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"The bill excludes investors and those who lied about their income on their loan applications."
That would exclude just about all of them.
David Kittle, chairman-elect of the Mortgage Bankers Association, said at a conference earlier this week that he sees no rush by mortgage bankers to write down loans.
These people need to be chased around by a Federal Reserve chairman wielding a cattle-prod. zzzaap
By the Corporations, For the Corporations.
If you aren't ruthless, then you are surely a fool.
Damned Ruthless Borrowers.
BAILOUTS FOR ME BUT NOT FOR THEE!!
Acting prudently and playing by the rules is for suckers.
If you don't screw up and make stupid decisions you will NEVER get your bailout!
Now go out there, stretch the rules until you don't recognize them and borrow more money than you could ever pay back. And then borrow more.
Do it for the Gipper...
One thing I truly hate about this bill is that it provides a strong incentive to jack appraisals.
It's obviously a big incentive to dump the risk on areas moving down now. Let's say my model shows me that I've got mortgages in an area dominated more by Alt-As than by subprime, and one which looks to take its main losses over the next few years. Those are the ones I'd pass to the FHA.
In an area in which a lot of price decline has already occurred, knocking off 15% from the current appraisal will not be a good deal for me.
I would think that the FHA would take heavy future losses over this one.
Goose sauce? Yes, please put some on my nothingburger. Hold the cheese.
ummm, Citi to sell $400bn of assets
Mortgage companies that choose to participate in the proposed plan would be required to write down the value of a delinquent loan by 15% from the home's current appraised value.
My understanding is different from this. My understanding is the new loan will be for 85% of the current appraised value. If an owner currently owes more than the appraised value then the lender will have to write off this difference in addition to the 15% of appraised value.
I wonder what happens to second liens. I think they would be wiped out.
The bill excludes investors and those who lied about their income on their loan applications.
And they'll be able to determine that how?
I'm telling you... it is going to get really mean at some point. We are not yet at the point of screaming arguments, threats and violence, but we will be.
About the $400B Citi assets, I just took a gander at their presentation. Over 50% of those assets are identified as related to real estate, CDO's or SIVs.
Man, are these guys in a world of trouble or what?
OT - please Hilary, leave the race NOW!
Someone please corrrect me if Im worng but arent current appraisals from banks at 85% of the asset value? To be honest with you, I dont know if another 15% writedown from that level is even enough, when you consider all the leverage that was used to buy and sell MBS products. The US tax payer would be stuck footing the bill. this doesnt even include any of the GSE's problems.
Is it time to open the Option Arms Company yet?
"We have semi-auto and full-auto. Early orders receive a 15% discount from MSRP. Cash only."
To CR and all,
What is everyones take on the Citigroup sale of half a trillion dollars in assets? Does this show how hard up they are to raise cash?
Brian23
I agree however there are some homes with mortgages that are greater than the value of the home. That is the mortgage may be 400k but the appraised value is only 350k and 85% of that would be below 300k. The whole thing that the cost would be only 3 billion to taxpayers is hogwash.
Tim: "What is everyones take on the Citigroup sale of half a trillion dollars in assets?"
Who are they going to sell them to, the Martians?
peripheral visionary,
the Us gov't of course
Borrowers would have to be at least 60 days late on their mortgage payments to qualify for the program.
I remember when the word qualify was only used when one didn't have any late payments on anything.
So is a perfect payment history the new deadbeat?
I watched about an hour of the debate yesterday on CSPAN. It was interesting how the opponents to the bill continued despite multiple corrections to misrepresent it as open to speculators, open to people who had fraudulently obtained their loans and exaggerated the end costs.
The bill specifically excludes non-owner occupants and anyone who misrepresented income on the original application. I assume this can be verified by a knock on the door (VA does this today) and by requiring the kind of income documentation that was once standard.
The cost of $300 billion would only be reached if every loan taken defaulted and if every defaulted property returned $0 to the Treasury.
Personally, I hate all the bail-outs - BSC, the accepting of car loans and other dross at the Fed window, the looming spectre of GSE default. The only thing that makes any of this bearable is the knowledge that I would hate "Great Depression: The Sequel" even worse.
Tim, I sincerely hope not. Bear in mind that that kind of money isn't available even to the Fed; it would have to be a Congressional action. The Fed may get away with the Bear Stearns bailout because it is "only" $30B with assurances that they would be getting it back (maybe, but you know what I mean.) CFC at ~$80B will be a harder sell; C at ~$500B (as much as the Iraq war) will be a very, very hard sell. Not that they won't try . . .
Citigroup lays out financial targets to investors, predicts 9 percent revenue growth
NEW YORK (AP) -- Citigroup Inc. said Friday it is aiming for 9 percent revenue growth as it looks to rebound from
400bn in non-performing asset's that i'm sure was used to mark eps with, and they think they can attain high water eps marks at 9%.
from prince's waltz to pandit's bacon. not pretty
Here's one goose really needs to be in some sauce.
"The only thing that makes any of this bearable is the knowledge that I would hate "Great Depression: The Sequel" even worse."
It ain't over until it's over and this ain't over rover.
umber2son writes:
"'The bill excludes investors and those who lied about their income on their loan applications.'
And they'll be able to determine that how?"
This gets back to a point that Tanta and many others on this blog have made repeatedly. There just isn't any equitable "one size fits all" plan. The way they will be able to determine eligible applicants is through a detailed examination of the file. And if there is no file, the assumption must be that the borrower is not eligible.
It's going to take an army of experienced analysts to do this. They'll be calling retired loan processors back and paying them premium bucks. Just like the Y2K remediation when retired C programmers were able to make tens of thousands of dollars a week combing through old code.
Personally, I hate all the bail-outs - BSC, the accepting of car loans and other dross at the Fed window, the looming spectre of GSE default. The only thing that makes any of this bearable is the knowledge that I would hate "Great Depression: The Sequel" even worse.
Again, what worries me is that there's this assumption that bailouts will prevent another Great Depression when there seems to be some evidence (perhaps not conclusive) that bailouts can lead to these types of events by encouraging more and more risk taking.
Is it a coincidence that we have oil prices near $126 and the sudden emergence of these inflationary food crises after the Bear bailout? I don't think so.
Is it a coincidence that worst excesses of the 1920s occurred after the Fed cut rates in 1927 to help "bailout" the slowing US economy and the problems European currencies were having?
I don't think so.
At the very least I think you've got to be very careful who and what you bailout.
Lots of numbers don't add up.
Don't know if you caught this:
pdf warning
http://www.corusbank.com/acrobat/Q108.pdf
"During the first quarter of 2008, Corus recorded a provision for credit losses of $37 million, which, after
charge-offs of $19 million related to condominium-secured commercial real estate loans, added $18 million
to its loan loss reserves.
The provision was in response to both issues with specific loans as well as
declines in the quality of our portfolio overall. Credit concerns resulted in nonaccrual commercial real
estate loans increasing dramatically to $420 million at March 31, 2008, up from $282 million at December 31, 2007, and $196 million one year ago. Due to the nonaccrual loans, interest income during the first quarter of 2008 was $8 million lower than if the loans had been accruing normally.
$420 million of non-accrual loans but only $37 million set aside for charge-offs? Almost all of it high-rise condo construction loans.
And get this: "Corus successfully originated $821 million in new commercial real estate loans during the first three months of 2008. This was not only substantially higher than the $321 million of originations during the first quarter of 2007, but in fact above the highest level of quarterly originations during 2007. With the potential for a near-term recession and with a goal of not adding any new problem loans to our portfolio, we are mindful to approach new business with a cautious, even pessimistic, view of the markets. We are pleased to report that over half of the 2008 first quarter originations were in the office sector. We are seeing new opportunities in the office,
apartment, and hotel markets as a result of the upheaval in financial markets. We expect to see a
considerable portion of our near-term originations in these three non-condo sectors as well. We are pleased
to create diversification in our loan portfolio by property type.
Can you believe these idiots?
Made construction loans to condos, until condos crashed.
Now making EVEN MORE loans to CRE, just before it crashes.
Why is the FDIC letting this fiasco happen?
Appears ResCap is technically defaulting on some paper. So when does continued distress become the true reality forcing more accurate marks?
rich - Amazing
The practical result at the neighborhood level is to wipe out the equity of everyone who put down 20% and to make whole everyone who who put down 5% or less. This at a time when lenders are demanding 20% down of borrowers. Welcome to the new "Ethical Hazard" where the more responsible you are the more you are punished.
That $400 billion garage sale that Citi is having will be $500 now (up $100 from yesterday, but what's $100 billion when your'e already toast?)
"...Pandit said the $500 billion figure represents about 22% of the firm's total assets...cuts will be broken down as 4% from auto holdings, 5% from subprime collateralized debt obligations, 6% from highly leveraged commitments, 11% from structured investment vehicles, 35% from real estate and 39% from other, unnamed assets..."
Will be amusing to see what they get for this stuff. Will it be possible for them to quietly sell it on without the public working out what the price was, or is $500 billion of bad news about to be unleashed on Wall Street?
I have a client who bought in a nice neighborhood--at peak--but put 30% down. One would that that was responsible. He is wiped out. If anybody deserves a bailout it is him.
He moved here from New York and property values seemed low to him by comparison.
A reduction of 15% would get him slightly above water.
39% from other, unnamed assets ...
Yikes. They're willing to break out the share of this $500B that's composed of subprime CDOs, auto loans, and SIVs ... and yet there's still a two-fifths chunk marked simply "Other"?
The mind boggles at what THAT could be. Subprime collateralized Stein Mart layaways? CDOs to the 10th power? And whatever it is, how the hell can ONE firm could wind up owning $200 billion worth of it?
And they'll be able to determine that how?"
Probably a check-box on the application.
[ ]I live in this property
[ ]I am not now, nor ever did, lie about my income on a mortgage applicaiton.
Attention Homeowners Who Pay On Time:
You are not currently eligible for mortgage restructuring with the assistance of federal agencies.
You need to begin thinking of ways to become eligible for such plans, else you will not receive any assistance from federal agencies.
Try to think of ways to owe far more than your home is actually worth on the market, and work really hard to become less current on your payment history.
Oh, you already are? Good show. I knew you would catch on!
re: "The mortgage industry has bitterly opposed legislative proposals that bankrupt homeowners be able to ask judges to reduce the amount they owe. But that is what this company hopes to accomplish through the threat of a bankruptcy filing."
as per corporations, what's good for a corporation isn't good for people, the living beings that created the corp to begin with
frankenstein's monster at least had a face
These MBS investors will never allow loans to be written down. They are quite content to bankrupt the borrowers to extract every last penny. Congressional threats are not going to change a thing. We will ride this disaster all the way to insolvency.
"These MBS investors will never allow loans to be written down. They are quite content to bankrupt the borrowers to extract every last penny. Congressional threats are not going to change a thing. We will ride this disaster all the way to insolvency."
Yes, that is ultimately what I'm hoping for in all of this. As Darwinian as that may sound, it is the only way for asset values and lending standards to return to some form of sanity again. It will hurt a lot of people and probably those who don't deserve...albeit to a lesser degree.
I bought in 2003 with 20% down in Orange County. I've got a 30 yr fixed and haven't missed/been late with a payment.
Is there any reason I shouldn't just stop paying and have my load reduced too?
I can pay. But it seems profitable not to.
Jwm In SD: I rent so it won't affect me in that way. I would love for prices to crash too so I can buy. Still, I wonder how much collateral damage we will do to folks just to keep the MBS investors (Arabs and Chinese?) from taking a hair cut?
Loan write down's don't necessarily keep proces from falling, they just keep some product off the market at foreclosure prices.
So cramdowns are ok if the debtor is a company, but not an individual?
The hypocrisy of bailing out corporations while leaving homeowners hung out to dry is just galling.
Help em all or screw em all. I prefer the latter.
Tim - C has payroll and dividends to cover. So, sell assets to meet obligations.
ac - I was chased by a goose once. fiesty little buggers!
CSC - I'd call your lender and ask the question. Just say your job is iffy and you are preparing for the future and are looking after "their" interest. Hech, you might get 10-15% shaved off the paper.
"C at ~$500B (as much as the Iraq war)"
Hyperbole overload. Iraq war cost is over a trillion. And that doesn't count wreckage of a country, hundreds of thousands of lost lives, etc.
"The practical result at the neighborhood level is to wipe out the equity of everyone who put down 20% and to make whole everyone who who put down 5% or less. This at a time when lenders are demanding 20% down of borrowers. "
I don't always see eye to eye with Dawg, but he makes a good point above. The congressional plans are a travesty. This is about bailing out security holders and screwing home owners who did things right (other than making than making the dubious decision to buy).
This is why an executive with competent people is so essential - to counterbalance the provincial interests of power brokers in congress (Dodd is from Connecticut - financial disaster ground zero) with a national view. But that requires an executive that might actually care about the nation.
Re the article "GMAC, which was formerly owned by G.M. "
actually GM only sold part of GMAC (unless the also sold the rest just very very recently?), which is quite unfortunate for GM.
When you saw those crazy Ditech commercials months ago, lending like walking the plank, that was GMAC....
GM unfortunately misestimated what GMAC could safely do I bet. They should have reined them in.
NYtimes:
"...Now the automakers stake is down to 49 percent, with the majority stake held by Cerberus Partners,"
etc.
probably needed in the excerpt for clarity.
These are the EXACT reasons BUSH said he would veto ANY bill that did not come from REPUBS!
Always pro-business, shat on the little people, even though it was the GREED of the pro-business that forced this very same situation upon the country.
ac writes:
Again, what worries me is that there's this assumption that bailouts will prevent another Great Depression...
Exactly my thought. Bailouts don't stop the fallout at all. They only transfer wealth to the entities that made bad decisions, on net from the rest of us.
We end up spending part of the money we will need to recover, and prop up bad decision makers.
..
The hypocrisy of bailing out corporations while leaving homeowners hung out to dry is just galling.
It is utility not hypocrisy. When large sums of money are at default risk between two corps, they can sit down at the table and talk until common ground is reached.
With homeowners, the amounts at default risk for each individual homeowner is so small that the cost of such negotiations isn't justified...
Lawyerliz,
Why is he "wiped out"? He is underwater, no argument. But can he sustain the payments? If so, there is a difference between "'wiped out" and choosing to deliberately default.
"Again, what worries me is that there's this assumption that bailouts will prevent another Great Depression... "
As a simple professor of statistics, I definitely don't feel qualified to make any assumptions regarding bad this might get. But when I see really smart people - like Krugman, Stiglitz, Schiff, Feldstein, and Bernanke - acting really worried, it gets my attention.
We built our lovely home in the DFW area in 1990 and will have it paid off (early) in under three years. It IS galling to have soldiered on responsibly with this debt for two decades while others, who through bad timing, bad judgment or bad luck, will have their loans reduced. If it avoids something worse, which is what Bernanke certainly seemed to be suggesting on Monday, then it's worth it. A bitter pill, though
Hyperbole overload. Iraq war cost is over a trillion. And that doesn't count wreckage of a country, hundreds of thousands of lost lives, etc.
foo | 05.09.08 - 11:49 am | #
Actually Joe Stiglitz, (Nobel Laurate in Eco 2001, former chair of CEA, etc) who has looked at it much closer than you or me, and is also smarter than just about anyone here (including me by a pretty good margin), puts the tab at $3T when all costs are factored in.
The kingdom of heaven is like a king who wanted to settle accounts with his servants. When he began to do this, a servant who owed him millions of dollars was brought to him. Because he could not pay off the debt, the master ordered him, his wife, his children, and all that he had to be sold to pay off the account. Then the servant fell at his master's feet and said, 'Be patient with me, and I will repay everything!' The master felt sorry for his servant, freed him, and canceled his debt. But when that servant went away, he found a servant who owed him hundreds of dollars. He grabbed the servant he found and began to choke him. 'Pay what you owe!' he said. Then that other servant fell at his feet and begged him, 'Be patient with me, and I will repay you.' But he refused. Instead, he turned away and had that servant put into prison until he would repay what he owed. The other servants who worked with him saw what had happened and felt very sad. They told their master the whole story. Then his master sent for him and said to him, 'You wicked servant! I canceled your entire debt, because you begged me. Shouldn't you have treated the other servant as mercifully as I treated you?' His master was so angry that he handed him over to the torturers until he would repay everything that he owed. That is what my Father in heaven will do to you if each of you does not sincerely forgive others.
I remain horrified by this whole fiasco, & the utter failure of my govmint to stop this train wreck. I am deeply worried that we'll never be able to afford to buy. We're retired Navy-- moved from pillar to post every 3 years-- & always rented, as we couldn't afford to get stuck with an unsaleable home when our tour was up. We retired out in Norfolk VA just when the bubble hit, & nothing was affordable.
Hampton Roads is another area with only one newspaper (currently up for sale & unwilling to damage its ad revenues from its realtor clients by telling the full local housing story, with numbers)which endlessly trumpets the "but our market is DIFFERENT!!-- now's a GREAT time to buy!!" mantra.
Like hell...-- I went househunting here last summer in hopes of more affordable prices-- didn't find any-- & most of the same homes I saw that failed to sell last summer are back on the spring market now-- & at the same prices! "The will to believe..."-- & this in a place that's glutted with inventory, & more coming on the market daily with the spring surge.
But, average people don't have access to any hard data on how their own local market is really doing. They rely on local media (dependent on the RE ad revenues) & local "RE experts!!" to tell 'em. There's little swabbie sailors here getting sucked into deals on their way out to Iraq that they will never get their money back on. The realtors here are all over these kids like lice because the military are of the few median-income folks left with access to $0 down (VA)loans.
$0 down on a still over-priced home in a declining market-- such a deal! It makes me sick-- to my heart & to my stomach.
Finally-- & sorry for length-- does anybody here know anything about this? That though one must be a military veteran to get a $0 down VA loan, apparently, anybody at all can buy VA foreclosures & get that same $0 down VA financing?
"Finally-- & sorry for length-- does anybody here know anything about this? That though one must be a military veteran to get a $0 down VA loan, apparently, anybody at all can buy VA foreclosures & get that same $0 down VA financing?"
HUD buys defaulted VA and FHA homes and resells them. The VA benefit, 0 down, is only available to eligible veterans, though HUD will often sell homes through FHA financing (currently 3% down).
Rest assured, the VA benefit is exclusively for veterans.
The 51% GMAC sale to Cerberus is one of the most ironic sales I can remember. As the article said, ResCap was isolated from the rest of GMAC to help protect it from suffering the ratings downgrades that GM was facing in 2005. It was very important at the time for ResCap to have investment-grade credit ratings so they could be competitive when offering mortgage loans. Now the whole situation has been turned on its head. Only 2 years ago, ResCap was called the "crown jewel" of GMAC, but now it is a giant stinking turd.
By the same token, 51% of GMAC was sold to help protect GMAC's credit rating from suffering rating downgrades because of GM. It became clear that not selling part of GMAC would actually be worse for GM because GMAC ratings downgrades would have made the company uncompetitive for financing autos.
In early 2007, GM had to cough up $1 billion to Cerberus because it was determined that the mortgage assets had declined in value before the closing. While GM still holds a 49% interest and GMAC is a drag on GM earnings, it's clear that GM would have suffered even greater losses if it kept all of GMAC.
Thank you, Nigel, & am sorry for this delayed reply. You are right-- I looked up the co. that apparently does VA foreclosures, Ocwen, & according to their website, anybody can buy a VA foreclosure and get VA financing, but non-vets must put 5% down. With that, they'd get a VA rate of 6% (on the day I looked). Also (& I found this rather unusual--)they tell you on the website that they don't use credit scores.
So hopefully they verify the income/asset form they require!