M&T Announces That the Alt-A (Liar's Loan) Meltdown Has Now Begun. Goodbye IndyMac

Supply, meet Demand...

M&T, a big Alt-A lender, admitted the obvious today, that the buyer pool for their Alt-A garbage has dried up, and they're stuck holding the bag.

The BIG Alt-A player, IndyMac, with 70% of their portfolio made up of this cancer, was out pumping their stock last week, trying to make people believe that since they don't have big subprime exposure, all would be fine with their stock and their Alt-A garbage.

Watch for criminal indictments soon at IndyMac I'd say after this stock manipulation effort. Their lead lawyer resigned last week - hmmm... wonder why?

(Note - I'm gleefully short NDE at time of writing)

M&T Shares Fall After Bank Reports Weak Bids on Alt-A Mortgages

Shares of M&T Bank Corp., the western New York bank partly owned by Warren Buffett's Berkshire Hathaway Inc., fell the most since 1998 after saying low bids for Alt-A mortgages it planned to sell will cut earnings by $7 million.

The stock tumbled $9.18, or 7.9 percent, to $106.65 at 10:30 a.m. in New York Stock Exchange composite trading.

Shares of mortgage lenders have tumbled this year as defaults on subprime loans rose to four-year highs. Companies that offer less-risky Alt-A mortgages including IndyMac Bancorp Inc. and Impac Mortgage Holdings Inc. say investors are mistaking them for subprime lenders and unfairly punishing their shares.

Here illegally? No income? No credit? No problema - here's a $500,000 loan for a new house you'll never pay back!

No, this is not an April Fools joke.

Washington Post: Foreclosure Wave Bears Down on Immigrants (who they call "victims")

Oooohhhh, those poor "victims" - the immigrants (legal and illegal). No, I guess they didn't sign the loan paperwork. No, since they're immigrants, they have no sense of supply and demand. No, they weren't as greedy as regular Americans. And no, they should have no personal responsibility, after all it was the evil realtor who conned them into joining the ponzi scheme (ok, that one has a bit of truth...)

Man, this article (and this reporter's attitude) make me sick.

Tip of the iceberg folks, tip of the iceberg. Remember all those illegals getting no-doc loans to buy homes at the peak? The ones employed by the REIC to build homes for more suckers? Well, they'll be zipping home now, turning in the keys, walking away, and saying "adios!" to a country of bagholders.

There's something almost poetically circular about that one, eh muchacho?

"¡Andale! ¡Andale! ¡Arriba! ¡Arriba! ¡Yii-hah!"

Foreclosure Wave Bears Down on Immigrants - Economic Success Story Turns Sour as Thousands May Face Losing Homes

By Kirstin DowneyWashington Post

Immigrants are emerging as among the first victims of a growing wave of home foreclosures in the Washington area as mortgage lending problems multiply locally and across the country.

Nationally, 375,000 high-interest-rate loans were made to Hispanics in 2005, and nearly 73,000 of them are likely to go into foreclosure, said Aracely Panameno, director of Latino affairs for the Center for Responsible Lending. About 1.1 million homes in the United States are expected to go into foreclosure in the next six years, and many native-born Americans are likely to be stuck with burdensome loans. But immigrants are getting hit first in part because their incomes tend to be lower and many have lost construction jobs.

Homeownership rates among immigrants surged in the first half of the decade, making their prosperity an economic success story. Now it is becoming apparent that many people managed to buy homes in an inflated real estate market by turning to unusual new mortgages only now receiving scrutiny from regulators and legislators. Many of these loans start with attractive low "teaser" rates but feature payments that can suddenly increase.

Unfamiliar with the U.S. mortgage market, unable to speak or read English well and vulnerable to the blandishments of real estate professionals who told them property values always rise, many immigrants are struggling to deal with high mortgage payments as their homes sag in value, making it harder to escape the loans by selling.

Tysons Corner mortgage broker Jose Luis Semidey, who has a popular Spanish-language real estate talk show on Radio Universal, is being deluged with calls from desperate homeowners who are falling behind on their mortgages. The calls started in late 2005 and have steadily risen; he now receives 40 to 50 calls a day from throughout the area.

"I see more coming," Semidey said.

HousingPANIC Stupid Question of the Day

How much did all the subprime and "liars loan" Alt-A buyers artificially inflate housing prices the past few years?

5%?
10%?
20%?

And who's gonna buy all these damn houses now?

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.

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

Why doesn't everyone see the obvious, and see what's obviously coming?

The subprime disaster doesn't start and stop there. It starts there. Alt-A, or "liars loans", are obviously next. I would actually suggest that liars loans (think Casey Serin) are actually in worse shape than subprime, since investors mistakenly trusted these higher-rated debt holdings more than subprime.

Head to the bunker HP'ers. Calm may have settled in again, but it would appear to just be the eye of the storm passing over. Get ready for the wall of wind to resume.

BusinessWeek: The Mortgage Mess Spreads - The subprime lending industry is getting hammered, and hedge funds and investment banks are feeling the pain

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: 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.

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."

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, 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?

"This is a very opaque industry, so no one really knows," says Mark M. Zandi, chief economist and co-founder of Moody's Economy.com (MCO) "My guess is that if you look at the top hedge funds, they're bearing most of the risk."

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 J. Kanouff, who heads bond surveillance for Clayton Holdings (CLAY), a consulting firm for institutional investors, adds that "hedge funds are getting very nervous about their investments."

There's also growing talk that many firms, in particular Goldman Sachs, incurred steep losses in trades based on the ABX subprime index. As market makers, the big banks were forced to take the other side of clients' short trades, or bets that the index would fall. When the index plunged 34% in the first 10 weeks of the year, the banks lost. Goldman, which reports first-quarter earnings on Mar. 13 and is a big player in the ABX market, declined to comment.

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." Says Nouriel Roubini, economics professor at New York University's Stern School of Business: "The risk that prime borrowers will start to feel financial stress in 2007 cannot be underestimated."