ICSC-UBS
Chain-store sales remained soft in the Oct. 20 week according to ICSC-UBS's same-store tally which came in at a year-on-year rate of 2.2 percent vs. the prior week's 2.5 percent pace. The week-to-week decline, perhaps skewed by calendar effects, showed a very steep decline of 1.5 percent. The report said warm weather continues to hurt demand for seasonal goods. The week's readings did in fact shake up the outlook of Michael Niemira who compiles the results and sees only a 2.0 percent rise for the month of October, down from his earlier forecast for 2.5 percent.
Redbook
Chain-store sales are definitely soft. Chain stores have been complaining of low traffic and poor sales for weeks, and today's chain-store reports from ICSC-UBS and now Redbook are showing year-on-year same-store growth under 2.5 percent. Redbook's rate for the Oct. 20 week, at 2.3 percent, was 1 tenth above ICSC-UBS's number. Watch for company statements from chain stores and of course for consumer sentiment data on Friday's calendar.
Countrywide Announces a $16 Billion Comprehensive Home Preservation Program
CALABASAS, Calif., Oct. 23 /PRNewswire/ -- Countrywide Financial Corporation today announced a comprehensive home preservation program to reach out to borrowers at-risk of default. Countrywide will launch an outbound calling initiative to refinance or modify up to $16 billion of Countrywide loans for borrowers who are facing an adjustable-rate mortgage reset through the end of 2008.
From the BankUnited release: Based on recent appraisals, the current weighted average loan-to-value of the loans in foreclosure as of Sept. 30, 2007, was approximately 86%, including the effects of mortgage insurance.
Later they say that the average LTV at inception for residential portfolio was 74.3%. Their operational area is hit hard by falling prices, so the 86% reflects not just neg-am but falling prices.
NPA/Total assets ratio moved from .16% to 1.39% over the course of the year. Closing allowance for loan loss at $58.6 million compared to starting ALL of $36.4 million. Commercial Q4 net chargeoff of 2.1 million, residential net chargeoff of 2.9 million.
Stating LTVs "including mortgage insurance" is a sure sign of trouble.
It was one of the first things I noticed about Luminent. Remember them?
Really, it's a worthless disclosure. Since they don't tell you what the average MI coverage is, you can't back into LTVs that you can compare across the industry.
Yeah. Not one "pre-net" disclosure. Still, they used MI over 80%. If most of their neg-ams started under 80%, they don't have much MI.
I really loved the part where they tout being a Florida bank as an asset. Also, fees on deposits and loans are up 28%. Very interesting - I wonder how much of that is late fees?
Average 12 month list price decline at the 50th percentile is 15% in Cape Coral and 12% in Miami. However, prices have been falling for longer than 12 months. I have real trouble figuring out how they get 86%. If you try to clear you usually have to offer 10% below. Maybe they are doing better at auctions, or maybe they haven't been clearing very many.
So you can translate this statement as saying, actually, $48 million of our interest income is hope and prayer rather than actual cash received. (Which more than wipes out the bank's net income if hope and prayer fail)
"Wise"? You use the word wise in conjunction with a discussion of OA originations in Florida? The average LTV at origination adjusted for MI was 74.3%, so it's difficult to imagine that they bothered much with, er, "wisdom".
And they're citing LTV, not CLTV. I'd guess there are alot of seconds that are on somebody eles's books. Is this at odds with the LTV percentages for OAs that Tanta was citing yesterday? Or is that a function of being CAcentric? Or am I just confused?
Yes, Bank United has been booking soo much deferred interest as income that its been the difference b/t being in the black and being in the red in terms of net profits, to the tune of almost 200 million over the last 4 quarters. Its all legit, but pure financial alchemy that will come back to haunt them when the NegAmOptARMS all hit their debt ceilings, are recast to higher payments and the borrowers all start walking away and Bank United is left with a bunch of REO properties that will not cover the original balance let alone the recast balance!!
The "Hybrid Opt Arms" (rate fixed for 5 years, minimum payment rate set 2% below that) we used to originate allowed a max of 2% per year neg am, so your numbers look right to me, Tanta.
"The company has identified and will work to refinance approximately $10 billion of mortgages. For this group, Countrywide will offer
borrowers options to refinance into prime or FHA loans. For those with credit issues, Countrywide will offer Fannie Mae or Freddie Mac's expanded criteria programs."
you think THIS is bad? FirstFed won't even give out their earnings announcement date...suffice it to say that they are not looking forward to the conference call. Speculation puts it on 10/26, but its anyone's guess.
I have been short BKUNA and DSL (its California cousin) since early this year, it has been some sweet sweet profits for me.
As interesting as the low quality of its portfolio is, what's even worse is that it is leveraged about 10 to 1. So it takes just a bit more than a 10% decline in the value of a portfolio of mostly neg-am Florida mortgages to wipe the company out entirely.
Hmm, do you think the value of Florida neg-am mortgages has gone down by more than 10% already? I do, and I think the company is insolvent right now, and it is only a matter of time before it won't be able to cook its books and hold off the FDIC.
Would anyone here care to buy a neg-am stated income mortgage in Florida for 90% of its face value? I wouldn't. Maybe 60%.
More interesting than the 2% annual balance growth is that if you annualize the current quarter's neg am you get a 3% current annual growth rate. Compound interest and adverse selection all rolled into one.
BKUNA has a 115% balance cap before their O/As recast so this still has a good couple years before meltdown.
I'm kind of confused on this and just want to make sure I'm clear.
In this post, you say, "I would be surprised if the average age is more than 24 months, which would produce a rate of around 2.00% annual average balance growth."
That would mean the average recast for a loan with a 110% cap would be five years out, so a 2006 loan, (if the rate of negative amoritization remanined the same), on average, would recast in 2011. If the cap were 115%, not until 2013/14. That jives with my previous understanding.
But, you said that any rate increase is simply absorbed by into the loan balance for someone making the minimum payment, and that the minimum payment would remain the same.
So if the person X had a $300,000 loan with a minimum payment of $1,300 that would add approximately 2% to the balance each year at y%. If the rate moves to y+1%, he is now adding to the balance at a rate of approximately 3% per year. Is that correct?
If that's the case, it would seem to require an immense amount of data to really understand what's going on in these lenders portfolios. It makes me wonder if they really have a way of tracking it accurately.
Two major British banks have lined up a total of $30 billion in emergency funds from the U.S. Federal Reserve, with analysts expecting other European investment banks to follow.
"Oct. 23 (Bloomberg) -- The Federal Reserve indicated it supports the plan brokered by Treasury Secretary Henry Paulson to increase liquidity in the market for asset-backed commercial paper.
...
The Fed's endorsement comes as some banks, analysts and international officials question whether the planned $80 billion fund will help. Deutsche Bank AG Chief Executive Officer Josef Ackermann said Oct. 21 that it is ``premature to make a firm judgment'' because details of the plan haven't been established.
Fed officials' silence since the agreement was announced Oct. 15 has been misinterpreted as criticism, the Fed official said."
Oh Goody.. Oh well, as long as they don't come out and say that the Super-SIV has discount window borrowing rights I suppose an overt endorsement is not such a bad thing. It's not like Paulson was doing this without their knowledge and tacit approval.
Bob_in_MA - Typically, at the five-year mark, POAs have a scheduled RECAST - which happens regardless of what payment options the borrower has chosen up to that point. So the 2006 vintage recasts in 2011 at the LATEST.
Servicing these loans is indeed a PITA. But they're sooo worth it.
The Superfund will have a direct ability to borrow - steal - from the taxpayers, thanks to runaway inflation. I can't wait for the rate cut later this week... ugh... Good thing the value of the dollar has no effect on inflation, or so says the happy clowns running this trainwreck.
I think I am going to start using corporate financing to run my own life.
I will book all estimated income across my entire life as immediate income. That should let me buy the biggest McMansion I could want. It seems only fair if they can book negative amortization as profit!
Next, all debt will be hidden off of my personal balance sheet in a large SIV.
Finally, I'll fill out the forms to get money for that SIV from the Fed discount window. I may also swap SIV assets with others so I we can make up prices for them and make money on fees. The SIV's will then be sold to suckers in the market.
"Yes, Bank United has been booking soo much deferred interest as income that its been the difference b/t being in the black and being in the red in terms of net profits, to the tune of almost 200 million over the last 4 quarters."
As I expected. I wonder just how many other banks have been doing the same thing and what the total amount of phantom income is out there?
I get a website, on bacon's latest link, but with timeout error. By the way Tanta, if a BKUNA option ARMs follows your UberNerd NegAm post, it should recast after 3-4 years. We know that recasts are mostly in 2010-2011 from the other day's CS chart, so if most we5e originated in 2005-2006, an early recast would fall in 2008-2009. But of course we don't have all the data on these loans... as you say... average age is elusive. I've always hated that about BKUNA but still shorted it and made money... thanks again for all the ubernerd posts, by the way.
Stating LTVs "including mortgage insurance" is a sure sign of trouble.
It was one of the first things I noticed about Luminent. Remember them?
From BKUNA's July press release:
"Based on recent appraisals, the current weighted average loan-to-value of the loans in foreclosure is 79%."
Looks like MI is a new addition to their LTV metric.
Good to find out what's happening to BKUNA. I bought 50 of the Dec $17.5 puts in August, so it's been a great winner, the stock now down to near $10.
The most recent Fortune mag, which I received yesterday has an article about a top "value" investor who recommended 3 "safe" stocks, including two from real estate. Unfortunately, one of these was the mortgage insurer, MTG, which is down about 40% in the last week. I bought the MGT Nov 30 puts when I read about MTG on this blog and they are up 300% in the last week or so. If anyone put the same money into the more agressive Nov $25 puts, they would probably be up 1000%.
Seattle was one of the last markets to fall. However, if you check out housingtracker.net, Seattle has, in the last three months, had a 4.3% decline in asking price and a 43% increase in inventory.
Not so bad as California and FL where the asking prices are down 8-12% according to the same source.
Tanta, I'll take one more shot at it. Please correct me if I am wrong. An average 2% annual average balance growth could reflect a portfolio with 50% of loans with -2% average balance growth (strong borrowers) and with 50% of loans with 4% average balance growth (weak borrowers). This would mean 50% of the portfolio would recast in 2008 for a portfolio with a 110% cap.
Clyde- FDIC's fund is what? 50B? Enough said. Canada only has an insurance fund of some 7B. Amazing. I've seen FDIC's fund depleted before when Bill Seidman was chair. It's not fun to watch it go to zero and then negative balance especially if it were to happen again now with unlimited war funding.
Please correct me if I am wrong. An average 2% annual average balance growth could reflect a portfolio with 50% of loans with -2% average balance growth (strong borrowers) and with 50% of loans with 4% average balance growth (weak borrowers).
I don't know what you mean by negative balance growth. (That would, logically, be amortization, not negative amortization.)
The release says that 6.5B of 7.5B have negative amortization. All we know is that the total neg am balance on that 6.5B is 270MM. Of course that would mean there are brand-new loans with $100 in neg am and three or four year old loans that could be sneaking up on the balance cap by now.
I suspect, personally, that the average loan age in this portfolio is probably less than 24 months, just based on industry origination and prepayment patterns for OAs: the vast majority of outstanding OAs were originated in 2005 or later. So I doubt there are many loans in that portfolio more than 36 months old.
But the fact remains that 87% of them have a higher balance than when the loan was originated. Note that a borrower who occasionally makes the minimum payment should still show no net neg am, unless the rest of the time that borrower makes the interest only payment exclusively. A borrower who usually makes the amortizing payment and only occasionally makes the minimum payment will have an amortized balance (just a higher amortized balance than the person would who never made the minimum payment).
Tanta, Thank you for the response. You are correct, I should have said amortizing for those making the maximum payment. Also, I was thinking of WAMU, who has been making significant OA loans since '04, although their early caps are 115%.
well fellas, one thing that i could add to the fact that the company is actually loosing money on a cash basis (around $30m a quarter), has $270m total negam and NPA - ALL of $150m. add to that only 18% of their loan book is full doc, and they also have $300m loans on land and $150m construction loans. a 2% tangible equity FDIC threshold for this company is $300m, so not so far from current equity $800m. i say 2 more quarters and FDIC/FHLB will be knockin on their door for their collateral. that is, if the fact that they have $2bn in CDs >$100K (hot money) doesn't kill them first.
Chain Stores:
ICSC-UBS
Chain-store sales remained soft in the Oct. 20 week according to ICSC-UBS's same-store tally which came in at a year-on-year rate of 2.2 percent vs. the prior week's 2.5 percent pace. The week-to-week decline, perhaps skewed by calendar effects, showed a very steep decline of 1.5 percent. The report said warm weather continues to hurt demand for seasonal goods. The week's readings did in fact shake up the outlook of Michael Niemira who compiles the results and sees only a 2.0 percent rise for the month of October, down from his earlier forecast for 2.5 percent.
Redbook
Chain-store sales are definitely soft. Chain stores have been complaining of low traffic and poor sales for weeks, and today's chain-store reports from ICSC-UBS and now Redbook are showing year-on-year same-store growth under 2.5 percent. Redbook's rate for the Oct. 20 week, at 2.3 percent, was 1 tenth above ICSC-UBS's number. Watch for company statements from chain stores and of course for consumer sentiment data on Friday's calendar.
Countrywide Announces a $16 Billion Comprehensive Home Preservation Program
CALABASAS, Calif., Oct. 23 /PRNewswire/ -- Countrywide Financial Corporation today announced a comprehensive home preservation program to reach out to borrowers at-risk of default. Countrywide will launch an outbound calling initiative to refinance or modify up to $16 billion of Countrywide loans for borrowers who are facing an adjustable-rate mortgage reset through the end of 2008.
CNNMoney.com: 404 Page Not Found
From the BankUnited release: Based on recent appraisals, the current weighted average loan-to-value of the loans in foreclosure as of Sept. 30, 2007, was approximately 86%, including the effects of mortgage insurance.
Later they say that the average LTV at inception for residential portfolio was 74.3%. Their operational area is hit hard by falling prices, so the 86% reflects not just neg-am but falling prices.
NPA/Total assets ratio moved from .16% to 1.39% over the course of the year. Closing allowance for loan loss at $58.6 million compared to starting ALL of $36.4 million. Commercial Q4 net chargeoff of 2.1 million, residential net chargeoff of 2.9 million.
I guess we now know where consumers are getting cash from...by not paying a full mortgage payment.
Stating LTVs "including mortgage insurance" is a sure sign of trouble.
It was one of the first things I noticed about Luminent. Remember them?
Really, it's a worthless disclosure. Since they don't tell you what the average MI coverage is, you can't back into LTVs that you can compare across the industry.
Bank of America
It looks like CFC has about 28K REOs in CA. About 2K in NJ..
Are these numbers for real?
Is it true?
CFC REOs upto 195K!!!
Countrywide Foreclosures (REO) Blog
So, the increase in negative am. $MM means that they are booking the interest as income even though they have not received the income yet?
China buys big chunk of Bear Sterns????
Hank Reardo
so the 86% reflects not just neg-am but falling prices.
I have a feeling that someone who quotes LTVs "including the effects of MI" is going to using original appraised value as the V in LTV.
hat tip "Anonymous"...i love it.
Yeah. Not one "pre-net" disclosure. Still, they used MI over 80%. If most of their neg-ams started under 80%, they don't have much MI.
I really loved the part where they tout being a Florida bank as an asset. Also, fees on deposits and loans are up 28%. Very interesting - I wonder how much of that is late fees?
Average 12 month list price decline at the 50th percentile is 15% in Cape Coral and 12% in Miami. However, prices have been falling for longer than 12 months. I have real trouble figuring out how they get 86%. If you try to clear you usually have to offer 10% below. Maybe they are doing better at auctions, or maybe they haven't been clearing very many.
Yes, they book it as income.
So you can translate this statement as saying, actually, $48 million of our interest income is hope and prayer rather than actual cash received. (Which more than wipes out the bank's net income if hope and prayer fail)
Still, they used MI over 80%.
It is not wise to use the 80% MI cutoff for OAs.
At minimum they should be getting MI over 75%, if not 70%.
Feels like another tidal wave getting ready to flood the florida coast line.
"Wise"? You use the word wise in conjunction with a discussion of OA originations in Florida? The average LTV at origination adjusted for MI was 74.3%, so it's difficult to imagine that they bothered much with, er, "wisdom".
FFIDC:
Can you comment on the risk-adjusted return on capital for large banks in this link. Does this concern you?
Institutional Risk Analytics
I am surprised by Wells' 1.34% RAROC, as well as BONY's -2.78%
And they're citing LTV, not CLTV. I'd guess there are alot of seconds that are on somebody eles's books. Is this at odds with the LTV percentages for OAs that Tanta was citing yesterday? Or is that a function of being CAcentric? Or am I just confused?
Yes, Bank United has been booking soo much deferred interest as income that its been the difference b/t being in the black and being in the red in terms of net profits, to the tune of almost 200 million over the last 4 quarters. Its all legit, but pure financial alchemy that will come back to haunt them when the NegAmOptARMS all hit their debt ceilings, are recast to higher payments and the borrowers all start walking away and Bank United is left with a bunch of REO properties that will not cover the original balance let alone the recast balance!!
Although I enjoyed the anonymity, I must now claim my virtual hat tip reward. Ta!
(Just another little setting that one has to make when buying a new laptop)
The "Hybrid Opt Arms" (rate fixed for 5 years, minimum payment rate set 2% below that) we used to originate allowed a max of 2% per year neg am, so your numbers look right to me, Tanta.
CNNMoney.com: 404 Page Not Found 1.htm
"The company has identified and will work to refinance approximately $10 billion of mortgages. For this group, Countrywide will offer
borrowers options to refinance into prime or FHA loans. For those with credit issues, Countrywide will offer Fannie Mae or Freddie Mac's expanded criteria programs."
Government bailout!
you think THIS is bad? FirstFed won't even give out their earnings announcement date...suffice it to say that they are not looking forward to the conference call. Speculation puts it on 10/26, but its anyone's guess.
I have been short BKUNA and DSL (its California cousin) since early this year, it has been some sweet sweet profits for me.
As interesting as the low quality of its portfolio is, what's even worse is that it is leveraged about 10 to 1. So it takes just a bit more than a 10% decline in the value of a portfolio of mostly neg-am Florida mortgages to wipe the company out entirely.
Hmm, do you think the value of Florida neg-am mortgages has gone down by more than 10% already? I do, and I think the company is insolvent right now, and it is only a matter of time before it won't be able to cook its books and hold off the FDIC.
Would anyone here care to buy a neg-am stated income mortgage in Florida for 90% of its face value? I wouldn't. Maybe 60%.
"I have a feeling that someone who quotes LTVs 'including the effects of MI' is going to using original appraised value as the V in LTV."
I agree.
Tanta,
More interesting than the 2% annual balance growth is that if you annualize the current quarter's neg am you get a 3% current annual growth rate. Compound interest and adverse selection all rolled into one.
BKUNA has a 115% balance cap before their O/As recast so this still has a good couple years before meltdown.
-Kerpowski
Tanta,
I'm kind of confused on this and just want to make sure I'm clear.
In this post, you say, "I would be surprised if the average age is more than 24 months, which would produce a rate of around 2.00% annual average balance growth."
That would mean the average recast for a loan with a 110% cap would be five years out, so a 2006 loan, (if the rate of negative amoritization remanined the same), on average, would recast in 2011. If the cap were 115%, not until 2013/14. That jives with my previous understanding.
But, you said that any rate increase is simply absorbed by into the loan balance for someone making the minimum payment, and that the minimum payment would remain the same.
So if the person X had a $300,000 loan with a minimum payment of $1,300 that would add approximately 2% to the balance each year at y%. If the rate moves to y+1%, he is now adding to the balance at a rate of approximately 3% per year. Is that correct?
If that's the case, it would seem to require an immense amount of data to really understand what's going on in these lenders portfolios. It makes me wonder if they really have a way of tracking it accurately.
UK Banks Line Up Emergency Fed Funds
Expired
Two major British banks have lined up a total of $30 billion in emergency funds from the U.S. Federal Reserve, with analysts expecting other European investment banks to follow.
OT- Bloomberg article: Fed Officials endorse M-LEC SIV plan.
Fed Signals Support for Paulson Commercial-Paper Plan (Update1) - Bloomberg.com
"Oct. 23 (Bloomberg) -- The Federal Reserve indicated it supports the plan brokered by Treasury Secretary Henry Paulson to increase liquidity in the market for asset-backed commercial paper.
...
The Fed's endorsement comes as some banks, analysts and international officials question whether the planned $80 billion fund will help. Deutsche Bank AG Chief Executive Officer Josef Ackermann said Oct. 21 that it is ``premature to make a firm judgment'' because details of the plan haven't been established.
Fed officials' silence since the agreement was announced Oct. 15 has been misinterpreted as criticism, the Fed official said."
Oh Goody.. Oh well, as long as they don't come out and say that the Super-SIV has discount window borrowing rights I suppose an overt endorsement is not such a bad thing. It's not like Paulson was doing this without their knowledge and tacit approval.
Bob_in_MA - Typically, at the five-year mark, POAs have a scheduled RECAST - which happens regardless of what payment options the borrower has chosen up to that point. So the 2006 vintage recasts in 2011 at the LATEST.
Servicing these loans is indeed a PITA. But they're sooo worth it.
The Superfund will have a direct ability to borrow - steal - from the taxpayers, thanks to runaway inflation. I can't wait for the rate cut later this week... ugh... Good thing the value of the dollar has no effect on inflation, or so says the happy clowns running this trainwreck.
I think I am going to start using corporate financing to run my own life.
It seems fair to me!
How long before we hear that M-LEC (aka "Mary Leak") has direct access to the discount window?
here's a picture of OA vintage performance:
http://cache.dbrs.com/pdf/21502701204988.pdf?transactionID=385113
"Yes, Bank United has been booking soo much deferred interest as income that its been the difference b/t being in the black and being in the red in terms of net profits, to the tune of almost 200 million over the last 4 quarters."
As I expected. I wonder just how many other banks have been doing the same thing and what the total amount of phantom income is out there?
Bacon - that URL is 403. Got another one?
Ella - everyone does that. That 'phantom income' is GAAP-Kosher, dontcha know.
Nope I did not know that. Just how long can an economy run on fumes?
Cramer thinks WaMu is the next CFC.
Why is he so sedate and analytical on the Street.com and such a loon everywhere else?
Now that we know the market value of fumes, maybe we can substitute them for petrochemicals.
Here is MSFT/Mocha land, WM has been laying off employees since last year. They saw the writing on the wall.
Bacon - that URL is 403. Got another one?
Try this.
http://cache.dbrs.com/pdf/21502701204988.pdf?transactionID=385200
try this then click on the Oct 1 piece, then there's a link in the pdf...
DBRS.com
re: WM. And this is in one of the only hot real estate markets left, Seattle.
yours doesn't work either Tanta, your linking skills are as poor as mine.
Tanta's link worked for me.
This ought to help out the bankers with the phantom profits.
From Credit Suisse
http://static.seekingalpha.com/uploads/2007/9/7/amortization_1.jpg
http://static.seekingalpha.com/uploads/2007/9/7/amortization_2.jpg
I get a website, on bacon's latest link, but with timeout error. By the way Tanta, if a BKUNA option ARMs follows your UberNerd NegAm post, it should recast after 3-4 years. We know that recasts are mostly in 2010-2011 from the other day's CS chart, so if most we5e originated in 2005-2006, an early recast would fall in 2008-2009. But of course we don't have all the data on these loans... as you say... average age is elusive. I've always hated that about BKUNA but still shorted it and made money... thanks again for all the ubernerd posts, by the way.
Hi CR and everyone,
Can you comment on the condition of Indymac (IMB)? It's stock had fallen more than 70% this year. Thanks.
Stating LTVs "including mortgage insurance" is a sure sign of trouble.
It was one of the first things I noticed about Luminent. Remember them?
From BKUNA's July press release:
"Based on recent appraisals, the current weighted average loan-to-value of the loans in foreclosure is 79%."
Looks like MI is a new addition to their LTV metric.
From the timeout error screen, type 'Option' in the search bar in the URH corner of the page > Go > first document.
Thanks,bacon.
Look at that '07 Alt-A. To infinity, and beyond!
Good to find out what's happening to BKUNA. I bought 50 of the Dec $17.5 puts in August, so it's been a great winner, the stock now down to near $10.
The most recent Fortune mag, which I received yesterday has an article about a top "value" investor who recommended 3 "safe" stocks, including two from real estate. Unfortunately, one of these was the mortgage insurer, MTG, which is down about 40% in the last week. I bought the MGT Nov 30 puts when I read about MTG on this blog and they are up 300% in the last week or so. If anyone put the same money into the more agressive Nov $25 puts, they would probably be up 1000%.
Ella:
Seattle was one of the last markets to fall. However, if you check out housingtracker.net, Seattle has, in the last three months, had a 4.3% decline in asking price and a 43% increase in inventory.
Not so bad as California and FL where the asking prices are down 8-12% according to the same source.
Boston Globe - Where's the bottom for Sovereign Bancorp?
Where's the bottom? - The Boston Globe
Tanta, I'll take one more shot at it. Please correct me if I am wrong. An average 2% annual average balance growth could reflect a portfolio with 50% of loans with -2% average balance growth (strong borrowers) and with 50% of loans with 4% average balance growth (weak borrowers). This would mean 50% of the portfolio would recast in 2008 for a portfolio with a 110% cap.
Clyde- FDIC's fund is what? 50B? Enough said. Canada only has an insurance fund of some 7B. Amazing. I've seen FDIC's fund depleted before when Bill Seidman was chair. It's not fun to watch it go to zero and then negative balance especially if it were to happen again now with unlimited war funding.
Please correct me if I am wrong. An average 2% annual average balance growth could reflect a portfolio with 50% of loans with -2% average balance growth (strong borrowers) and with 50% of loans with 4% average balance growth (weak borrowers).
I don't know what you mean by negative balance growth. (That would, logically, be amortization, not negative amortization.)
The release says that 6.5B of 7.5B have negative amortization. All we know is that the total neg am balance on that 6.5B is 270MM. Of course that would mean there are brand-new loans with $100 in neg am and three or four year old loans that could be sneaking up on the balance cap by now.
I suspect, personally, that the average loan age in this portfolio is probably less than 24 months, just based on industry origination and prepayment patterns for OAs: the vast majority of outstanding OAs were originated in 2005 or later. So I doubt there are many loans in that portfolio more than 36 months old.
But the fact remains that 87% of them have a higher balance than when the loan was originated. Note that a borrower who occasionally makes the minimum payment should still show no net neg am, unless the rest of the time that borrower makes the interest only payment exclusively. A borrower who usually makes the amortizing payment and only occasionally makes the minimum payment will have an amortized balance (just a higher amortized balance than the person would who never made the minimum payment).
Bill,
Yes, I follow the Housing Tracker. I should have said "so called" hot market.
Here is another interesting link that I follow. A bubble market tracker.
The page cannot be found
One more thing, BKUNA basically uses 115% caps so it's the best number to use for these estimations, not 110%
Tanta, Thank you for the response. You are correct, I should have said amortizing for those making the maximum payment. Also, I was thinking of WAMU, who has been making significant OA loans since '04, although their early caps are 115%.
well fellas, one thing that i could add to the fact that the company is actually loosing money on a cash basis (around $30m a quarter), has $270m total negam and NPA - ALL of $150m. add to that only 18% of their loan book is full doc, and they also have $300m loans on land and $150m construction loans. a 2% tangible equity FDIC threshold for this company is $300m, so not so far from current equity $800m. i say 2 more quarters and FDIC/FHLB will be knockin on their door for their collateral. that is, if the fact that they have $2bn in CDs >$100K (hot money) doesn't kill them first.