HousingPANIC - The Housing Bubble Blog with an Attitude Problem, 2005 - 2008: BUBBLETALK - Post housing crash articles and random musings here

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 tinyurl.com) keep it clean, have a good chat.

444 comments:

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Anonymous said...: Freddie Mac the No. 2 U.S. mortgage finance company, reported a fourth-quarter net loss of $480 million on Friday as a decline in long-term interest rates affected the value of its loan assets.

The housing finance sector has been shaken in recent weeks with increased mortgage delinquencies, particularly among high-risk subprime borrowers. Delinquencies have helped drive over twenty subprime mortgage lenders out of business.

The company plans to repurchase up to an additional $1 billion in common stock in conjunction with an issuance of up to $1 billion in preferred stock.

http://news.yahoo.com/s/nm/
20070323/bs_nm/freddie_results_dc; March 26, 2007 4:12 AM
Anonymous said...: Soft Pedaling the Housing Market Blues

On observing Federal Reserve Chairman Ben Bernanke minimize the likely economic impact of today's deepening housing market problems, one has to wonder what, if anything, might the Federal Reserve have learnt from the bursting of the dot-com bubble in 2001. At that time, too, the Fed downplayed the economic consequences of a collapsing asset market. And it did so only to find itself, a few months later, in the awkward position of having to aggressively cut interest rates to prevent the dot-com crash from precipitating a deep economic recession.

Drawing parallels between the earlier dot-com meltdown and today's unfolding problems in the housing market would seem appropriate given the very strong run-up in home prices over the past six years. As Robert Shiller, the renowned Yale University expert on the U.S. housing market, has correctly observed, between 2000 and 2006, home prices, adjusted for inflation, increased by a staggering 80 percent. That remarkable increase in home prices, which has no precedent in the United States over the past hundred years, increased household wealth by around 50 percent of GDP, or by an amount not dissimilar to that created by the earlier run-up in dot-com equity prices.
Among the more important factors fueling the housing market boom in recent years was the maintenance of abnormally low interest rates by the Fed in the wake of the bursting of the dot-com bubble. Not only did the Fed cut interest rates to as low as 1 percent by 2003, but it was also very slow in restoring interest rates to more normal levels over the next four years. No wonder, then, that speculative home purchases became increasingly rampant as the housing boom gathered pace.

Adding fuel to the housing market boom was an unprecedented relaxation of mortgage-lending standards and the introduction of a vast array of new lending instruments specifically designed to make it easier for the least creditworthy borrowers to buy homes. No longer were borrowers required to verify their income or to provide a credit record to qualify for a mortgage loan. And no longer did they need to pay high interest rates or amortization payments in the early stages of their loan, as adjustable rate mortgages and interest-only loans became the norm.

The trouble with today's housing market is that the chickens are now coming home to roost as the period of easy home credit has run its course. Fearful of igniting inflation, the Fed has restored interest rates to 5.25 percent and it shows no sign of dropping its inflation guard any time soon. At the same time, an alarming rise in defaults at the subprime, or the weak credit end, of the home market has led to the folding of many subprime mortgage lenders, which last year accounted for as much as 20 percent of total mortgage lending...

The rest of the article:

http://tinyurl.com/2qdtge; March 26, 2007 2:52 PM
Anonymous said...: "Mortgage Insurer Stocks Dip, Rebound Amid Turmoil in Subprime Lending Market"

In the weeks following the turmoil in the subprime mortgage market, the largest U.S. mortgage guaranty insurers saw their stock prices fall 10% or more.

http://www3.ambest.com/frames/
frameserver.asp?site=news&tab=
1&AltSrc=14&refnum=92399

Fed's Moskow: Subprime problems isolated

Obviously he has not been reading the newspaper, because the subprime crisis is currently hitting the Mortgage Insurers.

On the other hand he is correct about inflation being too high.

Chicago bank chief also tells students in Beijing that inflation is too high.

http://money.cnn.com/2007/03/26/
news/economy/bc.usa.fed.moskow.
reut/index.htm?section=money_
latest; March 26, 2007 5:27 PM
Anonymous said...: In real world, U.S. Fed's shift to neutral a portent of pain

Now let me see if I have this right. Little Ben Bernanke and his merry band of elves at the U.S. Federal Reserve have stirred the entrails and discern some disquieting signs. As their exquisitely modulated statement put it Wednesday, "recent indicators have been mixed and the adjustment in the housing sector is ongoing."

In fedspeak, that is the equivalent of a three-alarm fire bell.

Only a central banker writing for publication could describe the train wreck in the U.S. housing market as an adjustment, rather as if the Titanic's skipper had reported that an iceberg had adjusted his ship's course. There are adjustments, and then there are adjustments.

Surely the message in the statement is that the Fed is no longer as confident that Goldilocks is alive and well.

A more realistic assessment is that the Fed's shift to neutral is not a calm and effective response to changing circumstances. Rather, it's more like a cry of pain.

http://www.adres.nl/news/
financialNews/fed.asp; March 26, 2007 5:31 PM
Anonymous said...: The good news is the housing market is coming back and is well in Japan, the bad new is Japan probably do not need to buy as much US Treasury and US Dollar will get weaker.

Sumitomo Trust & Banking Co. Ltd., Japan's fifth-biggest bank, plans to buy Life Housing Loan Co., a housing loan unit of Shinsei Bank Ltd., for about 25 billion yen ($212 million), Japanese media reported.

No one at Sumitomo Trust or Shinsei could be reached for comment on the reports, carried by Jiji Press and the Yomiuri, Asahi and Mainichi newspapers.

Life Housing Loan, established in 1996, has attempted to carve a niche for itself by offering loans to self-employed people that might otherwise have difficulty borrowing money.

The Tokyo-based company had about 100 billion yen in outstanding housing loans as of the end of March last year, the media reported.

Sumitomo Trust planned to reach a deal by next month and complete the purchase in May, Jiji Press said on Saturday.

Shinsei has another housing loan unit, Rakuten Mortgage Co., a 50-50 joint venture with Internet firm Rakuten Inc.

http://yahoo.reuters.com/news/
articlehybrid.aspx?storyID=urn:
newsml:reuters.com:20070325:
MTFH13956_2007-03-25_06-05-
43_T140625&type=comktNews&rpc=44; March 26, 2007 5:39 PM
Anonymous said...: Is it time to short the Dollar?

Nice dip today.

http://quotes.ino.com/chart/
?s=NYBOT_DX&v=i; March 26, 2007 5:45 PM
Anonymous said...: More Gulf economies will move away from a dollar currency peg and shift foreign exchange reserves away from dollar to other currencies, including the Chinese yuan, the chief executive of Dubai International Financial Center (DIFC) said on Sunday.

DIFC CEO Nasser al Shaali noted that the UAE central bank had already started buying euros -- part of its strategy to move some 10 percent of its reserves into the single European currency before the end of the year.

"We've seen for example in the case of the UAE central bank a movement into the euro," Shaali told the Reuters Middle East Investment Summit.

"In the future most likely, we predict some of the economies in the region will adopt the Chinese yuan currency as well," he said, adding that he was not aware of that happening at the moment.

http://www.reuters.com/article/
MiddleEastInvestment07/
idUSL2507334820070325; March 26, 2007 5:56 PM
Anonymous said...: Gold back over $660/oz

Dollar going down and Inflation going up.

http://www.kitco.com/charts/
livegold.html; March 26, 2007 6:00 PM
Anonymous said...: Dollar only going to get weaker because European Finance ministers do not care if the Dollar will get weaker.

Finance ministers from the 13 nations that use the euro saw brighter prospects for their own economy Monday, ahead of wider talks that will consider rules to limit political interference in bank takeovers and make payments within the EU easier.

Euro-area ministers arriving for the talks dismissed the strength of the euro currency against the U.S. dollar and the Japanese yen.

"I'm not worried about the strength of the euro," said German Finance Minister Peer Steinbrueck. He said he was confident European economic growth would remain strong and he did not want to get worried about "horror scenarios," talking down fears of a downturn in the U.S. housing market.

Luxembourg Prime Minister Jean-Claude Juncker -- who will lead the Monday talks -- said salary increases seemed to be rising in line with productivity gains and policies were in place to tackle any problems.

New Dutch Finance Minister Wouter Bos was optimistic before listing the usual litany of ministers' woes.

"The European economy is growing well, there is no particular reason to complain," he told reporters. "There are certainly risks in terms of the oil price, the dollar and the U.S. housing market and we are certainly keeping an eye on those."

Ministers will also talk about the economies of rapidly growing Baltic state Latvia and this year's EU newcomers Romania and Bulgaria, warning them of the risks of overheating as they enjoy the current boom.

The substance of the two-day talks takes place Tuesday when finance ministers from the entire EU are expected to agree on -- but not formally adopt -- two key pieces of financial services legislation. They will likely rubber-stamp them after the European Parliament votes them through in coming months.

http://www.businessweek.com/ap/
financialnews/D8O3UOQ83.htm; March 26, 2007 6:10 PM
Anonymous said...: More than 65% of global foreign exchange reserves are held in US dollar-denominated assets but, as the dollar has weakened since 2003 against a basket of currencies, many central banks have diversified into euros and other main currencies. Sweden’s Riksbank took the most drastic action last year when it reduced US dollars holdings from 37% to 20%.

Sweden cuts dollar and turns its back on the yen

While most central banks have diversified their holdings out of US dollars from accumulated new reserves, Sweden took the drastic step last year of reducing its entire dollar holdings.

The country cut its US dollar holdings from 37% of its reserves to 20% and eliminated its 8% of holdings in yen. This changed what was a similar allocation to that of Norway, with about third each in euros, dollars and other currencies, to a greater exposure to Europe.

The Swiss National Bank has been moving its reserves from US dollars since 1998, with the euro and sterling benefiting the most. In the third quarter last year, the Swiss bank shifted some of its dollar holdings directly into yen, nearly doubling its allocation to 5%.

http://www.financialnews-us.com/
page=ushome&contentid=2447456280; March 26, 2007 6:17 PM
Anonymous said...: Yen Rises Against Dollar

The yen soared against the dollar in mid-morning trading after falling for most of the earlier morning in New York. The yen fell to a two-week low of 118.42 at around 9 a.m. ET. But the yen soared immediately after a housing data report in the U.S. reached a daily high of 117.70 at 10:30 a.m.

http://www.tradingmarkets.com/
.site/news/FOREX%20NEWS/518456/; March 26, 2007 6:19 PM
Anonymous said...: MORGAN'S NEW CENTURY FIRE SALE

In a dramatic reversal, Morgan Stanley is in the process of holding an auction for $2.48 billion in mortgages from subprime lender New Century.

The loans represent the collateral given to Morgan for a $2.5 billion credit line the firm extended to New Century. As the Irvine, Calif. -based company sank deeper into dire straits earlier this month, Morgan assured the market that the loans and repurchase agreements it had made to the company were in order.

It appears that Morgan has less confidence in the health of this collateral now that it had two weeks ago. Now, Morgan does not want to draw attention to the sale: It announced the sale of the 13,200 loans in a small public auction notice in a print ad Friday.

A Morgan spokeswoman declined to comment.

Subprime lenders like New Century have been caught in a quickening spiral for the past several months. Rising interest rates cut into their profit margins, and a slowing economy means that their already at-risk clientele may have trouble making mortgage payments.

In a painful new wrinkle, foreclosing on the house is no remedy for subprime lenders. The housing price bubble is bursting in many areas, so seized properties are selling for sharply less than their previous valuations.

http://www.nypost.com/seven/
03262007/business/morgans_new_
century_fire_sale_business_
roddy_boyd.htm; March 26, 2007 6:25 PM
Anonymous said...: Victim of Real Estate Bust: Your Pension - Part 1

It's the dirty little secret of Wall Street.

"U.S. lenders will make about $2.8 trillion in home-mortgage loans this year, according to the Mortgage Bankers Association. The MBA estimates that about 80% of these loans will end up in mortgage-backed securities. Mortgage-backed securities outstanding at the end of the first quarter totaled $4.61 trillion, up 61% since the end of 2000. In the same period, total Treasury securities outstanding grew 35% to $4.54 trillion.

Who buys those mortgage-backed securities? Pension funds have been one of the largest buyers for many years now.

What is a Mortgage-Backed Security?

A mortgage-backed security (MBS) is an asset-backed security whose cash flows are backed by the principal and interest payments of a set of mortgage loans.

These are usually packed and sold in bulk, and then are often resold. Quite often the person buying them has no real idea just how safe these mortgage loans are. Are they a bunch of subprime, house-flippers with no downpayments? There is usually no way to tell by the time the MBS has been sold and resold. The banks that originally made the mortgage loans don't care about the quality of the mortgage because they have already made their profit and off-loaded the risk to the pension fund, or insurance company, or foreign investor that bought the MBS.

How did we end up in this condition. Jim Jubak explained that the coming Baby Boomer retirement is a prime culprit. State and local government budgets are stretched thin. So do they raise taxes to pay for the coming flood of retirees? That's poltiically unpopular. So they change their investment strategy to get better returns, and that requires more risk. However, with so much cash moving towards higher yielding investments, that pushes down the returns for those riskier investments. Pension funds that should be investing in low-risk treasuries are investing in agency bonds. When agency bond yields are too low then they invest in MBS. And so it goes until pension funds are investing in MBS from subprime lenders.

The spread between the yield on high-yield bonds -- known as junk bonds -- and relatively safe U.S. Treasury bonds has averaged 5.24 percentage points since 1986...The spread is now a paltry 2.88 percentage points. The trend toward less yield for higher risk has been in place pretty much without interruption since the third quarter of 2001, when spreads maxed out at better than 10 percentage points.

It's well known that loan standards have been beyond loose in recent years. What isn't always known is that this has been true for more than just the sub-prime market. The next step up from subprime, known as Alt-A, has been the epicenter of this risky financing.

In 2006, according to UBS, interest- only loans, 40-year mortgages and option-adjustable-rate mortgages comprised more than 75 percent of Alt-A issuance. These loans often have little documentation of a borrower's income and rack up higher mortgage debt against the value of the underlying collateral (i.e., the house). UBS said that 76 percent of adjustable-rate interest- only loans written in 2006 had low documentation, while 57 percent had loan-to-value ratios greater than 80 percent. No surprise, then, that 3.16 percent of these loans are already delinquent by two months or more.

If you think we've already seen the worst of the RE Bust, think again. The resetting of subprime loans (i.e. when the "teaser" rates expire and they readjust to standard market rates) won't peak for another 10 months. Alt-A's peak for resetting is nearly two years off.

http://www.bitsofnews.com/
content/view/5450/43/; March 26, 2007 6:28 PM
Anonymous said...: Does anyone know the true numbers? Shiller states home value have went up 80 percent, where does he get his #'s. My house purchased in 99 for 195,000 sold for 680,000 in 05. Condo's in maui HI that sold for 85,000 in 01 now sell for 350,000 to 600,000. home prices are way higher then 80%. In utah houses that sold for 180,000 5 years ago now sell for 400,000. And the experts keep talking about sub prime, it's all the loans. Everybody i know have great credit and purchased a house for around 200,000 30year fixed @6.5 but there house is now valued at 600,000 or so and they have pulled out 200,000, or 300,000 out in home equity and seconds to remodel,cars vacations and now there payment is double what it was but there not considered sub-prime. but i know there in trouble as the payment are to high. These types of people will be bigger then the so called sub-primes. alot of the people also used the loans against their homes to buy investment properties which the loan states second home and their getting killed negative cashflow on properties in florida,az,nv,tx. how long will they carry the negative money that's the question.; March 26, 2007 6:31 PM
Anonymous said...: Subprime Woes May Cause Problems for U.S. RMBS Servicers

The effects of increased liquidity pressure on subprime residential mortgage companies may be felt in their servicing operations, as evidenced by recent negative servicer rating actions taken by Fitch Ratings. A new report by Fitch cites the financial condition of the entity as an important component in evaluating servicer ratings.

'Financial condition is an important component because it affects the servicer's ability to remain in business and continue to make investments in infrastructure, systems and staffing to meet its current and future servicing needs,' said Senior Director Mary Kelsch. 'The financial difficulties of the various parties thus far have been caused mainly by liquidity, overcapacity, margin pressure and poor asset quality, all of which are directly origination/seller focused.'

Servicers who do not have either a diverse product mix or financially strong resources could ultimately see their operations adversely affected, which may result in staff layoffs, loss of new loan volume and higher default levels. 'Any servicer that has predominantly subprime credit quality loans in portfolio could find its timelines and overall cost to service facing increased levels not seen in recent history,' Kelsch said.

http://home.businesswire.com/
portal/site/google/
index.jsp?ndmViewId=news_
view&newsId=20070326006029&
newsLang=en; March 26, 2007 6:37 PM
Anonymous said...: Subprime fallout: worst yet to come
US$300B in mortgages are resetting to higher rates

Homeowners have financed spending by taking equity out of their homes through mortgage refinancing, made possible by rising house prices and unfettered mortgage lending. Refinancing reached its peak at the start of 2005, but is no longer viable in the current environment of falling house prices. Just how lax were mortgage lending standards?

The reality is that millions of people who should not have had access to capital -- and ordinarily would not --obtained mortgages. Consider the effects of loose lending standards courtesy of a recent Credit Suisse report:

Forty per cent of the U.S. mortgage market consisted of subprime and Alt-A rated (one better than subprime) borrowers, a rise from15% in prior years.

Most, in fact four-fifths of Alt-A borrowers, obtained low/no documentation loans in 2006.

The average combined loan-to-value ratio in 2006 was an aggressive 91%. Speculation in housing represented 18% of the market in 2005 and 2006.

These marginal lending practices are now creating serious indigestion for homeowners since the housing market ground to a halt. Housing starts and building permits are off nearly 30% from February, '07, over the same month in '06. Default rates are up in the subprime sector and they are due to rise higher for subprime and Alt-A borrowers, suggesting house prices will remain depressed for some time.

The worst is yet to come for mortgage lenders and, perhaps, the housing sector. Roughly US$300-billion of securitized subprime mortgages with adjustable rates (ARMs) are resetting to higher rates in 2007 alone, and the maximum impact of subprime resets happens at the end of the year.

Billions -- make that hundreds of billions -- of mortgages have been securitized and sold as collateralized debt obligations (CDOs) to investors. That has allowed the issuers of these mortgages in varying states of credit quality to take some risk off their books. CDOs had been a major source of demand with emphasis on the word had. The "CDO machine is wheezing," according to Grant's Interest Rate Observer, and if this market dries up, it will undoubtedly just add to the tightness in U.S. housing.

http://www.canada.com/nationalpost
/financialpost/homebuyers/
story.html?id=c26d6e2a-e2ea-4be7-
945e-e70f521f6f6c&k=17556; March 26, 2007 7:11 PM
Anonymous said...: No wonder California has one of the biggest Subprime exposure. 83% of the the people in California can't read.

Although California law mandates that mortgage disclosures be provided in five languages other than English, if needed, it applies only to brokers who operate under real estate licenses, according to a state Department of Real Estate spokesman.

Those five languages -- Spanish, Chinese, Tagalog, Vietnamese and Korean -- are spoken by 83 percent of the 12 million Californians who don't speak English in their homes, according to the 2000 U.S. Census.

With its overheated housing market and sky-high prices, California became a haven for subprime mortgages, which account for more than a fifth of all the state's mortgages, according to First American Loan Performance.

Add to that a highly mobile immigrant population with rising incomes and you have a recipe for fraud, consumer advocates say.

'This is the perfect example of buyers who were being hoodwinked,' said Kevin Stein, associate director of the nonprofit California Reinvestment Coalition.

'Many borrowers were sold loans they could not afford and could not understand because of improprieties of the brokers ... and Wall Street.'

Stein and other housing advocates petitioned the Federal Reserve at a hearing this summer in San Francisco to strengthen laws requiring disclosures in non-English languages.

So far, he said, no action has been taken.

http://news.monstersandcritics.com/
usa/news/article_1278686.php/
Immigrant_borrowers_caught_in_
U.S._language_loophole; March 26, 2007 7:23 PM
Anonymous said...: Bonds of GMAC LLC's Residential Capital division, or ResCap, were cut to ``neutral'' from ``buy'' by Banc of America Securities LLC following the departure of two top finance executives.

GMAC announced the resignation of ResCap's chief financial officer, James Giertz, on March 23. Three days earlier, treasurer Louise Herrle said she planned to leave in April.

Yield premiums on ResCap bonds have increased since the beginning of the year on concerns about rising default rates on subprime mortgages.

``We view the departure of ResCap's two most senior finance executives as a significant negative given the challenges the company is facing,'' Banc of America credit analyst John Guarnera in Charlotte, North Carolina, wrote in a research note today.

Minneapolis-based Rescap is the seventh-largest originator and servicer of U.S. residential mortgage loans, and operates under brands including GMAC Mortgage and Ditech.com.

The company is owned by GMAC, which is 51 percent controlled by Cerberus Capital Management LP. The New York-based hedge fund purchased the stake from General Motors Corp. in November as the automaker sought to stabilize its finance unit's credit ratings.

http://www.bloomberg.com/apps/
news?pid=20601009&sid=
aWulOEkcJF4g&refer=bond; March 26, 2007 7:31 PM
Anonymous said...: From my local (Frederick County, MD) paper:

"Many Realtors and most of the public believe that 2006 was a bad year for real estate. Most agents looking at their production and income for the year found the change to be dramatic. Was 2006 really such a bad year? Let's take a look at the big picture. Statistically 2006 was the third best year in real estate ever. The reason it didn't seem that way is that the drop in sales from 2005 to 2006 was the most dramatic drop since 1979. Most predictions for 2007 are that the market will still decline. Maybe we'll have the fourth or even fifth best year ever. The best predictions are for a relatively flat market."
"The fate of the real estate market is dependent on two things: Affordability and availability. The issues are really determined at three levels."
"The first level is the macro or national level. The issues at this level are inflation and interest rates, both of which actually would point to a good market. Inflation is still very low and rates are still very affordable."
"The second level is the metro or city level. The issues at this level are population, employment and household income. Again, these issues still seem to favor a good market in our area. Commercial construction is up and new companies are coming to Frederick County. As a matter of fact, the Bureau of Labor Statistics reported that in February 2006, the lowest metropolitan division unemployment rate in the country was reported in Bethesda-Frederick-Gaithersburg at 2.7 percent."
"The final level is the micro or neighborhood level. The determining factors here are neighborhood dynamics and home prices. Frederick is a growing, dynamic area and while home prices have corrected somewhat from the increases of the past three or four years, the market has - by no means - crashed."
"All in all, Frederick is a great place to live and this is a great time to buy or sell."
"In closing, let's look at some statistics for the Frederick area:"
"Frederick County's 2000 population of 193,000 is expected to grow by 260,000 by 2015."
"Frederick County's 4,690 businesses employ more than 61,000 workers."
"GSA signed a lease for a 23,000-square-foot, high-bay warehouse to be constructed in Wedgewood, Frederick."
"Fannie Mae built a 210,000-square-foot building (Phase I) in the Villages of Urbana. Phase II & III will add 500,000 square feet."
"Carey International leased 35,000 square feet at Technology Park 270, moving the entire company from Washington, DC."
"Currently, there are 450,000 square feet of office, felx, and industrial space under construction in Frederick County."
"This is just a sampling of the 'good' news about our market. So the next time you see a talking head on television telling you how bad things are, try turning on something more factual, like cartoons"
-Larry Riggs, President-elect, FCAR

OK, interest rates are still low, though inflation is not (as the article contends). The job market is looking good too. However, the major point that the article did not mention is that prices are insane. A typical new SF house around here on only a 0.25 acre lot costs between $500,000 to $750,000! Try affording a 30-yr fixed mortgage with that price, even after obtaining a down payment by selling your current starter house. Even a decent existing single-family house will cost at least $420,000. Most people that live in Fred. Co. work in DC or its suburbs, a good 50-90 min. commute away. Not many jobs, even in the DC area, even with two incomes, pay enough for people to afford such prices in Frederick Co.
Are we supposed to believe that the low interest rates and good job market will make up for these ridiculous prices? Also, with inflation creeping up as it has, interest rates have no choice but to come up. Then what?; March 26, 2007 9:47 PM
Anonymous said...: Stupid question of the day:
If salaries and good jobs are increasing so much, as MSM, the government, and Kudlow like to advertise ad nauseum, why new home sales have been in the toilet? Anyone with a tiny drop of common sense (hard to find in America these days) and half working brain would assume that workers who are making good money at good jobs, in a great economy, would be buying lots of new homes. What happened? It must be Clinton's fault.; March 26, 2007 10:31 PM
FlyingMonkeyWarrior said...: The Most dangerous/safest States in the USA, according to a Morgan Quitno Crime Survey.

http://www.morganquitno.com/dang07.htm; March 26, 2007 10:50 PM
Anonymous said...: My wifes friend's husband purchased
4 condotels 2 orlando and 2 las vegas and I can find little info on these types of investments. I think that this is a bad Idea as his total income is only about $60,000. Does anyone know what these are; March 27, 2007 5:43 AM
Anonymous said...: Congrats, Keith! HP got a plug in a column from TheStreet.com's Doug Kass. Kass manages a hedge fund and makes appearances on CNBC, including Larry Kudlow's show. So a big dawg has taken note... arf!; March 27, 2007 6:24 AM
Anonymous said...: It is truly remarkable how the slightest provocation (last week's "solid" home-sales headline) had the media and other permabullish types declare that the housing market has finally bottomed (again!) and that the impact on the subslime mess would be contained.

Here is a more accurate analysis of what occurred in housing last month:

"Home sales increase in the springtime month over month, every year, even if the world is ending. It's called "the homebuying season" for a reason. So you don't look at February vs. January, or April vs. March. No, just like retailers look at Christmas vs. Christmas, not Christmas vs. July, any dummy that follows the housing market looks year over year. Here's the real numbers, and headline the MSM should have reported: Dubious NAR report shows home sales continue to crater, off 3.7% vs. last year, while unsold inventory explodes by another 763,000 units and median sales price (without incentives) is down 7.6% from peak.

February used-home sales (per the dubious NAR numbers) were supposedly 387,000 units, vs. 402,000 units February 2006, down 3.7%. Inventory is now at 3,748,000, vs. 2,985,000 in February 2006, up 763,000 unwanted homes, or 25.6%. And the median sales price (without cash back or incentives) in February of $212,800 is down $17,400 from the July 2006 peak.

http://www.thestreet.com/
_googlen/newsanalysis/
investing/10346665.html?cm_ven
=GOOGLEN&cm_cat=FREE&cm_ite=NA; March 27, 2007 8:38 AM
Anonymous said...: With Motorola, Lenovo, Texas Instruments all recently announcing layoffs one would figure that Big Blue would do the same.

Instead the old dotCom bubble economy join forces with the new dotSubprime bubble economy. It must be getting very slow in the tech sector for Big Blue to enter into the mortgage market this late in the game.

International Business Machines Corp. said on Monday it formed a unit that will sell software and computers for processing mortgage applications and also manage processing of home-loan paperwork on behalf of lenders

IBM, the world's No. 2 computer services company, will offer technology to help process mortgage applications, automating the complexities of collecting documents to complete loans.

http://news.yahoo.com/s/nm/
20070326/bs_nm/ibm_lending_dc; March 27, 2007 9:02 AM
Anonymous said...: The federal financial regulatory agencies today issued for comment a proposed Statement on Subprime Mortgage Lending to address certain risks and emerging issues relating to subprime1 mortgage lending practices, specifically, particular adjustable-rate mortgage (ARM) lending products.

The proposal addresses concerns that subprime borrowers may not fully understand the risks and consequences of obtaining these products, and that the products may pose an elevated credit risk to financial institutions. In particular, the proposed guidance focuses on loans that involve repayment terms that exceed the borrower’s ability to service the debt without refinancing or selling the property.

The statement specifies that an institution’s analysis of a borrower’s repayment capacity should include an evaluation of the borrower’s ability to repay the debt by its final maturity at the fully indexed rate, assuming a fully amortizing repayment schedule. The statement also underscores that communications with consumers should provide clear and balanced information about the relative benefits and risks of the products. If adopted, this statement would complement the 2006 Interagency Guidance on Nontraditional Mortgage Product Risks, which did not specifically address the risks of these ARM products.

The agencies request comment on all aspects of the proposed statement and are particularly interested in public comment about whether: 1) these arrangements always present inappropriate risks to institutions and consumers, or the extent to which they can be appropriate under some circumstances; 2) the proposed statement would unduly restrict existing subprime borrowers’ ability to refinance their loans; 3) other forms of credit are available that would not present the risk of payment shock; 4) the principles of the proposed statement should be applied beyond the subprime ARM market; and 5) an institution’s limiting of prepayment penalties to the initial fixed-rate period would assist consumers by providing them sufficient time to assess and act on their mortgage needs.

Comments are due sixty days after publication in the Federal Register, which is expected shortly. The Federal Register Notice with a copy of the guidance is attached.

1. The term “subprime” is defined in the Expanded Guidance for Subprime Lending Programs, issued by the agencies on January 31, 2001.

http://communitydispatch.com/
Housing_and_Mortgage_News_42/
Subprime_Mortgages_Agencies_
Seek_Comment_on_Subprime_
Mortgage_Lending_Statement.shtml; March 27, 2007 9:14 AM
Anonymous said...: Standard & Poor's raised its expectation for losses on 2006 subprime mortgage bond issues to as high as 7.75 per cent from a previous peak assumption of about 6.5 per cent, an analyst said on Monday.

S&P raised its requirements for loss coverage levels in July 2006, giving the best protection on bonds issued in the last two quarters, it said in the report.

S&P expects losses on 2006 subprime loans will range from 5.25 per cent to 7.75 per cent compared with about 4.5 per cent to 6.5 per cent previously, he said.

http://news.ninemsn.com.au/
article.aspx?id=256924; March 27, 2007 9:19 AM
Anonymous said...: Class-Action Lawsuit Filed Against Beazer Homes and Beazer Mortgage Corporation in North Carolina

Andresen & Associates and The Jackson Law Group PLLC, Charlotte-based law firms with extensive experience in mortgage fraud and class litigation, today announced that a lawsuit seeking class action status has been filed against Beazer Homes Corp. and Beazer Mortgage Corporation.

The case, pending in Mecklenburg County Superior Court on behalf of proposed Class Representatives Mark and Lea Tingley, alleges violations of North Carolina General Statutes Chapter 75, a consumer protection statute which proscribes unfair and deceptive trade practices. The action is with respect to numerous "low income" subdivisions in North Carolina where Beazer Homes Corp. built and sold newly-constructed homes. The suit alleges that Beazer Homes Corp. and Beazer Mortgage Corporation conspired to illegally finance unqualified purchasers to buy newly-constructed homes, thus making widespread foreclosure and abnormal property devaluation inevitable.

http://www.tickertech.com/
cgi/?a=news&ticker=a&w=&story
=200703200703261203PR_NEWS_
USPR_____CLM259; March 27, 2007 9:22 AM
FlyingMonkeyWarrior said...: TheStreet.com's Doug Kass
Congrats Keith.; March 27, 2007 3:55 PM
FlyingMonkeyWarrior said...: Darren said...

My wifes friend's husband purchased
4 condotels 2 orlando and 2 las vegas and I can find little info on these types of investments. I think that this is a bad Idea as his total income is only about $60,000. Does anyone know what these are

March 27, 2007 4:43 AM
****************
Yes. It is a new twist on Timeshare. Your wife's friend's husband and other "investors" own the Condo, but the Property Management is not a Rental Management Company, but a Luxury Resort Management Company and the Primises is run just like a Hotel/Motel. The owners share in the Rental income, and use their condo when they want.

They are very high end, usually a flag.

Here is one that is Amazing as an example:

www.thebluerose.com

AT the bottom of the page is an extensive report in Adobe format.
Although you have to read through the spin.; March 27, 2007 4:07 PM
FlyingMonkeyWarrior said...: Pakistan to support Iran in case of US attack: Rashid
RAWALPINDI: Federal Minister for Railways Shaikh Rashid Ahmed while expressing fear of a US attack on Iran has categorically stated that Pakistan would never offend a Muslim neighbour at the cost of a fair-weather friend, the US.

“We would support Iran if attacked by the United States and would not provide airbases to America,” he stated in categorical terms.

Addressing a ceremony held in connection with Pakistan Day celebrations at Lal Hawaili here on Friday, Rashid said it is now Iran's term after the US attacked Iraq and Afghanistan. “The US is sitting ready to attack Iran but Pakistan will never allow Washington to use its territory for launching an attack,” he added.

Being a nuclear state, the responsibility of Pakistan has increased manifold as far as conflicts in the region are concerned. “Pakistan is in a leading position for the Muslim Ummah and it would be impossible for Pakistan to support America in this regard.”

“We have decided in clear terms that we will support Iran instead of America if any aggression is initiated against Iran,” he said. “We cannot leave our best friend for the sake of a fair-weather friend,” he added.

He said Pakistan came into being in the name of Islam and it is our responsibility to make Pakistan a progressive and prosperous by following the teachings of Islam.

http://www.thenews.com.pk/daily_
detail.asp?id=48176; March 27, 2007 5:03 PM
Anonymous said...: Consumer Confidence Falls More Than Expected in March Amid Rising Gas Prices

Rising gasoline prices and stock market turbulence undermined consumer confidence in March, increasing worries about one of the economy's pillars, a widely watched index showed on Tuesday.

"The recent turmoil in financial markets coupled with the run-up in gasoline prices may have contributed to consumers' heightened sense of uncertainty and concern. The direction of both components over the next few months bears watching to determine whether this decline is just a bump in the road or something more substantial," she added.

Economists closely monitor consumer confidence because consumer spending accounts for two-thirds of all U.S. economic activity.

The Present Situation Index, which measures how shoppers feel now about economic conditions, increased slightly to 137.6 from 137.1 in February. The Expectations Index, which measures consumers' outlook in the next six months, declined to 86.9 from 93.8.

The report was a bit sobering for retailers and other businesses that rely on consumer spending.

But a slowing economy, particularly a weakening housing market, could challenge shoppers in the months ahead. Rising defaults and delinquencies in subprime mortgages and fewer home equity withdrawals that give consumers extra cash could curtail spending.

The latest report on housing, released Tuesday by Standard & Poors, further dimmed hopes for a rebound in the market. Prices of single-family homes across the nation depreciated in January compared to a year ago, the weakest results in more than 13 years, according to the S&P housing index.

The downbeat news on housing caused stocks to fall Tuesday as worries mounted that the nation's housing market may be slowing sharply enough to filter through the broader U.S. economy and dampen consumer spending.

http://biz.yahoo.com/ap/070327/
economy.html?.v=5; March 27, 2007 5:29 PM
Anonymous said...: Prices of single-family homes across the nation depreciated in January compared to a year ago, the worst results in more than 13 years, a housing index released Tuesday by Standard & Poor's showed.

The data underscored disappointing sales data released by the government on Monday.

The S&P/Case-Shiller composite index showed a drop of 0.7 percent from a year ago in the price of a single-family home based on existing homes tracked over time in 10 metropolitan markets. Growth hasn't been that slow since January 1994 when it dropped by 0.9 percent compared to January 1993, S&P said.

Government sales figures reported Monday showed that the number of home sales in February fell to the lowest level in seven years, and followed an even larger drop of nearly 16 percent in January.

MacroMarkets LLC Chief Economist Robert Shiller said the composites clearly show the "dire" state of the real estate market across the nation.

Federal Reserve governors watch housing as one of the most important indicators of the health of the overall economy. Economists fret that the slump in housing will drag down growth as the slowdown affects consumer spending and the construction industry.

On Monday, the Commerce Department reported that sales of new single-family homes fell 3.9 percent in February to a seasonally adjusted annual rate of 848,000, the slowest sales pace in nearly seven years. The February decline followed an even larger 15.8 percent drop in sales in January, which had been the largest one-month plunge in 13 years, another sign the market has not yet found a bottom.

http://biz.yahoo.com/ap/
070327/home_price_index.html?.v=2; March 27, 2007 5:36 PM
Anonymous said...: The dollar fell against the euro and yen Tuesday, after a report showed U.S. consumer confidence dropped in March for the first time in five months.

Shaken by a steady rise in gasoline prices and a weaker stock market, the consumer confidence index fell to 107.2 in March from a revised 111.2 in February, the Conference Board, a private research group, said Tuesday. Economists surveyed by MarketWatch were looking for a decline to about 108.6

http://www.marketwatch.com/news/
story/dollar-falls-after-consumer
-confidence/story.aspx?guid=
%7B26949314-330A-4BA2-A9F0-
F49C86C6113B%7D; March 27, 2007 5:43 PM
Anonymous said...: I agree with Anonymous 5:31PM about where prices have gone since 1999.

Houses in DC area have more or less tripled in value since 1999. Most salaries have been fairly flat the last 6 years, that is if you were forced to change jobs and didn't get your bogus 3% (LOL) COL adjustment. Why then is it unreasonable for prices to drop 50%? I doubt they will, chances are everyone who doesn't own now, has any sense of historical price trends, and is natural born American will just leave the area. This is what I hear when I talk to friends. The DC area is already one of the greatest outflow areas for domestic migration.

When I walk up Rock Creek Park past Kensington, I see 550-600K "starter" homes adjacent to the park on every side. This area is one of the primo Montgomery county locations in Maryland burbs. The park goers are about 99% hispanic from what I see. I guess those jobs "Americans wont do" are paying pretty good these days?!?

I doubt I will buy anything for the next 5 years. With every passing day, I read less of these blogs - only because this is too frustrating to keep tracking price corrections that are slow to occur.; March 27, 2007 5:47 PM
Anonymous said...: Pit said :

I love these For Sale adds :

This is a steal!!! Earn instant equity on this "below market condo!! We are almost giving it away!!
-----On market: 277 days

Non-profit organization offers this unit to low to moderate income buyer(s).
------ Property Tax $ 5259

Well below market never occupied ( desperate flipper)
----------On Market: 272 days

Motivated seller***price dropped $30k for quick sale!!
--------Days on Market: 284
-- not so quick; March 27, 2007 5:58 PM
Anonymous said...: "In the survey conducted by Gfk Roper, homeowners with mortgages were asked what type of mortgage they had. A stunning 34 percent of the homeowners had no idea."

http://tinyurl.com/2h4n7f

After reading this article, it's obvious to me that things are going to get a LOT WORSE as the housing bubble deflates....; March 27, 2007 7:20 PM
Anonymous said...: A top U.S. bank regulator and lawmakers in Congress from both parties called for a national crackdown on predatory lending, a main cause of the crisis in the subprime mortgage market.

"The time has come for national anti-predatory lending standards applicable to all mortgage lenders," Federal Deposit Insurance Corp. Chairman Sheila Bair told a House of Representatives subcommittee in a hearing on Tuesday.

Alabama's Spencer Bachus (news, bio, voting record), senior Republican on the House Financial Services Committee, of which the subcomittee is a part, said: "We still need ... some legislation addressing mortgage brokers ... some type of national standard."

Financial Services Committee Chairman Barney Frank (news, bio, voting record), a Massachusetts Democrat, said earlier this month he wants to pass a bill by the end of the year to curtail predatory lending. Connecticut Democratic Sen. Christopher Dodd (news, bio, voting record) is also planning to introduce anti-predatory lending legislation.

http://news.yahoo.com/s/nm/
20070327/pl_nm/usa_subprime_
congress_dc; March 27, 2007 7:20 PM
Anonymous said...: Federal Open Market Committee has lost all creditability anything short of an Immediate Rate Hike will be nothing more then Smoke and Mirror to the Speculative Currency Traders.

Cleveland Federal Reserve President Sandra Pianalto can talk up a storm about Inflation but every Speculative Currency Traders know that the Dollar has no support if the FOMC can not raise rate.

http://www.usatoday.com/money/
economy/2007-03-27-fed-inflation
_N.htm; March 27, 2007 7:39 PM
Anonymous said...: US mortgage crisis forces homeowners to take refuge in their cars

Predatory lenders should go to jail.

Predatory Lending Laws like the one being proposed in Arizona should become a federal law.

An investigation should be done to see how many of these legislatures were enticed by lobbyists such as Freddie Mac and Fannie Mae to do nothing all these years, and these do nothing regulators should be held accountable for their lack of action to allow predatory practices get this out of hand.

http://bellaciao.org/en/
article.php3?id_article=14592; March 27, 2007 8:05 PM
Anonymous said...: Now they cut the realty clerks medical insurance.

Health insurance options dwindle for self-employed
Group plans are being dropped or becoming unaffordable to many.
By Lisa Girion, Times Staff Writer
March 27, 2007
Coverage threatened

'It's a real stab in the heart'.
A major source of health insurance for people who work for themselves is disappearing, casting thousands of contractors, freelancers and solo practitioners into the ranks of the uninsured with little hope of obtaining new coverage.

Health plans offered by professional associations were once havens for millions of people who couldn't get coverage anywhere else. But as medical costs have soared, groups representing professions as varied as law and golf have been forced to stop offering the benefit or been dropped by insurers.

More than 8,000 people with coverage through the California Assn. of Realtors could be next if Blue Shield of California succeeds with its plan to cancel the group's health coverage.

"It's a real stab in the heart," said Marcy Garber, 62, an Encino real estate agent whose history of breast cancer makes her an almost-certain reject if she seeks similar coverage on her own.

Although no one tracks association coverage to know how many plans have disappeared, the experience of Marsh Affinity Services is telling. A decade ago, Marsh, which brokers and administers the health plans, had 142 such clients. Today, all but three have shut down.

Over the same period, the nation's uninsured population, now estimated at 45 million, rose dramatically, fueled in part by the dearth of affordable options for the self-employed, experts say. Among uninsured workers, nearly 63% are self-employed or work in small firms, Todd Stottlemyer, president of the National Federation of Independent Business, told Congress recently.; March 27, 2007 8:31 PM
Anonymous said...: With as many as 460,000 California homeowners reportedly at risk of losing homes bought with sub-prime mortgages, a top California business regulator called Monday for a ban on certain risky and controversial lending practices.

At issue for Department of Corporations Commissioner Preston DuFauchard were home loans being issued without lenders fully verifying the prospective buyer's income and employment status. These so-called stated- income loans have contributed to the collapse of the sub-prime mortgage market, he said.

"It's a real fluid situation," said DuFauchard, who has asked Gov. Arnold Schwarzenegger whether the commissioner can require about 8,000 mortgage and commercial loan lenders in the state to fully verify a prospective buyer's income and employment status to ensure that he or she can afford a loan.

The testimony came at a hearing of the California Senate's Banking, Finance & Insurance Committee, which also heard the estimate of 460,000 possible foreclosures from consumer activist Paul Leonard, director of the Oakland-based Center for Responsible Lending.

Many borrowers, who qualified for adjustable-rate mortgages based on their unverified stated-income declarations, fell behind on their payments as the economy and housing market softened in the last year. As a result, Leonard said, they were hit with suddenly increased interest rates that put monthly payments out of reach of low-income homeowners.

Leonard said he would welcome stronger oversight of mortgage bankers' underwriting guidelines by the state.

The Department of Corporations, he said, has only 25 examiners on staff and "and clearly doesn't have the resources to stay on top" of the situation.

But DuFauchard said his staff had "examined all companies within the last four years."

A report released Monday by RealtyTrac, a consulting firm that monitors foreclosure activity, said that more than 16,000 Californians entered the foreclosure process in February, a 79% increase over the same period last year.

DuFauchard told state Senate Banking Committee Chairman Michael Machado (D-Linden) that he had concerns that the proposed rule to ban stated-income loans could be overturned if mortgage bankers filed a lawsuit contending that the commissioner lacked the authority to do so.

The governor's office confirmed that it was reviewing DuFauchard's request. Spokesman Aaron McLear stressed that "the governor is clearly concerned with the rise in Californians foreclosing on their home loans."

http://www.latimes.com/business/
la-fi-subprime27mar27,1,2315678.
story?coll=la-headlines-
business&ctrack=1&cset=true; March 27, 2007 9:09 PM
Anonymous said...: Countrywide up over $1.2 Billion (with a B) in foreclosures.

http://countrywide-foreclosures.blogspot.com/; March 27, 2007 9:20 PM
Anonymous said...: Without any room to raise Interest Rate, the FOMC will soon put Ben Bernanke statement to the test as Speculative Currency Traders short the Dollar.

Federal Reserve Board chairman Ben Bernanke says U.S. markets could probably withstand the effects of a sell-off of treasury bills by foreign investors.

"Because foreign holdings of U.S. treasury securities represent only a small part of total U.S. credit-market debt outstanding, U.S. credit markets should be able to absorb without great difficulty any shift in foreign allocations," Bernanke said in a March 16 letter responding to Republican Senator Richard Shelby of Alabama.

International investors, including central banks, own about half of the $4.3 trillion (U.S.) of marketable treasuries outstanding, according to U.S. Treasury Department figures.

http://www.thestar.com/
Business/article/196263; March 27, 2007 9:38 PM

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