Calling the Plunge Proetection Team and the Knights Templar, the Plunge Protection team and the Knights Templar...Jimmy likes Claire's hat...Jimmy Likes Claire's hat
Do you think the PPT might get involved in this Banker? I thought they were only supposed to be called out in cases of financial meltdown. Or do you think the bond market liquidity crunch might lead to something that qualifies?
Banker, now that I see the story (added), it was only 1.6% of their 2006 loan volume - maybe $6+ Billion. But this probably impacts the marginal borrower.
We pretty clearly have significant issues in the credit markets. The only reason not to label it a credit crunch yet is duration. IIRC, in 1998, things got awfully cold for about four months then clicked back into place, well, because they did. Any views on how long this has to continue to have a significant economic impact?
I think what happens when things get really weird (and we are still not there today) is the Fed makes six or seven calls to Blankfein, O'Neal, Mack, Prince etc and makes cooing noises.
If anybody needed a gauge for how bad the credit market is getting:
NEW YORK, July 26 (Reuters) - Gazprom postponed on Thursday the expected sale of its 30-year benchmark dollar Eurobond as emerging markets sold off.
"It is not going to price today," a market source said in London, without giving details.
The Russian gas export monopoly had already scrapped on Wednesday its plans to issue 10-year paper as part of the same deal, due to volatile market conditions.
I sort of agree with you, but being a bit concerned about the bond freeze-up was wondering if you had more perspective than me, and your PPT comment allowed me to ask.
While I think the Fed and Administration have some deep contacts with industry leaders and Wall Street, I don't think that these guys are any more organized than being on a few advisory committees. And even if they were organized, I wouldn't have real high hopes for what they could accomplish in face of a hurricane force financial headwind. Even back in the days of the 1900's before the Fed, the unofficial plunge protection teams of J. P. Morgan and friends had difficulty damping out panics and didn't always succeed. I suspect that a modern equivalent wouldn't be able to do any better when faced with an international based market. Heck I even have doubts that the Fed could do it even with their ability to print the cash.
"JP Morgan Has tightened credit standards, including making adjustments to acknowledge declining home values in certain markets and reducing the use of high loan-to-value ratios and stated-income products"
Should we closee the barn door--wait where is the cow?
Watch for WestLB--German Bank. There are problems a-foot
I don't know what is more disturbing: the potential existence of a PPT that propped markets up the past weeks OR the fact that the wonderful efficient markets didn't see this coming.
"Credit-default swaps based on 10 million euros of the debt of WestLB, Germany's third-biggest state lender, surged 23,000 euros to 58,000 euros, according to data compiled by CMA Datavision in London."
arbogast, I thought it was, "the chair is against the wall."
And by the way, John has a long moustache.
NB: Special edition DVD of Red Dawn was just reviewed in theis week's The Onion AV Club (non-satirical, if funny and often bitingly critical) arts/entertainment review portion of the legendary satirical newspaper.
Banker, first, from the research, I recently read (I'll try to find the paper) that most credit crunches are sector specific and are based on standards, not price.
This points out a few misconceptions worth repeating:
1) Rates are too low for a credit crunch. Nope, it's happened before with rates even lower.
2) a credit crunch impacts all borrowers. Nope. A credit crunch is usually sector specific.
3) a credit crunch happens when rates increase significantly. Nope. A credit crunch happens when standards tighten - like with what is happening with mortgage loans and LBO loans (those convenant lite loans are going away).
So, to answer your question, I think this will start having an economic impact now. And if the corporate debt market stays tight for another 30 or 60 days, the odds of a recession increase significantly (something I'm looking at right now).
Owners oust WestLB boss after trading botch:
WestLB's owners ousted the bank's chief executive and another top executive after Germany's financial watchdog told them bank management had hidden massive trading problems.
"The up-until-now chief executive Thomas Fischer and Matthijs van den Adel, formerly chief risk officer and director in charge of labour, have been told to step down by the supervisory board," the bank said in a statement.
Earlier this year a series of trading blunders cost the state lender at least 240 million euros ($331 million), wiping about a third off its annual profit.
Bafin and state prosecutors in April launched a probe of WestLB. The evidence recently uncovered showed that WestLB's management covered up information about the trading problems, two sources familiar with the situation had told Reuters.
Fischer, the former boxer who grabbed the limelight during his career with colourful suits and long speeches, will leave the bank immediately. Van den Adel, will also clear his desk at WestLB's Duesseldorf headquarters.
DEJA VU
The episode echoes that of a similar debacle at the state-owned bank four years ago.
Then, Bafin had swooped when WestLB owned up to heavy losses in a investment arm run by the London banker Robin Saunders. The problems forced the exit of then Chief Executive Juergen Sengera and almost toppled the bank.
Once again, WestLB has racked up losses through its involement in risky business.
It placed a series of botched bets on shares in carmakers Volkswagen and BMW and in retailer Metro and now faces a bill, said one source, of 300 million euros. Some reports put the damage much higher.
Since the problems came to light, WestLB boss Fischer has come under heavy fire.
He labelled the losses "sabotage" and blamed rogue traders and others for taking advantage of the bank when its trading positions were leaked.
But it was not the losses that caught Bafin's attention. The watchdog believed that the full extent of the problems were hidden from the bank's non-executive supervisors.
The bank's owners are in talks about selling the troubled lender to Stuttgart-based state rival Landesbank Baden-Wuerttemberg. On Thursday, WestLB Chairman Rolf Gerlach said the bank wanted to play an active role in consolidation. --
Financial Times, today:
Junk-rated companies that have tapped generous loan markets in recent years could soon face funding difficulties....more than half of the $1,300bn leveraged loans market in the US will need to be refinanced in the next three years.....about $680bn of loans will mature between 2008 and 2011....Many highly leveraged firms rely on their ability to roll over existing loan debt into new loans rather than repay it when it matures...But refinancing plans could run into difficulty....leveraged loan sales could be hamstrung by credit market conditions and lack of investor appetite.... a funding dilemma in coming years because it was hard to predict the behaviour of non-traditional investors and demand from the collateralised loan obligations market....high-yield companies that need refinancing could struggle. That could contribute to higher defaults, particularly given that 56 per cent of leveraged loan debt maturing after 2007 is rated in the riskiest tier below B+....liquidity can be of significant importance in maintaining solvency and avoiding default, the Fitch report says.....many loans that have been issued in recent years lack traditional investor protections, which means that when companies run into trouble, investors will have fewer warning signals before an eventual default
(end quote)
"Many highly leveraged firms rely on their ability to roll over existing loan debt into new loans rather than repay it when it matures...But refinancing plans could run into difficulty"
Companies signed up for 2/28 hybrids too? Dang those things were all over the place.
I'm sorry, "But" it's hard for me to believe that the default swap market thinks there actually going to be paid off with the upcoming credit event's...
I hear a lot of But's coming
Correct me if I'm wrong, but isn't the entire idea of subprime that you charge them more interest because they are higher risk? Isn't the whole subprime equity tranche idea discredited by now? Isn't making the teaser rate fixed to 5 years really just ignoring the problem that we are in?
Sometimes it is better to be early, and get out with a lot of money and miss that last 5%. My father learned that lesson in 99/00- he got out in late 99, and for six months I had to listen to his carping about how the market is still going higher.
Then it fell, and all of a sudden I was his genius son. Nothing grows to the moon, and anyone who believes it does deserves what they get.
Real Estate was full of these morons, and now we get the reality of the situation leading to an overreaction adjustment. First we must have near total despair for a bottom to this, a situation that hasn't even fully dropped to reflect current market conditions.
Of course, the yield on the thirty year T-bond has dropped to 4.91- so now we should have a rally for the five people who can qualify for a thirty year fixed rate mortgage.
Well, someday this war's gonna end...but not with LEND.
Someone please explain to me how stocks are "cheap" when market PEs are 17-18 based on Es that will be falling in the upcoming recession??? Plus let's not forget that historical avg PEs are around 14.
I'm so tired of hearing about how the stock market is cheap based on fundamentals. Based on the fundamentals of a rapidly declining economy and PEs that are above historical averages, I see stocks as having a good ways to fall before they become "cheap."
Mayby you shoulda said cut losses (almost) to 200 by 3:30, then backed down again. We are having a -2.5% day instead of a -3% day, but that follows a -2% day on Tuesday and a -1.2% day on Friday. If we have another +0.5% day tomorrow, as we seem to be having every other day right now, we'll only be down 4% in the space of 6 sessions. Hardly nothin'.
I was trying to be funny. I don't think the PPT exists.
It was freaking hilarious.
I had images of black and white WWII vintage movies... or maybe Dr Strangelove... all we needed was a reference to 100% grain alcohol and 'precious bodily fluids'... maybe after the close.
There may or may not be a PPT - but IF they exist today's little blip wouldn't get them off the golf course or the beach.
but IF they exist today's little blip wouldn't get them off the golf course or the beach.
Paulson was quite visible today; you can't say he wasn't playing his part. He looked quite panicked, actually.
Uh, maybe you guys forgot about the infamous 'glitch' from February's selloff. If these 'glitches' continue on every selloff, the outsiders might start to get a little suspicious.
When it comes to the phony markets, be it stock or housing prices, that are propped up on debt and BS, I feel a quote from Megatron is order: "Fall! FALL!"
Look for more lenders to exit the correspondent business in sub-prime and alt-a. There is too much risk on the backside to allow a broker to do their own deals. No amount of due-dilly done by the lender short of fully reprocessing the loan be enough to mitigate the risk of what you really have. YSP adds insult to the injury.
The safest way for a lender to wade these waters without hitting the drop-off is to originate, process, underwrite and fund every deal. Lender orders the appraisal, not the LO in the broker shop.
"The safest way for a lender to wade these waters without hitting the drop-off is to originate, process, underwrite and fund every deal. Lender orders the appraisal, not the LO in the broker shop."
No way does the broker get squeezed out altogether. Those that actually provide rate shopping and consulting services will continue to be needed. It's the rogues whose only value-added is to facilitate fraud that are in trouble as prevention measures are escalated.
BTW, it's an absolute joke that appraisal procurement is left to the broker. This is one moral hazard that simply must go away. The lender that wins the "competition" needs to be in charge of the valuation. Problem I foresee there is that then that part of the equation will be as important as the rate quote when shopping from one lender to the next. But I guess that would be the lesser of two evils when compared to the gross misapplication of appraisal valuation that's occurring under the current system.
"Bear Stearns Cos. said late Thursday that it seized assets from the High-Grade Structured Credit Strategies Fund. The bank lent $1.6 billion to the hedge fund earlier this month after it suffered huge losses, partly from trading in the subprime mortgage market. On Thursday Bear said that $1.3 billion of the loan remained. Bear took control of the assets because the fund couldn't meet its margin obligations as part of the loan agreement, the bank explained......"
Was this the one that was supposedly worth 9 cents on the dollar a few days ago?
LawFitz - I agree with your sentiments. Brokers are a good thing to have in the marketplace to keep the direct lenders honest when it comes to costs and rates. Rogue brokers are a problem, but so are the well-intentioned that are inexperienced or clueless. Correspondents, for the most part, are a huge risk in today's market.
And why lenders are still allowing brokers to order appraisals is just another indicator of how clueless the lenders are. Fed's "guidance" is lacking here too....all the Plain English disclosures in the world are worthless if you have a bad appraisal. And the loss on a loan is rooted more in the initial appraised value than the toxic rate/terms of the deal.
So My question is what needs to be done so the Artery does not burst and we bleed to death...anyone?
We all know America is screwed we know this...but Europe is also going to have a good screwing herself....one big Financial Orgasm.
This will be a Global Incident with the Debt Ridden Richest country in the world the USA leading the way.
Tin foil hat ehh! maybe but it seems things are chugging along toward a 1987 style crash...if of course my nose hair was speaking to me correctly.
Calling the Plunge Proetection Team and the Knights Templar, the Plunge Protection team and the Knights Templar...Jimmy likes Claire's hat...Jimmy Likes Claire's hat
Banker,
You forgot, "The chair is against the door."
Okay, solons, which movie is, "The chair is against the door," from?
An extra MacCoupon to the person who correctly identifies the androgynous heroine.
Do you think the PPT might get involved in this Banker? I thought they were only supposed to be called out in cases of financial meltdown. Or do you think the bond market liquidity crunch might lead to something that qualifies?
Banker, now that I see the story (added), it was only 1.6% of their 2006 loan volume - maybe $6+ Billion. But this probably impacts the marginal borrower.
Best Wishes.
CR,
We pretty clearly have significant issues in the credit markets. The only reason not to label it a credit crunch yet is duration. IIRC, in 1998, things got awfully cold for about four months then clicked back into place, well, because they did. Any views on how long this has to continue to have a significant economic impact?
Andrew,
I was trying to be funny. I don't think the PPT exists.
Banker,
You REALLY don't think the Fab Four exists?
InOrlando,
The Beatles used to exist, but no more.
I think what happens when things get really weird (and we are still not there today) is the Fed makes six or seven calls to Blankfein, O'Neal, Mack, Prince etc and makes cooing noises.
just print more money ben!
A repost from another message thread:
If anybody needed a gauge for how bad the credit market is getting:
NEW YORK, July 26 (Reuters) - Gazprom postponed on Thursday the expected sale of its 30-year benchmark dollar Eurobond as emerging markets sold off.
"It is not going to price today," a market source said in London, without giving details.
The Russian gas export monopoly had already scrapped on Wednesday its plans to issue 10-year paper as part of the same deal, due to volatile market conditions.
With all of the banks closing their subprime divisions, who is going to answer the phones when the poop really hits the fan as rate resets peak in H2?
I'm sure glad this subprime thing is contained. I would be worried if it wasn't.
I sort of agree with you, but being a bit concerned about the bond freeze-up was wondering if you had more perspective than me, and your PPT comment allowed me to ask.
While I think the Fed and Administration have some deep contacts with industry leaders and Wall Street, I don't think that these guys are any more organized than being on a few advisory committees. And even if they were organized, I wouldn't have real high hopes for what they could accomplish in face of a hurricane force financial headwind. Even back in the days of the 1900's before the Fed, the unofficial plunge protection teams of J. P. Morgan and friends had difficulty damping out panics and didn't always succeed. I suspect that a modern equivalent wouldn't be able to do any better when faced with an international based market. Heck I even have doubts that the Fed could do it even with their ability to print the cash.
I know I keep talking about HTR, but check it out.
It is getting CREAMED. Double creamed.
All MBS stuff. Leveraged.
It is one super dead canary in a coal mine.
"JP Morgan Has tightened credit standards, including making adjustments to acknowledge declining home values in certain markets and reducing the use of high loan-to-value ratios and stated-income products"
Should we closee the barn door--wait where is the cow?
Watch for WestLB--German Bank. There are problems a-foot
I don't know what is more disturbing: the potential existence of a PPT that propped markets up the past weeks OR the fact that the wonderful efficient markets didn't see this coming.
You mean these problems Lawyer L?
"Credit-default swaps based on 10 million euros of the debt of WestLB, Germany's third-biggest state lender, surged 23,000 euros to 58,000 euros, according to data compiled by CMA Datavision in London."
Goldman Sachs, Bear Stearns Bond Risk Soars, Credit Swaps Show - Bloomberg.com
arbogast, I thought it was, "the chair is against the wall."
And by the way, John has a long moustache.
NB: Special edition DVD of Red Dawn was just reviewed in theis week's The Onion AV Club (non-satirical, if funny and often bitingly critical) arts/entertainment review portion of the legendary satirical newspaper.
Banker, first, from the research, I recently read (I'll try to find the paper) that most credit crunches are sector specific and are based on standards, not price.
This points out a few misconceptions worth repeating:
1) Rates are too low for a credit crunch. Nope, it's happened before with rates even lower.
2) a credit crunch impacts all borrowers. Nope. A credit crunch is usually sector specific.
3) a credit crunch happens when rates increase significantly. Nope. A credit crunch happens when standards tighten - like with what is happening with mortgage loans and LBO loans (those convenant lite loans are going away).
So, to answer your question, I think this will start having an economic impact now. And if the corporate debt market stays tight for another 30 or 60 days, the odds of a recession increase significantly (something I'm looking at right now).
Best Wishes.
Andrew-
Ahh, WestLB - Robin Saunders redux!
Owners oust WestLB boss after trading botch:
WestLB's owners ousted the bank's chief executive and another top executive after Germany's financial watchdog told them bank management had hidden massive trading problems.
"The up-until-now chief executive Thomas Fischer and Matthijs van den Adel, formerly chief risk officer and director in charge of labour, have been told to step down by the supervisory board," the bank said in a statement.
Earlier this year a series of trading blunders cost the state lender at least 240 million euros ($331 million), wiping about a third off its annual profit.
Bafin and state prosecutors in April launched a probe of WestLB. The evidence recently uncovered showed that WestLB's management covered up information about the trading problems, two sources familiar with the situation had told Reuters.
Fischer, the former boxer who grabbed the limelight during his career with colourful suits and long speeches, will leave the bank immediately. Van den Adel, will also clear his desk at WestLB's Duesseldorf headquarters.
DEJA VU
The episode echoes that of a similar debacle at the state-owned bank four years ago.
Then, Bafin had swooped when WestLB owned up to heavy losses in a investment arm run by the London banker Robin Saunders. The problems forced the exit of then Chief Executive Juergen Sengera and almost toppled the bank.
Once again, WestLB has racked up losses through its involement in risky business.
It placed a series of botched bets on shares in carmakers Volkswagen and BMW and in retailer Metro and now faces a bill, said one source, of 300 million euros. Some reports put the damage much higher.
Since the problems came to light, WestLB boss Fischer has come under heavy fire.
He labelled the losses "sabotage" and blamed rogue traders and others for taking advantage of the bank when its trading positions were leaked.
But it was not the losses that caught Bafin's attention. The watchdog believed that the full extent of the problems were hidden from the bank's non-executive supervisors.
The bank's owners are in talks about selling the troubled lender to Stuttgart-based state rival Landesbank Baden-Wuerttemberg. On Thursday, WestLB Chairman Rolf Gerlach said the bank wanted to play an active role in consolidation. --
Countrywide earning call transcript:
Countrywide Financial Q2 2007 Earnings Call Transcript -- Seeking Alpha
Combined with their presentation on credit quality:
http://about.countrywide.com/presentations/docs/2Q07%20Earnings%20Supplement%20FINAL.pdf
I think they are going to regret "grabbing market share" at the start of a downturn.
First Franklin cuts max CLTV?
Mortgage Grapevine: First Franklin's max ltv cut to 90%
I've been hearing a rumor this was going to happen for weeks.
Sector specific?
Gazprom
Chrysler
First Data
US Foodservice
Dollar General
Alliance Boots
So asides from RE, auto, energy, food and retail, it's contained?
Financial Times, today:
Junk-rated companies that have tapped generous loan markets in recent years could soon face funding difficulties....more than half of the $1,300bn leveraged loans market in the US will need to be refinanced in the next three years.....about $680bn of loans will mature between 2008 and 2011....Many highly leveraged firms rely on their ability to roll over existing loan debt into new loans rather than repay it when it matures...But refinancing plans could run into difficulty....leveraged loan sales could be hamstrung by credit market conditions and lack of investor appetite.... a funding dilemma in coming years because it was hard to predict the behaviour of non-traditional investors and demand from the collateralised loan obligations market....high-yield companies that need refinancing could struggle. That could contribute to higher defaults, particularly given that 56 per cent of leveraged loan debt maturing after 2007 is rated in the riskiest tier below B+....liquidity can be of significant importance in maintaining solvency and avoiding default, the Fitch report says.....many loans that have been issued in recent years lack traditional investor protections, which means that when companies run into trouble, investors will have fewer warning signals before an eventual default
(end quote)
Contained, just a bigger container required.
"Many highly leveraged firms rely on their ability to roll over existing loan debt into new loans rather than repay it when it matures...But refinancing plans could run into difficulty"
Companies signed up for 2/28 hybrids too? Dang those things were all over the place.
Is there any clearer sign that a market has peaked than private equity firms going public?
Those PE IPOs were the horsemen of the apocalpyse.
Into the Woods: Mortgage Credit Quality, Its Prospects, and Implications :: Moody's Economy.com
Anyone got an extra 6k to drop on the new Moody's study of mortgage credit quality?
Mortgage delinquencies could soar - Moody's Economy.com - Jul. 26, 2007
I'm sorry, "But" it's hard for me to believe that the default swap market thinks there actually going to be paid off with the upcoming credit event's...
I hear a lot of But's coming
Correct me if I'm wrong, but isn't the entire idea of subprime that you charge them more interest because they are higher risk? Isn't the whole subprime equity tranche idea discredited by now? Isn't making the teaser rate fixed to 5 years really just ignoring the problem that we are in?
The dollar just turned down again today and seems to continue dropping:
INO Equities Stocks Indexes - U.S $ INDEX (NYBOT:DX) Price Chart and Quote
Why do I get the feeling that the Dow will be down 400 @ 3pm, then cut the losses by 200 by the close?
PPT folks have no ammo left..paulson is helpless. let nature take its own course...
BX is @23..RIP
what is the corporate debt spread now?
Alec,
By one measure of 'market fear', the TRIN index, the Dow could very possibly close at 13,000.
Banker, can you feel the panic now?
Sometimes it is better to be early, and get out with a lot of money and miss that last 5%. My father learned that lesson in 99/00- he got out in late 99, and for six months I had to listen to his carping about how the market is still going higher.
Then it fell, and all of a sudden I was his genius son. Nothing grows to the moon, and anyone who believes it does deserves what they get.
Real Estate was full of these morons, and now we get the reality of the situation leading to an overreaction adjustment. First we must have near total despair for a bottom to this, a situation that hasn't even fully dropped to reflect current market conditions.
Of course, the yield on the thirty year T-bond has dropped to 4.91- so now we should have a rally for the five people who can qualify for a thirty year fixed rate mortgage.
Well, someday this war's gonna end...but not with LEND.
Everyone is f*cked. Lets all get drunk...
By one measure of 'market fear', the TRIN index, the Dow could very possibly close at 13,000.
There'd have to be a bomb go off on Air Force 2 for it to drop another 400 pts in 75 minutes, crazy naked fear.
I've just seen the 3pm bounce happen repeatedly during these scenarios since the credit storm began. It'll be interesting to see how it plays out.
Although things are getting a bit nutty. The 2:37pm The Street.com tick for the NAS:
Advancing\t222,033,000
Declining\t2,255,341,000
Unchanged\t-2,453,854,000
Total:\t \t23,520,000
Gary,
I'm getting old. Fast. Yes, "the wall".
You didn't name the androgynous female star, but I would have to look it up on IMDB anyway.
Someone please explain to me how stocks are "cheap" when market PEs are 17-18 based on Es that will be falling in the upcoming recession??? Plus let's not forget that historical avg PEs are around 14.
I'm so tired of hearing about how the stock market is cheap based on fundamentals. Based on the fundamentals of a rapidly declining economy and PEs that are above historical averages, I see stocks as having a good ways to fall before they become "cheap."
"Someone please explain to me how stocks are "cheap""
Stocks will be 'cheap' as long as stockbrokers make money on the churn. Same as with realtors.
alec,
Mayby you shoulda said cut losses (almost) to 200 by 3:30, then backed down again. We are having a -2.5% day instead of a -3% day, but that follows a -2% day on Tuesday and a -1.2% day on Friday. If we have another +0.5% day tomorrow, as we seem to be having every other day right now, we'll only be down 4% in the space of 6 sessions. Hardly nothin'.
Trading curbs in, everybody in the White House financial team will be lying thru their teeth on CNBC tomorrow morning:
Fear is in the air, the unconvincing performance tomorrow on TV should put the market down the chute.
Do you think that the Duke brothers are trying to get a look @ tomorrows GDP report?
I can take contest for new home sales for 2007: 698 K.
I was trying to be funny. I don't think the PPT exists.
It was freaking hilarious.
I had images of black and white WWII vintage movies... or maybe Dr Strangelove... all we needed was a reference to 100% grain alcohol and 'precious bodily fluids'... maybe after the close.
There may or may not be a PPT - but IF they exist today's little blip wouldn't get them off the golf course or the beach.
160+ up from the lows, climbing from 15 minutes before 3. I guess the only hiccup was that too may buyers jammed the switchboard between 2:55 - 3:15.
I think the containment vessel sprung a leak today....
but IF they exist today's little blip wouldn't get them off the golf course or the beach.
Paulson was quite visible today; you can't say he wasn't playing his part. He looked quite panicked, actually.
Uh, maybe you guys forgot about the infamous 'glitch' from February's selloff. If these 'glitches' continue on every selloff, the outsiders might start to get a little suspicious.
Or maybe they already are.
China should be interesting tonight.
China should be interesting tonight.
Yup - Japan too.
When it comes to the phony markets, be it stock or housing prices, that are propped up on debt and BS, I feel a quote from Megatron is order: "Fall! FALL!"
Look for more lenders to exit the correspondent business in sub-prime and alt-a. There is too much risk on the backside to allow a broker to do their own deals. No amount of due-dilly done by the lender short of fully reprocessing the loan be enough to mitigate the risk of what you really have. YSP adds insult to the injury.
The safest way for a lender to wade these waters without hitting the drop-off is to originate, process, underwrite and fund every deal. Lender orders the appraisal, not the LO in the broker shop.
Know your customer and you know your risk.
Contained, just a bigger container required.
Would Lake Erie suffice?
"There'd have to be a bomb go off on Air Force 2 for it to drop another 400 pts in 75 minutes, crazy naked fear."
Heck, a bomb going off on Air Force 2 would be a good excuse for a heck of a rally, even better if it had a mid-air collision with Air Force One
"The safest way for a lender to wade these waters without hitting the drop-off is to originate, process, underwrite and fund every deal. Lender orders the appraisal, not the LO in the broker shop."
No way does the broker get squeezed out altogether. Those that actually provide rate shopping and consulting services will continue to be needed. It's the rogues whose only value-added is to facilitate fraud that are in trouble as prevention measures are escalated.
BTW, it's an absolute joke that appraisal procurement is left to the broker. This is one moral hazard that simply must go away. The lender that wins the "competition" needs to be in charge of the valuation. Problem I foresee there is that then that part of the equation will be as important as the rate quote when shopping from one lender to the next. But I guess that would be the lesser of two evils when compared to the gross misapplication of appraisal valuation that's occurring under the current system.
"Bear Stearns Cos. said late Thursday that it seized assets from the High-Grade Structured Credit Strategies Fund. The bank lent $1.6 billion to the hedge fund earlier this month after it suffered huge losses, partly from trading in the subprime mortgage market. On Thursday Bear said that $1.3 billion of the loan remained. Bear took control of the assets because the fund couldn't meet its margin obligations as part of the loan agreement, the bank explained......"
Was this the one that was supposedly worth 9 cents on the dollar a few days ago?
Can I put soft-dollar money in the tip jar?
LawFitz - I agree with your sentiments. Brokers are a good thing to have in the marketplace to keep the direct lenders honest when it comes to costs and rates. Rogue brokers are a problem, but so are the well-intentioned that are inexperienced or clueless. Correspondents, for the most part, are a huge risk in today's market.
And why lenders are still allowing brokers to order appraisals is just another indicator of how clueless the lenders are. Fed's "guidance" is lacking here too....all the Plain English disclosures in the world are worthless if you have a bad appraisal. And the loss on a loan is rooted more in the initial appraised value than the toxic rate/terms of the deal.
So My question is what needs to be done so the Artery does not burst and we bleed to death...anyone?
We all know America is screwed we know this...but Europe is also going to have a good screwing herself....one big Financial Orgasm.
This will be a Global Incident with the Debt Ridden Richest country in the world the USA leading the way.
Tin foil hat ehh! maybe but it seems things are chugging along toward a 1987 style crash...if of course my nose hair was speaking to me correctly.