Wachovia Waives Refi Fees for Pick-A-Pay, Discontinues NegAm Products
Submitted by
CalculatedRisk on Mon, 06/30/2008 - 10:24am (113 comments)
in
Shopping at Amazon?
Wait! If you click on the Amazon banner link at the top of the page first, HCN will get a percentage of anything you purchase for 24 hours!
Open predictions
Our local book authors
User login
Who's online
There are currently 18 members and 124 guests online.
Recent Recommendations
Swell idea, guys. I'm sure the people who have been paying the minimum will jump at the chance to pre-pay, now that the penalties are gone. This should save Wachovia, yep.
Questions persist on Pittsburgh's paving and politics
Questions persist on Pittsburgh's paving and politics - Pittsburgh Tribune-Review
Pittsburgh has about $10.5 million earmarked to pave 52 miles of streets this year. Costa said he would like to be able to pave at least 80 miles each year because that would allow the city's roughly 800 miles of asphalt to be repaved once every 10 years.
"The dollars just aren't there," Costa said, noting the city's tenuous finances.
I guess the next step after waiving fees is to actually pay a bonus for a ReFi. Just a fancy way to participate in the loss.
Who's going to refinance houses that are underwater?
Oh wait, the taxpayers.
I wonder if Wachovia doesn't have it's causality wrong. If the fact that these people select into NegAm/Option ARM products the result that they are just more likely to be irresponsible people then this option won't really help them.
I guess cutting off the NegAm product will prevent these people from getting even further in debt, but I think that the real problem for Wachovia is the combination of increasing LTVs (in the face of declining property values) along with the fact that the people who having problems with these products appear to be people who can't afford more traditional fixed mortgages and people who never intended to make full payments....
Unless Wachovia offeres them a lower rate on top of this fee waiver, why would they switch from a really flexible product (NegAm) to a more inflexible product?
MDOT Funding Woes Fuel Dilemma
MDOT Funding Woes Fuel Dilemma - Jackson News Story - WAPT Jackson
The department is nearly 40 percent over its gas budget. In addition, drivers are using less gas because of high prices -- so gasoline tax revenue is down $3 million from last year.
Meanwhile, asphalt prices have increased significantly -- from about $312 per ton to $512 per ton in the past year.
Sign me up for triple the payment I am making now. Yep that will go over big.
wally, that is probably a better idea - offer them a bonus to refi! Maybe that will be the next announcement.
RhodesianRidgebackinAZ, yeah, no one is going to refi an underwater homeowner - even the housing bill requires the bank to write down the loan to about 85% LTV on a current appraisal. That isn't going to help much ...
The real meat of the press release is that Wachovia is no longer offering NegAm products.
Best to all.
why would they switch from a really flexible product (NegAm) to a more inflexible product
Neg-am has the built-in timebomb when the borrowers get 10-20% behind. When that happens, they generally have no choice, re-fi or walk.
Quarterly asphalt bids impacts commissioners road planning
Claremore Daily Progress - Quarterly asphalt bids impacts commissioners’ road planning
Prices have risen an average of $19 per ton for laid asphalt since March. That means Rogers County will pay $28,500 more per mile for roads this quarter.
The price hike was not unexpected. Chairman Dan DeLozier said last week he wouldnt be surprised if bids for laid asphalt came in close to $70 a ton this quarter.
A county road requires approximately 1,500 tons of laid asphalt per mile.
In March, commissioners reported that the cost increase at that time would add up to nearly $15,000 per mile. With prices climbing an average of $19 per ton since March, that means Rogers County will pay $28,500 more per mile for laid asphalt during this next quarter. The total cost increase over the last six months was between $40,000 and $45,000 per mile of county road.
I am sure this was a a condition of the PE players or JPM - end PAP or no $$ for you
Yeah, just another "See it's not OUR fault," PR attempt. Why would anyone do this? They always had the option to pay at the ammortizing rate. Refinancing to an ammortizing loan is simply giving them fewer options. Why go to the trouble of refinancing if all they want is to pay down their principal? Oh wait, they don't WANT to pay more money. What they want is for their negatively ammortizing payment to magicly pay off their house. I'm sorry to report that the appreciation fairy is dead. If you want to pay off your house you'll have to PAY off your house. No ponys for you.
To late.....declining market, no income, how many can possible qualify?
Consumer cashflow situation given runup in food & fuel is presumably much worse now than at origination for these products. I don't envision too many cash strapped homedebtors tripping over their dicks to sign up for higher payments. DOA.
That noise you hear is sound of the barn door closing with no animals inside.
Re: homedebtors tripping over their dicks to sign up for higher cost asphalt ... don't worry, every county in America will increase taxes to pay for higher material costs and meanwhile, as your property goes down in value...
The reality here is obvious to me, in that bank-like failures will result in less liquidity, but one og the end results will be higher pay of CEO-types that are in place to feed off the bones of this systemic failure. These CEOs and friends of the wealthy will do fine, as in every famine or depression or civil war, and hence, these people will demand that property taxes be raised for everyone, so that they will have smooth roads for the SUVs they need for shopping sprees.
I kid you not, property taxes will be raised as property values decline, because this upper-end echelon of thieves will push society into a quagmire which will result in civil war among classes.
iceman writes:
That noise you hear is sound of the barn door closing with no animals inside.
Not to mention the only thing left of the barn is the doors. The dang thing was nuked.
All of the option products were toxic. I know of some who think Wachovia is ok due to their more generous reset limits (125% of starting balance vs. 110% for most others). All it means is that when the time comes, no one will try to get current on their products.
I'm thinking of taking a nap until wave 5 of this credit crisis.
Got Popcorn?
Neil
I wonder if strip-mining the asphalt from those empty subdivisions in CA, NV, and FL might make financial sense?First the metal disappears from empty homes, then the roads start disappearing:)
Or cities could just take the asphalt from empty subdivisions since the roads are city property...although I am not sure when property rights shift from the builder to the city.
Troy said:
When that happens, they generally have no choice, re-fi or walk.
That's a choice.
It is (A) pay the mortgage or (b) the bank takes the home.
For this game show, all we'll here is:
"I'll take option "B" for a million..."
Got Popcorn?
Neil
Uh, lets see, infrastructure imporvements when times are good and materials normal price--or--- infrastrudcture improvements when materials are sky high, income falling and tax base evaporating? The later, of course, couldn't afford it in good times. I can just see the new Chevy ads--going to work? The New 4WD Blazer CAN get you there!
In 24 months' time (if not sooner), the mortgage market is going to look an awful lot like one of Henry Ford's early production lines ... you'll be able to get any type of mortgage you want from your lender, as long as it's a 30-year fixed with 20% down.
Lenders who want to do a little "livin' on the edge" may offer a 5/1 ARM. Maybe.
I honestly don't know whether that'll be a good thing or a bad thing.
Funny thing is that its probably lower risk to write a neg-am today than it was 2-3 years ago, since prices are much closer to a bottom now than they were then.
They should stop doing press releases letting everyone know that they are overreacting to news every already know two years ago.
What they should do is try to make a few bucks by writing some low LTV neg-am loans to carefully selected borrowers. Like in the old days.
In 24 months' time (if not sooner), the mortgage market is going to look an awful lot like one of Henry Ford's early production lines ... you'll be able to get any type of mortgage you want from your lender, as long as it's a 30-year fixed with 20% down.
If 20% down becomes standard we might just want to annex off Cali and boswash....
Kona HyperInflation News, I think you've pointed us to a textbook case of a vicious cycle. Higher oil prices = less driving plus higher road costs which leads to less gas tax and thus a combination of higher road expenses plus lower revenue to pay for roads. That all adds up to no road improvement.
What will be more dangerous when travelling in the future, the roads or the desperate people?
I was going to get a sport bike, but maybe i should consider a dual sport instead. Either way, I think the springfield 1911 i've been eyeing will become a reality sometime this year.
The real meat of the press release is that Wachovia is no longer offering NegAm products.
They probably took a look at the quarter end numbers and went "Whoops"
What they should do is try to make a few bucks by writing some low LTV neg-am loans to carefully selected borrowers. Like in the old days.
Of course, "carefully selecting" those borrowers to generate a profitable busienss model using exotic mortgages would require ... umm ... a staff of skilled, experienced underwriters. I'm sure Wachovia has thousands of them stashed away in their branches, just waiting to put their skills on display.
CR can you (or Tanta) explain what impact if any this has on securities based on these mortgages? Didn't prepayment penalties figure large in calculating the average lifespan of the loans and thus have a significant impact on how payments were structured to different tranches?
I think china is setup for a deflationary collapse with some similarities to what the US went through in the 30's.
The US on the other hand will not get the same kind of deflation this time, because of the enormous external debt. Even without hyperinflation, dollars will be worth less as the debt and economy contract. We should just get over the flation debate and call it a devaluary collapse.
Ken, good question. I'll ask Tanta, but Wachovia might have to pay the prepayment fee themselves on refi.
Best Wishes.
Re the paving problems:
Now that nobody can afford to drive gas-guzzling off-road vehicles and SUVs, none of our public roads will actually be passable by NON-SUV's...
Ahhh HAHAHAHAHAHAHAHAHAHA!
Uh, nobody here wants to disturb the asphalt on the parking lot behind the store. You hear me, don't touch it.
That's nice, Chaos.
We'll just call it flation.
Ken - these are mostly not securitized, but rather they are portfolio loans.
For the handful that are securitized, I would guess Wachovia is already "offering them a bonus to refi", since they will end up forking over the pp penalty themsleves.
But don't take my word for it, when we have readers from Worldsavings (hello, Hayward, CA!) and Wachovia (wassup in Charlotte, NC?) here at the moment. (thanks again to CR for adding Site Meter.) Maybe you guys can chime in and explain how that all works.?
Sorry to be obnoxious with asphalt OT, but Wachovia, WM, BAC, Countrywide and countless banks with diminished reserves, diminished cahflow, diminished customer bases, diminished growth and other diminished impacts -- will all be connected to the same web of hyperinflation, where material/operation costs will rocket, while cashflow is halted and in most cases, cashburn will increase.
Asphalt is symbolic of a physical infrastructure component that has been taken for granted for decades, but as infrastructure costs skyrocket at every local level, from gas pumps, to roads, to shingles, business as usual is going to morph -- if not melt backwards at a rapid rate, which I imagine will be result in collective shock, which is what you had in the last great Depression!
Meanwhile Hubert Hoover Bush and his media machine and army of well wishers are all blissfully ignorant and unaccountable, as banks like Wachovia attempt in vain to re-engineer products that have zero value.
Yeah, this will work. About as well as a Led Zeppelin.
Re-Fi out of your low neg-am teaser into a 7% 30 year fixed.
What could be simpler?
Cheers,
Excellent news for the 3 people in So Cal who are not underwater and/or can actually qualify for the higher payments associated with a refi.
Rumor has it that Wachovia execs will release a statement tomorrow that the company is investing in Beta tapes, the future of video technology.
Perhaps the next major breakthrough in science, economics and government will be:
Genetically enhanced government officials and bankers.
If the tests prove successful, the general population may apply.
The next step is to refi as many risky borrowers as possible into GSE or FHA loans. WB will take a hit, but at this point, it's an exericise loss mitigation and then passing the credit risk on to the taxpayer.
Doesn't their press department realize that the use of the phrase "Effective immediately..." can only cause trouble?
wes,
"Rumor has it that Wachovia execs will release a statement tomorrow that the company is investing in Beta tapes, the future of video technology."
Is their a beta index fund? I wanna get in while the getting is good.
Cheers,
Since the majority of these loans were made in the 2002-2006 time period, created as "stated / stated" mortgages, and primarily funded in Cali and Florida, I would guess their refi share will be 1-3% at best. Most people wont qualify. Most PMI companies wont insure. Most properties wont appraise.
This ship struck the iceberg some hours ago. It's now time to strike up the band.
A note from a 20 yr mortgage professional.
Re: .. none of our public roads will actually be passable by NON-SUV's...
This may be the ultimate test for Mad Max Road Warriors. I can see the day when only SIFMA bankers with shotguns will be on highways, driving bullet riddled SUVs, racing to get to the next CDO Squared deal, before the other punk gets there from Wachovia.
Ken, Tanta says the Pick-A-Pay stuff probably wasn't securitized.
Best WIshes.
FOG writes:
I wonder if strip-mining the asphalt from those empty subdivisions in CA, NV, and FL might make financial sense?First the metal disappears from empty homes, then the roads start disappearing:)
Or cities could just take the asphalt from empty subdivisions since the roads are city property...although I am not sure when property rights shift from the builder to the city.
Entrophy - Blade Runner was a reality show ahead of its time...
Make that entropy
Wachovia's mortgage portfolio totals $170 billion, of which $121 billion comprises Pick-A-Pay product. Within the total portfolio, Wachovia's exposure to the troubled California residential mortgage market is considerable at approximately $78 billion (of which almost $71 billion is Pick-A-Pay product). Thus, 59% of the Pick-A-Pay portfolio is in California, and this is the slice of the mortgage portfolio that has demonstrated the most deterioration to date.
Importantly, this portfolio slice had an original loan-to-value of 70%, and average borrower FICO scores in the mid to high 600s. Current average LTVs, primarily because of home price depreciation, are approximately 80%.
Many of the California markets have experienced, and are anticipated to continue experiencing, material home price deterioration. In those markets, default rates and ultimate credit losses are not only much higher than anticipated, but borrower performance is more highly correlated with the amount of equity remaining in the home than other historically useful performance indicators.
Taking all this into consideration, Wachovia refined its reserve model to reflect changing drivers of credit performance. Under this model, Wachovia estimates aggregate credit losses on its $121 billion Pick-A-Pay portfolio of $3.7 billion to $4.5 billion over the two year period 2008 through 2009. The $1.1 billion reserve build modeled specifically for this portfolio (in addition to another $1 billion for other loans) positions WB better to absorb future credit losses yet suggests that normal quarterly provisions will remain elevated over the intermediate term, relative to levels experienced during the past several years through mid 2007.
Although Fitch has affirmed Wachovia's ratings at this time, if credit losses deteriorate such that, for example, Pick-A-Pay losses materially exceed the implied upper end annual loss level of 1.9% of that portfolio over the 2008 to 2009 period, it would likely have negative rating implications for Wachovia. Of note, credit losses on Pick-A-Pay mortgages in 1Q'08 were still only $240 million or 0.79% of the portfolio, annualized, albeit markedly worse than 0.31% in 4Q'07.
Calculated Risk writes:
Ken, good question. I'll ask Tanta, but Wachovia might have to pay the prepayment fee themselves on refi.
This would be great for earnings: Write down the already booked earnings on the neg-am payments, and also write off pre-pay amount (although as stated above, not many will be able to take advantage).
That is, unless Wachovia goes tango uniform.
I foresee housing prices in one of the two Case-Shiller markets to not get hurt too badly yet going down with the banks that are headquartered there.
Link for above do dad;
Fitch Affirms Wachovia on 1Q Loss, Pending Capital Raise
Business Wire, April 14, 2008
Fitch Affirms Wachovia on 1Q Loss, Pending Capital Raise | Business Wire | Find Articles at BNET
What a F$*K up. they paid $25B for a option ARM lender, just to kill off the business two years later, and still hold a portfolio falling in value....
If they hadn't made that bone-head move, they wold have had minimal exposure to the worst markets and would be in a position to acquire something cheap in a year or two.
The real question is: when should I start growing my recession beard?
I guess all those folks were dancing in the old Wachovia Pick-a-Pay ads because they had just chumped the fourth largest bank in the US.
Daniel,
Carpe diem
If they hadn't made that bone-head move, they wold have had minimal exposure to the worst markets and would be in a position to acquire something cheap in a year or two.
Thus the sad story for Bank of America shareholders. They saw what happened to Wachovia, yet are emulating their Tryon St neighbors nonetheless by purchasing Countrywide.
You can't make this stuff up.
Yah see, $78 billion (of which almost $71 billion is Pick-A-Pay product) kinda reminds me of the $300 billion of shit loans that WaMu thinks it holds. Does anyone think Bernanke has the ability to step in and save trillions of losses. We have an economy in the process of melting and our quadriplegic government with retarded tentacles of collusion have spun a web that will destroy Rome by the year 2525....if Women can survive........dah, dah, dah dah, dahhh
OT -- the PPT is losing its touch: end of quarter, and all they can make stick is 30-40 points up on the Dow?
You schmucks/shylocks/shysters: we lend you big chunks of change for your lousy/worthless assets, and this is all you can do for us?, 30-40 points up?
Kona on topic for once said: "Importantly, this portfolio slice had an original loan-to-value of 70%"
I can't help but wonder how many of those 70% LTV PAPs have HELOCs behind them.
It's relevant because a borrower would be even more disinclined or unable to refi the PAP with a HELOC in place.
Thanks for being on topic, Kona. Please continue.
You ain't gonna need your teeth, won't need your eyes
Yeah, this'll work.
"Wait, you mean I had a prepayment penalty?"
I'll find a link, and sorry for the length:
April 14, 2008: 04:58 PM EST
NEW YORK -(Dow Jones)- Wachovia Corp.'s (WB) controversial Pick-a-Payment mortgage program lets borrowers choose between four monthly payment amounts. Unfortunately for Wachovia, these "Pick-a-Pay" borrowers are increasingly inventing a fifth choice: Not making mortgage payments at all.
The Charlotte bank reported on Monday a $350 million loss during this year's first quarter, due in large part to stunningly high losses within its $121 billion-plus book of flexible-payment, or Pick-a-Payment, mortgages - a legacy of Wachovia's ill-conceived 2006 purchase of Golden West Financial.
On Monday, Wachovia conceded total losses from Pick-A-Pay loans could eventually amount to a staggering 7% to 8% of the loans' combined value, a range of $8.5 billion to $9.7 billion - meaning the bank, and its shareholders, will likely be coping with Pick-a-Pay losses for years to come.
Among Wachovia's book of Pick-a-Pay loans, "nonperforming assets" - or soured loans - "grew 309.8% year-over-year," compared with an annual bad-loan growth rate of 119.7% for Wachovia's traditional mortgages, said Byron MacLeod, an analyst with Gradient Analytics, in a note to investors.
"To be sure, neither figure is good," wrote MacLeod, "but the Pick-a-Payment loan portfolio appears to carry substantially greater risk."
Losses from Pick-a-Pay loans totaled $1.1 billion in the first quarter alone, said Wachovia, accounting for more than one-fourth of the $4.1 billion in asset write-downs and loan-loss provisions that Wachovia reported.
In its earnings report, Wachovia announced it would raise $7 billion from the sale of common and preferred stock in order to offset present and future losses that Wachovia says will continue racking up through 2009.
Almost 60% of Wachovia's current Pick-a-Pay mortgages were written in the now- tanking California housing market, which is also the former stomping grounds of Golden West Financial Corp., the lender that Wachovia acquired for $25 billion in 2006.
Wachovia acquired Golden West at the height of the real-estate boom in order to quickly expand its nontraditional home-lending business, a once-lucrative industry that provided mortgages to riskier buyers by using less stringent underwriting guidelines.
That deal gave Wachovia the very same "option-ARM" lending business that's now at fault for so many of Wachovia's losses.
According to Wachovia's Web site, Pick-a-Payment loans are fixed- and adjustable-rate loans that allow borrowers to make a range of monthly payment amounts, including partial-interest payments that add the unpaid interest to the homeowner's loan balance. Wachovia has taken fire from consumer groups and analysts for offering the products, which critics say encourage borrowers to fall behind in repaying their mortgages, leading to more frequent delinquencies and foreclosures.
Data released Monday day gives credence to those critical claims: According to Wachovia, more than four of every 10 Pick-a-Payment mortgage holders, about 41%, have elected to pay the minimum payment allowed in each of the past 12 months.
This trend bodes very poorly for Wachovia's performance over the next few years since housing values in most regions are falling, leaving borrowers with less equity - and banks with less collateral to rely on when borrowers stop paying. Wachovia said it projects housing values will fall another 6.8% nationwide before hitting bottom in "mid-2009."
The length and severity of that decline is crucial, since borrowers who have no home equity, or negative home equity - that is, when a homeowner's mortgage balance equals or exceeds the home's value - are quitting their mortgages en masse, choosing to face the consequences of foreclosure rather than continue to fund a home whose value is falling.
"When equity in the home approaches zero, behavior changes," said Ken Thompson, Wachovia's chief executive.
Much to Wachovia's chagrin, even homeowners with high credit scores - once thought to carry little risk of foreclosure - are walking away from their mortgages.
]In February, Don Trunslow, Wachovia's chief risk officer, told analysts that although a homeowner's FICO score "is a predictor" of whether a homeowner will keep current on their mortgage," it appears that a...borrower feeling like they've lost equity in their home seems to be an even bigger driver of whether they actually default." He later called the trend "unprecedented," adding: "I don't understand it."
If other bank officials don't understand the new psychology, say analysts, they need to get smart - and fast.
In recent years, FICO scores - or complex credit-risk rating scores produced by Fair Isaac Corp. (FIC) in Minneapolis - have come to be lenders' most popular tool in evaluating mortgage applicants' likelihood of defaulting on their mortgage payments. In fact, during the boom times, mortgage applicants with sky- high FICO scores were often approved for a mortgage automatically by lenders' underwriting software.
That rush to approve could mean even more foreclosure trouble among highly- rated mortgage borrowers lies only a short jog down the road.
"Loans were made not locally, but centrally, with little underwriting expertise beyond the increasingly unreliable FICO score," according to Meredith Whitney and Kalmon Chung, banking analysts at Oppenheimer & Co., a unit of Oppenheimer Holdings Inc. (OPY), who wrote their comments last month in a note to investors.
Wachovia said it has tightened its underwriting standards considerably, and now writes Pick-a-Pay mortgages only to well-qualified borrowers. In fact, to the dismay of many analysts, Wachovia has repeatedly said that it remains enthusiastic about the loans, and will even expand the sales force that sells the product.
What's more, reports earlier this year confirmed that Wachovia pays richer commissions to employees who sell Pick-a-Payment loans, an extra incentive that Wachovia says it pays because the loans require more time to explain.
I figured this little bit of "good news" was the perfect opportunity to lay a PUT on these guys. I'm sure they'll be joining WM in the sub-$5 crowd soon.
dav,
"Wait, you mean I had a prepayment penalty?"
Wait, you mean I can't sell this for $100k more next year!?
Cheers,
I'll be damned. SDS finished in the green for the day. Helluva month, too.
Pitiful performance by the PPT.
Time to move them from GS-13 to GS-1.
ppt we are you
long-term federal agency debt jumped to $305.7 billion in the first six months of this year compared with $203.2 billion in the first half of last year.
Agency debt issuance jumps 50 percent in H1 2008
| Reuters
Bag holders of last resort.
Interesting bits on the paving problems. Just a short while back I posited that SUVs would be the vehicle of the future, since they'll haul lots of people and things over rough terrain. I've seen plenty of L.A. potholes that'd wreck a Prius, and that's during good times.
tj & the bear,
After buying World...Wach holds my mortgage. They'll be fine. Nothing to see here, move along.
Cheers,
LOL. my ticker sucks. SDS down .14, taking out the .14 dividend paid today . . .
Soft commodities are starting to roll over. I told you guys that wet weather did not mean a bad crop.
Since Wachovia CW/WAMU EtAl booked the "deferred intered" (AKA Neg AM) as income on their balance sheets in prior years, what then becomes of this phantom income which will never be realized? Should they re-state 2006 income forward to present?
Anyone short LEH - congrats!
Anonymous | 06.30.08 - 4:08 pm | #,
"Bag holders of last resort."
You said that in front of your mirror, right?
Cheers,
Remember when the old Winston-Salem Wachovia was the top rated bank in the country? Now it so FU'd.
You did see this, right?
Among Wachovia's book of Pick-a-Pay loans, "nonperforming assets" - or soured loans - "grew 309.8% year-over-year," compared with an annual bad-loan growth rate of 119.7% for Wachovia's traditional mortgages, said Byron MacLeod, an analyst with Gradient Analytics, in a note to investors.
Next they'll be handing over their customer list to their competitors!
NEW CONTEST!!!
Guess who will hold Misean's mortgage next!
I'll play.....
The Fed, baby!! Then John Q. Taxpayer
Man, things must be getting messy in N.C., just in time for Seb's return from the beach.
tj & the bear,
"Guess who will hold Misean's mortgage next!"
That's not nice.
;-P
But it does worry me a bit actually. I can cover the margin call, but not without PAIN!
Cheers,
I'm so tired of Fuc--ng Wachovia, can we get back to asphalt please!
Pot Holes in Our Future?
John Gapper on the U.S. "infrastructure inadequacy":
Economist's View: Pot Holes in Our Future?
here are lots of ways in which infrastructure inadequacy matters to the US but I would focus on two.
First, it imposes a drag on economic growth. The private infrastructure is poor enough broadband speeds lag behind other countries and mobile coverage is spotty. But much of the public infrastructure is unfit, a fact that was becoming clear even before Hurricane Katrina flooded New Orleans and a Minneapolis bridge collapsed during rush hour last year.
Saw an interview with Jimmy Rogers recently. The nice lady was badgering him bout when he was going to cover his Banks and I-Banks shorts. He was very nice and said he couldn't say. She kept hammering away until he finally had enough. "You want a price where I will cover?" "OK $8"
So the answer is not 42, it is 8.
There are far more "short to zero" candidates out there than I have money to invest.
That piece on high FICO walk aways seems to indicate that even relatively financially conservative folks got tempted by the house appreciation spiral. Well, they can kiss that high FICO score goodbye.
Here is an actual Wachovia foreclosure, and why their (and Fitch's) loss estimate is screwed. (pulled from weekly info I get from a title company and a quick internet search for comps)
House- 1571 Quite Slope Drive, Chula Vista, CA 92115. Owned by Wachovia as of May 30, 2008 foreclosure.
2005 sales price: $719,000. Loan balance $575,200. So yes, there was a "low" LTV when issued. So what about today?
Last sale on street: 1551 Quite Trail for $412,000 on May 8, 2008.
So if WB does well and grosses $425,000 on the sale, they still have over a 25% loss before any costs of foreclosure and sale, or loss of any amortized interest. So its probably a 40% loss in total, even with a loan that had an inital LTV of under 80%.
And this is one of 16 homes that WB took over LAST WEEK just in San Diego county.
UPDATE 1-US financial crisis is over, says Punk Ziegel's Bove
| Reuters
Remember when Dick Bove said the crisis was over and it was a once in a lifetime opportunity to buy Citigroup etc.
VFH financials were at $46 at the time. They are at $38 now.
hopeinsd,
hopeinsd...hopeinsd...hopeinsd...?
Hope seems to be fading.
Just a play on your name, I mean no insult.
Cheers,
Wachovia Watch 2008 Lives Here!!!!.
Wachovia Watch 2008 Lives Here!!!!
Re: I also recall that back in 2004 to 2006 at least, World/
Wachovia would offer their own 2nd heloc behind their own
neg.am first (like pic a pay) to 90% cltv. They were
quite lenient in those growing years, and indeed one of their
A/E's major selling points is that no recasting till 5 years.
It'like saying your reckoning day is still far away, even if
you keep on paying only the miniumum monthly payment. I don't
know if Wachovia ever cancelled or reduced their 2nd helocs
these days, but those twin loans at 90% cltv will be the first
to explode and those homeowners must be at 110% cltv by now.
So, they are just living on the overequity of their homes until
they run out of them and default at recast times.
Peter
WPA project substituted hand-hewn stone for inferior building materials. When labor is cheap, potholes will be lovingly fitted with hand-crafted granite pothole fillings.
Even if it doesn't get that far, public works projects are a larger component of GDP in recession/depression than they are in other times.
Yahoo!
"Top Stories
Stocks Up as Oil Eases Off High"
Wow 3 whole points! Oh ...my bad, stocks are in quintuple digits.
Friggin' pumpers.
Cheers,
"Ken, Tanta says the Pick-A-Pay stuff probably wasn't securitized."
This is just too good. I'd love to see the notes & attendees of the meeting when this decision was made. How many of the 'deciders' still have their jobs? There must be an insider reading this who can send the minutes to CR/Tanta.
Misean-
Don't worry. Everything I am hoping for is happening.
Worth noting that underwriting is the thing to focus on here:
Almost 60% of Wachovia's current Pick-a-Pay mortgages were written in the now- tanking California housing market, which is also the former stomping grounds of Golden West Financial Corp., the lender that Wachovia acquired for $25 billion in 2006.
Wachovia acquired Golden West at the height of the real-estate boom in order to quickly expand its nontraditional home-lending business, a once-lucrative industry that provided mortgages to riskier buyers by using less stringent underwriting guidelines.
That deal gave Wachovia the very same "option-ARM" lending business that's now at fault for so many of Wachovia's losses.
hopeinsd,
Me too my friend. I just hope I survive it.
Storm's coming in!
Cheers,
Neil,
Who are you kidding? New fathers seldom get that much sleep.
Wachovia's California nightmare
The 2006 purchase of Golden West has saddled the bank with a problem of growing proportions.
Blame Golden West for Wachovia's cringe-inducing loss - Apr. 14, 2008
Golden West was a leading issuer of so-called option adjusted rate mortgages (ARMs) - loans that give borrowers the right to pay less than the full bill - with a portfolio now valued at roughly $120 billion. Wachovia's holdings of those loans are getting painful: Wachovia said its reserve for possible loan losses on Golden West's portfolio of Pick-a-Pay variable rate mortgages surged in the latest quarter to $1.1 billion, while late payments nearly doubled to 3.1% of the portfolio
I heard once that the Southern California motto was "Fake it until you make it", referring of course to wealth.
FOG,
There's a lot more "faking it" in L.A. than most realize, which is why the West Side and coast are not anywhere near immune.
If that was what passes for a end of Q tape painting rally then the rest of this summer for equities is gonna be fuglier than Paul McCartney's divorce.
O-Joe, now is not the time to dollar cost average in for the ATH rally, now's not even a time to short.
CAPITULATE FOR THE SUMMER
Come back after labor day and see the lay of the land and which banks are about to go TU at the end of Q3.
Me, I've been closing out Citi shorts and buying munis in certain markets when the yields pop above 8% due to liquidation and made a couple of killings on frozen ARS auctions.
"With" major liquidity issues.
Price war in finance industry, a/k/a deflation. Watch it happen to capture falling (knife) revenue. There is insufficient wage n salary income to set a retail "floor".
post-'29 finance panic: Nuttin but dirt.
warp 10,
Every Star Trek junky knows you can't go past warp9 without repercusions.
Sheesh!
Oh wait!
Cheers,
I guess that Wachovia just had a PAP Smear.
Could someone please explain to me why pick-a-payment and stated-income loans are still legal? There's a reason they were banned for several decades following the Great Depression, the wisdom of which is apparently lost on our "Leaders".
The only thing we learn from history is that we learn nothing from history.
HARM writes:
"The only thing we learn from history is that we learn nothing from history."
The saying's been changed from "Those who ignore..." to "Those who study history are condemned to repeat it."
Just watch Ben Quixote.
Nice wordplay, homedad.
hopeinsd, I liked your comment this weekend, words to the effect that the rise in oil looks a lot like the housing bubble, i.e., speculative in origin, not supply/demand inbalance.
I do not see why it is so difficult to hide oil inventory -- ac's comment on Singapore was intriguing -- and, like you, I look for analogs.
Geez, the BLS has difficulty with jobs data, even with big sample sizes. Speculators have an incentive to hide and lie about oil data, so I bet they do.
JMO.
How is it possible that so many banks with supposedly intelligent Harvard graduated MBA's, Top 15 law school graduates, finance doctorates, et al., could have made such terrible decisions?
It boggles my mind that they were unable to detect the mortgage crisis, especially in CA where rundown shacks were going for 600k+. They had to have known this would happen, right? They couldn't ALL possibly be this stupid, correct?
Wachovia option arms were not securitized- and the AMRS that were, well pretty much all penalties have expired. So if Wachovia waive the prepay penalties they write down their own bal sheet. Question is does this set a precedent for others, e.g CWD WAMU? - because if those prepayment penalties are waived with the boatloads of securities behind them, then the penalty class holders will want-their-money and the IO holders will be unhappy, in a legal sense.
This is not my Father's Wachovia which was the most conservative bank in NC. My Father moved to Wachovia during the depression when it was the only Raleigh bank not to fail. But ,in the US, value is soon drained out of quality entities for the benefit of the few.
"Today's Wachovia Corporation was originally created by the merger of the legacy Wachovia Corporation and First Union Corporation. While the transaction was billed as a merger of equals, the transaction was actually a purchase of the legacy Wachovia by Charlotte-based First Union. First Union then took the Wachovia name."
Want another example - NC once had a great airline called Piedmont. It was bought by Allegany - probably the worst airline in US history and the quality vanished.
Seb is at the beach? Which one? Back in the day, Raleigh teens went to Atlantic Beach to party but I live between Wrightsville and Carolina /Kure Beaches so was just wondering.
Jim
They are waiving the pre-payment penalty because they are trying to refi them off the balance sheet to the GSE's.
NC Jim, Allegheny Air became US Air later - still has a big hub in Charlotte.