Inflation. Deflation. Printing Presses. Oh my.

The general consensus on this board was for a period of wild inflation, followed by the unavoidable deflation as The Great Unwinding takes hold.

Helicopter Ben, being the brilliant economist he is (and in control of the printing press), told us in 2002 that under no circumstances would there be deflation.

So now you have the market selling off anything connected with protecting yourself from inflation, and a rush toward US t-bills paying 0.47%, which if that's not deflation I don't know what is.

So, knowing what you know and seeing what you see, are you in the Inflation camp, or the Deflation camp?

I'm still without confidence because of all the factors at play. I see wild inflation right now, I feel deflation is to come, but I see the government and the Fed pumping out dollars. So deflation with a debased US dollar which is still deflation but may look like inflation.

Someone get me some Tylenol. And here's Schiff's view on Inflation/Deflation/Fed Policy

FLASH: Merrill Lynch predicts historic 15% crash in US home prices in 2008, falling 10% more in 2009, and falling more in 2010

Love seeing Yun trying to spin his way out of this one. Too bad he can't be sued or arrested.

Merrill says the total decline the next few years will be 20% to 30%. Hell, even those numbers are optimistic, especially for towns like Phoenix, Vegas, Miami, Detroit, Naples, Tampa, Boston, DC, Sacramento, OC, Tucson and oh so many more.

Housing prices to free fall in 2008

According to a Merrill Lynch report, home prices will drop 15 percent this year, and declines will continue in 2009.

NEW YORK (CNNMoney.com) -- The worst housing financial crisis in decades is only going to get worse, a Merrill Lynch report said Wednesday.

The investment bank forecasted a 15 percent drop in housing prices in 2008 and a further 10 percent drop in 2009, with even more depreciation likely in 2010.

By contrast, the National Association of Realtors (NAR) expects housing prices to remain flat in 2008. NAR did cut its home price estimate for the current quarter, however, to a 5.3 percent year-over-year decline, which represents the steepest drop in that price measure on record. But NAR sees an uptick in home prices in the last two quarters of 2008.

"Merrill Lynch's figures are way too pessimistic, and they are unprecedented," Lawrence Yun, the National Association of Realtors chief economist told CNNMoney.com. "There is so much variation in local housing markets, and we see stable price conditions for 2008."

It's not just subprime that's melting down - it's ALL OF IT (negative-am, alt-a, prime, seconds, auto, revolving, student, etc)

I hate reading "the subprime problem", "the subprime meltdown" and "the subprime crisis" in the lazy MSM. Note to the MSM and to the world:

CREDIT IS MELTING DOWN. ALL IF IT. SUBPRIME WAS JUST THE TINY FIRST WAVE. AND TRILLIONS WILL BE LOST. IT WAS A BIG HOUSE OF CARDS BUILT ON FRAUD AND GREED, AND IT AIN'T GETTIN' PAID BACK.

Should be obvious, but for some reason it ain't gettin' through to 'em yet. But it will.

Subprime losses to date – Merrill Lynch – $22.1bn
Citigroup – $18.1bn
UBS – $13.5bn
Morgan Stanley – $9.4bn
HSBC – $3.4bn
Bear Stearns – $3.2bn
Deutsche Bank – $3.2bn
Bank of America – $3bn
Barclays – $2.6bn
RBS – $2.5bn
Freddie Mac – $2bn

Washington Post business columnist: "It's Not 1929, but It's the Biggest Mess Since" - a house of cards that's about to come crashing down. Yup.

The MSM is really starting to get it now. So when do Wall Street and Main Street get the memo?

It's Not 1929, but It's the Biggest Mess Since

It was Charles Mackay, the 19th-century Scottish journalist, who observed that men go mad in herds but only come to their senses one by one.

We are only at the beginning of the financial world coming to its senses after the bursting of the biggest credit bubble the world has seen.

Everyone seems to acknowledge now that there will be lots of mortgage foreclosures and that house prices will fall nationally for the first time since the Great Depression.

Some lenders and hedge funds have failed, while some banks have taken painful write-offs and fired executives. There's even a growing recognition that a recession is over the horizon.

But let me assure you, you ain't seen nothing, yet.

If all this sounds like a financial house of cards, that's because it is. And it is about to come crashing down, with serious consequences not only for banks and investors but for the economy as a whole.

Alt-A "Liar's Loan" king IndyMac falling off the cliff, right on schedule

Weeeeeeeeeeeeeeeeeeeeeeeeee..... (yes, I'm short IndyMac and can't for the life of me figure out why the Feds haven't raided their offices yet)

Funny though how the King of Liar's Loans appears to be run by liars themselves (Mark to Market?). But don't worry HP'ers, like Enron and WorldCom before them, eventually IndyMac's probably incompetent auditors (where their CFO came from btw) will have to do their jobs. Eventually. I feel sorry for their likely soon-to-be-laid-off 8,600 employees, but hopefully they'll find honest work next time.

With a reported 8% of their entire portfolio already in default, home prices crashing, the Great Unwinding underway, and "Mark to Market" (which IndyMac refuses to do so far) looming, this pig is in a poke. No matter what the insider stock manipulators and spinmeisters want you to believe. Earnings are July 31 and I predict happy happy talk and spin - but we'll see if anyone believes it.

"Liar's loans". As in "Come on in and commit blatant mortgage fraud" loans. Amazing. How the Fed ever allowed IndyMac and other Liar's Loan facilitators to game the system this bad, I'll never understand. And who bought this crap?

Mortgage Crisis Roughs up IndyMac
The mortgage lender, which provides "Alt-A" loans, suffers as the mortgage crisis

For investors in IndyMac Bancorp (IMB), here's the good news: the mortgage lender handles hardly any subprime loans. Defaults on the risky mortgages have skyrocketed, killing off a few of IndyMac's rivals. And Bear Stearns reported that its two hedge funds that held subprime mortgage debt were virtually worthless.

The bad news for IndyMac: The subprime crisis is spreading to other kinds of debt.

On Wednesday, IndyMac's stock fell 5.5% to $27.45. A downgrade by a Lehman Brothers analyst exacerbated worries that have sent the stock falling almost 40% so far this year.

At the top of the list of worries is so-called "Alt-A" mortgages. Subprime loans are taken out by buyers with low credit scores. Buyers who take out Alt-A loans are supposedly less risky, but they submit little documentation to prove it. The loan approval is usually based on a credit score and little else, with no proof of income. There's a "big spectrum" of quality among the loans, says Standard & Poor's Equity analyst Stuart Plesser. (S&P, like BusinessWeek, is owned by McGraw-Hill.)

IndyMac, as one of the country's biggest Alt-A originators, is vulnerable as the defaults rise among these loans. "From a credit quality perspective, it's a notch above subprime," says Keefe, Bruyette & Woods analyst Manuel Ramirez (KBW does investment banking with IndyMac). However, "you've seen signs of pretty significant credit deterioration," he says. Delinquencies and defaults are up.

Part of the problem is that no one really knows how bad the loan crisis will get, Plesser says. Experts worry that defaults will increase. "How many people were given mortgages who couldn't afford the loan?" Ramirez asks.

As important for IndyMac, what's the value of the homes that serve as collateral for its loans? "Now that you have home prices going down, what they have backing [the loans] isn't as strong as it once was," Plesser says.

And then the hedge funds started to collapse... "People are nervous about how deep the revaluations will have to go"

"Mark to Market" anyone?

P.O.N.Z.I.S.C.H.E.M.E.

United Capital's Devaney Halts Redemptions on Funds

July 2 (Bloomberg) -- United Capital Markets Holdings Inc., a brokerage run by John Devaney, halted redemptions on some of its hedge funds that invest in subprime-mortgage bonds.

The funds are within the company's Horizon Strategy group, including the Horizon ABS Fund LP, said Michael Gregory, a spokesman for the Key Biscayne, Florida-based firm.

``We did that as a defensive move because we had an unusually high number of redemption requests and we didn't want to be a forced seller in this market,'' Gregory said in a telephone interview. One of the redemption requests was from an investor who had put up about 25 percent of the funds' money.

The decision by Devaney, 37, follows the collapse of two hedge funds run by Bear Stearns Cos., which also lost money amid a plunge in bonds backed by subprime mortgages. As the Bear Stearns funds faltered, prices of the securities tumbled on concern the bonds would be dumped on the market at fire sale prices. Owners of similar securities may face $90 billion in losses, Deutsche Bank AG analysts predicted June 29.

``People are very nervous about how deep the revaluations of these securities will have to go,'' said Virginia Parker, who helps advise about $1.8 billion in client money at Parker Global Strategies LLC in Stamford, Connecticut. ``These positions didn't get marked down until June. Nobody's hand was forced in the market until then.''

IMF: Subprime decline more rapid than expected. HP: Brace for Alt-A crash landing

OK, everyone, BRACE! Assume the crash position. Put your head between to your knees... The Alt-A meltdown is gonna surprise some folks, and may end up being a bigger story (and impact) than the Subprime Disaster.

You ready? We're coming in for a landing!

IMF warns subprime woes may spread, dollar falls

NEW YORK (Reuters) - Fallout in the U.S. subprime mortgage market could spread to related markets, the International Monetary Fund warned on Tuesday, as nagging worries about housing helped weaken the dollar.

The company's shares fell on investor concern that problems in subprime mortgages may be spreading to higher-quality housing loans, a view the IMF also gave credence to.

The IMF said in its semi-annual Global Financial Stability Report that a decline in the subprime market was more rapid than expected at this point in the overall housing downturn.

Looser underwriting standards may have gone beyond the subprime sector into portions of "Alt-A" mortgages, the next-riskiest area, the IMF said. In addition, there could be losses in other consumer credit markets, including credit card and subprime auto loan asset-backed securities, it said.

"Financial supervisors need to identify the potential for spillovers from the cooling of the housing market and continue ensuring that mortgage underwriting standards are maintained," the IMF said.

So much fraud. So many con-men. So little oversight. And the biggest Ponzi Scheme in the history of humanity.

Folks, I'm not sure if you realise it yet, but we're witnessing the biggest financial story of all time. The collapse of the US housing market (aka Ponzi Scheme), and the uncovering of the causes and the rampant corruption, will dominate the news cycle for years to come.

Life as America knew it will never be the same. Everyone, every man, woman and child, will be impacted. And the story won't stop at land's end. The housing Ponzi Scheme was worldwide. Even though the US sure did it up good. USA! USA! USA!

Here's just one of many mortgage fraud stories over at the mortgage fraud blog. And there are so, so, so many more to come. Get ready.

Atlanta's largest mortgage fraud trial see's 10 convictions and 12 guilty pleas

David E. Nahmias announced that after an eight week trial, a federal jury today returned guilty verdicts against ten defendants charged with multiple counts in a mortgage fraud scheme that targeted the Atlanta metro housing and condo market from 2000 through part of 2003.

The verdicts returned today included guilty verdicts on charges of loan fraud, wire and mail fraud, and money laundering.

United States Attorney David E. Nahmias said of the verdicts, “The monetary loss calculated to date is in excess of 41 million dollars but we expect it to be significantly higher when we conclude our work. More importantly, this monetary loss, as great as it is, does not fully capture the loss to the many neighborhoods and condominium communities that have been gutted of their value due to this one fraud scheme.

These guilty verdicts condemn the corrupt actions of the key people who were responsible for this fraud scheme, from crooked attorneys and appraisers, to loan officers, to the man at the top, Phillip E. Hill. The verdicts in this case take us one step closer to repairing the corroded cornerstone of a large-scale corrupt housing market that has made the metro Atlanta area one of the most active mortgage fraud locations in the nation.”

The subprime implosion, financial excess and an obvious accident waiting to happen

I love the headlines "analysts surprised" when it comes to things that we all know for certain, like the fact that the subprime implosion isn't "contained" as the Fed would have you believe, and that indeed it is spreading, most obviously into the "liar's loan" or Alt-A portfolio. And the true spillover effects into the housing market and US economy haven't even been seen yet, even though you damn well know they will be, and soon.

"Analysts Surprised"? Try "Analysts should have been reading HP", because it's all so damn obvious. Here's a good article on the subprime debacle, and what's to come.

Greed could bring America’s housing sector to grief

For hundreds of thousands of Americans, it is a personal financial disaster. For the wider US economy, it is a growing economic shock with an increasing potential to inflict severe repercussions on the nation’s prospects and prosperity.

The deepening scandal of the US “sub-prime” mortgage implosion looks more and more like a cautionary tale of financial excess that sits unhappily alongside Enron and the dot-com bubble, both in terms of scale and consequences.

It is story of Dickensian bleakness: of avaricious money-merchants and of the broken dreams of struggling but foolhardy men and women who seized on false promises of an easy leg up the ladder of their own aspirations.

Viewed in hindsight, the debacle that is now unfolding was, like many such events, an obvious accident waiting to happen.

Around the turn of the decade, as the US housing boom accelerated, a large group of greedy American lending institutions became so rashly intent on maintaining the growth of their loan books at all costs that they began to hand out mortgages to borrowers with varying combinations of poor credit history, no steady source of income and little or no collateral.

As lending criteria grew more and more relaxed, the risks associated with this reckless “sub-prime” lending escalated, with vulnerable borrowers being given access to loans for 100 per cent of property values and high multiples of their incomes. And, just as soaring house prices meant that more people had to resort to such sub-prime loans, so sub-prime lending itself gave more fuel to the property boom.

It is plain that the social consequences of all of this are as grim as they are scandalous. Yet many US analysts appear excessively relaxed about the wider fallout for a slowing American economy, arguing that the scale of the sub-prime market means that any spillover effects will be slight.

This looks about as complacent as the thoughtless lenders who are now going to the wall. Not only is it clear that the sub-prime crisis is going to get a whole lot worse before it runs its course, but the potential for a domino effect hitting large parts of the United States’s housing market, and the wider economy, looks rather greater.

The Knockout Blow: “If you think this is bad, imagine what it’s going to be like in the middle of the crisis.”

I like the "we've hit bottom" crowd, even though that field is getting smaller. Folks, now the the REIC is in full meltdown mode, and millions will eventually lose their jobs (including the illegals), all that does is speed up the crash even faster. The meltdown is just starting. And people think it's bad already? Man, just wait.

Throw in the inability of millions to get new loans, or refi their old toxic loans, and the writing is on the wall.

The Great Unwinding is here. What happens to a country who has lost it's manufacturing base, and the only thing left that they still build - houses - stops too? We'll now find out...

The housing market and the related construction industry is one of the biggest, if not the biggest driver of the economy.

The ability of “anybody with a pulse” (and probably their dog too) to get a loan is what drove the real-estate market.

The ability of people to refinance and cash-out home equity also fueled consumer spending and the economy.

But now a huge segment of prospective home buyers can no longer qualify for a mortgage to purchase a home, and home prices are stagnating and falling in many areas.

“It’s going to be a disaster for many people who don’t have a clue about what happens when a real-estate bubble pops,” said Rogers.Think of this as “the leading edge of the storm,” says Lou Ranieri, who is considered by some to be the father of the mortgage bond market.

“If you think this is bad, imagine what it’s going to be like in the middle of the crisis.”

Bear Stearns and IndyMac say Alt-A (liar's loans) won't have trouble. HousingPANIC says they will. Who you gonna bet on?

Remember the scenes in Titanic when the captain and crew assured passengers that all would be well?

We all know how that one ended, and many of us know how the Liars Loan Debacle will end too.

You cannot lend money carelessly to anyone who can smoke a mirror (Casey Serin), with no proof of income, no proof they can pay the money back and no proof they didn't take out multiple other liar's loans concurrently.

Oh, I correct that. Yes, in today's environment, you CAN lend money out carelessly to anyone. And that's why the mother of all meltdowns is underway.

Note, I'm short IndyMac (NDE), far and away the biggest issuer of liar's loans, via an October put.

Bear Stearns, IndyMac Say Subprime Woes Won't Spread

March 29 (Bloomberg) -- Bear Stearns Cos., the biggest U.S. underwriter of mortgage-backed bonds, said the surge of defaults in subprime home loans won't spread to other parts of the mortgage market, and IndyMac Bancorp Inc. said losses from more creditworthy customers are far below industry averages.

Lending 100 percent of the home value, not verifying borrowers' income and lower credit scores caused U.S. subprime defaults to rise, said Tom Marano, head of Bear Stearns' mortgage business, in a New York meeting with investors today. Only 7 percent of Alt-A mortgages, another low-documentation loan that's drawn scrutiny, combine all three risk factors, he said.

Shares of companies that offer less-risky mortgages including IndyMac Bancorp have fallen this year partly because investors were concerned Alt-A loans may go sour. Regulators including Federal Reserve Chairman Ben Bernanke said they don't see any ``spillover'' of defaults into safer mortgages, and IndyMac said today the industry's loss rate on Alt-A is one- seventeenth the level of subprime loans.

``The contagion isn't that big a problem,'' Marano said. ``I don't see the risk as being that significant at this point.''

Miami condo buyers: "I want out". Developers: "F*ck you!" REALTORS: "I want my commission check!"

The funniest thing about the rush for the condo-investor exits is all those real estate clerks who've already spent the commissions they'll now never collect.

Man, do I have dot-com deja-vu today...

Isn't it fun to watch a ponzi scheme unravel? What were they thinking? What were they thinking...

Nervous condo buyers want out - Jittery over the cooling condo market, some buyers seek to break their deals as developers resist.

In a cool housing market already overflowing with condos, what were once hot properties are now hot potatoes that many don't want in their hands. Buyers seeking to get out of contracts are pouncing on changes in developers' plans, including those related to higher insurance costs. Some are even combing through documents for blown deadlines, which developers blame on hurricane delays.

The tension is rising as closing day approaches for the roughly 25,000 new condos expected this year and next. And the spats between buyers and developers will help decide one of the biggest questions in the troubled housing market -- how many condo sales will actually close. If the spats continue, they would signal a rocky time to come, with unsold units and falling prices.

'This may be the beginning of the `interesting period,' '' said real-estate analyst Michael Cannon. ``We will see it evolve through 2008.''

So far, there have not been widespread defaults or much litigation, and by most accounts, buyers are going to the closing table, however reluctantly. Still, there is evidence of growing unease.

''The scary thing is, people who have flaked on me tell me they have like five other contracts in other buildings under construction,'' Covin said.

Shocked! Shocked I say! Subprime lenders targeted blacks, hispanics, poor people

Part of Bush's call for an "ownership" society of course was for rich people and bankers to own poor people. Call it the New Serfdom. Or financial slavery. And of course, those at the bottom of the socio-economic status ladder were easy targets for the subprime lenders empowered by Bush and Greenspan's call to ARMs.

I don't think the subprime lenders were verifiably racist. They were simply going after the easy targets (suckers) - the group of financially unsophisticated, underemployed, renting suckers who were made to believe that home ownership at any cost was a smart move.

Unethical mortgage brokers make more commission the more they screw someone, so they went all out and screwed people as hard as they could.

Payback is a bitch, and even though millions will go bankrupt and lose their homes, at least they took down the lenders, bankers and world financial system with them this time.

BOSTON (Reuters) - Barbara Anderson and her husband know racism. Among the first blacks to move into an Ohio neighborhood 25 years ago, she watched in horror as white neighbors burned her garage nearly to the ground.

Fast-forward to 2007 and Anderson talks of a different sort of discrimination: brokers of subprime mortgages who prey on borrowers with weak credit histories like the Andersons, who raised eight children in Cleveland's Slavic Village district.

"These subprime lenders target you to take you through disaster," said Anderson, 59, who filed for bankruptcy after a legal tussle with a subprime lender, a "nightmare" that she said ended four years ago when her home was nearly foreclosed.

"I was fortunate. I went to another bank that decided to give me a chance with a new loan. The day that happened my headache stopped, my blood pressure lowered, my sick stomach went away, and it was because now I could see some daylight."

Across the United States, blacks and Hispanics are more likely to get a high-cost, subprime mortgage when buying a home than whites, a major factor in a wave of foreclosures in poor, often black neighborhoods nationwide as a housing slowdown puts millions of "subprime" borrowers at risk of default.

Even more troubling, real-estate industry analysts say, is an alarming proportion of blacks and Hispanics who received subprime loans by predatory lenders even when their credit picture was good enough to deserve a cheaper loan.

Wow. Where do we even start. The Great Housing and Credit Crash is Here

Five days away and it feels like five years. Everything has become so clear now, so horrifically clear. We are now firmly, securely and undoubtedly in total and complete meltdown mode.

Historic, devastating meltdown mode.

The MSM still hasn't quite caught up - they're still talking about the now-obvious subprime meltdown. Some of the smarter folks in the room though are saying what's the next big problem - the Alt-A (liars loan) implosion, and the overall impact of this credit unwinding on home prices.

I see Merrill predicting a 10% decline in home prices now this year, and I read waaaayy too many stories on the plane about the house of cards falling in, how subprime's implosion will mean even fewer buyers, taking prices down even faster, causing more loans to go bad, causing prices to fall even faster, causing more loans to go bad... Well, add millions of loans that investors thought were much safer - the Alt-A pool, and that bonfire burns even hotter.

Folks, even the Greg Swann's, Bob Toll's and Ben Bernanke's of the world are going to have a tough time staying in denial or liar-mode now. This game is over. The Housing Ponzi Scheme has been exposed, the Great Unwinding is underway, and the panicked rush for the exits is here.

What you are witnessing, and what you will witness, will truly be historic. Never before has such a great financial bubble arisen, propped up by such a staggering amount of leverage. The size, scope, reach and depth of the collapse will shock the world.

But not HP'ers. We saw it all coming. All of it.

And I hope you're all ready.

Say goodbye to 1.1 million potential fools (new homedebtors) this year with the massive credit contraction underway

Regarding

* Homebuilders desperate to clear inventory,

* Mortgage brokers wanting to make loans

* Real estate clerks looking for commissions,

* Appraisers looking for work, and

* Desperate homedebtors looking to sell...

Have they figured out yet that the subprime meltdown and credit contraction underway will now severely limit the pool of potential fools (oops, I mean buyers) even more? (Which of course will speed up the pace of the housing crash underway)

(Reuters) - Tougher lending standards stemming from the shakeout in the beleaguered subprime mortgage industry could prevent up to 1.1 million U.S. homebuyers from getting mortgages this year, a Bear Stearns analyst told investors on Friday.

Banks and mortgage companies would sharply scale back lending to two groups: subprime and "Alt-A" borrowers, said Dale Westhoff, Bear Stearns' head of mortgage-backed research.

Consumers with low income and/or spotty credit histories are considered subprime borrowers, while Alt-A borrowers are typically those who fall short of being prime because they lack adequate income documentation.

Westhoff estimated a 30 percent, or $180 billion, contraction in the subprime sector in 2007 from 2006, and forecast a 25 percent, or $100 billion, decline in Alt-A loan production from last year.

"This implies a purchase contraction of 1.1 million borrowers," said Westhoff who was speaking at Bear Stearns mortgage conference here. "That's a non-trivial number."

That's gotta suck: Take out a toxic loan, figure you can refi when it adjusts, subprime melts down, now you're stuck

You can just hear the corrupt commission-hungry unregulated no-morals mortgage broker telling his sucker (oops, "client") to go ahead and take out the toxic no-down, no-doc, teaser-rate loan (with the massive hidden payoff fee), because the sucker (oops, "client") could just come back in a couple of years when the toxic loan was due to reset and refi.

Well, things change my friends. And now that sucker (oops, "client") is stuck like a pig in a poke, unable to refi because the funny money window is closed as subprime lenders go belly-up and Alt-A melts down.

Check out this USA Today cover story, with a mention of little Casey Serin as well...

Homeowners Stuck As Lenders Cinch Standards
USA TODAY

Edward Booker is one of nearly 3 million homeowners with adjustable-rate mortgages who've had trouble paying their bills. And, like Booker, many of them won't be able to refinance their loans once the interest rates start rising. At that point, they'll have to tighten their belts, sell their homes or lose them through foreclosure.

This month, the mortgage payment on Booker's Chicago home rose $200, to about $1,300. It'll go up again in September. He wants to refinance, but he fell behind on payments after his wife died of cancer in 2005, so no lender wants to take the risk.
"

I'm just trying to hold onto my house until I can figure out something else to do," says Booker, 58, a former rail-car inspector who's on disability.

Since the start of the year, more lenders have been shutting their doors to people such as Booker, just as those homeowners' interest rates are rising. They're slashing the "Bad credit? No problem" types of loan programs, known as subprime, that helped fuel the housing boom. And they're raising the bar for homeowners and first-time buyers to qualify for new loans.

"It will be a very severe correction (in the subprime market), and I think it will last anywhere from six to 12 months, during which many of the lenders who have operated in this market will gradually get pushed out of business," says Chris Flanagan, a managing director for JPMorgan.

The Center for Responsible Lending projects that 2.2 million homeowners with subprime loans will lose their homes.

Experts say there's plenty of blame to go around. During the real estate boom, lenders began offering an array of loans to borrowers with poor credit histories. They let many borrowers finance 100% of the purchase price, often asking for little or no proof of income or assets. Last year, 43% of loans required little or no documentation of the borrower's finances, according to First American LoanPerformance. These "stated-income" loans have earned the nickname "liar loans."

Some borrowers, meantime, contracted real estate fever and took out loans they didn't fully understand or stretched their budgets too thin. Some lied about their income on their loan applications, sometimes with a wink or a little help from their broker on a stated-income loan.

Casey Serin is a classic case. Serin, a Sacramento website designer who was profiled in USA TODAY in October, has admitted that he lied on his loan applications to buy eight houses in four states as investments. He hoped to flip them for a quick profit, but he made too many newbie mistakes. He sold three of the homes, the lenders foreclosed on two, and he's still trying to sell the remaining three.

NEW, FMT and LEND pretty much bit the dust today. This subprime implosion is fascinating isn't it?

NEW stock plummets another 69%

FMT down another 33%

LEND off 26%

CFC off 5%

Does anyone else have some serious dot-com deja-vu today?

This meltdown won't stop with subprime and the lenders. Nope, that's not where it ends. That's where it BEGINS.

NEW YORK, March 5 (Reuters) - Shares of New Century Financial Inc. dropped 69 percent on Monday on fears it could go bankrupt as rising concerns about defaults triggered a broad sell-off in the mortgage-lending sector.

Subprime lenders, which make loans to people with poor credit histories, suffered the biggest declines.

But the meltdown also spread to Countrywide Financial Corp, the largest mortgage lender, whose shares fell on concern that even homeowners with good credit scores will miss more payments.

"We think there is further downside risk, possibly to $0," wrote Merrill Lynch & Co. analyst Kenneth Bruce. "Bankruptcy seems a likely course of action."

Many subprime lenders are being forced to buy back loans at a loss, and several have quit the business or have gone bankrupt in the last three months.

Dot-com to dot-condo - company flame-outs, criminal investigations, and the disintegration of an industry. Subprime #2 New Century blows up

Damn I wish I had had the guts to short this one. Oh well, at least I pulled the trigger on LEND and CFC puts, two other big sub-prime lenders that are also flaming out. But damn, New Century is doing it IN STYLE!

Not only have they pets.com'ed on the stock side, not only have they helped bring the world financial markets to its knees last week, but noooooo, they're hitting the flame-out-trifecta, with the oh-too-predictable criminal investigation now underway.

Frog marches do earn the style points in my books. Bravo New Century! Bravo! Couldn't have scripted it any better. 10.0.

Now come the mass layoffs, the office closings, the shareholder lawsuits, and the "how could this happen" MSM stories. And NEW is just one of many. Here we go.

I think all the REIC insider-selling CEO stock manipulators are feeling more nervous by the day, and are probably thinking of making their get-away to Belize or Angola or somewhere pretty soon.

Right Angelo Mozilo (Countrywide)? Right Bob and Bruce Toll (Toll Brothers)? Right Bruce Karatz (KB Home)? Right Brad Morrice (New Century)? Right James Konrath (Accredited)?

SAN FRANCISCO (MarketWatch) -- New Century Financial Corp. said late Friday that it's facing a federal criminal probe and will likely breach a major lending covenant with its financial backers, bringing into question the survival of the second-largest U.S. subprime-mortgage lender.

The U.S. Attorney's Office for the Central District of California is conducting a federal criminal inquiry into trading in New Century securities as well as accounting errors, the company wrote in a regulatory filing late Friday.

The Securities and Exchange Commission also is looking into the company, as is the regulatory arm of the New York Stock Exchange, New Century disclosed. The company added that it is complying with all three inquiries.

Shares of New Century were down almost 25% in after-hours trading Friday at about $11, after falling more than 7% in the regular session to $14.65.

And this note on New Century's IR website today:

In light of New Century Financial Corporation's February 7, 2007 news release (New Century Financial Corporation to Restate Financial Statements for the quarters Ended March 31, June 30 and September 30, 2006), the financial information related to the quarters ended March 31, June 30 and September 30, 2006 should not be relied upon and is included on this Web site for historical archive purposes only.

Fleck: The game is over. Subprime helped cause the housing price bubble, and it's over. The Great Unwinding is here.

When it's over, it's really over. I'm amazed at the swiftness of the subprime implosion, and now come the spillover effects. Less housing demand (and ability to purchase). Lower housing prices. Hundreds of lenders imploding. Hundreds of thousands of REIC out of work. Stockholder and bondholder wipeouts. Hedge fund implosions. Financial market havoc.

Got popcorn? The Great Unwinding is here.

What's remarkable is that Wall Street was surprised by the implosions of lenders NovaStar Financial and New Century Financial. What we don't know is how quickly this mess will impact the economy.

Why does the stock market at large seem not to care about the many problems that exist? My best explanation is this: The stock market, which is normally thought of as a discounting mechanism, doesn't work that way at the moment.

When the market reverts to discounting and ceases to be the price-discovery animal it is today, there will be a tremendous amount of violence on the downside.

Ignorance aside, it pays to state the obvious: The subprime industry was absolutely critical to the inflating of the real-estate bubble. If loans had been made only on a responsible basis -- to people who put money down and looked like they could actually repay the money, irrespective of rising house prices -- that bubble would never have achieved anything close to the heights it did.

That game is obviously over. Let me repeat that -- over. The real-estate market of the past few years will not be seen again in our lifetimes. The only thing we don't know is at what rate this unwinding will play out across the economy and, more importantly (to me), in the minds of the Goldilocks-enthralled community on Wall Street.

"Slowly but surely, people are starting to get it, and slowly but surely, I am starting to think that the tipping point in credit -- via a subprime-generated shambles in CDO (collateralized debt obligation) land -- is closer than anybody imagines."

That HP "you only have days to prepare" call on Friday night was insane. But oh, so easy to make.

Remember this HP post on Friday night?

PEOPLE OF THE WORLD, THE TIME IS NIGH.

THE GREAT HOUSING CRASH IS HERE. DUCK AND COVER. LIGHT FUSE AND GET AWAY.

YOU ONLY HAVE DAYS TO PREPARE.

THE EPIC HOUSING CRASH IS UNDERWAY.

THE GREAT UNWINDING IS HERE. THE BIGGEST BUBBLE, EL FINANCIAL MANIA GRANDE, IN HUMAN HISTORY HAS BEEN PIERCED.

IT HATH BEEN FORETOLD.PEACE OUT. GOOD LUCK. FULL STOP.

I hope many of you, not because of HP but because of reality, have made the moves in your lives to prepare not just for what's happening, but for what is to come. The Dow could go back up 500 points tomorrow (it won't), but that's not the issue. The issue is that The Great Unwinding is here. No more BS. No more spin. It's here. So get ready and deal with it.

Now I'm going to try to think of tomorrow's winning Lotto numbers. I'll let you know if I come up with anything.