"o manage the increase in loans in foreclosure, we have significantly increased our staff responsible for handling Oreo properties and working with delinquent borrowers."
Gee, they are "amazed" by this. How "surprising." "Nobody could have expected this." and so on... and I have an IRA account with these chimps - argh!
It amazes me how common sense has been thrown out the window with this Bubble. Why, anyone can "get into a home." I still have people today trying to convince me that paying 40% to 50% of my gross salary to mortgage payments is just fine and not risky at all. Wrong! Oh, and you can even make a smaller down payment if you get the chance - again, bad idea. The level of financial ignorance is amazing. People really think houses are basically free (no down payments) and no amount per month is too much to "own" a place. Is it any wonder people are defaulting at such huge numbers?
The big banks drank the Kool-aid as well, while adding their own spin of how "real estate only goes up!" and if it says AAA it must be good. Did anyone even stop to connect the dots between people making $50K a year buying $500K houses with no money down on toxic loans and what those loans would be worth when they explode? I guess the banks really thought that by slicing and dicing the sewage and distributing it all over it would suddenly smell and taste great. I guess not!
Hey the stock market has fallen a wee bit today, but never you worry, it'll be back up by the end of the day. It always is. After all "tomorrow is another day." (hat tip to Vivien Leigh).
I am assuming that Wachovia is included results of its World Savings loans. World Savings was one of the worst "fog a mirror, get 100% jumbo ARM" companies. Downey and First Franklin were up there too.
And there is obviously unemployment among real estate agents, loan brokers, and smaller contractors, yet I think all would be independent contractors, thus not on payroll stats and possibly not eligible for unemployment.
"Did anyone even stop to connect the dots between people making $50K a year buying $500K houses with no money down on toxic loans and what those loans would be worth when they explode?"
--
"it is amazing that we could take $300 million of losses on AAA paper. We didn't expect that that paper could degenerate that fast, with that kind of swiftness
Economists are incapable of forecasting recessions before they happen and business people are incapable of seeing sharp downturns and losses.
No wonder that economists and business people are lagging indicators.
Only the stupid homebuilders listened to the economists forecast of the housing demand! These people could have taken the time to look at the data and determined that they were overbuilding like crazy. Blind leading the blind! Into the abyss below the cliff. Let us see how many homebuilders survive the 2008-10 depression (20% at the most).
Have they said anything about nonperforming loans at Golden West in particular? I couldn't see anything in the release.
They specialize in option ARMs in Calif. Wachovia bought it at a big premium at the peak of the real estate market. It reminds me of the sale of about.com right as the dot-com market was imploding. I guess, the AOL deal is the all-time great one in this category.
First is reduction of income or underemployment. Second is the assumption of additional debt from lenders other than Wachovia and thereby changing the credit profile from the origination of the loan.
"Reduction of income or unemployment" -- do they mean a reduction in income from what the borrower STATED their income was? Are they talking about their "liar loans"?
"Assumption of additional debt" -- I'm assuming they're talking about the piggyback loan. Are they telling us that they didn't know that the borrower had no money for a down payment, and would therefore have to take out a second loan to cover the cost of the mortgage?
"and third is unemployment" -- presumably among employees of real estate brokers in mortgage originators.
How nice that Wachovia paints themselves as unsuspecting victims in this. How could anyone have seen this coming?(pretty much everyone who had their eyes open.)
I'm guessing much of this is from the Golden West purchase. They are not including a great amount of detail on loans, loan to value, FICO scores, or delinquency percentages. This is data that Golden West was famous for providing. A few months ago, the CFO of Wachovia was quoted in a Forbes Magazine article. Money quote:
"The bank doesn't include in its annual report the enormous detail Golden West provided on its mortgage operations"-- with the CFO saying it's not needed. He called the Golden West disclosures "boiler plate", and said that "If we have something new to say, we will include it".
The three reasons given by Wachovia are bogus. I have a friend who works at one of their collection centers in CA and she said the homeowners will tell you those things because there is a better chance of restructuring the loan or interest rate. If they admit to being a flipper then they get zero mercy from the bank...
During the recent market freeze up, HSBC seized bonds from Luminent and auctioned them off for 50 cents on the dollar for 'A' rated securities.
The kicker is, there was only one bidder at the auction. HSBC!
I wondered how warehouse lenders were able to dispose of 40-50B+ in seized collateral in less than a week in frozen markets with zero news on who was buying those securities.
Okay, based upon the last few days' postings, nobody in a position to forecast such events "could have {insert one of the following-foreseen, predicted, expected} X to have {declined, fallen, lost value} so {steeply, quickly, mindnumbingly fast}.
I, for one, am not much interested in any of those same persons' forecasts going forward. With every such statement, they drive what little confidence might have remained out of investors' sentiments, and increase the probability of {recession, depression, panic, term-yet-to-be-invented for these times}. This is the inevitable outcome of a market economy based on spin and not production.
Billionaire Warren Buffett said he was skeptical about the U.S. Treasurys plan to create an $80 billion fund to buy distressed assets from structured investment vehicles linked to home lending.
I dont see any way that pooling a bunch of mortgages, changing the ownership, is going to change the viability of the mortgage instrument itself whether people can make the payments, he said. It would be better to have them on the balance sheets so everyone would know whats going on
Foreclosures for November set area record
By SANDRA BAKER
Star-Telegram staff writer
The number of homes slated for foreclosure auction in November hit a record for the 10-county area of North Texas, Addison-based Foreclosure Listing Service said Thursday.
For the Nov. 6 auction, 4,220 homes are on the block for Dallas, Tarrant, Collin, Denton, Rockwall, Ellis, Johnson, Grayson, Parker and Kaufman counties. The last record monthly number of 4,056 homes was posted in February, the research firm said.
That compares with 1,221 listed in Novem- ber 2000, the firm said. It was in 2001 that postings began to rise, and they have accelerated every year since.
The new level is unwelcome news, said George Roddy, president of Foreclosure Listing Service
Maybe some mortgage-savvy folks here can explain this to me: about six months ago I found out that some young friends had bought their home back in 2005 using an ARM - and a neg am ARM at that. I urged them then to refi into a 30 year fixed loan. I had heard that they had refi'ed soon after that.
Then last night I had dinner with them and they told me that their loan was a 30 year fixed IO loan (certainly not what I recommended, but it is "fixed"). So I asked them how long they can pay the IO as in when does the loan require full payments to begin and they said that as far as they knew they could pay the interest only for the whole 30 years. Is there any such loan? Don't most IO loans have a 5 or 10 year period where they allow you to pay the IO payment, but then reset to full amortizing payments?
"It would be better to have them on the balance sheets so everyone would know whats going on"
And it would be better if that three-card monty guy moved his hands slower. Buffett is right, of course; all that crap should be on balance sheets, and always should have been.
it is amazing that we could take $300 million of losses on AAA paper. We didn't expect that that paper could degenerate that fast, with that kind of swiftness
Bofiz, re the 30yr fixed IO loan, it could entail a balloon payment of the entire principal at the end. Maybe everyone is assuming a refi somewhere along the way...
I am nowhere in the same league as some other posters in terms of mortgage savvy, and not even in the same species as Tanta. However, I will take a stab at it, and let other wiser folks correct me if I'm wrong.
My guess is that a fixed 30 year I/0 has a balloon payment of the entire principal at the end of the period. So in essence, your friends are leasing the house from the bank, not owning.
HVH said:
Bofiz, re the 30yr fixed IO loan, it could entail a balloon payment of the entire principal at the end. Maybe everyone is assuming a refi somewhere along the way...
Assuming one kept the loan for 30 years, doesn't that pretty much define renting from the bank?
The Dow is down over 200 points, but a half-dozen of the biggest homebuilders are up.
Somebody's channeling Peter Lynch and looking to the future: "Yes, the world is coming to an end, but just in case it doesn't what might be worth owning?"
All you negative nellies are missing the significance of this particukare visit to the confessional. Wachovia told the truth. This is huge. Not only that but with these confessions we can get out of the rubber room we've been placed in for the last two years. We see debt people and get locked up. Wachovia sees them too and we aren't so crazy after all. I know for sure that everything Wachovia says about California is true. We self employeds are hypersensitive to economic stress and underemployment is indeed in full force.
My favorite confession is also a first for the industry. The character of the loans and the borrowers they retain are now nothing like they were when originally booked.
Finally, CRE. While they are absolutely truthful and even express caution for the future it appears that they may not have learned the Res RE lesson that modern lending can go bad far faster than they can even track. CRE doesn't have any emotional xomponent. There is no moral hazard to use as leverage. CRE is best desribed as Res RE minus 3 quarters.
I guess in this society, people will pretty much sign onto anything..as long as they are part of the Ownership Society and the Got to have..Everyone look at me group.
30 year IO..Sheesh just when you think you have seen everything.
"Assuming one kept the loan for 30 years, doesn't that pretty much define renting from the bank?
Amazing ."
It's nowhere close to renting. You don't put 20% down deposit when you rent a place, and you don't incur gain/loss on property value when you leave the house if you rent it.
An IO loan in this case (not every case) is actually pretty sound as long as the LTV is not high and the borrower can refi even if house price drop another 15% in the future.
Well yes and no. You do get a 100% equity appreciation for 30 years. Not real valuable in this environment, but over 30 years??, probably an OK deal.
Granted you have all the maintenance, tax and insurance costs on your shoulders as well.
And oh yeah, you can't give notice and break the lease.
The sad thing is for probably only 100 to 200 a month more you could be actually building equity over those 30 years, regardless of future appreciation and actually own something after 30 years.
However if you think that value 10 to 15 years from now will be higher than today, and you plan to move or trade up, that's probably not a bad deal.
Seems like a reasonable decision to me - - depending on the cost to rent a comparable all those years (and remember rents would be going up, not holding level)
I dont see any way that pooling a bunch of mortgages, changing the ownership, is going to change the viability of the mortgage instrument itself whether people can make the payments, he[Buffett] said. It would be better to have them on the balance sheets so everyone would know whats going on
Warren, Warren surely you know that the whole point of this like most of what Wall Street does is to keep everyone from knowing what is going on. Knowing what is going on is the last thing Wall Street likes for the masses.
Just keep your eye on the falling ball called Corus Bancshares. Their quarterly earnings announcement was such transparent BS as to be laughable. They are setting themselves up for lawsuits and SEC suits by being so dishonest about problem loans, especially in South Florida condo construction projects.
The bank added: "Nevertheless, we are bullish that in the long run condominiums and condominium construction will remain a permanent fixture in the U.S. housing market. With the reputation Corus has built as an expert in this niche, with our highly experienced and trained staff, and with our strong balance sheet and income statement, we are very well positioned to capitalize on the eventual housing recovery that we are confident will occur."
Yeah, maybe condos are permanent in some form or other. But not Corus. This will be one of the biggest FDIC hits ever, when it hits.
Wachovia (or watch-over-you as my Father used to say) was for generations a VERY conservative NC bank and probably should have stayed that way. But then NCNB was a small state bank back then as well (now BoA - the second largest).
IMO, the jury is still out on allowing cross state banking. It was considered risky for a long time and for a reason.
The calculus of living paycheck to paycheck in America is getting harder.
What used to last four days might last half that long now. Pay the gas bill, but skip breakfast. Eat less for lunch so the kids can have a healthy dinner.
Across the nation, Americans are increasingly unable to stretch their dollars to the next payday as they juggle higher rent, food and energy bills. It's starting to affect middle-income working families as well as the poor, and has reached the point of affecting day-to-day calculations of merchants like Wal-Mart Stores Inc., 7-Eleven Inc. and Family Dollar Stores Inc.
Food pantries, which distribute foodstuffs to the needy, are reporting severe shortages and reduced government funding at the very time that they are seeing a surge of new people seeking their help.
While economists debate whether the country is headed for a recession, some say the financial stress is already the worst since the last downturn at the start of this decade.
From Family Dollar to Wal-Mart, merchants have adjusted their product mix and pricing accordingly. Sales data show a marked and more prolonged drop in spending in the days before shoppers get their paychecks, when they buy only the barest essentials before splurging around payday.
"It's pretty pronounced," said Kiley Rawlins, a spokeswoman at Family Dollar. "It seems like to us customers are running out of food products, paper towels sooner in the month.
Wal-Mart, the world's largest retailer, said the imbalance in spending before and after payday in July was the biggest it has ever seen, though the drop-off wasn't as steep in August.
And 7-Eleven says its grocery sales have jumped 12-13 percent over the past year, compared with only slight increases for non-necessities like gloves and toys. Shoppers can't afford to load up at the supermarket and are going to the most convenient places to buy emergency food items like milk and eggs.
"It even costs more to get the basics like soap and laundry detergent," said Michelle Grassia, who lives with her husband and three teenage children in the Bedford-Stuyvesant section of Brooklyn, N.Y.
Her husband's check from his job at a grocery store used to last four days. "Now, it lasts only two," she said.
The only thing dumber than buying "AAA sub prime" as investment-grade paper is being "surprised" when it loses value. Dumb and Dumber sums up this management team.
Good for you finding the only sector not tanking today. I sold off my DHI puts on Wed. and booked a nice 100% gain.
However, if you pull up a 3 month or YTD chart of the XHB on any finance site, and plot the chart, you will see that this is merely a bounce of new lows set earlier in the week. The downward channel (higher lows, lower highs) is intact.
The final downleg for the homebuilders is yet to come, IMO. That will be the panic/capitulation stage when 3-5 major players exit stage left.
Not likely a 30-yr IO with a year 30 balloon. That product doesn't anymore exist anymore since the downturn.
More likely a 30-Yr fixed with a 10-yr IO option and a loan officer who didn't properly educate the borrower. Meaning if you make just the IO payment during the first 10 years, then it adjusts to a fully amortizing 20-Yr loan at the beginning of year 11, with a significant adjustment to the payment.
The thought process with SO MANY of recent homeowners is that the financing is just temporary. They will either refi or earn a lot more money in 10 years. At least that's the hope.
"While economists debate whether the country is headed for a recession, some say the financial stress is already the worst since the last downturn at the start of this decade.
From Family Dollar to Wal-Mart, merchants have adjusted their product mix and pricing accordingly. Sales data show a marked and more prolonged drop in spending in the days before shoppers get their paychecks, when they buy only the barest essentials before splurging around payday.
"It's pretty pronounced," said Kiley Rawlins, a spokeswoman at Family Dollar. "It seems like to us, customers are running out of food products, paper towels sooner in the month."
Wal-Mart, the world's largest retailer, said the imbalance in spending before and after payday in July was the biggest it has ever seen, though the drop-off wasn't as steep in August."
Somebody's channeling Peter Lynch and looking to the future: "Yes, the world is coming to an end, but just in case it doesn't what might be worth owning?"
Sebastian
I think Seb puts his finger on a real psychology with this statement.
On a lighter note, I am glad my job is not putting together conference calls like this one. Do people practice the night before?
Prepare the Helicopters Bernanke is coming in for a landing...oh ya we are truly F@cked.
Let's translate the BenSpeak:
"stronger action by the central bank may be warranted to prevent particularly costly outcomes" = GS must not be allowed to lose money, at all costs.
"robust-control methods" = lookout below on OpEx mornings
"The concern about worst-case scenarios" = Wall St. bonuses may be affected. Absolutely Not allowed!
"assessing the economy's true state "remains a formidable challenge." = we really have no idea, but suspect it's all bad. Hank tells me I have to help out his friends.
"Uncertainty about the economy "provides a reason for the central bank to strive for predictability and transparency" = never let the sheeple know how they are being sheared.
1) Buffett on MLEC: "I dont see any way that pooling a bunch of mortgages, changing the ownership, is going to change the viability of the mortgage instrument itself..."
Perhaps the true goal is to collect enough of the sh*t together into something that is "too big to fail", to force a future bailout?
2) Bubble in the UK: Currently in Scotland, where the news just showed a city on the west coast where prices have gone up 30% in one year. Subprime mortgages still all around.
Is there something different in how these things are funded here? It certainly can't be CMO investors: who the hell is going to buy securities with this stuff now? (And if this stuff is really ongoing in a delayed-mirror reflection of the US in 2006, then please tell me how to short the British version of the ABX...)
One of CNBC's talking heads (Dylan something) last night said housing was "approaching" a recession.
FOX has stated that CNBC is too pessimistic and will be more about success on their new business channel. Looks like CNBC has adjusted preemptively. If US housing is not a recession, I don't want to see a real one.
The former chairman of the Federal Reserve said the super- fund proposal by Citigroup, Bank of America and JP Morgan Chase with the backing of the US Treasury could undermine confidence in credit markets.
Mr Greenspan told Emerging Markets magazine, It is not clear to me that the benefits exceed the risks. He added: The experiences I have had with that sort of intervention are two-sided.
Estimates of homes sitting empty run as high as 17.4 million.
Foreclosure rates are soaring, and as those owners are kicked out of their homes for not paying, the structures are sitting empty, with no one waiting in line to buy at any price. Meanwhile, more than $1 trillion in adjustable-rate loans will kick mortgage payments much higher by June 2008 for tens of thousands of homeowners, which will push foreclosure rates even higher as people simply walk away from houses they can't afford. I saw this happen in the last down-cycle in Los Angeles in the late 1980s; it gets ugly and stays that way for years, not months.
According to a report by investment bank Punk Ziegel, there are 17.4 million vacant houses in the country, and only 4.3 million of those are second homes.
This is truly a scary thought....I think its time to seriously consider plane tickets to a far away land.
All I need to do to get the market to turnaround before the -300 pt mark today is say : "This ship be sinking!" (well, at least it's always worked up til today)
Estimates of homes sitting empty run as high as 17.4 million.
Think. One out of four? No. What you are probably hearing is that insome bubble zones like Phoenix as many as 1 out of 4 houses for sale are currently vaccant.
Interesting list of reasons. It totally flies in the face of the main message on why foreclosures are happening... loan resets. Every anecdotal press story is about a middle class family with a $1500 payment that resets to $2500 and they now can't afford it.
I'm convinced that that's just a small fraction of the problem. Wachovia's reasons reflect the true problem... people are simply in over their heads. DTIs are too high, regardless of the type of financing. This is why the '06 and '07 mortgages are defaulting at such high rates... and they haven't reset yet!
When DTIs were more reasonable, people could absorb a financial hit... more credit card debt, temporary unemployment, weathering a downturn in their industry of employment, and still make the mortgage payment. Now they're stretched too thin and they immediately find themselves in trouble.
This reminds me of something a coworker of my wife's said a couple years ago when she and her husband bought a house at the height of the SoCal housing bubble. She said that they really had to stretch to afford the house they bought but "we figure we'll just eat peanut butter and jelly sandwiches for the next 5 years." This was said with a straight face...
In America, making financial plans dependent on depriving yourself of the lifestyle to which you are accustomed is always doomed to fail.
story going around MLCO is having an emergency board meeting this weekend. Their bond losses are apparently much worse than announced. They are cleaning house in fixed income this weekend.
Do I root for more people flooding into my TIPS, driving the price up yet destroying their future real return?
The short-term part of my brain is in, "Woohoo!" mode.
The long-term part of my brain is in, "Oh oh!" mode.
I'm not even remotely a buyer of stocks again yet, not that my crystal ball works any better than the next person's.
What if this is just the early innings of a lack of real return game? If so, there are going to be a LOT of investors watching what they thought was real prosperity becoming much more illusionary shortly.
I'm awaiting the day when financial advisors start wondering about old rules of thumb, like the safety of drawing 4% from a retirement fund, expected returns of 10%, housing prices only go up, and so on.
The Dow is down over 200 points, but a half-dozen of the biggest homebuilders are up.
Somebody's channeling Peter Lynch and looking to the future: "Yes, the world is coming to an end, but just in case it doesn't what might be worth owning?""
LOL! Make that over 350 points down, and it would appear as if everybody changed their mind about buying the homebuilders. Not such an odd coincidence, after all, huh?
Nice try, but it's not people channeling Peter Lynch, it's the quants soiling their pants again. From Dow Jones:
3:59 (Dow Jones) Some of the stocks spiking while everything else sells off look like aberrant moves and mass short covering that characterized the quant blowup in August. Back then, quants were alleged to have exacerbated the market's drop. Standard Pacific (SPF) recently surged 10% and ExpressJet Holdings (XJT) added 16%; Beazer Homes USA (BZH) was up 4% and Oscient Pharmaceuticals (OSCI) surged 21% - all without an obvious catalyst. A partner at a quantitative hedge fund, who didn't wish to be identified, said he's seen a lot of trading Friday "that looks like quant hedge funds are doing unwinding."
But by all means, jump in with a bid on the homebuilders if you hear Peter talking to you. I'm sure it will work as perfectly, just like that New Century trade back in February.
Borkfatty, that's the problem. They misuse the word vaccant. One in 7.5 houses is 11.3 million and the vast majority are second homes. IIRC Palm Springs shows something like a 40% "vaccancy" rate by this metric. This is a far cry from vaccancy.
Apparently on the conference call, this was the haircut from $1 Bln that was purchased out of their funds. Evergreen's money markets are around $50 bln in assets.
"I think it is amazing that we could take $300 million of losses on AAA paper."
What is amazing is that so much garbage was considered AAA paper.
"o manage the increase in loans in foreclosure, we have significantly increased our staff responsible for handling Oreo properties and working with delinquent borrowers."
Oreo properties?
Sounds yummy!
Gee, they are "amazed" by this. How "surprising." "Nobody could have expected this." and so on... and I have an IRA account with these chimps - argh!
It amazes me how common sense has been thrown out the window with this Bubble. Why, anyone can "get into a home." I still have people today trying to convince me that paying 40% to 50% of my gross salary to mortgage payments is just fine and not risky at all. Wrong! Oh, and you can even make a smaller down payment if you get the chance - again, bad idea. The level of financial ignorance is amazing. People really think houses are basically free (no down payments) and no amount per month is too much to "own" a place. Is it any wonder people are defaulting at such huge numbers?
The big banks drank the Kool-aid as well, while adding their own spin of how "real estate only goes up!" and if it says AAA it must be good. Did anyone even stop to connect the dots between people making $50K a year buying $500K houses with no money down on toxic loans and what those loans would be worth when they explode? I guess the banks really thought that by slicing and dicing the sewage and distributing it all over it would suddenly smell and taste great. I guess not!
Hey the stock market has fallen a wee bit today, but never you worry, it'll be back up by the end of the day. It always is. After all "tomorrow is another day." (hat tip to Vivien Leigh).
we had about $300 million, in losses on AAA sub prime paper in trading desks and inventory.
Words that should never, ever, be placed next to each other in a sentence: Triple A sub prime.
I am assuming that Wachovia is included results of its World Savings loans. World Savings was one of the worst "fog a mirror, get 100% jumbo ARM" companies. Downey and First Franklin were up there too.
And there is obviously unemployment among real estate agents, loan brokers, and smaller contractors, yet I think all would be independent contractors, thus not on payroll stats and possibly not eligible for unemployment.
"Did anyone even stop to connect the dots between people making $50K a year buying $500K houses with no money down on toxic loans and what those loans would be worth when they explode?"
Yeah, they did. And didn't care.
--
"it is amazing that we could take $300 million of losses on AAA paper. We didn't expect that that paper could degenerate that fast, with that kind of swiftness
Economists are incapable of forecasting recessions before they happen and business people are incapable of seeing sharp downturns and losses.
No wonder that economists and business people are lagging indicators.
Only the stupid homebuilders listened to the economists forecast of the housing demand! These people could have taken the time to look at the data and determined that they were overbuilding like crazy. Blind leading the blind! Into the abyss below the cliff. Let us see how many homebuilders survive the 2008-10 depression (20% at the most).
Jas
Prediction-
12 months from now "who would have predicted how fast CRE would decline" "these are class A properties that are going down" blah blah...
by across the board they were implying either across lending institutions or across SP/Alt A/prime.
its ironic that the losses are not based on credit or lies or type of predatory loan but in events that occured to the HO after the loan was let...
which means we are in trouble if thats the truth...
John Galt $
" ... if thats the truth"
What are the odds?
Have they said anything about nonperforming loans at Golden West in particular? I couldn't see anything in the release.
They specialize in option ARMs in Calif. Wachovia bought it at a big premium at the peak of the real estate market. It reminds me of the sale of about.com right as the dot-com market was imploding. I guess, the AOL deal is the all-time great one in this category.
First is reduction of income or underemployment. Second is the assumption of additional debt from lenders other than Wachovia and thereby changing the credit profile from the origination of the loan.
"Reduction of income or unemployment" -- do they mean a reduction in income from what the borrower STATED their income was? Are they talking about their "liar loans"?
"Assumption of additional debt" -- I'm assuming they're talking about the piggyback loan. Are they telling us that they didn't know that the borrower had no money for a down payment, and would therefore have to take out a second loan to cover the cost of the mortgage?
"and third is unemployment" -- presumably among employees of real estate brokers in mortgage originators.
How nice that Wachovia paints themselves as unsuspecting victims in this. How could anyone have seen this coming?(pretty much everyone who had their eyes open.)
I'm guessing much of this is from the Golden West purchase. They are not including a great amount of detail on loans, loan to value, FICO scores, or delinquency percentages. This is data that Golden West was famous for providing. A few months ago, the CFO of Wachovia was quoted in a Forbes Magazine article. Money quote:
"The bank doesn't include in its annual report the enormous detail Golden West provided on its mortgage operations"-- with the CFO saying it's not needed. He called the Golden West disclosures "boiler plate", and said that "If we have something new to say, we will include it".
Start the firing clock.
good pull Bob in Mass and Brian...
dont expect any detail in MSM financial medium..
John Galt$
The three reasons given by Wachovia are bogus. I have a friend who works at one of their collection centers in CA and she said the homeowners will tell you those things because there is a better chance of restructuring the loan or interest rate. If they admit to being a flipper then they get zero mercy from the bank...
Hey Tanta and CR and the rest...
New Survey Shows ARM Mortgage Holders are Clueless
we have no clue.....
New Survey Shows ARM Mortgage Holders are Clueless
sorry if its a double post..
John Galt$
Off Topic, but hot...
During the recent market freeze up, HSBC seized bonds from Luminent and auctioned them off for 50 cents on the dollar for 'A' rated securities.
The kicker is, there was only one bidder at the auction. HSBC!
I wondered how warehouse lenders were able to dispose of 40-50B+ in seized collateral in less than a week in frozen markets with zero news on who was buying those securities.
HSBC Is Sued Over Valuation Of Fund's Bonds
"we had about $300 million, in losses on AAA sub prime paper in trading desks and inventory"
Anon > No this is correct for the current bubble as a "AAA subprime" borrower is a class that has:
No (negative) credit history but no assets either and where the LTV is 110%
Conjure Bag stands by his original forecast of recession in Q1-08
Okay, based upon the last few days' postings, nobody in a position to forecast such events "could have {insert one of the following-foreseen, predicted, expected} X to have {declined, fallen, lost value} so {steeply, quickly, mindnumbingly fast}.
I, for one, am not much interested in any of those same persons' forecasts going forward. With every such statement, they drive what little confidence might have remained out of investors' sentiments, and increase the probability of {recession, depression, panic, term-yet-to-be-invented for these times}. This is the inevitable outcome of a market economy based on spin and not production.
Warren Buffet said it so nicely.
Billionaire Warren Buffett said he was skeptical about the U.S. Treasurys plan to create an $80 billion fund to buy distressed assets from structured investment vehicles linked to home lending.
I dont see any way that pooling a bunch of mortgages, changing the ownership, is going to change the viability of the mortgage instrument itself whether people can make the payments, he said. It would be better to have them on the balance sheets so everyone would know whats going on
Sort of O/T:
Foreclosures for November set area record
By SANDRA BAKER
Star-Telegram staff writer
The number of homes slated for foreclosure auction in November hit a record for the 10-county area of North Texas, Addison-based Foreclosure Listing Service said Thursday.
For the Nov. 6 auction, 4,220 homes are on the block for Dallas, Tarrant, Collin, Denton, Rockwall, Ellis, Johnson, Grayson, Parker and Kaufman counties. The last record monthly number of 4,056 homes was posted in February, the research firm said.
That compares with 1,221 listed in Novem- ber 2000, the firm said. It was in 2001 that postings began to rise, and they have accelerated every year since.
The new level is unwelcome news, said George Roddy, president of Foreclosure Listing Service
Maybe some mortgage-savvy folks here can explain this to me: about six months ago I found out that some young friends had bought their home back in 2005 using an ARM - and a neg am ARM at that. I urged them then to refi into a 30 year fixed loan. I had heard that they had refi'ed soon after that.
Then last night I had dinner with them and they told me that their loan was a 30 year fixed IO loan (certainly not what I recommended, but it is "fixed"). So I asked them how long they can pay the IO as in when does the loan require full payments to begin and they said that as far as they knew they could pay the interest only for the whole 30 years. Is there any such loan? Don't most IO loans have a 5 or 10 year period where they allow you to pay the IO payment, but then reset to full amortizing payments?
And a follow up micro-rant--a "nobody could have expected" statement is an indication that officers were not duly diligent. Get the lawyers warmed up.
The hole truth and nothing but the truth...The question is can you handle the truth???
Dissident Voice : It’s Time for the Banks to Face the Hangman
--
"Conjure Bag stands by his original forecast of recession in Q1-08"
Only off by 5-6 months, better than most economists.
Jas
"It would be better to have them on the balance sheets so everyone would know whats going on"
And it would be better if that three-card monty guy moved his hands slower. Buffett is right, of course; all that crap should be on balance sheets, and always should have been.
Anyone else think that James is living in DENIAL!!
kurty > They already are on it!
MetroPCS Sues Merrill Over Risky Investment - WSJ.com
it is amazing that we could take $300 million of losses on AAA paper. We didn't expect that that paper could degenerate that fast, with that kind of swiftness
I laugh at that.
Bofiz, re the 30yr fixed IO loan, it could entail a balloon payment of the entire principal at the end. Maybe everyone is assuming a refi somewhere along the way...
bofiz,
I am nowhere in the same league as some other posters in terms of mortgage savvy, and not even in the same species as Tanta. However, I will take a stab at it, and let other wiser folks correct me if I'm wrong.
My guess is that a fixed 30 year I/0 has a balloon payment of the entire principal at the end of the period. So in essence, your friends are leasing the house from the bank, not owning.
HVH said:
Bofiz, re the 30yr fixed IO loan, it could entail a balloon payment of the entire principal at the end. Maybe everyone is assuming a refi somewhere along the way...
Assuming one kept the loan for 30 years, doesn't that pretty much define renting from the bank?
Amazing .
CR said: "...Across the board!..."
Speaking of across the board, here's an odd coincidence.
Quotes for SPF, TOL, BZH, ... - Yahoo! Finance
The Dow is down over 200 points, but a half-dozen of the biggest homebuilders are up.
Somebody's channeling Peter Lynch and looking to the future: "Yes, the world is coming to an end, but just in case it doesn't what might be worth owning?"
Sebastia
All you negative nellies are missing the significance of this particukare visit to the confessional. Wachovia told the truth. This is huge. Not only that but with these confessions we can get out of the rubber room we've been placed in for the last two years. We see debt people and get locked up. Wachovia sees them too and we aren't so crazy after all. I know for sure that everything Wachovia says about California is true. We self employeds are hypersensitive to economic stress and underemployment is indeed in full force.
My favorite confession is also a first for the industry. The character of the loans and the borrowers they retain are now nothing like they were when originally booked.
Finally, CRE. While they are absolutely truthful and even express caution for the future it appears that they may not have learned the Res RE lesson that modern lending can go bad far faster than they can even track. CRE doesn't have any emotional xomponent. There is no moral hazard to use as leverage. CRE is best desribed as Res RE minus 3 quarters.
I guess in this society, people will pretty much sign onto anything..as long as they are part of the Ownership Society and the Got to have..Everyone look at me group.
30 year IO..Sheesh just when you think you have seen everything.
"Assuming one kept the loan for 30 years, doesn't that pretty much define renting from the bank?
Amazing ."
It's nowhere close to renting. You don't put 20% down deposit when you rent a place, and you don't incur gain/loss on property value when you leave the house if you rent it.
An IO loan in this case (not every case) is actually pretty sound as long as the LTV is not high and the borrower can refi even if house price drop another 15% in the future.
re " ... renting from the bank "
Well yes and no. You do get a 100% equity appreciation for 30 years. Not real valuable in this environment, but over 30 years??, probably an OK deal.
Granted you have all the maintenance, tax and insurance costs on your shoulders as well.
And oh yeah, you can't give notice and break the lease.
The sad thing is for probably only 100 to 200 a month more you could be actually building equity over those 30 years, regardless of future appreciation and actually own something after 30 years.
However if you think that value 10 to 15 years from now will be higher than today, and you plan to move or trade up, that's probably not a bad deal.
Seems like a reasonable decision to me - - depending on the cost to rent a comparable all those years (and remember rents would be going up, not holding level)
It is sort of like renting, except that the potential for appreciation/loss rides with the homeowner.
I dont see any way that pooling a bunch of mortgages, changing the ownership, is going to change the viability of the mortgage instrument itself whether people can make the payments, he[Buffett] said. It would be better to have them on the balance sheets so everyone would know whats going on
Warren, Warren surely you know that the whole point of this like most of what Wall Street does is to keep everyone from knowing what is going on. Knowing what is going on is the last thing Wall Street likes for the masses.
Just keep your eye on the falling ball called Corus Bancshares. Their quarterly earnings announcement was such transparent BS as to be laughable. They are setting themselves up for lawsuits and SEC suits by being so dishonest about problem loans, especially in South Florida condo construction projects.
This press release is exhibit A.
Page expired - MSN Money
The bank added: "Nevertheless, we are bullish that in the long run condominiums and condominium construction will remain a permanent fixture in the U.S. housing market. With the reputation Corus has built as an expert in this niche, with our highly experienced and trained staff, and with our strong balance sheet and income statement, we are very well positioned to capitalize on the eventual housing recovery that we are confident will occur."
Yeah, maybe condos are permanent in some form or other. But not Corus. This will be one of the biggest FDIC hits ever, when it hits.
Wachovia (or watch-over-you as my Father used to say) was for generations a VERY conservative NC bank and probably should have stayed that way. But then NCNB was a small state bank back then as well (now BoA - the second largest).
IMO, the jury is still out on allowing cross state banking. It was considered risky for a long time and for a reason.
The calculus of living paycheck to paycheck in America is getting harder.
What used to last four days might last half that long now. Pay the gas bill, but skip breakfast. Eat less for lunch so the kids can have a healthy dinner.
Across the nation, Americans are increasingly unable to stretch their dollars to the next payday as they juggle higher rent, food and energy bills. It's starting to affect middle-income working families as well as the poor, and has reached the point of affecting day-to-day calculations of merchants like Wal-Mart Stores Inc., 7-Eleven Inc. and Family Dollar Stores Inc.
Food pantries, which distribute foodstuffs to the needy, are reporting severe shortages and reduced government funding at the very time that they are seeing a surge of new people seeking their help.
While economists debate whether the country is headed for a recession, some say the financial stress is already the worst since the last downturn at the start of this decade.
From Family Dollar to Wal-Mart, merchants have adjusted their product mix and pricing accordingly. Sales data show a marked and more prolonged drop in spending in the days before shoppers get their paychecks, when they buy only the barest essentials before splurging around payday.
"It's pretty pronounced," said Kiley Rawlins, a spokeswoman at Family Dollar. "It seems like to us customers are running out of food products, paper towels sooner in the month.
Wal-Mart, the world's largest retailer, said the imbalance in spending before and after payday in July was the biggest it has ever seen, though the drop-off wasn't as steep in August.
And 7-Eleven says its grocery sales have jumped 12-13 percent over the past year, compared with only slight increases for non-necessities like gloves and toys. Shoppers can't afford to load up at the supermarket and are going to the most convenient places to buy emergency food items like milk and eggs.
"It even costs more to get the basics like soap and laundry detergent," said Michelle Grassia, who lives with her husband and three teenage children in the Bedford-Stuyvesant section of Brooklyn, N.Y.
Her husband's check from his job at a grocery store used to last four days. "Now, it lasts only two," she said.
Business finance news - currency market news - online UK currency markets - financial news - Interactive Investor
The only thing dumber than buying "AAA sub prime" as investment-grade paper is being "surprised" when it loses value. Dumb and Dumber sums up this management team.
hey Seb,
Good for you finding the only sector not tanking today. I sold off my DHI puts on Wed. and booked a nice 100% gain.
However, if you pull up a 3 month or YTD chart of the XHB on any finance site, and plot the chart, you will see that this is merely a bounce of new lows set earlier in the week. The downward channel (higher lows, lower highs) is intact.
The final downleg for the homebuilders is yet to come, IMO. That will be the panic/capitulation stage when 3-5 major players exit stage left.
After that, the bottom will truly be in.
Not likely a 30-yr IO with a year 30 balloon. That product doesn't anymore exist anymore since the downturn.
More likely a 30-Yr fixed with a 10-yr IO option and a loan officer who didn't properly educate the borrower. Meaning if you make just the IO payment during the first 10 years, then it adjusts to a fully amortizing 20-Yr loan at the beginning of year 11, with a significant adjustment to the payment.
The thought process with SO MANY of recent homeowners is that the financing is just temporary. They will either refi or earn a lot more money in 10 years. At least that's the hope.
Yahoo! 404 - Page Not Found
"Living paycheck to paycheck gets harder"
"While economists debate whether the country is headed for a recession, some say the financial stress is already the worst since the last downturn at the start of this decade.
From Family Dollar to Wal-Mart, merchants have adjusted their product mix and pricing accordingly. Sales data show a marked and more prolonged drop in spending in the days before shoppers get their paychecks, when they buy only the barest essentials before splurging around payday.
"It's pretty pronounced," said Kiley Rawlins, a spokeswoman at Family Dollar. "It seems like to us, customers are running out of food products, paper towels sooner in the month."
Wal-Mart, the world's largest retailer, said the imbalance in spending before and after payday in July was the biggest it has ever seen, though the drop-off wasn't as steep in August."
The Dow is down over 200 points, but a half-dozen of the biggest homebuilders are up.
Not catching a falling knife, eh? Maybe a falling anvil?
Somebody's channeling Peter Lynch and looking to the future: "Yes, the world is coming to an end, but just in case it doesn't what might be worth owning?"
Sebastian
I think Seb puts his finger on a real psychology with this statement.
On a lighter note, I am glad my job is not putting together conference calls like this one. Do people practice the night before?
This Youtube dedication goes out to Chuck Prince.
CRE: "Nearly all of these loans are on a with-recourse basis."
Whew. I feel much better about these loans now.
Prepare the Helicopters Bernanke is coming in for a landing...oh ya we are truly F@cked.
Let's translate the BenSpeak:
"stronger action by the central bank may be warranted to prevent particularly costly outcomes" = GS must not be allowed to lose money, at all costs.
"robust-control methods" = lookout below on OpEx mornings
"The concern about worst-case scenarios" = Wall St. bonuses may be affected. Absolutely Not allowed!
"assessing the economy's true state "remains a formidable challenge." = we really have no idea, but suspect it's all bad. Hank tells me I have to help out his friends.
"Uncertainty about the economy "provides a reason for the central bank to strive for predictability and transparency" = never let the sheeple know how they are being sheared.
Classic
Mortgage Credit News - This Week
Lou Barnes column this week is interesting.
More than a few people will be watching the FDIC's press release this afternoon. It's Friday which means time for another bank closing.
Couple of things I haven't heard yet:
1) Buffett on MLEC: "I dont see any way that pooling a bunch of mortgages, changing the ownership, is going to change the viability of the mortgage instrument itself..."
Perhaps the true goal is to collect enough of the sh*t together into something that is "too big to fail", to force a future bailout?
2) Bubble in the UK: Currently in Scotland, where the news just showed a city on the west coast where prices have gone up 30% in one year. Subprime mortgages still all around.
Is there something different in how these things are funded here? It certainly can't be CMO investors: who the hell is going to buy securities with this stuff now? (And if this stuff is really ongoing in a delayed-mirror reflection of the US in 2006, then please tell me how to short the British version of the ABX...)
One of CNBC's talking heads (Dylan something) last night said housing was "approaching" a recession.
FOX has stated that CNBC is too pessimistic and will be more about success on their new business channel. Looks like CNBC has adjusted preemptively. If US housing is not a recession, I don't want to see a real one.
File under "Where Alan goes, trouble follows?
Greenspan questions superfund
The former chairman of the Federal Reserve said the super- fund proposal by Citigroup, Bank of America and JP Morgan Chase with the backing of the US Treasury could undermine confidence in credit markets.
Mr Greenspan told Emerging Markets magazine, It is not clear to me that the benefits exceed the risks. He added: The experiences I have had with that sort of intervention are two-sided.
Gotta be worth another 1000 books of publicity.
Greenspan precipitated this mess, I wish he would just retire already and head to his mansion in Paraguay with all the other CEO Corporate scum.
rumours of indymac going under
also fitch downgrades
Fitch Affirms $1.27B & Downgrades $265.5MM from 4 IndyMac Subprime Transactions
News
Estimates of homes sitting empty run as high as 17.4 million.
Foreclosure rates are soaring, and as those owners are kicked out of their homes for not paying, the structures are sitting empty, with no one waiting in line to buy at any price. Meanwhile, more than $1 trillion in adjustable-rate loans will kick mortgage payments much higher by June 2008 for tens of thousands of homeowners, which will push foreclosure rates even higher as people simply walk away from houses they can't afford. I saw this happen in the last down-cycle in Los Angeles in the late 1980s; it gets ugly and stays that way for years, not months.
According to a report by investment bank Punk Ziegel, there are 17.4 million vacant houses in the country, and only 4.3 million of those are second homes.
This is truly a scary thought....I think its time to seriously consider plane tickets to a far away land.
All I need to do to get the market to turnaround before the -300 pt mark today is say : "This ship be sinking!" (well, at least it's always worked up til today)
So what are the sell off predictions today
Me Ill predict below 400 at the bell..conservatively
has Cramers head exploded yet? I can't stand to look at him anymore?
I predict PPT intervention and miracle rally here in the last hour
Indaymac Link????
Uh, chophouse, you haven't been paying attention. It's the last HALF hour when that happens.
Off-topic but hilarious.
Lennar.com - "Time is running out" ad.
Tucson, AZ New Homes by Lennar
Yes, indeed, time IS running out.
Sell, baby, sell!
Estimates of homes sitting empty run as high as 17.4 million.
Think. One out of four? No. What you are probably hearing is that insome bubble zones like Phoenix as many as 1 out of 4 houses for sale are currently vaccant.
which of those lennar hoods has the meth labs...
may as well get sourcing on free dope when i'm payin crackrock mortgages
which of those lennar hoods has the meth labs...
The ones still selling and holding value? Just a guess.
Interesting list of reasons. It totally flies in the face of the main message on why foreclosures are happening... loan resets. Every anecdotal press story is about a middle class family with a $1500 payment that resets to $2500 and they now can't afford it.
I'm convinced that that's just a small fraction of the problem. Wachovia's reasons reflect the true problem... people are simply in over their heads. DTIs are too high, regardless of the type of financing. This is why the '06 and '07 mortgages are defaulting at such high rates... and they haven't reset yet!
When DTIs were more reasonable, people could absorb a financial hit... more credit card debt, temporary unemployment, weathering a downturn in their industry of employment, and still make the mortgage payment. Now they're stretched too thin and they immediately find themselves in trouble.
This reminds me of something a coworker of my wife's said a couple years ago when she and her husband bought a house at the height of the SoCal housing bubble. She said that they really had to stretch to afford the house they bought but "we figure we'll just eat peanut butter and jelly sandwiches for the next 5 years." This was said with a straight face...
In America, making financial plans dependent on depriving yourself of the lifestyle to which you are accustomed is always doomed to fail.
"Yes, the world is coming to an end, but just in case it doesn't what might be worth owning?"
"Yes, the world is coming to an end, but just in case it doesn't what might be worth owning(with OPM)hehehehe?"
OT on Merrill:
story going around MLCO is having an emergency board meeting this weekend. Their bond losses are apparently much worse than announced. They are cleaning house in fixed income this weekend.
"you see mortimar, regardless if our clients make money, we still charge the fee... "
Well here you go Mr. Cote
read for yourself...sounds like a pretty convincing to me.
For home-builders, the worst is to come - MSN Money
Good grief.
Do I root for more people flooding into my TIPS, driving the price up yet destroying their future real return?
The short-term part of my brain is in, "Woohoo!" mode.
The long-term part of my brain is in, "Oh oh!" mode.
I'm not even remotely a buyer of stocks again yet, not that my crystal ball works any better than the next person's.
What if this is just the early innings of a lack of real return game? If so, there are going to be a LOT of investors watching what they thought was real prosperity becoming much more illusionary shortly.
I'm awaiting the day when financial advisors start wondering about old rules of thumb, like the safety of drawing 4% from a retirement fund, expected returns of 10%, housing prices only go up, and so on.
Job cuts ahead at Wachovia...
Jobs cuts ahead at Wachovia |
News for Dallas, Texas | Dallas Morning News
| Dallas Business News
Now?
My 400 mark prediction is getting closer and closer...
Drinks anyone??
Not one of the more effective short squeezes going into the close today. In fact it looks more and more like a long squeeze.
Was everybody really counting on a suprise rate cut at 3:00 today?
Ya the first to go the Depatment that manages credit cards - what an joke! (imho)
i'm disappointed with the CR Visitors Online Index. Only 106 with a drop like this?
Here's a musical tribute of today's stock market action.
"Speaking of across the board, here's an odd coincidence.
Yahoo! - 400 Bad Request 2cdhi
The Dow is down over 200 points, but a half-dozen of the biggest homebuilders are up.
Somebody's channeling Peter Lynch and looking to the future: "Yes, the world is coming to an end, but just in case it doesn't what might be worth owning?""
LOL! Make that over 350 points down, and it would appear as if everybody changed their mind about buying the homebuilders. Not such an odd coincidence, after all, huh?
Everybody is watching their tickers. Look for a traffic spike in about ten minutes as folks start trying to figure out what just happened.
Sebastian is bidding up the HBs?
Yup 350 down and the dollar at 77.36...things are sure looking up.
Bloomberg - Cheyne, IKB SIVs Default on ($7B)Commerical Paper as Assets Fall - $7B sounds like a big number to me.
Cheyne, IKB SIVs Default on Commercial Paper as Assets Fall - Bloomberg.com
Borka ,YES !
I WANT A LITTLE TIN FOIL UMBRELLA , PLEASE.
Well, Well, Well. DOW has finished down by 2.6% today.
Next Monday is going to be very interesting.
Many people will be doing deep thinking over the weekend.
I predict large sell off in Asia monday (maybe even China), and capitulation in our markets on Monday.
But, hell, I said that last Friday too.
The problems with the unregulated United States economy under Chimp Bush are not only bigger than you imagine, but bigger than you can imagine.
which of those lennar hoods has the meth labs...
I'd guess those who are current in their mortgages. Once they default, it's an abandoned meth lab.
Banker:
You still out there?
I'd love to hear your opinions based on past experience -- with or without current inside information.
Sebastian,
Nice try, but it's not people channeling Peter Lynch, it's the quants soiling their pants again. From Dow Jones:
3:59 (Dow Jones) Some of the stocks spiking while everything else sells off look like aberrant moves and mass short covering that characterized the quant blowup in August. Back then, quants were alleged to have exacerbated the market's drop. Standard Pacific (SPF) recently surged 10% and ExpressJet Holdings (XJT) added 16%; Beazer Homes USA (BZH) was up 4% and Oscient Pharmaceuticals (OSCI) surged 21% - all without an obvious catalyst. A partner at a quantitative hedge fund, who didn't wish to be identified, said he's seen a lot of trading Friday "that looks like quant hedge funds are doing unwinding."
But by all means, jump in with a bid on the homebuilders if you hear Peter talking to you. I'm sure it will work as perfectly, just like that New Century trade back in February.
Black Monday 20 Year Anniversary?
Stay Tuned...
One in 7 1/2 houses is actually vacant.
Borkfatty, that's the problem. They misuse the word vaccant. One in 7.5 houses is 11.3 million and the vast majority are second homes. IIRC Palm Springs shows something like a 40% "vaccancy" rate by this metric. This is a far cry from vaccancy.
WB took a $40mm loss on "certain asset backed commercial paper investments from Evergreen money market funds."
http://www.wachovia.com/file/wb3Q07pr.pdf
Apparently on the conference call, this was the haircut from $1 Bln that was purchased out of their funds. Evergreen's money markets are around $50 bln in assets.
chophouse says ( about a 30 year I/O loan)
Uh, I predict the banks are going to be absolutely astonished by how many people in these I/O loans "give notce and break the lease"