They didn't stop at any point in 06 with an EPD rate of 80% must mean that the defaults occurred in late 06. Still, 2 months of 07 strikes me as sleeping at the job, no?
calmo, it's quite possible that the bulk of the repurchase requests came late in Q4. And that nobody at Resource was really very prompt about bringing the subject up with Daddy at Fulton. Especially if someone still held out hope that there would be a scratch & dent market for this stuff, or they could somehow get Mystery Investor to back off. I note language in the report suggesting that a lot of these repuchases are still "in process," which tells me that they're trying to negotiate.
Still, February is pretty good compared to some of the other outfits we've seen who just cut this crap off two weeks ago.
NEW YORK (Reuters) - A Credit Suisse Group (CSGN.VX) unit is charging three subprime mortgage lenders with violating loan obligations and has filed lawsuits totaling over $30 million.
DLJ Mortgage Capital Inc., a Credit Suisse unit that purchases mortgage loans from lenders, alleges in separate suits that Sunset Direct Lending LLC and Infinity Home Mortgage Co. Inc. breached agreements to repurchase loans they originated.
DLJ is seeking nearly $24 million in buybacks from Sunset and $3 million from Infinity.
The suits allege that the lenders violated agreements to repurchase loans in the event of payment defaults. The suits cite clauses that require repurchases if borrowers are delinquent for 30 days within the first three months of the loan sale.
DLJ also filed suit against Netbank Inc. (Nasdaq:NTBK - news), alleging failure to provide both funds and information relating to purchased loans. The suit seeks $4 million in damages.
The three suits, filed in the U.S. Southern District Court in New York, likely represent a new chapter in the subprime mortgage crisis, where underperforming loans have threatened both lenders and the Wall Street firms that purchased them.
SACRAMENTO 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.
Ron, "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."
Arnold is in the hip pocket of the REIC. It's his personal and political gravy train. Mr DuFauchard is wasting his time.
Nicholas, if I read this correctly it's 9% repurchases, and 80% of those were EPDs. The $72MM is what they have left of 2006 loans that are not past the period where they could no longer be forced to repurchase them (that is, they are not yet more than 90 days from sale to the investor).
However, 9% repurchase rate is wildly unacceptable in any sane understanding of this business.
FYI: "Historically," an EPD rate of more than 1% was grounds for panic if you called yourself a prime lender.
How much longer can government officials claim that subprime is contained, as if it's some well defined space in what is by definition a blurry credit continuum? M&I revealing that the secondary market was not interested in their AltA loans at a price they could tolerate is pretty clear evidence, to me.
I would suspect that Q1 earnings releases will confirm that the purchase of mortgage debt in general is now being viewed with a healthy dose of caution - and discounted in the marketplace. Capitulation in the RE market by struggling borrowers in the face of a barrage of dire RE news should make the point moot...
barely: per your post the other day regarding the inverted yield curve thing, I noticed Mish had a good discussion about this which I hardly understand but provide a bit for you and a link>
The Fed has set an artificially low interest rate. The market wants higher rates because it sees the problems these low rates are causing: that money is getting into speculation and very low grade credit. The Fed must supply enough new credit (repo) in order to keep rates from rising. The recent steepening of the yield curve is telling us that this is hard to do: they are doing too many repos trying to keep rates low.
If the Fed wants to stop pumping money they would admit that rates are too low and would raise them.
In fact the recent steepening is very alarming. It is due to defaults/foreclosures/ where lenders are saying they cannot continue to pass on to speculators/low quality borrowers all that new credit the fed is trying to force into the market.
An inverted yield curve normally predicts a recession. That recession comes home to roost when the yield curve suddenly steepens our of that inversion: the market is tightening out of necessity just as the fed is trying to make it not to.
Lending 100% of home values, unverified borrower income, and lower credit scores caused the subprime fall, while only 7% of alt-A mortgages combine all three of those factors [my emphasis], said the head of Bear Stearnss [ticker: BSC] mortgage business, Tom Marano.
ron, thanks. mish may be right or wrong, but the yield curve did nudge its way back into place based on BB's testimony. At least that's how I saw it. At least it didn't go the other way.
The thing that distinguishes the M&Ts from a NEW is they have the financial capacity to decide, at least for a while, that they won't sell their originated mortgages. The question is how long...
" a fluid situation" I have seen a fluid like that come out of a sick cat.On these epd,do not discount outright fraud,this is the tailend of the bubble,and you usually see rampant fraud and insane risk taking at that stage.I am aware of a couple of multibillion dollar frauds in california in temecula and madera.when you have 100% financing and 500k plus homes,it can add up fast.
John, that seems like a pretty shallow arguement, at least to me. All based om the following rear-view observations:
"Losses from more creditworthy customers are well below industry averages, according to Pasadena, Calif.-based IndyMac "
No one suggested the entire nuclear chain reaction was supposed to occur violently and all at once. NDE, in connection with this release, elected to NOT disclose their delinquency numbers, although they acknowledged earlier, in Mar, that their loan losses will increase this year. They are an AltA lender so I would assume they are seeing something in the course of operating their business that indicates what they HAVE seen concerning losses is different from what they WILL see...
However, would YOU do loans (AT 100% LTV when it was already CLEAR that real estate appreciation was stopping) where 9% of the people just don't even bother paying the loan back right from the start, and NOT fire the people responsible?
In the absence of extenuating circumstances--my branch manager got abducted by aliens and replaced with a cyborg, for instance--I'd fire anyone remotely responsible for letting my EPD rate get to 2.00%.
And I'd start with the person responsible for reading the repurchase reports and work down to the loan officer.
Jan-Martin has also been a tower of strength for us at Doom. I really don't know what we'd have done without him. He actually divides his time between his native Germany and Long Island, so has his finger very much on the pulse of NYNY. Don't be fooled by his funky sense of humor and exotic (but rapidly improving) command of English. His own blog Immobilienblasen is a serious piece of work and well worth checking out.
"Lending 100% of home values, unverified borrower income, and lower credit scores caused the subprime fall, while only 7% of alt-A mortgages combine all three of those factors [my emphasis], said the head of Bear Stearnss [ticker: BSC] mortgage business, Tom Marano."
That argument seems facile to me. Of course only 7% of alt-A mortgages combine all three factors. By definition, Alt-a consists of higher credit scores than subprime.
Alt-a is subprime style underwriting and lending programs, but to marginally better borrowers (as best as can be measured by a FICO score).
Take a S&L like Downey Financial (DSL: Blogger: Page not found
88% of their loan portfolio has no actual income verification.
Meanwhile, they allow borrowers to negatively amortize up to 110% of the original loan amount through option arms.
And the LTVs - probably understated to begin with through generous appraisals - are now even higher thanks to declining home prices.
They didn't stop at any point in 06 with an EPD rate of 80% must mean that the defaults occurred in late 06. Still, 2 months of 07 strikes me as sleeping at the job, no?
foreclosures escalating rapidly in michigan!
Housing Crisis Knocks Loudly in Michigan - washingtonpost.com
calmo, it's quite possible that the bulk of the repurchase requests came late in Q4. And that nobody at Resource was really very prompt about bringing the subject up with Daddy at Fulton. Especially if someone still held out hope that there would be a scratch & dent market for this stuff, or they could somehow get Mystery Investor to back off. I note language in the report suggesting that a lot of these repuchases are still "in process," which tells me that they're trying to negotiate.
Still, February is pretty good compared to some of the other outfits we've seen who just cut this crap off two weeks ago.
NEW YORK (Reuters) - A Credit Suisse Group (CSGN.VX) unit is charging three subprime mortgage lenders with violating loan obligations and has filed lawsuits totaling over $30 million.
DLJ Mortgage Capital Inc., a Credit Suisse unit that purchases mortgage loans from lenders, alleges in separate suits that Sunset Direct Lending LLC and Infinity Home Mortgage Co. Inc. breached agreements to repurchase loans they originated.
DLJ is seeking nearly $24 million in buybacks from Sunset and $3 million from Infinity.
The suits allege that the lenders violated agreements to repurchase loans in the event of payment defaults. The suits cite clauses that require repurchases if borrowers are delinquent for 30 days within the first three months of the loan sale.
DLJ also filed suit against Netbank Inc. (Nasdaq:NTBK - news), alleging failure to provide both funds and information relating to purchased loans. The suit seeks $4 million in damages.
The three suits, filed in the U.S. Southern District Court in New York, likely represent a new chapter in the subprime mortgage crisis, where underperforming loans have threatened both lenders and the Wall Street firms that purchased them.
This Alt-A program has ~18% percent just not paying right from the start (early delinquency)?
In a 100% LTV situation?
That is IMO, CRIMINALLY bad underwriting.
SACRAMENTO 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.
Ron, "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."
Arnold is in the hip pocket of the REIC. It's his personal and political gravy train. Mr DuFauchard is wasting his time.
Just remember, all you have to do is click together your ruby slippers, and say "The problems are confined to sub-prime."
There. Fixed.
Nicholas, if I read this correctly it's 9% repurchases, and 80% of those were EPDs. The $72MM is what they have left of 2006 loans that are not past the period where they could no longer be forced to repurchase them (that is, they are not yet more than 90 days from sale to the investor).
However, 9% repurchase rate is wildly unacceptable in any sane understanding of this business.
FYI: "Historically," an EPD rate of more than 1% was grounds for panic if you called yourself a prime lender.
How much longer can government officials claim that subprime is contained, as if it's some well defined space in what is by definition a blurry credit continuum? M&I revealing that the secondary market was not interested in their AltA loans at a price they could tolerate is pretty clear evidence, to me.
I would suspect that Q1 earnings releases will confirm that the purchase of mortgage debt in general is now being viewed with a healthy dose of caution - and discounted in the marketplace. Capitulation in the RE market by struggling borrowers in the face of a barrage of dire RE news should make the point moot...
barely: per your post the other day regarding the inverted yield curve thing, I noticed Mish had a good discussion about this which I hardly understand but provide a bit for you and a link>
The Fed has set an artificially low interest rate. The market wants higher rates because it sees the problems these low rates are causing: that money is getting into speculation and very low grade credit. The Fed must supply enough new credit (repo) in order to keep rates from rising. The recent steepening of the yield curve is telling us that this is hard to do: they are doing too many repos trying to keep rates low.
If the Fed wants to stop pumping money they would admit that rates are too low and would raise them.
In fact the recent steepening is very alarming. It is due to defaults/foreclosures/ where lenders are saying they cannot continue to pass on to speculators/low quality borrowers all that new credit the fed is trying to force into the market.
An inverted yield curve normally predicts a recession. That recession comes home to roost when the yield curve suddenly steepens our of that inversion: the market is tightening out of necessity just as the fed is trying to make it not to.
Is the Fed Pumping?
Mish's Global etc.
More Alt-A problems? No need to worry Bernake and crew say things are contained in subprime and the outbreak wont spread!??!?!??!
barely: "How much longer can government officials claim that subprime is contained, as if it's some well defined space ..."
Quite a while as long as the investment banker's analysts get away with statistical comments like this one ...
"Alt-A Industry Safe From Subprime Meltdown?", by Aaron Johnson, BankNet360, March 30, 2007.
ron, thanks. mish may be right or wrong, but the yield curve did nudge its way back into place based on BB's testimony. At least that's how I saw it. At least it didn't go the other way.
The thing that distinguishes the M&Ts from a NEW is they have the financial capacity to decide, at least for a while, that they won't sell their originated mortgages. The question is how long...
" a fluid situation" I have seen a fluid like that come out of a sick cat.On these epd,do not discount outright fraud,this is the tailend of the bubble,and you usually see rampant fraud and insane risk taking at that stage.I am aware of a couple of multibillion dollar frauds in california in temecula and madera.when you have 100% financing and 500k plus homes,it can add up fast.
John, that seems like a pretty shallow arguement, at least to me. All based om the following rear-view observations:
"Losses from more creditworthy customers are well below industry averages, according to Pasadena, Calif.-based IndyMac "
No one suggested the entire nuclear chain reaction was supposed to occur violently and all at once. NDE, in connection with this release, elected to NOT disclose their delinquency numbers, although they acknowledged earlier, in Mar, that their loan losses will increase this year. They are an AltA lender so I would assume they are seeing something in the course of operating their business that indicates what they HAVE seen concerning losses is different from what they WILL see...
Jan-Martin has done a great job with his blog, all the more remarkable given he's not even in the U.S.
D'oh, yeah, 9% still...
However, would YOU do loans (AT 100% LTV when it was already CLEAR that real estate appreciation was stopping) where 9% of the people just don't even bother paying the loan back right from the start, and NOT fire the people responsible?
In the absence of extenuating circumstances--my branch manager got abducted by aliens and replaced with a cyborg, for instance--I'd fire anyone remotely responsible for letting my EPD rate get to 2.00%.
And I'd start with the person responsible for reading the repurchase reports and work down to the loan officer.
redfish,
Jan-Martin has also been a tower of strength for us at Doom. I really don't know what we'd have done without him. He actually divides his time between his native Germany and Long Island, so has his finger very much on the pulse of NYNY. Don't be fooled by his funky sense of humor and exotic (but rapidly improving) command of English. His own blog Immobilienblasen is a serious piece of work and well worth checking out.
"Lending 100% of home values, unverified borrower income, and lower credit scores caused the subprime fall, while only 7% of alt-A mortgages combine all three of those factors [my emphasis], said the head of Bear Stearnss [ticker: BSC] mortgage business, Tom Marano."
That argument seems facile to me. Of course only 7% of alt-A mortgages combine all three factors. By definition, Alt-a consists of higher credit scores than subprime.
Alt-a is subprime style underwriting and lending programs, but to marginally better borrowers (as best as can be measured by a FICO score).
Take a S&L like Downey Financial (DSL: Blogger: Page not found
88% of their loan portfolio has no actual income verification.
Meanwhile, they allow borrowers to negatively amortize up to 110% of the original loan amount through option arms.
And the LTVs - probably understated to begin with through generous appraisals - are now even higher thanks to declining home prices.