Housing Wire: Moody’s Downgrades 1,923 Subprime RMBS Classes
Submitted by
CalculatedRisk on Tue, 04/22/2008 - 12:58pm (85 comments)
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Number 1?
Are the analysts at Moody's on valium?
Anyone know what % of America lives paycheck to paycheck with little savings?
For those people, wouldn't a 10% reduction in income make them insolvent and default on debt?
Market rally tomorrow?! :^)
chickenlittle: "Anyone know what % of America lives paycheck to paycheck with little savings?"
You mean some people don't??
Is it me, or does 1,923 seem like a lot?
That 10% reduction of income is coming as unemployment lowers wages. This notwithstanding the increase in expenses thanks to our crack team of experts at the FOMC.
How many of these are already at the Fed as collateral? After all, they were Aaa-rated. What happens now that they aren't? Will the Fed force the banks to take 'em back?
Here is the problem as I see it, in third world countries, food can consume over 50% of a person's income. If food costs double, than you have riots.
In America, in the last seven years, more and more American's have borrowed more and more. We were making trillions of dollars of loans with questionable ability to repay.
During that time bank executives got billions in bonuses.
Now that the economy is slowing, layoffs are ramping up, and commodity costs are skyrocketing, there is probably a HUGE percentage of America that is currently insolvent.
The question now is what percentage of America is underwater and how much debt is involved?
Can you imagine how many municipalities are living paycheck to paycheck and depending on rising tax revenues to meet much higher outstanding debt?
chickenlittle writes:
Anyone know what % of America lives paycheck to paycheck with little savings?
According to CNN, 4 in 10 workers.
Can someone tell me what is changing that makes these dribble out the way they do? Or are they just so backed up that they just do a batch and then let everyone know how much work they've finished? I mean, what data is coming out which is going into their model which said these things were better a little while ago than they are now? Or is this just Moody's waking up to what we all here already know? How long do they get to reasonably be in denial about how bad things are and when does it get built into their valuations? I just find this all to be a little game they are playing, and it strikes me that there is someone pulling the strings in all matters financial, making sure that reality comes to the world only in small doses, and as much of it as possible to be let out with a whimper, to avoid causing a bang.
We've sunk into this like a frog in slowly boiling water: a year ago this would have been incredible news, widely greeted with disbelief and denial.
Will the Fed force the banks to take 'em back?
Lucky Jim |
No they are backstopped by the Fed. Thats that - risks are now a part of the social obligation. As taxpayers, it will only mean a few hundred bucks per person in added taxes, in 2009.
Lucky Jim @ 5:21 pm
Good question. I wonder if someone at the Fed has thought of it. Or must one of us petition them to suggest they give back the shitty MBS and get back the not-quite-so-declining in real value treasurys they gave out.
Surely that was part of the scam. To delay the downgrade until AFTER the window had accepted the collateral?
steelhead @ 5:26 pm
I'm betting it will DECLINE to 4 in 10 when people start to see the hand writing the wall and adjust their habits accordingly -- as if THAT will ever happen.
Sorry if this has been posted already. Pretty scary; the potential collapse of Fannie and Freddy.
Concerns rising that Fannie and Freddie could need bailout - Apr. 21, 2008
The Fed repos roll over. Even if they don't toss out the downgraded securities now, they surely won't let the banks use non-qualifying collateral in the frequent roll-overs. Right?
Effe
Could this be connected (forced?) by Bank of Scotland's more realistic write downs?
Oh, good! California is almost to the bottom, then!
Calif. home prices down 22.48%, nations worst
April 22nd, 2008 · 17 Comments · posted by Jon Lansner/O.C. Register columnist
First American LoanPerformance says California home prices were falling at a 22.48% annual pace in late March, again, worst in the nation. Next in this dubious line was Florida (-17.41%), then Nevada (-16.67%), Arizona (-16.32%), and Ohio (-10.78%.) California has been at the bottom of this national ranking since May. (Whats behind the price slump? Golden State foreclosures are soaring. READ HERE!)
The nations top performer was Utah, with 4.9% annualized gains, the second consecutive month that states taken the crown. (As an aside, with an eye to todays Democratic primary: Pennsylvania home prices are falling at 6.46%, the nations 36th ranked market by this FALP math. In March 2007, Pennsylvania homes were appreciating at a 1.8% pace.)
FALP says 28 states now show year-over-year real estate declines However, on a quarter-over-quarter basis, there are now 36 states with decreasing property values. To read more, CLICK HERE
Oops, wrong thread. Sorry...
I'd love to read the full report.
Did Moody's sit down with some unemployed underwriters and look through the loan files?
If so, what did they find?
Were these broker-originated loans or bank originated?
How many are in default?
OT -- Q1 earnings only down 30% year-over-year (an improvement over Q4 07, which was down 57% YOY), so far (20% in).
Seb, I see light at the end of the tunnel!
The Wall Street Journal Online - WSJ.com Log In
It's hard to put these numbers in context. How big is 1,923?
We asked the same question about Silicon Valley tax reductions in,
"How Big Is 41,231?"
http://www.viewfromsiliconvalley.com/id405.html
Thanks!
jg
i have an acct at Credit Suisse FWIW.
I hope the Fed is holding some of that junk.
The Fed has $45 billion, max, in equity ('Other liabilities and capital). It would break my heart to see it go 'BK.'
FRB: H.4.1 Release--Factors Affecting Reserve Balances--December 3, 2009
C'mon, Fed, come clean on your writedowns and equity charge!
idoc, you are smarter than that! Aren't those guys dead men walking, like JPM, C, BOA, UBS, et al.?
Merrill Offers $9.55 Billion of Bonds, Preferreds (Update4) - Bloomberg.com
i thought these clowns didn't need to raise anymore capital?
Moody's downgrades Downey to Ba1, negative outlook
New York, April 22, 2008 -- Moody's Investors Service downgraded the
senior unsecured ratings of Downey Financial Corp. to Ba1 from Baa2.
Downey Saving and Loan Association's bank financial strength rating was
downgraded to D+ from C-, long term deposit rating to Baa3 from Baa1 and
short-term deposits to Prime-3 from Prime-2. Moody's placed a negative
outlook on all Downey entities. This action concludes the review that
began January 24, 2008.
Will the Fed force the banks to take 'em back?
Lucky Jim |
Who cares? Certainly not the bank execs. The banks may get them back, but they already released their Q1 numbers, so no hit to capital since they were AAAAAAAAA. By next quarter the fed will lower the collateral bar.
$40B in equity for the Fed (near the bottom of the H.41, 'Capital.'
It would break my heart to see the Fed make a capital call on its schmember schmuck/shyster/shylock banks.
C'mon, Ben: make that write down and break out that tin cup!
"First American LoanPerformance says California home prices were falling at a 22.48% annual pace in late March, again, worst in the nation"
Where's that luminary, Gary Watts, when we need RE appreciation explained?
I gotta put my reading glasses on; I'm making too many typos.
"Is it Friday yet?"
Maybe they couldn't wait and thought election night was a good enough distraction.
Um, just looked at Markit:
ABX-HE-A 07-1
9.01
Yes folks! A paper sold just over one year ago is now trading at a 91% discount!!!
A paper!!!
This is just unbelievable.
Incredible.
Where are the losses?
Now tell me this isn't an all time swan dive?
Big black swans.
TEN of the index constituents are now rated CCC
Wall Street got some 'splaining to do to the lucky buyers of this sewage sold as gold.
This is definitely not over, and wall street equity will have their turn in the barrel soon.
Someday this war's gonna end...
"Downey Saving and Loan Association's bank financial strength rating was
downgraded to D+ from C-, long term deposit rating to Baa3 from Baa1 and
short-term deposits to Prime-3 from Prime-2. Moody's placed a negative
outlook on all Downey entities."
Nice! Where was the ratings agencies, OTS, & FDIC over the past year when it was obvious to all those shorting DSL stock that they were dead meat?
What whine goes well with that shit sandwich RMBS owners are now eating?
Pretty soon now I expect Fridays will be dominated, not by ratings downgrades, but by bank failures announced by the FDIC.
TGI Fridays!
My next thought is that BAC will most likely walk away from CFC due to these downgrades. They will be unable to sustain the amount of capital needed to take the writedowns that will be in the pipeline to the balance sheet at CFC.
The next question is if the Fed is willing to let CFC go bk and then have BAC take over the working parts and leave the portfolio for dead with a federal entity.
Ummmmmm.
I think that just might be the only option. Hey Warsh, pay attention- you will soon have to help decide the fate of the housing market!
Someday this war's gonna end...and the rubble sure won't look pretty to the survivors.
Good lord. I need tums just to read this thread.
Ambac reports tomorrow.
Maybe Gasperini will have his old job back.
When are they going to grow a spine and downgrade Ambac and MBIA?
This is from the njrereport blog:
APP.com | Asbury Park Press | Monmouth and Ocean counties news, community, entertainment, yellow pages and classifieds. Serving Monmouth and Ocean counties, NJ
It's just getting started here in NJ. Wall street layoffs have just started too. People are walking on eggshells. The bravado is gone. There is fear in the air.
After a week in Cozumel I logged on the innanet for the 1st time and nothings changed. Write downs continue, shareholder dilution continues, downgrades continue and the market trades sideways or up... I think I'll go back to the pool and have another mojito...
Angry Saver, that NJ link is great:
"The Federal Reserve data showed that:
"Forty percent of the 10,800 subprime loans provided to homeowners in Monmouth and Ocean counties were given without full documentation of income, and the average credit score was about 610, far below the top score of 850.
"Forty percent of subprime borrowers at the Shore are also behind on their loan payments. Eleven percent are in foreclosure.
"The nearly 79,973 subprime borrowers in New Jersey owe an average of $250,614 on their loans, the fifth highest balance in the United States. That's about $20 billion in subprime loans."
I wonder if these have been written down yet?
this is what will happen:
some of these downgraded securities are on the Feds books, so bernanke will soon have to disclose a sizeable writedown and a desperate need for a quick cash infusion into the fed. the fed will issue 17.5% convertible preferred to the cartel consisting of blackstone, kkr and citadel who will end up owning 49% of the fed and, as an extension of that, 49% of the U S of A. Fed will issue junk bonds right after that, the proceeds of which will go to the cartel for some early payoff on their investment. What they'll do with the 49% of this country i don't know, but i'm sure they'll milk it for all it's worth.
Angry Saver, what exit are you from? ; )
I'm from 16E, and being right across NYC we expect that the worst will now come for us here.
I wonder if any of those AAA-rated securities are among those taken by the Fed as collateral? I guess the bank would have to take them back.
I think Jackk is right on the money. i just scared of
who get the other 51%.
damn typos
doom,
We lived off exit 9 for seven years. Definitely miss the great Asian restaurants of New Jersey. There are no masala dosas to be had in Western MA.
57th!
Yes!
am i too late?
This is a hint from dryfly - hint, hint - start paying attention to the operating companies owned by private equity. I just got an email today that there was an office massacre at one of the clients I work with, owned by a mid-sized PE.
There are serious cracks in this biz sector too. Very serious.
Doom,
Exit 14, Short Hills Mall.
For all of the non-initiated, people from NJ are identified by what Turnpike Exit & mall they are nearest.
Checker,
By and large, Monmouth & Ocean Counties are very desirable locales. I never would have expected that kind of foolishness.
dryfly, I thought you and mp would find this one of interest.
Founded in 1982, Tech Valley Printing was located in an industrial part of Watervliet, right off the railroad tracks. The company occupied a 200,000-square-foot building on Ninth Avenue, where it printed circulars, newspaper inserts, books and materials for financial firms. It also printed the state's annual budget.
But the company, which absorbed four smaller printing companies in the past decade, began laying off its staff in early February and closed for good on Feb. 8. A month later, it was forced by creditors into Chapter 7 bankruptcy.
Proceeds from the auction -- the amount was not available Wednesday -- will go to creditors. The company owes more than $6 million.
For some who came to the auction, there wasn't much of interest to be had.
"It's all junk," said Patrick Ryan, owner of Modern Press in Albany. "It's not maintained."
One press still had ink on the rollers and needed to be cleaned. Another unit had a paper jam, he said. "It's like somebody just turned it off."
Gary Blum, president of Shipman Print Solutions in Niagara Falls, said Tech Valley Printing's failure may be a sign of the times.
"We're starting to get an auction notice once a week," he said. "We're starting to get worried."
Printers may have reason to be. In 2006, commercial printing business sales increased 5.3 percent; in 2007, they rose 2.9 percent. This year, experts predict sales will be up just 1.5 percent -- or down 1 percent.
"There are companies that are succeeding, but it's getting harder and harder for them to compete," said Joseph Vincenzino, a senior economist at the National Association for Printing Leadership in Paramus, N.J
Sad, sad story, 12th-.
We have to abolish the Fed, return to gold, and abolish fractional reserve banking so that we do not go through this -- which will take 10-15 years to sort through -- again.
Terrible, what easy credit to households, businesses, and governments -- it appears to have started in '81, to my eyes -- has done.
Bob in MA,
The Indian food in NJ is outstanding. Great Thai too. Our seafood is a little dicey though.
Maybe Bob_in_MA can send us lobster, and we'll ship him the Asian food.
12th Percentile,
Any possibility electronic communication has voided some demand / need for a hard copy?
Can't remember the last time I received something of importance (i.e. not a solicitation) that wasn't electronic.
Wait, with the price of oil hitting almost $120 today, scratch that thought. Scratch any thought of shipping anything.
I wonder if any of those AAA-rated securities are among those taken by the Fed as collateral? I guess the bank would have to take them back.
I thought the banks could post anything that was investment grade (so minimum BBB-) rating.
barely has it right.
BSC taught us that the Fed will backstop securities, and Paulson will write the get out of jail free card. Also taught us that any major swap player cannot fail due to counterparty risk cascading.
Major players have new captial infusions. The weakest will now start to fail. Unless they are in the club above, they are toast. BTW, GSE's are also in the club.
Bob_in_MA writes:
I wonder if any of those AAA-rated securities are among those taken by the Fed as collateral? I guess the bank would have to take them back.
Seems obvious to me that when the time comes for the fed to "force the bank to take them back" that for one reason or another the bank is not going to take them back.
Ritchie Bros. Auctioneers - Auction Catalog Search Results
I have to laugh.
Ritchie Bros is now starting to liquidate lots;-}
Construction equipment and home lots!!!!
Someday this war's gonna end...
COMMERCIAL RE CRUMBLING:
Commercial real estate agents like to say that retail follows the rooftops. The rooftops have practically stopped budding.
Redding is on track this year to record fewer than 100 housing starts for the first time since 1974. And were coming off 2007 when the city issued the fewest single-family-home permits since 1981.
Almost on cue, available retail and office space appears to be rising. Just drive around town.
Whats more, there are finished strip malls sitting largely vacant. Steve Mungia, commercial relationship manager for Umpqua Bank in Redding, said the eyes dont deceive. Commercial and office real estate activity in the north state has slowed.
Were seeing a little bit of a correction, but its less severe than the housing market, Mungia said.
Redding commercial real estate agent Ken Miller said retail complexes dont happen without an anchor tenant lined up. With the retail economy slowing, you see anchor tenants pulling back, Miller said.
When I featured California Espresso Cafe in an April 7 business feature, owner Christine Sullivan was candid about the challenge these tough economic times pose for retailers like herself. But Sullivan, who bought the business in October, gave me every indication that she was going to stick it out.
Guess not. Sullivan cut her losses and closed suddenly last week. In an e-mail to customers and friends, Sullivan said her rent went up $600, adding that we seem to just keep putting more money in and not enough is coming out.
Roger Lefebvre, who sold the business to Sullivan, still owns the note but wouldnt say how much Sullivan owes him. Lefebvre has no plans to reopen. It will cost too much to reopen and try to make it the way the market is going today, Lefebvre said.
Buzz: Commercial real estate agents pinched by housing crunch, too» Redding Record Searchlight
i love perpetual preferred's.
they seem so,so , permanent
I'm going to start an on-line petition asking Bernanke to resign.
I need help with some of the reasons why he should resign, one of them is that he is clearly over his head in the real world versus a college classroom, but there's lot others.
Please email your reasons and I will cherry-pick and include the best of them when I write the petition.
chickenlittle writes:
Anyone know what % of America lives paycheck to paycheck with little savings?
According to CNN, 4 in 10 workers.
those are the ones paying there full, righteuos share of taxes
These securities were all sold to sophisticated investors who fully understood the risks,right? Like pension funds...and they did the required due diligence,so hoocoodanode?Jeez just think of the stress these managers are undergoing...
I wonder if any of those AAA-rated securities are among those taken by the Fed as collateral? I guess the bank would have to take them back.
The Fed may have collateral maintenance agreements and the paper may be pushed back "immediately" (the trigger for a push back may only be once a week); that's standard in private sector collateral agreements.
Even if the paper drops in value, it only matters if the bank borrowing against it defaults - the bank still owns the $#%@. I'd guess that the Fed would be a senior creditor in a bankruptcy, so there's really a lot more assets backing up these repos than just the posted collateral (tough luck to the subordinated debt holders).
.
jg writes:
We have to abolish the Fed, return to gold, and abolish fractional reserve banking so that we do not go through this ...again.
In the absence of fractional reserve banking, who is loaning money and how are they doing it? Just curious.
In the absence of fractional reserve banking, who is loaning money and how are they doing it?
You know, Mish for one likes to talk about this and it makes me discount everything else he says. Seriously, eliminate fractional reserve banking? So basically everything has to be funded by equity?
Oh yeah, that'd be great for greasing the wheels of the economy. How would you like your 18% small business loan, or 13% mortgage...
Thanks 12th - BTW I know the capital Region fairly well, my daughter went to RPI.
1) it is affordable
2) if it wasn't for state gov it would have been abandoned long ago.
Beautiful country if you don't go downtown Troy or Watervliet.
If peak oil ever really comes - places like this will rebound quite a lot - at least in relative terms. Its the kind of place where the re-manufacturing & 'localized production' for Boston & NYC will be done (in all those low cost medium sized cities stretching out across NY State & Penna).
We aren't there yet by any means.
We have to abolish the Fed, return to gold, and abolish fractional reserve banking so that we do not go through this -- which will take 10-15 years to sort through -- again.
Ya and start chipping flint too. Where'd my club go, gonna find me a woman.
Ain't gonna happen jg - move on.
The Fed's got a new idea; manufactured synthetic financial memories
Tfoot.
would'nt be so bad. hi rates on loans and growth out of profit would (probably) end the huge stratification of incomes and wealth.
"My next thought is that BAC will most likely walk away from CFC due to these downgrades. They will be unable to sustain the amount of capital needed to take the writedowns that will be in the pipeline to the balance sheet at CFC."
Anyone from or in Charlotte can go to the intersection of Highway 77 and Harris BLVD (near the Northlake mall for those from NJ). There is a commercial building there that had been empty for months. It now has a large "Countrywide" sign on it.
I think BofA is seriously intent on closing the deal for the mortgage servicing and then possibly letting the rest of countrywide that owns the loans run off in the special corporate entity (redwood) or something that they created for the deal
from the charlotte observer
Charlotte.com
The Charlotte Observer, N.C., Doug Smith Column.
By Doug Smith, The Charlotte Observer, N.C. Knight Ridder/Tribune Business News
Mar. 25--One of the largest office buildings in north Mecklenburg has signed six tenants in recent weeks, bringing its occupancy to nearly 50 percent.
In the booming late '90s, such a performance probably wouldn't have been noteworthy.
But in these lean times for landlords, competitors will pay close attention to Beacon Partners' approach to leasing up a five-story, 130,000-square-foot building in Harris Corners Corporate Park at Interstate 77 and W.T. Harris Boulevard.
Two Harris Corners, completed about 15 months ago, was home to about a half-dozen tenants until Countrywide Mortgage Co. spearheaded the recent surge by leasing...
Kis sed:
"Surely that was part of the scam. To delay the downgrade until AFTER the window had accepted the collateral?"
Of course that was part of the scam. You have a masterful understanding of the game, Kis.
Now back to your regularly scheduled program of shills telling us how we couldn't live without the Fed and their cronies gathering and distributing credit from thin air.
New rule: If you are going to use words like portend then you have to spell separate correctly.
InfoViewer: Regulator fears wave of bank failures
More good news from the OCC
d- and all of you naysayers; as I tell my children, 'In the depths of the depression, we will see this happen.'
We'll see.
Long ago, there were savings banks; if you wanted safety for your money, you parked it there.
Then, there were investment banks; if you wanted high returns and were willing to accept the risk, you parked your money there.
You don't do fractional reserve in the first type of bank.
dashingdwl writes:
Moody's downgrades Downey to Ba1, negative outlook
New York, April 22, 2008 -- Moody's Investors Service downgraded the senior unsecured ratings of Downey Financial Corp. to Ba1 from Baa2.
Downey Saving and Loan Association's bank financial strength rating was downgraded to D+ from C-, long term deposit rating to Baa3 from Baa1 and short-term deposits to Prime-3 from Prime-2. Moody's placed a negative outlook on all Downey entities. This action concludes the review that began January 24, 2008.
dashingdwl | 04.22.08 - 6:14 pm | #
can someone add some color to what this might mean to dsl?
dryfly writes:
Thanks 12th - BTW I know the capital Region fairly well, my daughter went to RPI.
1) it is affordable
2) if it wasn't for state gov it would have been abandoned long ago.
Beautiful country if you don't go downtown Troy or Watervliet.
...
that's cold dryfly. actually with better management at the local government level, the capital region would be a nice place to live. good schools, nice landscape, decent cultural distractions, and still some ag industry to be found.
12th percentile - i have a fine center square townhome coming up for rent this summer - i've been away from albany for awhile - what's the best listing venue?
To the Board : Any specifics on the actual Aaa downgrades for those who have access to Moody's. What percentage of the overall downgrades reflect cuts of more than just a nominal one or two levels ? How many Aaa RMBS tranches were cut to non - investment grade. Any details would be appreciated guys and gals .Thanks in advance.