role that used to be played by junk bonds. They represent easy money--too easy, in retrospect. Borrowed money, if it gets out of hand, puts economic history on speed: everything rises faster, then collapses harder. Foolish lenders become the enablers of foolish borrowers.

In the 1990s, people came to believe that stock prices would rise forever. They learned differently. And now we are learning differently about real estate as well. Whenever the price people will pay today depends on the belief that other people will pay even more tomorrow, you've got a bubble. It takes only a slight letdown in those expectations to send the whole delightful, self-feeding process into reverse.

more here...

THERE'S A FIRE IN THE DAMN MOVIE HOUSE! GET OUT NOW!

Yes, it's time to make some noise. How many more lenders need to implode until everyone is awoken from their slumber.

IT'S ALL FALLING APART NOW FOLKS. FAST. HARD. AND BAD. THE GREAT UNWINDING IS HERE. THE UNITED STATES HOUSING MARKET PONZI SCHEME IS CRASHING. FRAUD IS RAMPANT. FLIPPERS ARE F*CKED. THE SYSTEM GOT GAMED. AND THE MONEY AIN'T GETTIN' PAID BACK.

There. I hope that helps. If it didn't, read Fleck's post this week (written before Novastar melted down today):

The housing ATM rot is just the beginning - Lenders New Century and HSBC finally admit problems, but the bulls still don't want to see the obvious: A negative economic reaction is inevitable.

From New Century came word that (a) its financials were basically no good and that (b) it hadn't properly accounted for loans it had sold to other institutions and that might now be sent back.

Even more important was the news from HSBC, regarded as a good operator, which revealed that it was going to take its mortgage loan-loss reserves from $8.8 billion and change to $10.6 billion and change

"Its systems for screening subprime borrowers and for assessing the default risk they posed were flawed. Many of those loans have soured, sometimes quickly. The percentage of HSBC mortgages more than 60 days past due is climbing. Fraud by borrowers has been higher than expected."

Yes, there is a consequence To which I would respond: No kidding. How clever, how smart, how awake did you have to be to know that that was going on and that this was going to be the outcome?

Even though stock market participants have been willing to suspend disbelief, we still face the problem of an unwinding real-estate market, its impact on the economy and its impact on the stock market. Of course, the latter would also reinforce the prior two problems.

As I said, all of these problems have been hiding in plain sight. But the fact that folks want to pretend the problems don't matter -- and push out the moment in time when they react -- doesn't change the reality that the risks are extraordinarily high these days. Pretending will only make the dislocation bigger.

The recent collapse in the shares of New Century demonstrates what I expect to happen literally any day now in technology and the tape at large, although predicting when is impossible. Folks should not underestimate the power of the trickle-up in the rot from the housing ATM finance mechanism.