FLASH: Bear Stearns on verge of failure - emergency bailout by Fed underway. HP calls for the arrest of Bear CEO Alan Schwartz for false statements

Now things are getting interesting...

I'd like to see the crap toxic mortgage CDO's the US taxpayer via the New York Fed just bought.

Oh, wait, no, I really WOULDN'T like to see the crap toxic mortgage CDO's the US taxpayer just bought.

This one's not surprising, but what is amazing (and illegal) is that Bear's CEO Alan Schwartz put out these false and misleading statements this week:

Exhibit A: "Our balance sheet has not weakened at all," he said. "We don't see any pressure on our liquidity."

Exhibit B: "We don't see any pressure on our liquidity, let alone a liquidity crisis"

Exhibit C: "there is absolutely no truth to the rumors of liquidity problems that circulated today in the market"

COME ON MAINSTREAM MEDIA - GET ON THIS STORY LIKE FLIES ON SH*T. THE US TAXPAYER IS BEING ROBBED IN THE NIGHT AND YOU LAZY BUMS DO NOTHING!!!

JPMorgan Chase, With Federal Reserve Bank of NY, to Provide Funding to Bear Stearns

NEW YORK (AP) -- The federal government and JPMorgan Chase & Co. teamed up on a bailout of Bear Stearns Cos. on Friday, a last-ditch move to save the investment bank, which acknowledged its dire financial straits after a week of firm denials.

Bear Stearns lost half of its value within 30 minutes of the market open.

While it was not clear exactly how much money Chase would pump into Bear, a person familiar with the bailout, who spoke on condition of anonymity because the talks are private, said Chase may end up buying Bear Stearns outright.

And then the f**ked borrowers started suing Countrywide Toxic Mortgage, and the lawyers got real excited

Countrywide, IndyMac, First Fed, WaMu, Wells Fargo and the rest of the toxic lenders who put people into teaser rates and option ARMs (to earn higher commission), and whose agents knowingly falsified loan applications and appraisals "to make the numbers work" (to earn higher commissions), will find out soon enough that there aren't enough lawyers in the land to handle the onslaught of lawsuits coming their way.

The 1980's had asbestos. The 1990's had tobacco. The 2000's will have housing.

Quick! Someone call John Edwards!

(note, I'm short WaMu and WFC)

Borrowers sue Countrywide Financial

Several people who took on home loans from Countrywide Financial Corp. are suing the company, claiming they and other borrowers were steered unnecessarily into taking on risky loans with built-in payment hikes, which ultimately led them to go bankrupt or lose their homes.

The seven plaintiffs filed an amended complaint Friday against the Calabasas-based company and several of its subsidiaries.

Among the allegations are claims that Countrywide tried to "induce as many borrowers as possible into expensive and dangerous subprime loans, because such loans are the most lucrative for Countrywide."

FLASH: San Diego home prices have already crashed 15% from the peak. How low will they go?

20%?
30%?
50%?
More?

Suzannnnneeee!!!!

It was all fraud and speculation folks. We're going back to looking at Price to Income ratios, and at Rental Yields. Unfortunately anyone who bought in 2004 - 2007 is going to get wiped out. And they can thank Alan Greenspan, Ben Bernanke and their local realtor on commission.

SAN DIEGO – Home prices in San Diego County tumbled nearly 10 percent last month from year-ago levels, taking the median down to $440,000, the lowest in more than three years, DataQuick Information Systems reported Monday.

The latest price represents a 15 percent fallback from the all-time record of $517,500 set in November 2005. It was a bigger decline than the 11.7 percent peak-to-trough drop from 1992 to 1996, when the San Diego economy slid into a deep, prolonged recession.

FLASH: Right on schedule, toxic-loan king WaMu melts down, on verge of failure, announces massive write-off, office closures and layoffs

HP'ers knew this toxic lender was on its way to insolvency for some time, along with Countrywide, IndyMac, First Fed and many more. They called them "liar's loans" for a reason folks. The mortgage fraud self-enrichment paper promoted and endorsed by the on-their-way-to-jail bank execs at WaMu and more just simply ain't gettin' paid back. And now they and their shareholders, near-junk bond holders and account holders will pay the price.

Memo to WaMu account holders and bond holders - GET YOUR MONEY OUT OF THIS BANK AS FAST AS YOU CAN. WAMU IS THE US's NORTHERN ROCK. And we're still just getting started.

(yes, I'm still short WaMu via July 08 puts. I don't see how it survives)

Mortgage Crisis Forces Big Cuts at WaMu - Mortgage Problems Force WaMu to Close Offices, Slash Over 3,100 Jobs and Drop Subprime Loans

Washington Mutual Inc., the nation's largest savings and loan, said Monday problems in the mortgage and credit markets are forcing it to close offices, slash over 3,100 jobs, and set aside far more than expected for loan losses in its fourth quarter. The company also said it was slashing its dividend 73 percent.

FLASH: Foreclosures up 100% from last year. Oopsie, you mean those toxic loans had to be paid back?

WWCT?

(translation: what was Countrywide thinking?)

Number of US Homes Facing Foreclosure Doubles in Third Quarter

LOS ANGELES (AP) -- A soaring number of U.S. homeowners struggled to make mortgage payments in the third quarter, with properties in some stage of foreclosure more than doubling from the same time last year, a mortgage data company said Thursday.

A total of 446,726 homes nationwide were targeted by some sort of foreclosure activity from July to September, up 100.1 percent from 223,233 properties in the year-ago period, according to Irvine-based RealtyTrac Inc.

I'd like to "own" a $10 million mansion in Malibu. Wouldn't you?

I'd like to "own" a $10 million mansion in Malibu. But alas, I can't afford that.

But if I was able with the help of a corrupt mortgage broker to illegally con a lender into giving me a loan for such a house, with no-down, no-doc, 1% teaser rate negative-am (I choose the payment) mortgage, then hey, I could "own" my $10 million Malibu dream house!

For a few months anyway.

But after reality sets in, and I can't afford the monthly payment anymore, and the home hasn't gone up in value like I was promised by my realtor, and I lose the house to foreclosure, is that such a bad thing? Should I be bailed out? Should I expect my lender to renegotiate my loan, or hold the interest rates at 1%?

After all, even though I'd like to "own" a $10 million mansion in Malibu, I can't afford that.

Wall Street Journal Page One Expose: The United States of Subprime

Thanks to Beth over at the WSJ for sending this one over. I rip on the MSM for not doing their jobs during the bubble (or the Iraq invasion) but damn, some of 'em are making up for lost time now (the WSJ, the FT, the Economist and more).

Too much in here to list, but I'd encourage all of you to read the full article, and know what's coming.

This is gonna be ugly, it's gonna last for years and years, and the impact of the housing crash and mortgage meltdown will be felt worldwide.

No matter what realtors on commission try to tell you.

The United States of Subprime - Data Show Bad Loans Permeate the Nation; Pain Could Last Years

As America's mortgage markets began unraveling this year, economists seeking explanations pointed to "subprime" mortgages issued to low-income, minority and urban borrowers. But an analysis of more than 130 million home loans made over the past decade reveals that risky mortgages were made in nearly every corner of the nation, from small towns in the middle of nowhere to inner cities to affluent suburbs.

The analysis of loan data by The Wall Street Journal indicates that from 2004 to 2006, when home prices peaked in many parts of the country, more than 2,500 banks, thrifts, credit unions and mortgage companies made a combined $1.5 trillion in high-interest-rate loans. Most subprime loans, which are extended to borrowers with sketchy credit or stretched finances, fall into this basket.

The Journal's findings reveal that the subprime aftermath is hurting a far broader array of Americans than many realize, cutting across differences in income, race and geography. From investors hoping to strike it rich by speculating on condominiums to the working poor chasing the homeownership dream, subprime loans burrowed into the heart of the American financial system -- and now are bringing deepening woe.

"We had an aggressive home-mortgage industry trying to get people into homes they couldn't afford at a time when home prices were very high. It turned out to be a house of cards," says Karl Case, an economics professor at Wellesley College. "We're in the early stages of the cleanup."

Countrywide Mortgage Death Pool - Anyone want to guess how many billions of losses CFC will pre-announce next week (after Angelo dumps more shares)?

How big will the write-down be?
When will it be announced?

Note - Orangelo Mozilo is going to be dumping more shares on the open market this week. So look for the horrific news to be delayed until week after next. And note - similar to Angelo, I'm short on CFC stock - but via Oct puts.

Countrywide's Mozilo Selling More Stock

Countrywide Chairman and CEO Angelo Mozilo will unload an unspecified number of his struggling company's shares next week as part of a pre-arranged trading plan.


Countrywide, the nation's largest lender, has been slammed as a spike in defaults of subprime mortgages left investors scared of buying its loans on the secondary market. Its stock has been cut by more than half since reaching a 52-week high of $45.26 in late January.

Orangelo Mozilo's Countrywide Toxic Mortgage launches hilarious PR campaign, declares "Now it's personal" and makes employees take "loyalty oaths"

Oh, where to start?

Orangelo's PR consultants are trying to pump up his soon-to-be-laid-off employees by making them take "loyalty oaths", while oddly wearing green (why not orange?) "Protect our House" wristbands and launching a crisis-management PR offensive aka "crusade". They've declared "NOW IT'S PERSONAL" and "WE'RE NOT GOING TO TAKE IT!".

No, I am not making this up.

Seriously, I am not making this up. As a matter of fact, here are the super-secret leaked talking points (pdf)

Here's HP's message to Orangelo:

Orangelo, you screwed America by pushing toxic loans on the ignorant masses because they paid you more than conventional loans. You earned huge commissions as you insider-traded your company's stock while directing your company to buy shares on the open market to prop up the price.

You are a pig, you are a leech, and you are the representation of everything that is wrong with American business today. Now indeed it is personal - and there are millions of Americans who want to see your orange ass hauled to jail today. Or worse. IF indeed you're being unfairly attacked and you believe in your company, here's a suggestion:

Buy a share of your own stock. Or set aside a few hundred million of your ill-gotten gains into a Countrywide Customer and Ex-Employee Assistance Fund. Yeah, I didn't think so.

Here's HP'er Seth Jayson at Motley Fool on the bizarre goings-on at Countrywide. Enjoy. And someone get me one of those wristbands! (note I'm short CFC via Oct puts)

Countrywide CEO Angelo Mozilo -- the aforementioned butcher's son -- might be right about things being "personal," but he's completely misguided on the identity of the victims in this story. It ain't Countrywide, and it ain't Mozilo.

But for all those poor souls that were bum-rushed into risky loans during a dangerous housing bubble, and who may lose them as interest rates reset, this is now intensely personal. There are few things more personal than the danger of being tossed out of your home because you can't afford the gimmicky loan you little understood, and whose risks you weren't prepared to assume.

But you're not fooling anyone, Mr. Mozilo. We know exactly what you did during this bubble: You fanned the flames while cashing out hundreds of millions of dollars, leaving everyone else holding the bag, including 12,000-plus employees who are getting the ax while you enjoy those millions.

Will Countrywide Toxic Mortgage's Angelo Mozilo go to jail?

A) Yes
B) No
C) Not soon enough

Here's another couple of stinging exposes of The Orange One by Bloomberg and Krugman at the NY Times. Nice to see (again) the MSM catch up to HP. I especially liked the point that the damage caused by Mozilo to Americans (and foreign investors) is SIGNIFICANTLY worse than anything Ebbers or Lay did. SIGNIFICANTLY worse.

Note I'm short CFC via Oct puts.

Countrywide CEO sold big as stock dropped - Quick changes in Mozilo's trading plan raise red flags, experts say. The mortgage firm says the sales were in line with company policy.

As the mortgage industry swooned in late 2006 and 2007, Countrywide Financial Corp. Chief Executive Angelo Mozilo cashed in stock options valued at $138 million -- vastly expanding his wealth even as his shareholders watched their stock shrink in value.

"There is clearly no legal prohibition of altering your plan," said David Priebe, a Bay Area attorney who has helped set up more than 50 of such plans for executives. "But the more that you modify or add to your plan over a short period of time, the more risk that someone will call it into question. I would not say that you cannot do it. I would say there is a risk if you do do it."

And now here's Krugman highlights:

Enron’s Second Coming?

These days, of course, Mr. Mozilo doesn’t look like such a wonderful guy, after all. Instead, he’s starting to bring back memories of other people who used to be praised not just as great businessmen but as great human beings — people like Enron’s Ken Lay and WorldCom’s Bernie Ebbers.

So far, nobody has accused Mr. Mozilo of breaking the law. Still, what we’re learning from the housing mess is that the crisis of corporate governance, which made headlines in the early years of this decade, never went away.

Still, how can it be that so soon after Enron, WorldCom and other scandals rocked the business world, we’re once again hearing about executives cashing in just before their companies are revealed as less successful than advertised? The answer, of course, is that we never dealt properly with those scandals.

There is one big difference this time: the number of victims — misled borrowers, homeowners whose neighborhoods are being destroyed by foreclosures, investors who thought they were buying safe assets — is even larger.

Countrywide Mortgage's Orangelo Mozilo gets his very own cartoon!

Nice to see the stock market recognize the stench coming from America's Toxic Lender too... (yes, I'm short CFC and The Orangeman)...

Sorry Helicopter Ben. Even you can't save Countrywide!

Thanks frothy for the lead

CNBC's Diana Olick and others on the Fed cut and the "mortgage despair cycle"

I know the housing cheerleaders are all excited, and desperate homedebtors looking to unload are all in a tizzy, but sorry, bad news. The Fed could (and might) cut to zero, but it ain't gonna help. China and hedge funds ain't gonna buy the CDO's anymore, the Fed funds rate does not set mortgage rates, the toxic mortgages are still gonna reset, foreclosures are still gonna soar, and housing is still wildly overvalued.

And remember, as the stock market soars - stocks ain't houses. Mutually exclusive investment classes. Invest accordingly.

Diana Olick: Since we’re all "Fed, Fed, Fed," it behooves me to weigh in on how a Fed rate cut would affect mortgage interest rates, not to mention the current mortgage despair spiral, as lenders run for cover and investors turn up their collective noses. From everything I hear, it’s not going to do much in the short term, but rather than hear it from me, I thought I’d pose the question to some of my fave experts and let you hear from them:


Bill Seidman/Fmr. Head of FDIC, CNBC Chief Commentator: "If credit is bad, rates don’t count. I don’t care if you lower the rate 100 basis points. It may improve some of the profits of those institutions that lost a lot of money due to bad credit, but it does not address itself to the real problem, which is bad lending. And let me emphasize: it’s not just subprime, it’s substandard lending."

Jay Brinkmann/Mortgage Bankers Assoc.: "The Fed rate cut has already been priced in."

Howard Glaser/Fmr. HUD Official, Mortgage Industry Consultant: "My view is that the effect is likely to be limited – probably a short -term psychological boost more than a fix for mortgage market liquidity... You could lower the rate to zero and those loans (subprime, alt-a) are still not coming back."

HousingPANIC message to realtors and mortgage brokers on commission: WE WON'T BE FOOLED AGAIN YOU BASTARDS!!!

Are you ready for the storm?

Again and again, and you'll know why soon enough, I'll repeat this mantra from the HP bible - Manias, Panics and Crashes:

· The final phase is a self-feeding panic, where the bubble bursts. People of wealth and credit scramble to unload whatever they have bought at greater and greater losses, and cash becomes king.

And so here we go... should be quite the ride this week, pre-Fed. Buckle up.

Banks face 10-day debt timebomb

Britain's biggest banks could be forced to cough up as much as £70bn over the next 10 days, as the credit crisis that has seized the global financial system sparks a fresh wave of chaos.

Fears of this impending call on bank credit lines are the true reason that lending between banks has ground to a halt, according to senior money market sources.

"Banks are hoarding cash," said David Brickman, the head of European credit strategy at Lehman Brothers. "We think the reason for that is the commercial paper markets. There was $100bn of commercial paper issued by European institutions that was scheduled to roll over in August, much of which struggled to do so.

FLASH: As predicted here 48 hours ago, down-and-out toxic mortgage lender Countrywide Mortgage laying off 10,000 to 12,000 (for starters)

Tomorrow's news today here at HP... And hey, it's Friday night, time the mortgage lenders, banks and builders put out the REALLY bad stuff... (note - yes, of course, I'm short CFC)

This one was easy HP'ers. Next comes the multi-million (if not billion) dollar financial restatement as their auditors demand Orangelo "marks to market" the crap on his books. But only 12,000 Angelo? Sorry to say, but 61,000 are actually at risk, as this toxic business struggles to stay afloat (now that Angelo has cashed out). Maybe he can chip in for their severances with his ill-gotten gains.

Question though Angelo: With 12,000 less employees, who'll manage the lines of people streaming into your Countrywide offices looking to get their deposits back?

Countrywide Plans to Cut As Many as 12,000 Jobs

Countrywide Financial Corp. is expected to announce plans to reduce its work force over the next three months by 10,000 to 12,000 jobs, representing as much as 20% of the current total.

The largest U.S. home-mortgage lender also expects that its loan originations in 2008 will be about 25% lower than this year.

Anyone want to guess when Countrywide announces the mass layoff and a hundreds-of-millions of dollars "mark to market" balance sheet markdown?

Orangelo has dumped enough shares, and the cat's out of the bag, so now he's gotta be thinking Sarbanes Oxley, and staying out of jail.

So here comes the huge layoff (20,000?), office closures, and shocking cancer loan portfolio markdown (mark to market CFC auditors? anyone minding the store?)

I've got a feeling the news could be soon, real soon... and yes, I own CFC puts. Do you?

HousingPANIC Stupid Question of the Day

Where did all the "you guys are all chicken littles, brown shirts and winged monkeys" now-is-a-great-time-to-buy-there-is-no-housing-bubble realtor trolls go?

(I guess bubbles weren't for bathtubs, eh Kendra?)

(Extra credit - everyone look at that price chart from Vegas (thanks Doom). Anyone see the toxic-loan-speculator-fed bubble now? That one's gonna take some time to deflate)

I don't think anyone knows just how bad this mortgage meltdown / ARM reset debacle is gonna be

In come the waves....

Millions of homeowners around the nation are now getting the news in the mail: The interest rate on their home loans is going up, possibly to double-digit levels.

The hardest hit are expected to be people who have less-than-stellar credit and cannot afford to make the new payments. An increase of several hundred dollars a month will force them either to get relief or to default. The prospect of significant and growing losses has already rocked Wall Street and shaken up the broader mortgage markets. And, concerned about the human suffering, policymakers are already searching for ways to help people out.

"The meltdown in the subprime market is the biggest threat to the housing market and the broader economy," says Mark Zandi, chief economist at Moody's Economy. com. "It is at the vortex of the problem."

Over the next several months, banks will be changing the "teaser rates" that homeowners received two years ago.

The peak for resetting loans will be in October, when the rates on some $50 billion worth of mortgages are likely to rise by 2 percentage points or more. This could mean a rise of several hundred dollars a month for many borrowers.

As predicted by HP, laid-off homebuilder illegals now fleeing housing-crash-central Arizona in droves. What's that giant sucking sound now?

Gotta love the folks who didn't understand that the housing bubble and illegal immigration were linked at the hip.

If you're still in that camp, hopefully this article will make you understand.

Illegals built the houses. Some illegals bought the houses (using toxic loans of course). And now that the corrupt REIC work has dried up, and home prices are falling, plus the states are making it illegal to hire an illegal, we've got a big stinking mess on our hands.

Will they stay, go underground, and turn to lives of crime?

Will they go home, leaving ghost towns of run down neighborhoods, empty Wal-Mart stores, and a sea of foreclosures?

Or will they rob the banks on the way out (Countrywide and Indymac of course), doing cash-out refis with bloated appraisals, never intending to pay back the loans?

What a mess. Ay caramba. Here's a report from housing-crash and illegal-immigration-hellhole Phoenix Arizona.

New hiring law nears, migrants flee
Immigration hard-liners cheer, but economic fallout begins

Undocumented immigrants are starting to leave Arizona because of the new employer-sanctions law.

The state's strong economy has been a magnet for illegal immigrants for years. But a growing number are pulling up stakes out of fear they will be jobless come Jan. 1, when the law takes effect. The departures are drawing cheers from immigration hard-liners and alarm from business owners already seeing a drop in sales.

Some are moving to other states, where they think they will have an easier time getting jobs. Others are returning to Mexico, selling their effects and putting their houses on the market.

Adrian, a 34-year-old undocumented immigrant from Sonora, plans to move back to Mexico as soon as he can sell a 2-acre tract he owns in Tonopah.

Adrian said his sister also is selling her house with plans to return to Mexico. He knows other undocumented immigrants who are refinancing their houses and getting cash out so they can return right away rather than waiting for their houses to sell.

Want to see which banks of mortgage lenders may fail first? Well, here you go..

When you don't adequately set aside loan-loss reserves (helloooo - is anyone auditing these companies?) you get into a heap of trouble right quick.

WaMu - you're next...