Is this a small but pertinent example of what Kash is talking about in terms of the dangers of banks having inadequate reserves? Or is it just an isolated case of a really badly run bank?
Hey let's party
Let's get down
Let's turn the radio on
This is the meltdown
Get out the camera
Take a picture
The drag queens and the freaks
Are all out on the town
And cowboy Jane's in bed
Nursing a swollen head
[Chorus]
Sunshine Sally and Peter Ustanov
Don't like the scene any how
I dropped acid on a Saturday night
Just to see what the fuss was about
Now there goes the neighborhood
The photo chick made to look sickly
Is standing in her panties in the shower
She plays the guitar in the bathroom
While the police dust her mother's plastic flowers
And Schoolboy John's in jail
Making a killing through the U.S. mail
[Chorus]
This is the movie of the screenplay
Of the book about a girl who meets a junkie.
The messenger gets shot down
Just for carrying the message to a flunkie.
We can't be certain who the villans are 'cuz everyone's so pretty
But the afterparty's sure to be a wing-ding as it moves into your
city
[Chorus]
There goes the neighborhood
There goes the neighborhood
Tanta, the first rule of posting blog entries on Calculated Risk is that each post must contain at least one graph... preferably with shaded recession bars.
How about some thoughts on mortgage fraud? Specifically, guesses about the extent, the impact on the run-up of prices, the exposure of automated underwriting systems to fraud, and the fallout.
Alo, I'm more in the "beer mosey" than the "beer run" league these days, but by cracky I'm still in the game.
I must have missed your earlier post on the LoanCity thing. Attention span? Me?
What I see here is at minimum an operational competency problem. However, it's the kind of "incompetence" that usually comes about because the operation's cash flow is insufficient. So it's not really a reserves problem--it involves loans that LC sold to someone else. What it means is that LC "borrowed" money out of the accounts that it holds "in trust" (other states may call them "custodial accounts"; CA calls them "trust accounts"). These accounts for P&I (principal and interest payments) and T&I (taxes and insurance, or the "escrow" account) are supposed to have funds incoming from borrower payments, and outgoing only to 1) the noteholder (P&I) or the insurance company or tax authority (T&I). They never get "commingled" with the lender's own operating funds, because they are only held in trust (for the borrower or the noteholder; if you are still the noteholder because you haven't sold the loan yet, you have to pay yourself out of the P&I account and show a debit to that and a credit to your own (non-trust) account).
It looks like LoanCity was short of operating cash, so they "borrowed" money from the trust accounts. It further looks like they owed some coin to WAMU, not all of which was just P&I, but they used P&I funds to cover the debt (instead of part P&I and part LC's own money, as appropriate).
This is the kind of thing that happens at the "thinly capitalized" mortgage banker. Obviously, damn near anything can cause a business to have cash-flow problems, but it's certainly possible that they stem from the current mortgage malaise: either LC couldn't sell its loans fast enough to bring cash in, or it had to buy back loans with its limited cash and then "borrowed" to make payroll, or some combination thereof. Ugly situation.
Congrats Tanta! Seems the old rule is running true and no good deed (or set of deeds) goes unpunished.
That being said, and speaking of (property) deeds, I'll second Wab's request. It would be good to get an insider's view of the extend and impact of mortgage fraud. In other words, is this the worst you have seen. And secondly, (and probably more importantly) how many other shoes are out there yet to drop or dominoes likely to get toppled by the sub-prime melt down that we lay people don't have a clue about. Any probability guesses of them dropping would also be helpful.
It be too early fer gin'n'tonics so I must conclude the purpose of the post is to make introductions all around (and then drink). I look forward to subsequent lessons on the inner workings.
Hi Tanta. I'm a long time lurker and I just wanted to say thanks for your posts so far! I'm in my mid-twenties and have been following along out of academic interest and wow, you're amazing (as is CR). Thanks for the education. Looking forward to more!
Fed unchanged, said "biggest risk is inflation will fail to moderate"
Translation: The lagging indicator data won't allow us to cut rates when we really want to, so the biggest risk is we can't jump in to save this economy with some hefty rate cuts.
Congrats Tanta, way to make a great blog even greater. Your posts are always an education. Only thing is now I'm not sure it will be needed for me to read through the comments section on every post, since so much more of your work will be in the main post. The type face is much nice in the main blog anyways. Well I'm sure I will continue to read the comments anyways.
Interesting how they jawbone about the threat of inflation yet always ascribe it to wage pressure, capacity utilization, etc. Guess they don't want to spook anyone with the real threat, i.e., a "disorderly" decline in the dollar.
nothing like more ultra-nerd treatises like the neg-am explanation, which causes one to run screaming from the house as the overall status of the market becomes crystal.
Fed stance: They can't move. It's blood soup either way. All they have is their hot air machine. In fact its blood soup where they are right now.
Tanta, as a fellow "co-blogger" let me be the second (uh, fifteenth) to welcome you to this exclusive fraternity (hmmm, that's not quite right, oh well ...)
Kidding aside, your unique servicer perspective has proved invaluable to the housing bubble community, and I'm sure your "boss" has already discovered that tag-team blogging has great advantages over flying solo. Your rise to prominence is an inspiration to actual and potential "number 2s".
I second the thought that the Fed is in Zugzwang, but are frozen because they need part of the market to assume they will ease, while another part needs to assume they will tighten, and a choice will falsify one audience's assumption or the other.
Any validity to those rumors about a potential buy-out offer for Archer Daniels Midland? Or is it just jaw-boning to drive the price up?
I have no idea... I thought the Andreas family would take it private in the 80s LBO craze... but I guess their logic then was 'Why buy the cow when the milk is free?' Has anything really changed?
Ask yourself... Would you buy ADM with Brazil hanging over its head like the Sword of Damocles? I wouldn't... at least not until ADM got a lot deeper into 'Brazil'. Was that what Bush was up to last week & we didn't get the memo? Opening the door for Cargill & ADM?
But then I never owned the stock & didn't pay much attention to it - just took their pay check... then later moved on.
"Blood soup" says Oats and I think the examination of that "inflation fear" bears this out. Nobody, but nobody thinks that wages are about to crash the economy which is still "growing" until the next GDP report and then it will be described as "showing promises of growth".
One item in that CPI list bothers me: OER currently at 3.6%, ie your house actually appreciated on the basis of rents you could extract from it --by 3.6% over last month. I need to see this data up close and personal...to square with other elements of my picture that suggest there were more rentable homes and likely less renters, given the real house builders have gone back to Mexico.
Now of course the price of gas went up more than 3.6%, but CPI core (and this B inflation) is not about energy which the Fed has no control over in any case.
So "Hold" until there is blood in the streets is how this looks to me.
Thanks! thats what I was wondering, when I saw these rumors: Who? By the way, IMHO the whole ethanol from corn for fuel thing is crazy shouldnt you be drinking the stuff rather than putting it in a gas tank.
Why, here's to ADM, those agri-demons (lifts glass of EtOH, which is either ethanol or what in the innocent days of my youth was known as Everclear (the rotgut, not the band)).
I am collecting requests for future posts. All requests will be taken under advisement. In the old days, I'd have told you that I'll get to it when I damned well feel like it. 'Course, now that we've got a tip jar up, I feel obligated to amend that to "I'll get right on it." (If you think those two statements are equivalent, you've been in the corporate world too long.)
Anyway, I have a post on mortgage insurance (oh! the drama!) in the works, and I thought what I might do is post it later in the day, since these long posts push the short ones to the bottom of the page, and the short ones are often of interest because they're very current hot topics (like the EtOH at the Federal Reserve). You could think of it as a Bedtime Story, on the East Coast, or perhaps a Happy Hour Story on the West Coast.
Or, I could just post these things whenever I manage to finish them. Your thoughts?
shouldnt you be drinking the stuff rather than putting it in a gas tank.
LOL. Folks I knew at ADM did both... we made sweeteners (fructose) and ethanol in the same plant... people would sneak some of both home & mix the two with really strong instant ice tea... 'ADM Ice Tea Coolers'.
What is a bit scary was we were 'cracking the azeotrope' with benzene so there was always the risk a trace of benzene would remain in the final product. Oh well, life's full of risks.
If you ever read the book "Hitchhikers' Guide To The Galaxy" you might be familiar with the 'Pan Galactic Gargle Blaster'... one of the ingredients is 'Arcturan Mega-gin' which if not properly iced loses its 'benzene'. That was not missed by my engineering peers.
So we also referred to the 200 proof as 'Arcturan Mega-gin' or 'Mega-gin' for short.
Ah - the 80s. We were all going to die from nuclear war soon anyway. Whatever happened to that?
BTW - I can make a case why 'wet milling' corn to ethanol isn't nearly as big of a waste from a process & resource perspective - but thats a long tedious sermon for some other day.
We shall be happy to receive any of your offerings Tanta. "We are gathered here today" as the Queen says, but for better reasons than making sure she hasn't kicked the bucket.
The Americans withdraw from Iraq. Soon after, the Middle East collapses into turmoil as a regional war breaks out between Sunnis and Shias. Back at home, America has been thrown into a severe recession as many banks have become insolvent and are forced into a government credit rationing program. Inflation runs rampant across the globe as an energy dependent world attempts to make the transition from oil. Amidst the chaos, a bill passes allowing non-residents eligibility for the American presidency. The Neo-Populist, Schwarzenegger, is leading in the polls by a wide margin, leaving little hope for the UberNerd Party candidate, known only as The Tantanator.
. . . She took her Blogger sword in hand,
Long time the Arnold foe she sought.
So rested she by the ORE
And stood a while, in thought.
And as, in Bloggish thought she stood
The Neo-Pop, with eyes aflame,
Came woofling through the polling wood
And struck a pose and flexed his deltoids and otherwise became very annoying as he came.
One-two! One-two! And through and through
The Blogger Blade went snicker-snack.
She left him dead and with his head
She went commenting back.
And hast thou slain the Arnold Thing?
Come to my arms, my beamish nog!
Oh frabjous day! Calloo! Callay!
He chortled on his blog.
Hmm, mortgage insurance coming up next - look forward to that. As there are so many MBO/MBSs out there with "insurance", I hope you'll explain to all us out here where MGIC and the others are going to get the funds to pay all those claims. Or am I being too optimistic?
I'm just not up to this crackling cocktail conversation ... but welcome, Tanta, from another newbie blogger!
My wish is for more quantitative stuff on (1) What fraction of recent loans are at risk of defaulting in coastal southern California, and (2) What fraction of potential buyers are now gone from the buyer pool with the new lending standards?
I used to own some mortgage reits and made some money there in times past. Got scared early and left before the present difficulties. How does one smell BS in the conference calls, quarterly reports, and other assorted info available to the know-nothing investor such as myself?
What are red flags I could be on the lookout for in lenders generally?
" ... tightening of loan underwriting standards now underway is likely to push demand for homes down 15 percent and depress prices by 5 percent this year.
That's the rather gloomy forecast by analysts who follow the stocks of major home builders for Banc of America Securities LLC. ...
If all lenders stopped making zero- or near-zero-down loans altogether that could cut demand for housing by 22 percent."
there are some discussions on appraisal fraud on appraisersforum.com.I'll be at a seminar on mortgage fraud tomorrow,greg Harding,chief enforcment officer for Cal-OREA will be speaking.Identity theft is the coming thing,get a name and license # from the state,download a standard URAR form,fill it out,sign and add the particular appraisers license #,and hey presto! saves the appraisal fee(bribe?) too!since you are already commiting multiple felonies (wire fraud,mortgage fraud,conspiracy)why not keep a little more jingle in you pocket.
As long as you are taking special requests, can you speak to the credibility of the two premier credit rating agencies S&P and Moody's as it relates to MBS. Is Fitch better?
I had emailed CR a while ago on an observation I made that PIMCO is hiring Fitch to help evaluate "quality" (see news on the PCM Fund - a closed-end bond fund holding primarily commericial MBS). Also, there was a Gretchen Morgenson write up on NYT couple of weeks ago when the MBS issues became widely know which talked of a spat between the rating agencies.
Godalmighty! I go out to do some shopping and Tanta has 'splained the whole thing already -- man you drive this thing fast!
PS: My Suggestion: Ms. Tanta goes to Washington -- Tanta's fantasy mortgage-industry legislation so we don't get fooled again. Something in a carpetbomb-friendly format so we can email all of our public servants. Said it before, but I do think you might have a talent for producing sound public policy...just sayin....
Add a congrats from here also.
Uncork the good Pinot Noir for you.
My interests are a bit more varied in financial and business than real estate concentration historically here.
1) Some MBS, S&P, Moody's discusssion would be interesting. Seems to me became a business to say as paid and collect fees.
2) Am interested and others might be too as to whether when this shakes out, most of these contracts will be set aside behind the scenes and discounted, then sold to investment houses for the big profits and maybe, negotiating discounts to buyers who live in residence (excluding flippers, second homes) Also, returning to loan cap fig. and taxing vs. a free $500k of the top)
2) Am v. interested and other might be too in the of these large Private Equity Groups putting together packages of billions and buying up all these companies.
3) The billions of USD, treasury debt, and Agency bonds in hands of key foreign countries, effects and consequences on U.S. is of great concern to me, maybe others also.
I would like to hear your thoughts on the nonexistant equity ratios that we seem to have for reserves- Basel II?
Conversely, I will generously contribute to a discussion on Herstatt risk, should we ever decide it becomes necessary. Of course, that discussion is theorhetical until realized;-}
Like our subprimes used to be about the hidden tsunami. Kinda looks like the ocean is retreating right now and a whole bunch of folks are running out onto the sands....
Tanta, enjoy our attention, for you have been prescient on this one!!!
Next act will be commercial...and therein lies some bank exposure...
March 22 (Bloomberg) -- China's financial watchdog, Auditor- general Li Jinhua, has a mixed message for the investors who've spent $74 billion on shares in his country's banks since 2001.
The good news, says the man nicknamed ``Iron Face'' for his perceived incorruptibility and because he rarely smiles in public, is that his campaign against corruption, embezzlement and waste has helped to improve banking practices in the past seven years.
The bad news: It may be a couple of decades more before the banks' management is acceptable by Western standards.
It would be naive to think that once these state-owned banks are listed publicly they won't suffer any operational problems,'' says Li, 63, whose position at the head of China's National Audit Office gives him cabinet minister rank.It might take a whole generation to get these banks into reasonable shape.''
Cadbury choclate filled easter eggs.
Wow! Neal got the topic on the first guess!
Congrats Tanta --when will you be doing a beer run for us?
Sorry to nag this post up to your thread-but am really curious about what you and other folks think about these LoanCity docs:
404 - File or directory not found. loancity.htm
Is this a small but pertinent example of what Kash is talking about in terms of the dangers of banks having inadequate reserves? Or is it just an isolated case of a really badly run bank?
Wooho Tanta!!!
Hey let's party
Let's get down
Let's turn the radio on
This is the meltdown
Get out the camera
Take a picture
The drag queens and the freaks
Are all out on the town
And cowboy Jane's in bed
Nursing a swollen head
[Chorus]
Sunshine Sally and Peter Ustanov
Don't like the scene any how
I dropped acid on a Saturday night
Just to see what the fuss was about
Now there goes the neighborhood
The photo chick made to look sickly
Is standing in her panties in the shower
She plays the guitar in the bathroom
While the police dust her mother's plastic flowers
And Schoolboy John's in jail
Making a killing through the U.S. mail
[Chorus]
This is the movie of the screenplay
Of the book about a girl who meets a junkie.
The messenger gets shot down
Just for carrying the message to a flunkie.
We can't be certain who the villans are 'cuz everyone's so pretty
But the afterparty's sure to be a wing-ding as it moves into your
city
[Chorus]
There goes the neighborhood
There goes the neighborhood
-SHERYL CROW
Ach! Bum link: here is the real LoanCity doc link:
404 - File or directory not found.
Tanta, the first rule of posting blog entries on Calculated Risk is that each post must contain at least one graph... preferably with shaded recession bars.
"If you can't graph it, it ain't news."
There goes the neighborhood
With all these foreclosures, the neighborhood was already in trouble.
Congrats on the promotion, tanta. I hope your signing bonus was HUGE.
Do you take requests?
How about some thoughts on mortgage fraud? Specifically, guesses about the extent, the impact on the run-up of prices, the exposure of automated underwriting systems to fraud, and the fallout.
Alo, I'm more in the "beer mosey" than the "beer run" league these days, but by cracky I'm still in the game.
I must have missed your earlier post on the LoanCity thing. Attention span? Me?
What I see here is at minimum an operational competency problem. However, it's the kind of "incompetence" that usually comes about because the operation's cash flow is insufficient. So it's not really a reserves problem--it involves loans that LC sold to someone else. What it means is that LC "borrowed" money out of the accounts that it holds "in trust" (other states may call them "custodial accounts"; CA calls them "trust accounts"). These accounts for P&I (principal and interest payments) and T&I (taxes and insurance, or the "escrow" account) are supposed to have funds incoming from borrower payments, and outgoing only to 1) the noteholder (P&I) or the insurance company or tax authority (T&I). They never get "commingled" with the lender's own operating funds, because they are only held in trust (for the borrower or the noteholder; if you are still the noteholder because you haven't sold the loan yet, you have to pay yourself out of the P&I account and show a debit to that and a credit to your own (non-trust) account).
It looks like LoanCity was short of operating cash, so they "borrowed" money from the trust accounts. It further looks like they owed some coin to WAMU, not all of which was just P&I, but they used P&I funds to cover the debt (instead of part P&I and part LC's own money, as appropriate).
This is the kind of thing that happens at the "thinly capitalized" mortgage banker. Obviously, damn near anything can cause a business to have cash-flow problems, but it's certainly possible that they stem from the current mortgage malaise: either LC couldn't sell its loans fast enough to bring cash in, or it had to buy back loans with its limited cash and then "borrowed" to make payroll, or some combination thereof. Ugly situation.
Oh, Tanta, The New York Times has published an article in honor of your arrival as a star blogger, and it isn't about tantric sex, either.
It is an absolute, flat-out, five-star must read.
It even quotes Alan Greenspan!
ECONOMIX; Once Again, Debt Is Miscast As the Villain - NY Times
Don't worry, be happy!
Say, is this the swanky cocktail party I was hearing about down below? Mind if I hang around and have a few?
Congrats Tanta! Seems the old rule is running true and no good deed (or set of deeds) goes unpunished.
That being said, and speaking of (property) deeds, I'll second Wab's request. It would be good to get an insider's view of the extend and impact of mortgage fraud. In other words, is this the worst you have seen. And secondly, (and probably more importantly) how many other shoes are out there yet to drop or dominoes likely to get toppled by the sub-prime melt down that we lay people don't have a clue about. Any probability guesses of them dropping would also be helpful.
Welcome, Tanta, and all the best.
It be too early fer gin'n'tonics so I must conclude the purpose of the post is to make introductions all around (and then drink). I look forward to subsequent lessons on the inner workings.
Hi Tanta. I'm a long time lurker and I just wanted to say thanks for your posts so far! I'm in my mid-twenties and have been following along out of academic interest and wow, you're amazing (as is CR). Thanks for the education. Looking forward to more!
Welcome Tanta,
Fed unchanged, said "biggest risk is inflation will fail to moderate"
Translation: The lagging indicator data won't allow us to cut rates when we really want to, so the biggest risk is we can't jump in to save this economy with some hefty rate cuts.
Congrats Tanta, way to make a great blog even greater. Your posts are always an education. Only thing is now I'm not sure it will be needed for me to read through the comments section on every post, since so much more of your work will be in the main post. The type face is much nice in the main blog anyways. Well I'm sure I will continue to read the comments anyways.
Say, is this the swanky cocktail party I was hearing about down below? Mind if I hang around and have a few?
Did some one say 'SWANK'? I just LOVE swank....
I'm for anything that'll keep you healthy & off the streets, Mildred!
Fed unchanged? Such a surprise (yawn).
Interesting how they jawbone about the threat of inflation yet always ascribe it to wage pressure, capacity utilization, etc. Guess they don't want to spook anyone with the real threat, i.e., a "disorderly" decline in the dollar.
ahhh...more bong water to be savored...
nothing like more ultra-nerd treatises like the neg-am explanation, which causes one to run screaming from the house as the overall status of the market becomes crystal.
Fed stance: They can't move. It's blood soup either way. All they have is their hot air machine. In fact its blood soup where they are right now.
Who gave the keys to the riskloves in the market this afternoon?
Tanta, as a fellow "co-blogger" let me be the second (uh, fifteenth) to welcome you to this exclusive fraternity (hmmm, that's not quite right, oh well ...)
Kidding aside, your unique servicer perspective has proved invaluable to the housing bubble community, and I'm sure your "boss" has already discovered that tag-team blogging has great advantages over flying solo. Your rise to prominence is an inspiration to actual and potential "number 2s".
Oats,
I second the thought that the Fed is in Zugzwang, but are frozen because they need part of the market to assume they will ease, while another part needs to assume they will tighten, and a choice will falsify one audience's assumption or the other.
Hey dryfly ( struggling to heard over the cocktail party chatter, and so far off topic to be meaningless to everyone else )
Any validity to those rumors about a potential buy-out offer for Archer Daniels Midland? Or is it just jaw-boning to drive the price up?
Regards,
Any validity to those rumors about a potential buy-out offer for Archer Daniels Midland? Or is it just jaw-boning to drive the price up?
I have no idea... I thought the Andreas family would take it private in the 80s LBO craze... but I guess their logic then was 'Why buy the cow when the milk is free?' Has anything really changed?
Ask yourself... Would you buy ADM with Brazil hanging over its head like the Sword of Damocles? I wouldn't... at least not until ADM got a lot deeper into 'Brazil'. Was that what Bush was up to last week & we didn't get the memo? Opening the door for Cargill & ADM?
But then I never owned the stock & didn't pay much attention to it - just took their pay check... then later moved on.
What's your take?
"Blood soup" says Oats and I think the examination of that "inflation fear" bears this out. Nobody, but nobody thinks that wages are about to crash the economy which is still "growing" until the next GDP report and then it will be described as "showing promises of growth".
One item in that CPI list bothers me: OER currently at 3.6%, ie your house actually appreciated on the basis of rents you could extract from it --by 3.6% over last month. I need to see this data up close and personal...to square with other elements of my picture that suggest there were more rentable homes and likely less renters, given the real house builders have gone back to Mexico.
Now of course the price of gas went up more than 3.6%, but CPI core (and this B inflation) is not about energy which the Fed has no control over in any case.
So "Hold" until there is blood in the streets is how this looks to me.
Dryfly
Thanks! thats what I was wondering, when I saw these rumors: Who? By the way, IMHO the whole ethanol from corn for fuel thing is crazy shouldnt you be drinking the stuff rather than putting it in a gas tank.
Regards,
Why, here's to ADM, those agri-demons (lifts glass of EtOH, which is either ethanol or what in the innocent days of my youth was known as Everclear (the rotgut, not the band)).
I am collecting requests for future posts. All requests will be taken under advisement. In the old days, I'd have told you that I'll get to it when I damned well feel like it. 'Course, now that we've got a tip jar up, I feel obligated to amend that to "I'll get right on it." (If you think those two statements are equivalent, you've been in the corporate world too long.)
Anyway, I have a post on mortgage insurance (oh! the drama!) in the works, and I thought what I might do is post it later in the day, since these long posts push the short ones to the bottom of the page, and the short ones are often of interest because they're very current hot topics (like the EtOH at the Federal Reserve). You could think of it as a Bedtime Story, on the East Coast, or perhaps a Happy Hour Story on the West Coast.
Or, I could just post these things whenever I manage to finish them. Your thoughts?
Another reason I prefer CR to real life: people get promoted based on competence!
What A Concept.
shouldnt you be drinking the stuff rather than putting it in a gas tank.
LOL. Folks I knew at ADM did both... we made sweeteners (fructose) and ethanol in the same plant... people would sneak some of both home & mix the two with really strong instant ice tea... 'ADM Ice Tea Coolers'.
What is a bit scary was we were 'cracking the azeotrope' with benzene so there was always the risk a trace of benzene would remain in the final product. Oh well, life's full of risks.
If you ever read the book "Hitchhikers' Guide To The Galaxy" you might be familiar with the 'Pan Galactic Gargle Blaster'... one of the ingredients is 'Arcturan Mega-gin' which if not properly iced loses its 'benzene'. That was not missed by my engineering peers.
So we also referred to the 200 proof as 'Arcturan Mega-gin' or 'Mega-gin' for short.
Ah - the 80s. We were all going to die from nuclear war soon anyway. Whatever happened to that?
BTW - I can make a case why 'wet milling' corn to ethanol isn't nearly as big of a waste from a process & resource perspective - but thats a long tedious sermon for some other day.
We shall be happy to receive any of your offerings Tanta. "We are gathered here today" as the Queen says, but for better reasons than making sure she hasn't kicked the bucket.
i sold my house at the peak and used the proceeds to invest in girl scout cookies.
Tanta,
How 'bout a history piece on down payments? Obviously, "the reports of their demise have been greatly exaggerated".
2011: The Dawn Of A New Era
The Americans withdraw from Iraq. Soon after, the Middle East collapses into turmoil as a regional war breaks out between Sunnis and Shias. Back at home, America has been thrown into a severe recession as many banks have become insolvent and are forced into a government credit rationing program. Inflation runs rampant across the globe as an energy dependent world attempts to make the transition from oil. Amidst the chaos, a bill passes allowing non-residents eligibility for the American presidency. The Neo-Populist, Schwarzenegger, is leading in the polls by a wide margin, leaving little hope for the UberNerd Party candidate, known only as The Tantanator.
Credit Slips has a piece on one-way arms worth reading.
Credit Slips
Conan might be an appropriate choice, given what the world is supposed to look like in a (so-called) "post carbon society".
. . . She took her Blogger sword in hand,
Long time the Arnold foe she sought.
So rested she by the ORE
And stood a while, in thought.
And as, in Bloggish thought she stood
The Neo-Pop, with eyes aflame,
Came woofling through the polling wood
And struck a pose and flexed his deltoids and otherwise became very annoying as he came.
One-two! One-two! And through and through
The Blogger Blade went snicker-snack.
She left him dead and with his head
She went commenting back.
And hast thou slain the Arnold Thing?
Come to my arms, my beamish nog!
Oh frabjous day! Calloo! Callay!
He chortled on his blog.
Hi Tanta,
Congrats ! Love your writing, and don't lose your keys.
Looking forward to your precise, fact filled posts on the housing bust. I'll enjoy referencing them on my site/blog.
Hmm, mortgage insurance coming up next - look forward to that. As there are so many MBO/MBSs out there with "insurance", I hope you'll explain to all us out here where MGIC and the others are going to get the funds to pay all those claims. Or am I being too optimistic?
Tanta, as long as you keep chortling....
CR, good move!
Calmo, "promises of growth" bwahahhahahhah!!!
I'm just not up to this crackling cocktail conversation ... but welcome, Tanta, from another newbie blogger!
My wish is for more quantitative stuff on (1) What fraction of recent loans are at risk of defaulting in coastal southern California, and (2) What fraction of potential buyers are now gone from the buyer pool with the new lending standards?
I used to own some mortgage reits and made some money there in times past. Got scared early and left before the present difficulties. How does one smell BS in the conference calls, quarterly reports, and other assorted info available to the know-nothing investor such as myself?
What are red flags I could be on the lookout for in lenders generally?
Would never think about getting snotty with you..... still trying to recover from the last time!
uff at first i thought someone hacked the blog and in reality its Tanta throwing a party
Good new post about my recent question here from Sacramento Land(ing). Excerpts:
From Inman News
" ... tightening of loan underwriting standards now underway is likely to push demand for homes down 15 percent and depress prices by 5 percent this year.
That's the rather gloomy forecast by analysts who follow the stocks of major home builders for Banc of America Securities LLC. ...
If all lenders stopped making zero- or near-zero-down loans altogether that could cut demand for housing by 22 percent."
there are some discussions on appraisal fraud on appraisersforum.com.I'll be at a seminar on mortgage fraud tomorrow,greg Harding,chief enforcment officer for Cal-OREA will be speaking.Identity theft is the coming thing,get a name and license # from the state,download a standard URAR form,fill it out,sign and add the particular appraisers license #,and hey presto! saves the appraisal fee(bribe?) too!since you are already commiting multiple felonies (wire fraud,mortgage fraud,conspiracy)why not keep a little more jingle in you pocket.
As long as you are taking special requests, can you speak to the credibility of the two premier credit rating agencies S&P and Moody's as it relates to MBS. Is Fitch better?
I had emailed CR a while ago on an observation I made that PIMCO is hiring Fitch to help evaluate "quality" (see news on the PCM Fund - a closed-end bond fund holding primarily commericial MBS). Also, there was a Gretchen Morgenson write up on NYT couple of weeks ago when the MBS issues became widely know which talked of a spat between the rating agencies.
Godalmighty! I go out to do some shopping and Tanta has 'splained the whole thing already -- man you drive this thing fast!
PS: My Suggestion: Ms. Tanta goes to Washington -- Tanta's fantasy mortgage-industry legislation so we don't get fooled again. Something in a carpetbomb-friendly format so we can email all of our public servants. Said it before, but I do think you might have a talent for producing sound public policy...just sayin....
How long until vacant builder spec homes become pot grow houses to pay the loan?
Add a congrats from here also.
Uncork the good Pinot Noir for you.
My interests are a bit more varied in financial and business than real estate concentration historically here.
1) Some MBS, S&P, Moody's discusssion would be interesting. Seems to me became a business to say as paid and collect fees.
2) Am interested and others might be too as to whether when this shakes out, most of these contracts will be set aside behind the scenes and discounted, then sold to investment houses for the big profits and maybe, negotiating discounts to buyers who live in residence (excluding flippers, second homes) Also, returning to loan cap fig. and taxing vs. a free $500k of the top)
2) Am v. interested and other might be too in the of these large Private Equity Groups putting together packages of billions and buying up all these companies.
3) The billions of USD, treasury debt, and Agency bonds in hands of key foreign countries, effects and consequences on U.S. is of great concern to me, maybe others also.
I would like to hear your thoughts on the nonexistant equity ratios that we seem to have for reserves- Basel II?
Conversely, I will generously contribute to a discussion on Herstatt risk, should we ever decide it becomes necessary. Of course, that discussion is theorhetical until realized;-}
Like our subprimes used to be about the hidden tsunami. Kinda looks like the ocean is retreating right now and a whole bunch of folks are running out onto the sands....
Tanta, enjoy our attention, for you have been prescient on this one!!!
Next act will be commercial...and therein lies some bank exposure...
Looks like we aren't the only ones with 'weak regulators'...
Bloomberg: China Regulator Is Paper Tiger as Banks Fund Stocks (Update1)
Bloomberg: Corruption in Chinese Banks to Go On for Decades, Auditor Says
From that last one... opening paragraphs:
March 22 (Bloomberg) -- China's financial watchdog, Auditor- general Li Jinhua, has a mixed message for the investors who've spent $74 billion on shares in his country's banks since 2001.
The good news, says the man nicknamed ``Iron Face'' for his perceived incorruptibility and because he rarely smiles in public, is that his campaign against corruption, embezzlement and waste has helped to improve banking practices in the past seven years.
The bad news: It may be a couple of decades more before the banks' management is acceptable by Western standards.
It would be naive to think that once these state-owned banks are listed publicly they won't suffer any operational problems,'' says Li, 63, whose position at the head of China's National Audit Office gives him cabinet minister rank.It might take a whole generation to get these banks into reasonable shape.''
Good thing the Chinese are patient.
when do these lenders cut off subprime? how about alta?
Tanta, Could you comment on this perspective on the potential impact of adjustments to the FHA loan program? Thanks for all your insights.
"Senate Banking Committee this morning hears from industry and
regulators on subprime lending.
We see expansion of the FHA mortgage program as a solution [to the subprime mortgage problem] and
expect Congress to act this year."
the beauty of this site is it's pithy analysis. as much as i like tanta's enteries, i don't have time to read them.