Countrywide Commercial Real Estate Loan Pipeline
Submitted by
CalculatedRisk on Tue, 11/13/2007 - 9:48pm (39 comments)
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Is there a market where I can wager on how long Countrywide will remain in business?
OT: S&P: Mortgage Banks to Be Hit Next Year
Forbes.com File Not Found
The chaos in the mortgage markets is only going to get worse in 2008 and will put a dent in U.S. mortgage bank earnings, according to a report released Tuesday by Standard & Poor's.
Next year will be the worst for mortgage bank earnings since the 1990s, the ratings agency said.
...
In 2007, mortgage correction has curtailed origination activity, with a 21.9 percent drop in originations in the third quarter. Through the first nine months of 2007, $1.980 trillion of mortgages were originated, down 12.4 percent from the first nine months of 2006. Some estimates show a 20 percent drop in originations in the fourth quarter, S&P said.
Originations in 2008 will plummet further, possibly not exceeding $1.5 trillion, S&P said.
Is there a market where I can wager on how long Countrywide will remain in business?
mjc | 11.14.07 - 1:08 am | #
yes it is called the Stock Market.
You were kidding weren't you?
CR,
If CRE has already peaked, then we are probably in midst of a recession.
Many clothing manufacturers? wholesalers in Downtown Los Angeles
are saying this Christmas season was a bust. All the Chinese suppliers are saying the orders from Europe are dropping too.(Anecdotal)
DH, thanks for the info. I think CRE is peaking right now - we won't know for a couple of months. This decline in the pipeline suggests either CFC is not competitive in CRE (losing market share) or the loan volume is drying up (what I suspect).
Best Wishes.
CR,
Who are the dominant players in CRE financing?
San Diego is in recession. There was no line at the SD Marketplace Costco gas station! The 16 pumps were usually full with a line up until just a few weeks ago, but there were only two or three cars. It was almost eerie. And the 99 Cent Only store may be having a problem with the exchange rate. I notice a definite lessening of inventory, even with the Xmas stuff out. Now where am I going to get my potato chips?
sdtfs,
Similar in Colorado Springs only for resteraunts. I went to my favorite Sunday night and there were only 10 families there with probably the ability to seat 40. Usually a 45 minute wait and this isn't the first time its getting more common.
OT there is a booming business for FOR LEASE SIGNS. Virtually every strip mall has at least one vacancy sometimes several. Around a 10% vacancy is whats estimated. Though the price is at a record per sqft 12.34.
YouTube -
sdtfs, I wouldn't draw any conclusions about the overall San Diego economy from the gas lines at Costco. There are dynamics specific to the local gasoline market.
The savings offered by Costco stations varies widely over time. What I've observed, as a long time reader of sandiegogasprices.com, is that Costco and other independent stations tend to react faster than name-brand stations do to changes in wholesale gasoline prices. This means that one tends to save less at Costco during periods of rising wholesale gasoline prices.
Because of the inconveniences of buying gas at Costco, buyers are probably very sensitive to the savings level even after they are already on the lot to shop for other Costco merchandise.
Does anyone know of any public reports created by a group within the Federal Reserve called "Counterparty Risk Management Policy Group II" ?
It was seemingly created around 2004-2005 to "look at what systemic risks had been created by the explosion of entrants into the hund fund market and the aggressiveness with which wall street was welcoming them"
- NY Times.
Think about CFC's risk profile too. Remember that graphic in the WSJ today on how much risk took on in residential? Well, gee, you think for some reason, someone on their team said that wasn't a good idea in CRE, only RRE? I seriously doubt it. They are so forked it is just silly.
http://www.crmpolicygroup.org/docs/CRMPG-II.pdf
I put up some more charts for those interested (inspired by CR's earlier "Bloomberg's Berry: No Recession" post).
Flow of Funds Fun!
CPRMG seems to be an industry watchdog, Anand. There are at least two major reports outstanding.
(Prepub update: Found one here: Toward Greater Financial Stability: A Private Sector Perspective. Report of the Counterparty Risk Management Policy Group II,
July 27, 2005 (PDF) . See footnote 9 here for refs, etc.)
[and as for Haloscan ...]
Other stuff of possible use:
Bernanke, 2006:
[My emph.]
Geithner, 2006:
As a interested reader of this blog (and the comments of course) I may have something to contribute:
I have just quickly put some numbers together into an Excel file. Check it out, you can download it under:
http://www.gegenantrag.net/files/equity.xls
(Or my blog, but since I just posted it, it will take a while till you see it)
Sorry, just realized I messed something up: The Excel file refers to a previous post (Bloomberg's Berry...)
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I guess if next year is worse than this, then the Implode-O-Meter will go up to 500?
They are the best of the worst, they actually can survive.
Newton,
I really like your spreadsheet. It's cool. It shows that a 10% decline in home values in a given year would wipe out a lot of the equity in leveraged homes.
I think some people are missing the point about MEW psychology. Here's an example:
Joe would like to get rich. But as long as he has $100,000 of home equity, he feels okay. His home appreciates by $50,000. He would like to keep the gain and get rich. But instead, he takes a $50,000 HELOC and still feels okay. This happens several times. Each time, he HELOCs and still feels okay.
But then, his home depreciates by $50,000. Now, he feels bad because his equity is down to $50,000. No HELOC.
So what if there's home equity left? Most people aren't going to borrow down to their last dollar.
Ahahahahaha - Tanta this MM of manure is for you (with icing on top in the form of lame reporter or editor insert at the end of the graf:
``I suspect some real `cow patties' remain in some prominent institutional punchbowls in the U.S. and abroad, and they will undoubtedly come to light before too long,'' Fisher said, referring to cow dung.
Fed's Fisher Sees `Sustainable' Growth, Price Risks (Update1) - Bloomberg.com
Please, I beg of you, hoist this high on the blog
Serious commodity inflation is undeniable. I would argue that we have been seeing pass-thru for many months already, but somehow, the numbers manage to avoid bubbling their way up to the government's published readings.
Will that change? We will find out soon.
But what we have seen a lot of is manufacturers and producers showing profit deterioration, attributed to rising commodities - Tyson, General Mills, P&G, Kelloggs... on and on. By holding the line on prices, they actually contribute to making the problem worse as they falsely encourage the fed that it's OK to lower. The game of chicken can't last forever.
More containment?
Florida Holds $2.2 Billion of Debt Cut to Junk (Update1)
By William Selway and David Evans
Nov. 14 (Bloomberg) -- The Florida agency that manages about $50 billion of short-term investments for the state, school districts and local governments holds $2.2 billion of debt cut to junk status.
The downgrades affect more than 4 percent of what the Florida State Board of Administration has purchased for the funds, according to a report by the agency's director, Coleman Stipanovich, that will be delivered at a Cabinet meeting of Republican Governor Charlie Crist today. Some $3.6 billion, or 7.3 percent, of the securities may be downgraded by credit- rating companies, according to the document, provided to Bloomberg by the state board.
[snip]
Unfortunately the Florida Public Funds managers did not read Tanta's UeberNerd library. This is the result:
The Florida agency that manages about $50 billion of short-term investments for the state, school districts and local governments holds $2.2 billion of debt cut to junk status.
The downgrades affect more than 4 percent of what the Florida State Board of Administration has purchased for the funds, according to a report by the agency's director, Coleman Stipanovich, that will be delivered at a Cabinet meeting of Republican Governor Charlie Crist today. Some $3.6 billion, or 7.3 percent, of the securities may be downgraded by credit- rating companies, according to the document, provided to Bloomberg by the state board.
Note that it's quite possible that as much as 10% of their holdings may end up rated as junk. Note also that if one of these fine minds had been reading this blog that fine mind could have sold the junk while it still was rated decently.
Given the economic situation that Florida is in, this is a nasty blow.
Sorry, Energyecon - we must have been typing at the same time.
OT,
Huge yen pump going on this morning - from 111.01 to 111.65 or so - whereever the slosh came from yesterday, its back to the yen this morning.
Retail Sales Up Only 0.2 Percent
Wednesday November 14, 8:38 am ET
By Martin Crutsinger, AP Economics Writer
Retail Sales Post Small Gain in Face of Numerous Economic Troubles
WASHINGTON (AP) -- Retail sales managed a small increase in October as consumers struggle to cope with a steep slump in housing, tighter credit conditions and soaring energy costs.
The Commerce Department reported Wednesday that retail sales edged up 0.2 percent in October compared to the previous month. It was the weakest showing since a 0.1 percent rise in August and represented a significant slowdown from a 0.7 percent jump in September sales.
[snip]
MoM,
I defer to you - keep your blog on my favorites list - full disclosure, CR is the first one on the list!
Nov. 14 (Bloomberg) -- The Florida agency that manages about $50 billion of short-term investments for the state, school districts and local governments holds $2.2 billion of debt cut to junk status.
Orange County 14 years later...and bigger.
rich,
Thanks.
I think you're absolutely right about the MEW psychology.
A lot of homeowners that are near 0-10% of equity will drastically cut their expenses.
Falling home prices shift a lot of previous "hey my house is an ATM" guys near the "danger zone" which will result in reduced consuption at least from this group.
Bloomberg's Berry is probably right about these homeowners who have a 500.000$ home and a 100.000$ mortgage, for example.
So the question is: How many homeowners can be considered weak with an equity of 20% or lower?
GS and Bear sterns have given the all clear...
is the discussion over?
From the retail sales report,
The increase in sales was boosted by a 0.8 percent jump in purchases at service stations that probably reflected higher gasoline prices. Excluding gas, retail sales were up 0.1 percent, the smallest increase in four months.
i stole this link from coppedge (careful it's 54 pages):
Real Estate Cycles of the 1990s and 2000s in Major US Metro Areas
http://cache.dbrs.com/pdf/21617409400826.pdf?transactionID=430033
Back at it again....
"Mortgage applications in the U.S. rose last week as refinancing jumped to the highest level in more than two years and filings for purchases rebounded.
The Mortgage Bankers Association's index of applications to buy a home or refinance a loan increased 5.5 percent to 707.3, the highest this year. The group's refinancing gauge rose 6.4 percent and its purchase index climbed 4.8 percent. "
U.S. MBA's Mortgage Applications Index Rose 5.5% Last Week - Bloomberg.com
This "must" be the bottom of the housing slump....
It takes maybe 5 minutes till the first stupid "gasoline is driving the economy" article appears.
The Countrywide graph is a pretty direct answer to Berry.
Hi!
Great site. I have a blog I've started on Real Estate, Technology and Marketing. I'm focusing on Web 2.0 applications, but there will be a lot about relevant technologies.
Thanks,
Darren
Web 2.0, Technology and Real Estate