Shouldn't banks be happy getting an asset that they'll easily be able to turn into cash? Of course they have to price it right, but I just don't understand why the banks don't want to foreclose.
You know what, you can say "banks don't want to hold houses" or "banks don't want to be landlords"... but I'll counter that with "women don't want to be prostitutes". When times are hard you have to adapt to the times...
Elvis, just trying to point the that impact from Option ARM defaults will be felt in different neighborhoods - not where most of the subprime damage happened.
"[T]he Los Angeles bank is on the front lines of what could be the next big mortgage debacle: payment option mortgages."
I thik thee needs to be a government agency appointed to determine exactly what the "next big mortage debacle" is going to be, this idle speculation is annoying to me.
With all due respect, if "Forty percent of its borrowers became at least 30 days" you have a lending problem not a payment problem. As my Nana said in her own words..."shit begets shit"
Elvis - You may be right but after a few and at the age of 98 still on her own growing her own garden and driving, and volenteering, and making "jacks" she can say all she likes!
btw She has often said "never suck the nipple of Mr. Downey" [the local bank branch manager in the 40s]
I only see option arms being a problem in the metro areas that have seen the greatest price declines. We all know which areas I speak of...well, if don't then you just haven't been paying attention.
unearthly,
Showing graphs like that is unwelcomed. There are several IBers and Sheila Bair on this blog right now. Given the time of the evening, this could give them nightmares. I hope you can sleep now that you know you have ruined others sleep.
Average Joe writes:
Excuse me, but 48% seems rather conservative.
Given that 70% pay the minimum, I call BS.
Seconded. BS. Even if they could pay more at origination, what are the chances that their lifestyle did not expand into that extra cash, given the expectations of crazy growth in the new paradigm that seemed to be held by most folks who took these products?
Watch the next several months in CA. You are going to see slightly rising median prices as these higher balance Option ARM's go through the python. Some sorry souls will be reporting a bottom and potentially some silver lining about the end of the housing crisis, but we are in the middle innings folks. It will get much darker before the light.
after the MER nickel on the dollar CDO deal....any, any and all transactions in the RE field are good money, so long as you get a nickel and a penny and the bubble dollar, and only have to take back 75% of the paper...
Buried under all this are 5-year Interest-Only ARM's which will recast to P&I around the same time. Payments will likely double for many of these home debtors. Nothing like throwing gasoline on a raging inferno.
Recall that they banks were booking the deferred interest payments as profits, so no only do they lose on the cost of default, but it also wipes out profits they've already thought they had.
And yet, when all is said and done, I expect the middle and (especially) upper class 'hoods to hold their value much better than the lower class 'hoods.
It's nice to think all will suffer equally, but at the end of the day some are more subprime than others. The US has the highest Gini coefficient of any developed country, and this has gotten considerably worse under the Bush admin.
The class bifurcation of America continues apace...
Instead houses originally selling for $200K REOed for $100K... we'll see houses originally selling for $500K REOed for $200K... median selling price increase of $100K!!!
[$100K to $200K]
End Of Crisis. Housing Market - Mission Accomplished!!!
First Fed has a Texas ratio of 45 as of the end of March; probably higher now. Anything above 40 is regarded as very very bad news with regard to survival.
After today Hank Paulson should put on a cowboy hat jump in a H2 drive it up the steps of wall street , with that huge american flag behind him and declare mission accomplished! Nothing like it would have ever been done before and would give a huge boost to national morale. Even crox shares will be up that day!
jim writes:
First Fed has a Texas ratio of 45 as of the end of March; probably higher now. Anything above 40 is regarded as very very bad news with regard to survival.
jim | 08.05.08 - 11:42 pm | #
Look on the bright side... it will make some pizza place really, really happy.
All those knife catchers who are buying the current "subprime" quality homes that have been forclosed on as investments will find that when the much higher quality properties that were purchased with OA's forclose come on the market in mass, and have to drop down to a level where a good many people will need a down payment and steady income to purchase, they'll find that there are more high end homes than there are people who can afford them. This will push down prices on lower quality homes below all historical measures.
You can't believe how many "$900,000" homes were built and then bought by people who can only afford about half that. There are simply too many of these types of homes and when they have to be absorbed, they will kill the lower end.
And yet, when all is said and done, I expect the middle and (especially) upper class 'hoods to hold their value much better than the lower class 'hoods."
Yep - I was all jacked up when I first heard about these - thinking they would take down the so far "immune" areas in close in DC. Then, I learned that the total number of Option Arms outstanding is about 1.5% of the close in homeowner population. Nothing to sneeze at, but nothing at all like the places fancy pants places out in CA and AZ that are burning down as we speak...
Average Joe writes:
Recall that they banks were booking the deferred interest payments as profits, so no only do they lose on the cost of default, but it also wipes out profits they've already thought they had.
I recall they were booking fully amortized payments while receiving the lowest option. If this is right, there is going to be a river of blood if they ever have to come clean. These days, I'm not sure they will.
does 30 days past due even matter. I would think that is pretty good. Nothing should be deemed delinquent until 300 days. and if that doesn't work just keep doubling it every year until this whole thing just blows over.
So I'm really confused. Has anyone looked at the impact of the SEC shorting regulations? Is it true that its a nothingburgher or a somethingburgher? Is it true that IB's are intentionally holding back shares for shorting? What's going on?
Yep - I was all jacked up when I first heard about these - thinking they would take down the so far "immune" areas in close in DC. Then, I learned that the total number of Option Arms outstanding is about 1.5% of the close in homeowner population. Nothing to sneeze at, but nothing at all like the places fancy pants places out in CA and AZ that are burning down as we speak...
Come back in 4 years prices will be down 40% but your interest will be over 10% imo...
I don't think you should call them "exotic mortgages." I call them "erotic mortgages." because when women come to stay in my option mortgage $2M house, they get all hot and bothered.
Tim writes:
Whats the joke about the FDIC and pizza?
Tim | 08.05.08 - 11:48 pm | #
FFDIC said that when they closed a bank the FDIC team comes flying into to town after hours - usually on a Friday - and storms the bank. They set up office and copy doc's & transfer accounts - all the stuff they gotta do to get it ready to open the next working day under a new name & sometimes even new ownership.
They go pretty much around the clock and so order out a lot of pizza - sent to the bank.
So if you hear there is a run on take outs in your area - you'll probably have a different bank the next business day.
FirstFed is scrambling to modify the loans of borrowers who can't afford the higher payments. As of the end of June, nonperforming assets climbed to 8.2% of total assets, compared with 0.85% a year earlier.
Take this number and multiply it by the outstanding option arms (see the reset curve) which I'm eyeballing to be about $200B. So nonperforming assets are a mere $16B so far.
But the kicker is, take a good look at the reset graph from CS. The resets for option ARMs have BARELY started. It's going to be a doozy.
The article says that since FirstFed set the recast cap at 110%, they are among the first to feel the hit.
The article, however, neglects to mention that the fact that the cap is at 110% also means the hit should be smaller; banks with loans that reset at 125% should see higher rates of default because the payment spike is much more substantial.
Elvis writes:
Option ARMs were tailored for flippers. Flippers who are underwater swim away. That equates to a 93% default rate.
Elvis | 08.05.08 - 11:57 pm | #
What happens to the other seven percent - they get eaten by sharks?
Instead houses originally selling for $200K REOed for $100K... we'll see houses originally selling for $500K REOed for $200K... median selling price increase of $100K!!!
[$100K to $200K]
End Of Crisis. Housing Market - Mission Accomplished!!!"
On a consolidated basis, Countrywide funded $2.9 billion in pay-option loans during the month as compared to $8.0 billion in December 2005. Fourth quarter 2006 pay-option fundings were $10 billion as compared to $24 billion for 2005's fourth quarter. For the 2006 full year, pay-option fundings were $64 billion, which compares to $95 billion for 2005.
The stats I was looking for showed that in 2006, 41% of all loans CFC placed in CA were POA. Of those, 91% were Stated / NINJA. So about 1/3 of every CA loan was a no verified income POA.
The fact is that people who are buying now aren't choosing to pay less for the same house,
They are buying as much house as they can afford.
The transaction amounts will probably stay steady (or drop with higher rates or tighter standards), the only difference will be better and better homes will be dropping into the affordability zone of buyers.
2 of the 3 - most likely 3 of the 3 listed above - will survive this mess. But it's indicative of the inattention that people are paying to what's going on.
Effective Parental Risk Management:
What are you crying for? You've still got everything below the nail!
Now go get a bandaid.
Thanks for the post of revised POA resets, unearthly.
It fits with what I've been observing around here since the spring - an increase in more high-end homes going onto the market empty and price reduced from what they sold for a couple years ago, and short sales of same are starting.
The LA Times article mentioned that FirstFed's specialties were home equity loans and pay option ARMs.
No worries, though. In a recent newsletter, the CEO of FirstFed wrote:
"FirstFed is not currently in any danger of being taken over by the FDIC nor do we foresee any scenario that could even put us in that position."
I still believe that the option ARM issue is a non-issue for the banks. You can't hit the middle class that hard. In effect, the politicians won't let 25% of San Diego homeowners go into foreclosure. That is where the mother of all bailouts will occur and the banks will survive thanks to your tax dollars.
I have put this link up before but here it is again. A graph that shows the timetable for Option ARM and Alt-A resets and the Fed's map of the concentration of these procucts. METROPOLITAN | Property Management & Real Estate Investments. You will have to scroll through the article to get to them.
In effect, the politicians won't let 25% of San Diego homeowners go into foreclosure.
Won't let? What are they supposed to do about it?
C'mon, Tom, people 3 years ago were saying the government wouldn't let housing prices fall; 1 year ago they were saying they wouldn't let a major investment bank fail.
It's hard to believe; the town that I live in here in SW BC (North of Spokane, sorta) has listed the CHEAPEST detached, none-manufactured single family home at a price of $375,000.
I think our affordability is hanging right in there with Honolulu. I almost wish a good correction would hit, just so my kids might have a chance at ownership one day. However, no Alt-A or subprime in this neck of the woods. Perhaps it's just a matter of time before it all craters.
I "third" the notion that 48% default rate sounds low... if you're talking about the default rate of the borrowing population that still has an Option ARM (that is, excluding those that refied out already).
These products really took off in late '05. Remember what the yield curve looked like then?
From late '05 through '06, your IO payment, and hence your P&I payment, was HIGHER with an Option ARM than it would have been on a 5-10 year IO loan. So even if you wanted some "optionality" to your payments in that time period, it made no sense to pay up for the Option ARM if you had the ability to make even an IO payment monthly.
In other words, Option ARM borrowers from that vintage were signaling in no uncertain terms that they COULD NOT make even the IO payment. When I pointed this out to the head of wholesale production at a major originator, he said, "Oh yeah, this is purely an affordability product."
Does that make sense? I'm not sure I've done this dramatic point justice. These borrowers were not even able to make the IO payment. Their houses are worth less, and they've "neg am'ed" their way to larger debt outstanding. There is simply no place for these borrowers to go except to FC.
Seriously, as someone who bought in LA in '01 and is getting out now while the getting is still (fairly)good, my biggest fear is that the avalanche of bad news is going to scare away potential buyers. Can't we have some happy talk... at least until I close escrow?
"Can't we have some happy talk... at least until I close escrow?"
Ain't got no place to lay your head
Somebody came and took your bed
Don't worry, be happy
The land lord say your rent is late
He may have to litigate
Don't worry, be happy
Lood at me I am happy
Don't worry, be happy
You're timing is good, dude. We are going to be needing to move in 12-18 months from OC. While we have good equity today, we're wondering if we will even be able to get out without burning our credit to the ground and "walking." God I hope it doesn't come to that.
I talked some friends into selling in late 2005 and they finally sold in early 2006. They were located close to the south-east end of the 90(iirc, i got the hell out of there).
I was worried at the time that they wouldn't be able to sell.
Now I realize there will always be a buyer at the right price, and lucky for you it looks like financing will be available for a bit longer. Just don't be greedy!
Price Stout: The Playa Vista development was built (after years of legal battles) on top of the Ballona Wetlands. There is a huge methane gas deposit directly underneath that occasionally seeps to the surface. They have had to evacuate several times.
I must confess to anecdotal evidence from my friends in the banking industry. It would be best stated that, although it may exist, it is, in my opinion, certainly out of the mainstream. That is not to say that people are not leveraged; they are, but usually with 5%-10% down and long amortization rates, and two incomes.
Most of my neighbours are from "somewhere else" like oil-rich Alberta (which, I might add, makes it somewhat akin to living next to Saudi Arabia). I worry that we are getting hollowed out, with only well-off being able to live here. It makes it almost impossible to hire and retain people here due to the cost of housing.
BTW, listings are up 43% this month over last year, but prices are still out of any reasonable level. Even down in Seattle, things seem to be holding up well, no?
Playa Vista was built on fill. So if we get a good shaker, it could go "Atlantis." It's like filling a bowl with gravel and water, putting something heavy on it, and shaking it back and forth. Adios, Amigos. (I think parts of Newport Beach are built on a similar gravel fill.)
Methane is apparently seeping up into the development, but it is protected by a prophylactic "shield" and methane detectors. They built the dev on a previously-unknown fault line which crosses over a gas storage facility of the SoCal Gas Co. So when the big one comes, they will all be dead. (Or evacuated, if the alarms work well.)
CSC: I was misinformed then that it was a natural deposit not a Gas Co facility -- which makes it even more idiotic I suppose. But there is the lovely concert park, so they've got that going for them.
Citigroup Inc. is in negotiations with US state and federal regulators to resolve allegations of wrongdoing in the auction-rate-securities market that could result in its buying back several billion dollars of the illiquid securities from investors and paying a sizable fine, the Wall Street Journal reported in its online edition, citing people familiar with the matter.
New York Attorney General Andrew Cuomo on Friday said he is prepared to charge Citigroup Inc. with fraudulent sales of auction-rate securities and with the destruction of key documents.
I ve heard a horror story or two about unprofessionalism of some of the Wachovia staff from a customer of ours.
So while several month prior I would have no doubts about the survival of thy firm, I can't be so sure anymore.
Playa Vista was actually pretty seductive. We looked there. The methane, gravel fill, and LAPD jurisdiction were enough to scare us away. But, in truth, the place is very nice to look at...even without a "playa" or a "vista."
It is so funny watching this train wreck in motion. Stocks are down a couple of THOUSAND points and it pops up 300 in a day and I really thought Maria B. had an orgasam on the set of CNBC. She looked like a school girl that just got out of the backseat of the starting QB's Camaro at makeout point. I agree about the oversuply high income housing... as a real estate appraiser....there is over 12 months of standing inventory in the $500,000+ price range. That is chump change for CA but in GA that's some real coin. The particular County I am speaking of has the Chicken Plant as it's largest employer. Do bankers not take demographics into consideration when reviewing their loan portfolio? Does anyone actually wonder where all those Mc Mansion owners work? I will need to get together with "currently smoking cannabis" just to get to tomorrow. Each day is a disaster and the DPA Nehamiah is a bane on our society. I can't begin to describe what a joke appraising those transactions can be. Nite all and fight the lunacy....and remember Sheila Blair hates bloggers because we actually EDUCATE the sheep versus lead them to the slaughter. Some lead, some follow, and others just stare paralized by stupidity!
Ducking- Well, since your info is from people in the banking industry, it must be true, LOL. Couldn't find a more solid group of folks anywhere.
Seriously, if Canadian bankers are actually honest people, could you send a few our way?
Sales off 43% from last year is how it starts. Looks like your children will be having their chance to own a home someday.
And no, the Seattle market is not holding up. Houses are still way overpriced, if that's the definition of "holding up" these days, and sometimes I think it is the current definition of "holding up".
Official stats have us down 6% from last year. So we have indeed begun the downward climb towards affordability. Hopefully, it will accelerate as it goes along, as it's done in other places.
With the median price around 10X median income, we've got a considerable way to fall.
Money Man: I got super blazed and took the CNN tour a while back, then wound up in "Underground Atlanta" somehow. It was nuts. The fine folks at Interland seemed to understand when I showed up stoned, so I guess the ATL is as chill as the OC. I'll bring the herb.
Someone just bragged to me he got a new McMension in the Sylmar CA (gated community, lol ).
Well according to provided payment vs total (PV) value info his rate is just under 4%. I don't think anyone can get a fixed loan under 4% right now so the second wave consistent of people that never learn is in the making.
I just kept it to myself though, wishing them G' Luck, human nature could be downright pathetic.
If you were in Underground I hope you had your AK.....It's chill if you can keep outta site and make little direct eye contact. Atl is OK but it sure has changed since I was a young'un. I really liked the OC...but it is just too fast and expensive for my taste. I spent a month in LA back in 93 and got to see the Baywatch peeps down at Marina Del Ray. That was cool for a recent high school grad. Good Times...I predict that our values will plummet here because all the Mc Mansions were built on old cattle pastures and horse farms. The best Golf Club around me sits next to an old chicken farm and it smells for miles in August. I laugh everytime I think about all those stuffy bankers bitchin' about the smell while teeing off on 13. I regress....things are bad but look at the bright side....at least we still have nuclear capabilities and one helluva Military. What are they gonna do...send over some sovreign wealth fund manager and demand their money in a paper bag? Later brother.. I still have one house to appraise tomorrow...may be the last for quite some time.
The Federal government today can still sell its debt. There is a rush for liquidity in a recession period. But there will come a time when, just like the capital markets in August 2007, there will be an unforeseen lock-up of the market for Treasury debt. The Federal Reserve will then have to inflate by buying this debt.
The bankruptcy that is guaranteed by the two pay option mortgages known as Social Security and Medicare will be paid off in a wave of inflation. This inflation will begin long before the trust fund of Medicare goes into the red in 2017.
There will be a default. That default will be mass inflation. The on-budget debt of the United States government will force the FED's hand before the off-budget debt does. But if it doesn't, the backward-walking mortgage of Medicare will force the default.
We will have to take our medicine earlier or later. I predict earlier.
"things are bad but look at the bright side....at least we still have nuclear capabilities and one helluva Military. What are they gonna do...send over some sovreign wealth fund manager and demand their money in a paper bag?"
Well, we ve got much more then just military to brag about. So in the long run, we will probably be just fine. The question is, "at what cost?" or rather "how much pain will the average joe take before the new dawn?"
A year ago, it wouldn't have terrified me because I wouldn't have believed that TPTB would be so stupid as to purposely push this country into something so hellishly destructive as run away inflation.
Now, after watching their every (inflationary) response to this neccesary correction, I know I was wrong and they will, indeed, throw every last one of us under the bus if they think it might preserve their precious system.
Now, Mr. Roubini told Barron's, the government is overregulating, bailing out troubled participants and intervening in every market.
"The regulators should investigate themselves for bailing out Fannie Mae and Freddie Mac, the creditors of Bear Stearns and the financial system with new lending facilities. They have swapped U.S. Treasury bonds for toxic securities," he told Barron's. "It is privatizing the gains and profits, and socializing the losses as usual. This is socialism for Wall Street and the rich."
He said that sometimes it is necessary to use public money to rescue institutions, but in a way that does not bail out the people who made the mistakes. "In each one of these episodes, the government bailed out the shareholders, the bondholders, and to some degree, management," Mr. Roubini told Barron's.
As for the banks that will go bankrupt, they will include community banks that finance homes, stores, downtown areas, commercial real estate and other mainstays of U.S. towns and cities, Mr. Roubini said.
Note: Please don't miss Tanta's post this morning on the NY Times and Freddie Mac.
The guy I speak to is a personal friend who's a bank manager; I've got no reason to think he's BS'ing me. Subprime lending is virtually unheard of here (perhaps not allowed; but I'm not sure) but 100%LTV is done by small outfits catering to new immigrants (and boy howdy, do we have them in Vancouver). Tack on a few extra points for the risk premium.
10X income is about right. Really, the only reason I mentioned it at all tonight was to point out how insane it was; yet still, the people pour into town. Mostly mid-fifties boomers, looking for their place in the sun. As you know, the climate is reasonably warm here, and the thought of retiring in Coldbutt, Manitoba has not sat well with affluent folks last 5 years. I hope you're right about the correction; I don't mind a haircut as long as everyone else is in line with me.
Went into a WAMU branch after work tonight, and noted that they are suddenly offering pretty-damn-enticing CD rates to members.
Two different WAMU branch managers have called me in the last 2 weeks to inform me of their "CD specials". Today's call was most intriguing--she said rates were going up tomorrow and she could get me around 4.55% APY on 8 month deposits. When I asked why were rates increasing on WED when usually they adjust on FRI, she replied "I think it has something to do with the FED meeting today". WTF?
Now, after watching their every (inflationary) response to this neccesary correction, I know I was wrong and they will, indeed, throw every last one of us under the bus if they think it might preserve their precious system.
waitinginPNW | 08.06.08 - 2:48 am | #
But can it work? I don't believe the Fed can inflate. I don't see the numbers needed to take on the new debt necessary to replace the destruction.
Well...The O/A blowup is upon us...slow moving train wreck...Hoocoodanode...
What a freaking nightmare. It seems far worse watching the massive looming hurricane (O/A one of many large bands) and then watching the storm lash at us. Despite our best attempts to avoid the brunt, it may get us yet.
Exotic loans just aren't that common in Canada and the securitization is relatively primitive.
CMHC, the local equivalent of Fannie and Freddie, ginned up their offerings to 40 year loans and 100% but it was very short lived. Finance has forced them to back off to 35 years and 95%. Meanwhile, 90 day delinquencies in bank portfolios were reported in early July at 0.27%, rather lower than the US experience.
However, in BC, we have price to income metrics that are not far off California top of the bubble levels, so something has to crack eventually. Vancouver anecdotes are all about dark towers, which has to be a perfect analog of dark fiber in 1999. My anecdote is that sales in my neck of the woods - a very small market indeed - have gone from 20 per month as recently as January to just 2 in July.
Maybe the freaking Albertans have finally run out of money. I hear rumors the local realtors are going to start advertising in Oman.
But can anyone seriously tell me that they cannot picture Maria B in full leather wearing a ball gag? I want her more than I want property values to hold until I expat and leave this land.
Most of the yankee expats are in Guanacaste, Costa Rica. Jaco is mellow. The carib side is even more chill. Puerto Viejo, Costa Rica is ganja-friendly, rastafarian, and beautiful. Many of the "cabina" joints are run by expats from Europe and elsewhere.
And I don't have a guiche piercing. It's on my list, but I will be branded before I pierce my unit.
Costa Rica is also full of hot hookers. The nicaraguans (Nicas) are especially nice. In Jaco, they can be found at Beatle Bar. In San Jose, well.... they are ubiquitous.
I've been lurking on this site for a while, since Roubini screwed up his site in January. When I have time I read all the comments and most links. What a diverse intelligent(mostly) and twisted bunch. Loved the squirell sub-thread recently. I think some of the newbies pouncing on Tanta have a thing or two to learn about how media myths work. Also I see the English Lit background-pay attention to the text!!etc.
P.S.
Over here we have an informal fraternal lodge "SOTS" kinda like the racoon lodge. The Secret order of the Squirrel. TEN RULES
LA Seller writes:
Not yet. Hence the need for happy talk.
If happy talk were all we needed to keep the markets bright and brisk, dot com would have been the beginning of a new age for mankind. Didn't you hear? We had an all new economy where bubbles never popped and everyone got their very own cyberpony.
Upper middle income people should be perfectly capable of making the higher payments. They are generally finacially literate folks who took perfectly reasonable risks. They no doubt properly accounted for the possibility that they would have to make higher payments after recast. They surely used the money they saved during the low payment period to make good investments or payoff other high cost debt.
They would never make the foolish bets that the ignorant subprime slime made and lost. Right?
These are smart middle and upper income people. Right?
They knew what they were doing. Right?
They could never have been fooled by unscrupulous brokes, appraisers, and lenders. Right?
"Dien Truong, a 35-year-old, water deliveryman, pulled out $156,000 in cash when FirstFed refinanced the $628,000 mortgage on his Richmond, Calif., home in 2005. ... His loan application shows that Mr. Truong and his wife earn $165,000 a year, more than double their actual income, says Katrina Vizinau, a housing counselor with Community Housing Development Corp. of North Richmond. Like Mr. Truong, she says, many borrowers say they didn't read the application until later."
To me, this is the key part of the article, and perhaps the fastest, simplest explanation of what has gone wrong in this country for the past 7 years.
the U.S. mortgage-finance company hobbled by record foreclosures, will slash its dividend at least 80 percent after posting a quarterly loss that was three times wider than analysts' estimates.
The second-quarter net loss of $821 million, or $1.63 a share, compares with the 54-cent a share average estimate...
"Dien Truong, a 35-year-old, water deliveryman, pulled out $156,000 in cash when FirstFed refinanced the $628,000 mortgage on his Richmond, Calif., home in 2005. ... His loan application shows that Mr. Truong and his wife earn $165,000 a year, more than double their actual income, says Katrina Vizinau, a housing counselor with Community Housing Development Corp. of North Richmond. Like Mr. Truong, she says, many borrowers say they didn't read the application until later."
To me, this is the key part of the article, and perhaps the fastest, simplest explanation of what has gone wrong in this country for the past 7 years.
IRE |
But they only had to make an additional $9,000 to make their 'income' that year to 165K. Heh.
"But that changed, she said, when investment-banking firms entered the industry and set lower lending standards, which FirstFed and others followed."
As I learned in college...lowering one's standards can raise one's average, but you are also a whole helluva lot more likely to wake up next to the lunch lady or a domesticated animal.
``Both Fannie and Freddie are going to be profoundly insolvent by the time we're done with this.''
Welcome to the era of degrees of insolvency.
"We remain committed to raising $5.5 billion of new capital and will evaluate raising capital beyond this amount depending on our needs and as market conditions mandate," Syron said in today's statement.
So my philosophical quandary for the day is: Does -$5B qualify as "profound insolvency"?
ambac, due to the weird accounting trick where bad companies get to report profits in proportion to how likely they are to go broke - reports a huge headline profit for the quarter.
Of course absent this accounting trick they made a larger than expected loss.
But the headline figures sound exciting.
Sort of like a doctor telling the family of a dying man that the unfortunate has improved since the last visit because everyone has recently become more sure of his ultimate demise.
This inflation will begin long before the trust fund of Medicare goes into the red in 2017.
Actually its the Social Security trust fund that goes red in 2017. Medicare is already broke and requires funding from general revenues. Makes your point even stronger...
If there are 194 homes for sale according to the local MLS and the same MLS reports 35 sales during the March to July 2008 time period - does that constitute a slow down?
I mean it's only 22 months of inventory or something like that.
This being another one of those "its different hear" kinda places NOT!
i see most vintages for subprime from 2005 onwards as problematic..is 2004 subprime a very small % of total or it may come into play as prices dip t0 2002 levels? Now option arm has longer duration maturity (typ 5 yrs) so things done in 03/04 would be at play here
The Majority of U.S. Homeowners Thinks Their Home is Insulated From the Housing Crisis
Self-deception is an amazing and powerful thing. I've come to the conclusion that self-deception is the single-most important factor keeping our species from going extinct.
Also later today, Paulson will announce that Freddie`s securities are backed by the good faith of U.S. Air Force. (just in case the Chinese might ask any weird questions)
Freddie Mac to Report Quarterly Profit, Miller Says (Update2)
By Jody Shenn
Aug. 5 (Bloomberg) -- Friedman, Billings, Ramsey & Co. analysts said Freddie Mac will report a second-quarter profit, instead of loss as previously forecast, because an increase in interest rates boosted the value of some assets.
The analysts led by Paul Miller now say McLean, Virginia- based Freddie Mac will report net income of 50 cents a share tomorrow, compared with an earlier estimate for a loss of 63 cents. The average estimate of 10 analysts surveyed by Bloomberg is for a loss of 55 cents a share.
Last quarter, rising interest rates boosted the value of Freddie Mac's guarantees on mortgage bonds and interest-rate derivatives used as hedges for its holdings, the analysts said in a report today. Higher fees on new insurance and a rise in the profitability of its portfolio will also help offset losses related to the record surge in U.S. foreclosures, they wrote.
The potential income streams from guarantee assets rise when interest rates climb as the expected lives of the securities Freddie Mac backs extend with a drop in forecasted refinancing and home sales. The yield on the benchmark 10-year U.S. Treasury rose from 3.41 percent on March 31 to 3.97 percent on June 30, according to data complied by Bloomberg.
The Friedman analysts narrowed their expected loss for Freddie Mac for all of 2008 to 87 cents a share, from $2.52, while maintaining an ``underperform'' rating on the shares.
Gains from revaluations won't ``be sustainable in the long term,'' the analysts wrote.
Freddie Mac rose 52 cents, or 6.9 percent, to $8.04 in New York Stock Exchange composite trading today. The shares have fallen about 86 percent in the past year, amid the largest drop in U.S. home prices since the Great Depression.
Freddie Mac and Fannie Mae, the government-chartered companies that own or guarantee 42 percent of the $12.1 trillion of U.S. residential-mortgage debt, ``will continue to have trouble with both credit losses and capital levels'' in future quarters, the analysts wrote.
To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net.
Last Updated: August 5, 2008 16:32 EDT
These bastards shouldn't be allowed to trade anything as long a the US taxpayers are on the hook to bail these assholes out. Need to drive a stake threw the heart of this monster.
I've noticed CD rates at other banks starting to come back up lately. It wouldn't surprise me that troubled banks will attract yield chasers, the FDIC insures the deposits when they fail, and more importantly, the banks the yield chasers pulled their money out of are more unstable as a result.
Bloomberg gave me a nice bedtime story, and then I wake up to this
The second-quarter net loss of $821 million, or $1.63 a share, compares with the 54-cent a share average estimate...
(source - JP, AP)
If you want to have some fun guys, just look at Tanta's posts praising Fannie or Freddie and what F or F stock did the next day. So far it's never failed. Thank you Tanta! I hope you are not going to disappointment me today.
Actually, the FDIC has said that teams must not just order pizza and have to diversify their orders (pizza, burgers, and other take out) to prevent early disclosure. Cheers.
do you or have you read the Michael Connelly books featuring your namesake? -- Miike in Long Island
No I haven't, Miike. To be completely honest, I'm swamped with artists in my family, so I'm familiar with Hieronymus B, and I've always been taken with his utterly nightmarish visions. (They coincide with my own perceptions.) I'm more of the engineering type, form-follows-function, though gene-borne artiness means I try to achieve beauty for practical reasons.
But the tawdry answer to my present handle is that I'm an incurable punster. I've tried rehab many times, but it never lasts long. Had I not been castigated for creativity here, I'd have posted under at least a dozen more equally tendentious handles by now.
Anonymous Bosch: Thanks much for the great link. I know I am getting older when current events and engaged people are as exciting a 'find' as porn used to be.
unearthly writes:
Burbed, have a link to that 1.5% Option ARM number? How many 5-year I/O loans were taken out? I'm sure NoVa was crawling with these kind of loans.
Unearthly - Unfortunately I dont. The guy who posted it got it from the NY FED county by county maps, but the fed took those away.
Note, certain parts of NOVA certainly are cralwing with this sort of paper. Problem is, its heavily concentrated in the hard hit areas (Loudoun & PWC) and much less so, in the close in, so far pretty immune areas.
How very interesting. They are opening a new branch in Irvine next week (yet another connection to the mortgage mess!). At the grand opening, they are providing wine and hors d'oeuvres. Perhaps if we all drink enough, we will be persuaded to give them a bunch of deposits.
Good morning alll...Let me just give you a heads up on just how crooked the lending business has been for the past decade. I have lost over $150,000-$200,000 in fees in the appraisal industry for NOT making the values that these scumbags wanted. This is in a suburban area of the South, where appraisal fees are around $275-350 each. That is a lot of coin because I am a one man shop. Being an appraiser means if you tell the truth about what is really going on it is your mea culpa. You will be blackballed, disowned, and called out for stopping the flow of the system. I was taught as a young boy by my grandfather that if you are good at what you do, fair, and are honest...you will never hurt for business. Guess that was before the mortgage Nazis took over the financial sector. I see the greed that was perpuated from the homeowners all the way up the food chain to Wall Street. Appraisers will only push numbers to EAT not for the money. You would have to have more than 5-10 working for you to make it worth he risk of prison. Some, will not bend to the pressure and hope that good will prevail but I only see the good getting impailed on the sword of truth. Be happy, very very happy you are not in such a profession. Sorry for the rant but I am tired of hearing all the appraisers are crooks...some really are suffering for doing the right thing. The problem is that even the dumb shits you are trying to protect from themselves actually wanted those idiotic LTV's. The banks don't care because they have always known the FED is willing to back the game when it hit extra innings.
Persevere, Money Man. The Good (at just about anything) don't get any attention any more - the people who pay their taxes, those who pay their mortgages, the people who insist on doing the job right.
If it's any consolation, you're among kindred spirits here. Welcome to the gang hanging by the lifeboats. Oh yes, they're stenciled S.S.Titanic.
The howling here in Manhattan when the high end goes thud is going to be loud. I mean, these people have serious entitlement issues and they are NOT going to like having their $1.5M pad decline to $850K. That would be like going from 5th Avenue to 1st. Imagine the shame....
goodevening!
How many option arms are there in the mentioned "window"?
Shouldn't banks be happy getting an asset that they'll easily be able to turn into cash? Of course they have to price it right, but I just don't understand why the banks don't want to foreclose.
You know what, you can say "banks don't want to hold houses" or "banks don't want to be landlords"... but I'll counter that with "women don't want to be prostitutes". When times are hard you have to adapt to the times...
Thank god. I'm sick of those nice people in China.
How many option arms are there in the mentioned "window"?
A lot
fourple, its like a double double.
"The key here, for the housing market, is that the next wave of defaults will be hitting middle to upper middle class neighborhoods.
Let's take class out of the equation and call them middle and upper earning idiots. Kind of like our simple presidnet.
o_vaseline, I'm trying to find some stats on option ARMs by year. I'll post them if I find them.
Best Wishes.
Elvis, just trying to point the that impact from Option ARM defaults will be felt in different neighborhoods - not where most of the subprime damage happened.
Best Wishes.
If 48% or less default, I'll reveal my secret identity to the Joker.
CR,
I realize that. Just a really small joke.
LA Times just did a more favorable writeup of FirstFed:
FirstFed reduced loan risk early on - Los Angeles Times
"[T]he Los Angeles bank is on the front lines of what could be the next big mortgage debacle: payment option mortgages."
I thik thee needs to be a government agency appointed to determine exactly what the "next big mortage debacle" is going to be, this idle speculation is annoying to me.
IIRC, most of the IB's have not even began writing the bulk of these down???
Yay! Charleston 4.8%.
"The government shouldn't be trying to bribe people into buying houses in a falling market".
Finally, a politician with a conscience. Unfortunately, he works for UK citizens. Americans should be so lucky.
404
With all due respect, if "Forty percent of its borrowers became at least 30 days" you have a lending problem not a payment problem. As my Nana said in her own words..."shit begets shit"
Anyone know how many '03-'07 5/1 Interest-Only loans will recast to P&I?
Nana shouldn't be saying those words.
wake me when the ATM's start shutting down....thats the key..
FDIC takes a bank under?...Potter steps in with liquidity.
hint: FED/Treasury is Potter...
hat tip Wonderful Life.
The key here, for the housing market, is that the next wave of defaults will be hitting middle to upper middle class neighborhoods.
Where I'm located, "subprime" is a code word, so the local conventional wisdom is that there's no housing bubble...
In about 12 months, I'm sure the Foreclosure Relief Act of 2008 will be revisited once TPTB realize that subprime was not contained...
More generous provisions ahead.
I've been waiting for the pay option loans to rip the sh@t out of the Seattle/Puget Sound market.
A couple years ago, this area was # 7 in the nation for idiots signing up for this type of guaranteed future financial insecurity.
ac- if you're reading, did you really sign up for a walk-away? If so, please keep us posted on how it goes.
Elvis - You may be right but after a few and at the age of 98 still on her own growing her own garden and driving, and volenteering, and making "jacks" she can say all she likes!
btw She has often said "never suck the nipple of Mr. Downey" [the local bank branch manager in the 40s]
I only see option arms being a problem in the metro areas that have seen the greatest price declines. We all know which areas I speak of...well, if don't then you just haven't been paying attention.
In the tonier area of Phoenix/Scottsdale its already happening, except those people are seriously underwater with an anvil tied to their leg.
why the banks don't want to foreclose
domino effect on their other mortgage assets...
REsets from earlier post
Good news the resets will peak in mid-2011.
Bad news the resets don't peak until 2011
Calculated Risk: IMF: Mortgage Reset Chart
In the tonier area of Phoenix/Scottsdale its already happening, except those people are seriously underwater with an anvil tied to their leg.
Fit them with a pair of concrete galoshes...
Excuse me, but 48% seems rather conservative.
Exactly how do they come up with these numbers since many of them are stated income anyway.
I'd be shocked if 10% could afford their house after the reset since they couldn't afford it before on a "normal" loan.
Given that 70% pay the minimum, I call BS.
The Option ARM reset schedule might be closing in quicker than previously estimated. Revised Option ARM Reset Schedule
another good sunset
unearthly
I like CR graph better more colors...
unearthly,
Showing graphs like that is unwelcomed. There are several IBers and Sheila Bair on this blog right now. Given the time of the evening, this could give them nightmares. I hope you can sleep now that you know you have ruined others sleep.
obody gets me:
300 days to foreclosure? dont you know what this means for banks profit?
better short SKF, its going under the 100 el bucko mendoza line, just like oil.
I bet 88% of Option Arm holders have absolutely no clue what they are going to do when their ARM resets.
Perhaps 48% might know one is coming and even fewer probably know when and how much
How Barclay's and USB know is beyond me.
Perhaps they are saying that this is how many are or will be upsidedown at the time of reset.
Average Joe writes:
Excuse me, but 48% seems rather conservative.
Given that 70% pay the minimum, I call BS.
Seconded. BS. Even if they could pay more at origination, what are the chances that their lifestyle did not expand into that extra cash, given the expectations of crazy growth in the new paradigm that seemed to be held by most folks who took these products?
I wrote about First Fed in April. They were a train wreck waiting to happen.
Blogger: Blog not found
Watch the next several months in CA. You are going to see slightly rising median prices as these higher balance Option ARM's go through the python. Some sorry souls will be reporting a bottom and potentially some silver lining about the end of the housing crisis, but we are in the middle innings folks. It will get much darker before the light.
after the MER nickel on the dollar CDO deal....any, any and all transactions in the RE field are good money, so long as you get a nickel and a penny and the bubble dollar, and only have to take back 75% of the paper...
nodoby can see a floor.....right.
ac- if you're reading, did you really sign up for a walk-away? If so, please keep us posted on how it goes.
No... I didn't buy options with the credit account I "borrowed" from the next door neighbor while taking care of her cats either.
Nor did I sell the house I was leasing and buy it back for 30% less before my lease was up.
Sometimes I feel foolish for not trying.
I guess I'll never have a career on Wall Street.
You are going to see slightly rising median prices as these higher balance Option ARM's go through the python.
Higher median what, REOs?
Y'know, that figure - 40% - just floors me. Yep, it's a lending problem...
So forget about SKF, just find out what banks are sucking wind on this and short them.
40%?
And that ain't the sunset you're watching, it's this bank exploding.
Buried under all this are 5-year Interest-Only ARM's which will recast to P&I around the same time. Payments will likely double for many of these home debtors. Nothing like throwing gasoline on a raging inferno.
Oh fee fyy phoe, the market's up over 300 points today. Who cares about your downbeat postings? So little faith.
Recall that they banks were booking the deferred interest payments as profits, so no only do they lose on the cost of default, but it also wipes out profits they've already thought they had.
Should do some real damage.
And yet, when all is said and done, I expect the middle and (especially) upper class 'hoods to hold their value much better than the lower class 'hoods.
It's nice to think all will suffer equally, but at the end of the day some are more subprime than others. The US has the highest Gini coefficient of any developed country, and this has gotten considerably worse under the Bush admin.
The class bifurcation of America continues apace...
Alec writes:
You are going to see slightly rising median prices as these higher balance Option ARM's go through the python.
Higher median what, REOs?
Alec | 08.05.08 - 11:31 pm | #
Yup.
Instead houses originally selling for $200K REOed for $100K... we'll see houses originally selling for $500K REOed for $200K... median selling price increase of $100K!!!
[$100K to $200K]
End Of Crisis. Housing Market - Mission Accomplished!!!
First Fed has a Texas ratio of 45 as of the end of March; probably higher now. Anything above 40 is regarded as very very bad news with regard to survival.
After today Hank Paulson should put on a cowboy hat jump in a H2 drive it up the steps of wall street , with that huge american flag behind him and declare mission accomplished! Nothing like it would have ever been done before and would give a huge boost to national morale. Even crox shares will be up that day!
jim writes:
First Fed has a Texas ratio of 45 as of the end of March; probably higher now. Anything above 40 is regarded as very very bad news with regard to survival.
jim | 08.05.08 - 11:42 pm | #
Look on the bright side... it will make some pizza place really, really happy.
Fianl thought,
All those knife catchers who are buying the current "subprime" quality homes that have been forclosed on as investments will find that when the much higher quality properties that were purchased with OA's forclose come on the market in mass, and have to drop down to a level where a good many people will need a down payment and steady income to purchase, they'll find that there are more high end homes than there are people who can afford them. This will push down prices on lower quality homes below all historical measures.
You can't believe how many "$900,000" homes were built and then bought by people who can only afford about half that. There are simply too many of these types of homes and when they have to be absorbed, they will kill the lower end.
"Tranches of Lunacy writes...
And yet, when all is said and done, I expect the middle and (especially) upper class 'hoods to hold their value much better than the lower class 'hoods."
Yep - I was all jacked up when I first heard about these - thinking they would take down the so far "immune" areas in close in DC. Then, I learned that the total number of Option Arms outstanding is about 1.5% of the close in homeowner population. Nothing to sneeze at, but nothing at all like the places fancy pants places out in CA and AZ that are burning down as we speak...
Man - I really cant win!!!
I heard Sheila Bair doesn't tip and will only buy pizza if there are really good coupons.
Whats the joke about the FDIC and pizza?
Isn't the Texas Ratio all about comercial loans, not residential?
$900k homes are affordable when they sell for $300k in REO auctions.
Average Joe writes:
Recall that they banks were booking the deferred interest payments as profits, so no only do they lose on the cost of default, but it also wipes out profits they've already thought they had.
I recall they were booking fully amortized payments while receiving the lowest option. If this is right, there is going to be a river of blood if they ever have to come clean. These days, I'm not sure they will.
Whats the joke about the FDIC and pizza?
Tim |
I dunno. Is it "Sheila Bair walks into a bank with a ledger under one arm and a pizza under the other"...You finish it...
does 30 days past due even matter. I would think that is pretty good. Nothing should be deemed delinquent until 300 days. and if that doesn't work just keep doubling it every year until this whole thing just blows over.
So I'm really confused. Has anyone looked at the impact of the SEC shorting regulations? Is it true that its a nothingburgher or a somethingburgher? Is it true that IB's are intentionally holding back shares for shorting? What's going on?
The problem with delinquent loans is they are delinquent. Just like that 14 yr old kid at 7-11 with a switchblade.
Funny thing is that exotic mortgages make people think they are wealthier than they are...
Want a $1M home with 10% down and $2800/month payments? Try the 5-year Option ARM. Recasts to $6500/month
Want a $1M home with 5% down and $3000/month payments? Try the 5-year I-O ARM. Recasts to $6000/month
Yep - I was all jacked up when I first heard about these - thinking they would take down the so far "immune" areas in close in DC. Then, I learned that the total number of Option Arms outstanding is about 1.5% of the close in homeowner population. Nothing to sneeze at, but nothing at all like the places fancy pants places out in CA and AZ that are burning down as we speak...
Come back in 4 years prices will be down 40% but your interest will be over 10% imo...
I don't think you should call them "exotic mortgages." I call them "erotic mortgages." because when women come to stay in my option mortgage $2M house, they get all hot and bothered.
Burbed, have a link to that 1.5% Option ARM number? How many 5-year I/O loans were taken out? I'm sure NoVa was crawling with these kind of loans.
Tim writes:
Whats the joke about the FDIC and pizza?
Tim | 08.05.08 - 11:48 pm | #
FFDIC said that when they closed a bank the FDIC team comes flying into to town after hours - usually on a Friday - and storms the bank. They set up office and copy doc's & transfer accounts - all the stuff they gotta do to get it ready to open the next working day under a new name & sometimes even new ownership.
They go pretty much around the clock and so order out a lot of pizza - sent to the bank.
So if you hear there is a run on take outs in your area - you'll probably have a different bank the next business day.
Option ARMs were tailored for flippers. Flippers who are underwater swim away. That equates to a 93% default rate.
FirstFed is scrambling to modify the loans of borrowers who can't afford the higher payments. As of the end of June, nonperforming assets climbed to 8.2% of total assets, compared with 0.85% a year earlier.
Take this number and multiply it by the outstanding option arms (see the reset curve) which I'm eyeballing to be about $200B. So nonperforming assets are a mere $16B so far.
But the kicker is, take a good look at the reset graph from CS. The resets for option ARMs have BARELY started. It's going to be a doozy.
So if you hear there is a run on take outs in your area - you'll probably have a different bank the next business day.
Thanks, wait I just got it the Domino's Effect...
Come back in 4 years prices will be down 40% but your interest will be over 10% imo...
Tim | 08.05.08 - 11:53 pm | #
If you got enough cash for a BIG down payment you will still be ahead.
If you still have the cash (and a job) that is.
The article says that since FirstFed set the recast cap at 110%, they are among the first to feel the hit.
The article, however, neglects to mention that the fact that the cap is at 110% also means the hit should be smaller; banks with loans that reset at 125% should see higher rates of default because the payment spike is much more substantial.
And yet, we're seeing 40%. Fuck me.
Ivan,
This isn't that kind of site. I think you meant to log onto Calculated Frisk.
Elvis writes:
Option ARMs were tailored for flippers. Flippers who are underwater swim away. That equates to a 93% default rate.
Elvis | 08.05.08 - 11:57 pm | #
What happens to the other seven percent - they get eaten by sharks?
dryfly writes:
"Yup.
Instead houses originally selling for $200K REOed for $100K... we'll see houses originally selling for $500K REOed for $200K... median selling price increase of $100K!!!
[$100K to $200K]
End Of Crisis. Housing Market - Mission Accomplished!!!"
somebody is seeing the rally in real time.
No, they refinance with Uncle Fannie and Aunt Freddie.
I wonder how many 125% recasts will be on a 80/20 loans, perhaps resulting in a > 125% LTV? Throw in falling prices and the LTV could go to 200%
.
Couldn't find the CFC article i was looking for, but here is a news release from 2 years back
Countrywide Reports December 2006 Operational Results
Money quote-
On a consolidated basis, Countrywide funded $2.9 billion in pay-option loans during the month as compared to $8.0 billion in December 2005. Fourth quarter 2006 pay-option fundings were $10 billion as compared to $24 billion for 2005's fourth quarter. For the 2006 full year, pay-option fundings were $64 billion, which compares to $95 billion for 2005.
The stats I was looking for showed that in 2006, 41% of all loans CFC placed in CA were POA. Of those, 91% were Stated / NINJA. So about 1/3 of every CA loan was a no verified income POA.
Or POS, as the case may be. If memory serves...
Or live in the city Sebastian lives in where flipping is a viable profession.
Elvis writes:
No, they refinance with Uncle Fannie and Aunt Freddie.
Elvis | 08.06.08 - 12:04 am | #
LOL - good one. Of course you are well aware there are more than a few on this forum who would rather take their chances with the sharks.
G'nite Elvis.
dryfly,
I don't think you'll get much of a pop in median.
The fact is that people who are buying now aren't choosing to pay less for the same house,
They are buying as much house as they can afford.
The transaction amounts will probably stay steady (or drop with higher rates or tighter standards), the only difference will be better and better homes will be dropping into the affordability zone of buyers.
Currently Smoking Cannabis
Are you a WSA reader. Meant to ask based on a comment you made some days back.
cheers
sbarrkum
When times are hard you have to adapt to the times...
U.S. lawmakers urge foreclosure delay until Oct 1
UPDATE 1-U.S. lawmakers urge foreclosure delay until Oct 1
| Reuters
They're adapting as fast as they can. Look honey a couple more months of free rent.
Elvis,
'Round here, the 14 year old delinquents pack heat, NOT switchblades.
YouTube - Meredith Whitney: More writedowns ahead.
did everyone catch this Meredith Whitney on CNBC on Mon... Nothing new
"They're adapting as fast as they can. Look honey a couple more months of free rent...."
yu mooves the peoples or yu gets liquids,big damn....no more village, only cond-hotel.
"If you're buying a house, it shouldn't cost more than twice your income. That's just good economics". Martin Luther King, Jr. 1968
sigh....now we've got Fannie and Freddie, Nehemia Group and a host of other crooks.
Basically in the video Meredith says the market will loose 2 trillion in liquidity this year...
Worse than 33% declines in homes
Reduce credit card lines 2 trillion to consumers
35% of Wachovia's deposits are uninsured
40% of JP Morgans uninsured
20% of CITI
Couple of data points:
I/O loans were at 22.9% of total volume in 2004, 26.2% and 2005 and 22% in 2006.
In 2006 30% of loan originations in California, Nevada, Colorado and Arizona were I/O.
35% of Wachovia's deposits are uninsured
40% of JP Morgans uninsured
20% of CITI
Tim | 08.06.08 - 12:26 am | #
2 of the 3 - most likely 3 of the 3 listed above - will survive this mess. But it's indicative of the inattention that people are paying to what's going on.
Effective Parental Risk Management:
What are you crying for? You've still got everything below the nail!
Now go get a bandaid.
Thanks for the post of revised POA resets, unearthly.
It fits with what I've been observing around here since the spring - an increase in more high-end homes going onto the market empty and price reduced from what they sold for a couple years ago, and short sales of same are starting.
The LA Times article mentioned that FirstFed's specialties were home equity loans and pay option ARMs.
No worries, though. In a recent newsletter, the CEO of FirstFed wrote:
"FirstFed is not currently in any danger of being taken over by the FDIC nor do we foresee any scenario that could even put us in that position."
Phew.
Cool... the Fed posted a video of their meeting today. They're getting faster:
YouTube
- 3 Stooges teach the alphabet
In 2005 and 2006 $535 billion in Option-ARM loans were originated, or about 9% of total loan volume.
I still believe that the option ARM issue is a non-issue for the banks. You can't hit the middle class that hard. In effect, the politicians won't let 25% of San Diego homeowners go into foreclosure. That is where the mother of all bailouts will occur and the banks will survive thanks to your tax dollars.
I have put this link up before but here it is again. A graph that shows the timetable for Option ARM and Alt-A resets and the Fed's map of the concentration of these procucts. METROPOLITAN | Property Management & Real Estate Investments. You will have to scroll through the article to get to them.
In effect, the politicians won't let 25% of San Diego homeowners go into foreclosure.
Won't let? What are they supposed to do about it?
C'mon, Tom, people 3 years ago were saying the government wouldn't let housing prices fall; 1 year ago they were saying they wouldn't let a major investment bank fail.
Hey, slightly O/T :
Went into a WAMU branch after work tonight, and noted that they are suddenly offering pretty-damn-enticing CD rates to members.
Is this the same panicked last-ditch move to raise capital that IndyMac did? Is WAMU going through its final death twitches on the operating table?
4.15 percent -- 6 month
4.25 percent -- 13-17 months
5.00 percent -- 48-59 months
That beats anything I found online.
sbarrkum writes:
Currently Smoking Cannabis
Are you a WSA reader. Meant to ask based on a comment you made some days back.
I don't think so. I have no idea what WSA stands for.
It's hard to believe; the town that I live in here in SW BC (North of Spokane, sorta) has listed the CHEAPEST detached, none-manufactured single family home at a price of $375,000.
I think our affordability is hanging right in there with Honolulu. I almost wish a good correction would hit, just so my kids might have a chance at ownership one day. However, no Alt-A or subprime in this neck of the woods. Perhaps it's just a matter of time before it all craters.
Sorry, I just re-posted my above post in the more-appropriate Tanta WAMU posting from earlier today. Resume your sharp banter! Cheers
63 online right now. Anyone wanna tell dirty jokes or fantasize about Maria Bartiromo's possible piercings?
I "third" the notion that 48% default rate sounds low... if you're talking about the default rate of the borrowing population that still has an Option ARM (that is, excluding those that refied out already).
These products really took off in late '05. Remember what the yield curve looked like then?
From late '05 through '06, your IO payment, and hence your P&I payment, was HIGHER with an Option ARM than it would have been on a 5-10 year IO loan. So even if you wanted some "optionality" to your payments in that time period, it made no sense to pay up for the Option ARM if you had the ability to make even an IO payment monthly.
In other words, Option ARM borrowers from that vintage were signaling in no uncertain terms that they COULD NOT make even the IO payment. When I pointed this out to the head of wholesale production at a major originator, he said, "Oh yeah, this is purely an affordability product."
Does that make sense? I'm not sure I've done this dramatic point justice. These borrowers were not even able to make the IO payment. Their houses are worth less, and they've "neg am'ed" their way to larger debt outstanding. There is simply no place for these borrowers to go except to FC.
"FirstFed is not currently in any danger of being taken over by the FDIC nor do we foresee any scenario that could even put us in that position."
The dumb ass forgot to say at this time, he ain't gonna make it in the big league.
Sharkie - slight correction, WaMu of course isn't raising capital but liquidity, and yes that's exactly what they are trying to do.
"Oh yeah, this is purely an affordability product."
Translation: Find a greater fool or FC.
The clock is ticking and the greater fools have gone.
Seriously, as someone who bought in LA in '01 and is getting out now while the getting is still (fairly)good, my biggest fear is that the avalanche of bad news is going to scare away potential buyers. Can't we have some happy talk... at least until I close escrow?
@LA Seller
Have you signed the P&S agreement and gotten past all contingencies? If so count yourself as lucky and get the checked cashed asap.
"Can't we have some happy talk... at least until I close escrow?"
Ain't got no place to lay your head
Somebody came and took your bed
Don't worry, be happy
The land lord say your rent is late
He may have to litigate
Don't worry, be happy
Lood at me I am happy
Don't worry, be happy
@unearthly
Not yet. Hence the need for happy talk.
Ducking the Fog-
I'm really beginning to wonder why so many Canadians believe that there aren't some real bad loans up there.
Without crap loans, how in the world would your prices get so high? It's a serious question.
Ah, I was in BC last week and saw ads for 100%, no money downs, without even looking for them.
Have you really researched the types of loans being made up there or are you just repeating "common knowledge".
Right and up the chain it goes...
Subprime -> Alt-A -> Option ARM -> Hybrid ARM -> I/O -> ARM -> Fixed -> All Cash...
So far we've crossed off Subprime...
LA Seller: Here's hoping you're not in Playa Vista. Methane and liquefaction are not usually considered "good news."
unearthly-
I think at some point we will skip a few and end up at my handle.
CSC: Westchester, actually. Just around the corner. Serves 'em right for building on a swamp though.
You're timing is good, dude. We are going to be needing to move in 12-18 months from OC. While we have good equity today, we're wondering if we will even be able to get out without burning our credit to the ground and "walking." God I hope it doesn't come to that.
Did someone request some happy talk? Here it is: The housing market is near bottom and option arm's will be refinanced at lower rates.
happy song- YouTube -
O-Joe
LA Seller-
I talked some friends into selling in late 2005 and they finally sold in early 2006. They were located close to the south-east end of the 90(iirc, i got the hell out of there).
I was worried at the time that they wouldn't be able to sell.
Now I realize there will always be a buyer at the right price, and lucky for you it looks like financing will be available for a bit longer. Just don't be greedy!
Our plan was originally to move in about a year. But things have accellerated a bit... (spending time on CR no doubt lit a fire.)
What's the story w/ Playa Vista. I have a number of friends who own there.
I mean, what's the issue other than the lack of a "playa" or a "vista"
Maria Bartiromo piercing/tattoo probabilities:
Navel piercing: 85%
Nipples: 75% ring, 65% barbell
Little man in the boat: 50%
"Outer": 50%
"Inner": 50%
Guiche: 15%
Tattoo under bikini: 80%
Price Stout: The Playa Vista development was built (after years of legal battles) on top of the Ballona Wetlands. There is a huge methane gas deposit directly underneath that occasionally seeps to the surface. They have had to evacuate several times.
Morgan Stanley issues alert on Spanish banks
By Ambrose Evans-Pritchard
Morgan Stanley issues alert on Spanish banks - Telegraph
O-Joe: Thank you, I feel better.
WaitinginPNW:
I must confess to anecdotal evidence from my friends in the banking industry. It would be best stated that, although it may exist, it is, in my opinion, certainly out of the mainstream. That is not to say that people are not leveraged; they are, but usually with 5%-10% down and long amortization rates, and two incomes.
Most of my neighbours are from "somewhere else" like oil-rich Alberta (which, I might add, makes it somewhat akin to living next to Saudi Arabia). I worry that we are getting hollowed out, with only well-off being able to live here. It makes it almost impossible to hire and retain people here due to the cost of housing.
BTW, listings are up 43% this month over last year, but prices are still out of any reasonable level. Even down in Seattle, things seem to be holding up well, no?
Playa Vista was built on fill. So if we get a good shaker, it could go "Atlantis." It's like filling a bowl with gravel and water, putting something heavy on it, and shaking it back and forth. Adios, Amigos. (I think parts of Newport Beach are built on a similar gravel fill.)
Methane is apparently seeping up into the development, but it is protected by a prophylactic "shield" and methane detectors. They built the dev on a previously-unknown fault line which crosses over a gas storage facility of the SoCal Gas Co. So when the big one comes, they will all be dead. (Or evacuated, if the alarms work well.)
what's the issue other than the lack of a "playa" or a "vista"
Potential liquefaction.
CSC: I was misinformed then that it was a natural deposit not a Gas Co facility -- which makes it even more idiotic I suppose. But there is the lovely concert park, so they've got that going for them.
Citigroup Inc. is in negotiations with US state and federal regulators to resolve allegations of wrongdoing in the auction-rate-securities market that could result in its buying back several billion dollars of the illiquid securities from investors and paying a sizable fine, the Wall Street Journal reported in its online edition, citing people familiar with the matter.
New York Attorney General Andrew Cuomo on Friday said he is prepared to charge Citigroup Inc. with fraudulent sales of auction-rate securities and with the destruction of key documents.
Business finance news - currency market news - online UK currency markets - financial news - Interactive Investor
Uh-Oh
"35% of Wachovia's deposits are uninsured
40% of JP Morgans uninsured
20% of CITI"
I ve heard a horror story or two about unprofessionalism of some of the Wachovia staff from a customer of ours.
So while several month prior I would have no doubts about the survival of thy firm, I can't be so sure anymore.
"[T]he Los Angeles bank is on the front lines of what could be the next big mortgage debacle: payment option mortgages."
What what what, one option to pay another option not to pay with the understatement of possibility of the second?
Is it 04-05 all over again?
Playa Vista was actually pretty seductive. We looked there. The methane, gravel fill, and LAPD jurisdiction were enough to scare us away. But, in truth, the place is very nice to look at...even without a "playa" or a "vista."
I'd love to get a CR prediction of numbers of foreclosures over the next few years.
You say the next wave will be smaller...but how much smaller? And when will the second wave peak? Has the first wave peaked yet?
I know it's impossible to project this stuff exactly, but a projected range would be pretty interesting.
It is so funny watching this train wreck in motion. Stocks are down a couple of THOUSAND points and it pops up 300 in a day and I really thought Maria B. had an orgasam on the set of CNBC. She looked like a school girl that just got out of the backseat of the starting QB's Camaro at makeout point. I agree about the oversuply high income housing... as a real estate appraiser....there is over 12 months of standing inventory in the $500,000+ price range. That is chump change for CA but in GA that's some real coin. The particular County I am speaking of has the Chicken Plant as it's largest employer. Do bankers not take demographics into consideration when reviewing their loan portfolio? Does anyone actually wonder where all those Mc Mansion owners work? I will need to get together with "currently smoking cannabis" just to get to tomorrow. Each day is a disaster and the DPA Nehamiah is a bane on our society. I can't begin to describe what a joke appraising those transactions can be. Nite all and fight the lunacy....and remember Sheila Blair hates bloggers because we actually EDUCATE the sheep versus lead them to the slaughter. Some lead, some follow, and others just stare paralized by stupidity!
Ducking- Well, since your info is from people in the banking industry, it must be true, LOL. Couldn't find a more solid group of folks anywhere.
Seriously, if Canadian bankers are actually honest people, could you send a few our way?
Sales off 43% from last year is how it starts. Looks like your children will be having their chance to own a home someday.
And no, the Seattle market is not holding up. Houses are still way overpriced, if that's the definition of "holding up" these days, and sometimes I think it is the current definition of "holding up".
Official stats have us down 6% from last year. So we have indeed begun the downward climb towards affordability. Hopefully, it will accelerate as it goes along, as it's done in other places.
With the median price around 10X median income, we've got a considerable way to fall.
Money Man: I got super blazed and took the CNN tour a while back, then wound up in "Underground Atlanta" somehow. It was nuts. The fine folks at Interland seemed to understand when I showed up stoned, so I guess the ATL is as chill as the OC. I'll bring the herb.
No challenges on Bartiromo's body modifications? I'm surprised. The guiche call could be as high as 40%.
Someone just bragged to me he got a new McMension in the Sylmar CA (gated community, lol ).
Well according to provided payment vs total (PV) value info his rate is just under 4%. I don't think anyone can get a fixed loan under 4% right now so the second wave consistent of people that never learn is in the making.
I just kept it to myself though, wishing them G' Luck, human nature could be downright pathetic.
If you were in Underground I hope you had your AK.....It's chill if you can keep outta site and make little direct eye contact. Atl is OK but it sure has changed since I was a young'un. I really liked the OC...but it is just too fast and expensive for my taste. I spent a month in LA back in 93 and got to see the Baywatch peeps down at Marina Del Ray. That was cool for a recent high school grad. Good Times...I predict that our values will plummet here because all the Mc Mansions were built on old cattle pastures and horse farms. The best Golf Club around me sits next to an old chicken farm and it smells for miles in August. I laugh everytime I think about all those stuffy bankers bitchin' about the smell while teeing off on 13. I regress....things are bad but look at the bright side....at least we still have nuclear capabilities and one helluva Military. What are they gonna do...send over some sovreign wealth fund manager and demand their money in a paper bag? Later brother.. I still have one house to appraise tomorrow...may be the last for quite some time.
MM: Easy dude.... good luck.
FYI MESSAGE for Sheila Bair and Banker friends:
10 X income is too high. People can't even begin to pay off the loan.
3% downpayments. Really stupid idea. Surprised you guys couldn't piece that piece of logic together.
NINA loans. Another stupid idea.
You set yourselves up for GRANDIOSE FAILURE.
Do you get it now, or are you still grasping for an understanding of the principles of sound banking/lending?
The Federal government today can still sell its debt. There is a rush for liquidity in a recession period. But there will come a time when, just like the capital markets in August 2007, there will be an unforeseen lock-up of the market for Treasury debt. The Federal Reserve will then have to inflate by buying this debt.
The bankruptcy that is guaranteed by the two pay option mortgages known as Social Security and Medicare will be paid off in a wave of inflation. This inflation will begin long before the trust fund of Medicare goes into the red in 2017.
There will be a default. That default will be mass inflation. The on-budget debt of the United States government will force the FED's hand before the off-budget debt does. But if it doesn't, the backward-walking mortgage of Medicare will force the default.
We will have to take our medicine earlier or later. I predict earlier.
The Looming Federal Default: Sooner or Later? by Gary North
Tic-Tock-Tic-Tock
MM: For the record, I think the OC sucks ass. And I expected to dislike ATL and actually really liked it. Go figure. Buckhead was a good time.
"things are bad but look at the bright side....at least we still have nuclear capabilities and one helluva Military. What are they gonna do...send over some sovreign wealth fund manager and demand their money in a paper bag?"
Well, we ve got much more then just military to brag about. So in the long run, we will probably be just fine. The question is, "at what cost?" or rather "how much pain will the average joe take before the new dawn?"
CSC
is this what you're talking about? i didn't think she had 'boys'.
Guiche piercing - Wikipedia, the free encyclopedia
Anon-
The inflation talk terrifies me. Please stop.
A year ago, it wouldn't have terrified me because I wouldn't have believed that TPTB would be so stupid as to purposely push this country into something so hellishly destructive as run away inflation.
Now, after watching their every (inflationary) response to this neccesary correction, I know I was wrong and they will, indeed, throw every last one of us under the bus if they think it might preserve their precious system.
Now, Mr. Roubini told Barron's, the government is overregulating, bailing out troubled participants and intervening in every market.
"The regulators should investigate themselves for bailing out Fannie Mae and Freddie Mac, the creditors of Bear Stearns and the financial system with new lending facilities. They have swapped U.S. Treasury bonds for toxic securities," he told Barron's. "It is privatizing the gains and profits, and socializing the losses as usual. This is socialism for Wall Street and the rich."
He said that sometimes it is necessary to use public money to rescue institutions, but in a way that does not bail out the people who made the mistakes. "In each one of these episodes, the government bailed out the shareholders, the bondholders, and to some degree, management," Mr. Roubini told Barron's.
As for the banks that will go bankrupt, they will include community banks that finance homes, stores, downtown areas, commercial real estate and other mainstays of U.S. towns and cities, Mr. Roubini said.
Note: Please don't miss Tanta's post this morning on the NY Times and Freddie Mac.
Waiting in PNW:
The guy I speak to is a personal friend who's a bank manager; I've got no reason to think he's BS'ing me. Subprime lending is virtually unheard of here (perhaps not allowed; but I'm not sure) but 100%LTV is done by small outfits catering to new immigrants (and boy howdy, do we have them in Vancouver). Tack on a few extra points for the risk premium.
10X income is about right. Really, the only reason I mentioned it at all tonight was to point out how insane it was; yet still, the people pour into town. Mostly mid-fifties boomers, looking for their place in the sun. As you know, the climate is reasonably warm here, and the thought of retiring in Coldbutt, Manitoba has not sat well with affluent folks last 5 years. I hope you're right about the correction; I don't mind a haircut as long as everyone else is in line with me.
Girls get the perineum too, dude. Wiki doesn't know bod mod.
It's pretty hawt, actually. You can flick it.
Sharkie writes:
Went into a WAMU branch after work tonight, and noted that they are suddenly offering pretty-damn-enticing CD rates to members.
Two different WAMU branch managers have called me in the last 2 weeks to inform me of their "CD specials". Today's call was most intriguing--she said rates were going up tomorrow and she could get me around 4.55% APY on 8 month deposits. When I asked why were rates increasing on WED when usually they adjust on FRI, she replied "I think it has something to do with the FED meeting today". WTF?
Now, after watching their every (inflationary) response to this neccesary correction, I know I was wrong and they will, indeed, throw every last one of us under the bus if they think it might preserve their precious system.
waitinginPNW | 08.06.08 - 2:48 am | #
But can it work? I don't believe the Fed can inflate. I don't see the numbers needed to take on the new debt necessary to replace the destruction.
Don't forget that Maria is a rebel. Watch her, you can see it in her eyes. She is a naughty girl. Very naughty. I love her.
Well...The O/A blowup is upon us...slow moving train wreck...Hoocoodanode...
What a freaking nightmare. It seems far worse watching the massive looming hurricane (O/A one of many large bands) and then watching the storm lash at us. Despite our best attempts to avoid the brunt, it may get us yet.
Probability of a Fourchette: 75%
@waiting ...
Exotic loans just aren't that common in Canada and the securitization is relatively primitive.
CMHC, the local equivalent of Fannie and Freddie, ginned up their offerings to 40 year loans and 100% but it was very short lived. Finance has forced them to back off to 35 years and 95%. Meanwhile, 90 day delinquencies in bank portfolios were reported in early July at 0.27%, rather lower than the US experience.
However, in BC, we have price to income metrics that are not far off California top of the bubble levels, so something has to crack eventually. Vancouver anecdotes are all about dark towers, which has to be a perfect analog of dark fiber in 1999. My anecdote is that sales in my neck of the woods - a very small market indeed - have gone from 20 per month as recently as January to just 2 in July.
Maybe the freaking Albertans have finally run out of money. I hear rumors the local realtors are going to start advertising in Oman.
crap now i have to look up fourchette. is that like fondue? four score? four square? fore skin?
dude. i'd think that might tear during certain vigorous, um, proceedings. like on a 331 point up day, so to speak.
"like on a 331 point up day, so to speak."
This is what sets CR apart. For those of us too weird to be respectable, and too nerdy to be cool, this is home.
Where else can a dude with stretched ear lobes and a three foot bong discuss the FOMC without drawing a yawn?
But can anyone seriously tell me that they cannot picture Maria B in full leather wearing a ball gag? I want her more than I want property values to hold until I expat and leave this land.
that is what photoshop is for. i think you just self-commissioned that image. i have no facility for that, myself. imagination, yes.
leave this land? what, migrate from behind the orange curtain? toward what?
china is polluted, australia is drought ridden, canada has geese, costa rica has stupid 'mercan tourists, congo has ebola, europe has europeans...
Most of the yankee expats are in Guanacaste, Costa Rica. Jaco is mellow. The carib side is even more chill. Puerto Viejo, Costa Rica is ganja-friendly, rastafarian, and beautiful. Many of the "cabina" joints are run by expats from Europe and elsewhere.
And I don't have a guiche piercing. It's on my list, but I will be branded before I pierce my unit.
Costa Rica is also full of hot hookers. The nicaraguans (Nicas) are especially nice. In Jaco, they can be found at Beatle Bar. In San Jose, well.... they are ubiquitous.
I've been lurking on this site for a while, since Roubini screwed up his site in January. When I have time I read all the comments and most links. What a diverse intelligent(mostly) and twisted bunch. Loved the squirell sub-thread recently. I think some of the newbies pouncing on Tanta have a thing or two to learn about how media myths work. Also I see the English Lit background-pay attention to the text!!etc.
P.S.
Over here we have an informal fraternal lodge "SOTS" kinda like the racoon lodge. The Secret order of the Squirrel. TEN RULES
1. protect yer nuts.
2. always save some for later.
and so on.
Here are a couple comments regards Fannie Maes newly announced fees and who they affect most:
Effective Demand: Robin hood?
LA Seller writes:
Not yet. Hence the need for happy talk.
If happy talk were all we needed to keep the markets bright and brisk, dot com would have been the beginning of a new age for mankind. Didn't you hear? We had an all new economy where bubbles never popped and everyone got their very own cyberpony.
Upper middle income people should be perfectly capable of making the higher payments. They are generally finacially literate folks who took perfectly reasonable risks. They no doubt properly accounted for the possibility that they would have to make higher payments after recast. They surely used the money they saved during the low payment period to make good investments or payoff other high cost debt.
They would never make the foolish bets that the ignorant subprime slime made and lost. Right?
These are smart middle and upper income people. Right?
They knew what they were doing. Right?
They could never have been fooled by unscrupulous brokes, appraisers, and lenders. Right?
Bloomberg - Freddie declares $1.63/share net loss, cutting divided to $.05
Playboy lost $2.1 million this quarter. Hef needs a new business model...but what does he really care?
"Dien Truong, a 35-year-old, water deliveryman, pulled out $156,000 in cash when FirstFed refinanced the $628,000 mortgage on his Richmond, Calif., home in 2005. ... His loan application shows that Mr. Truong and his wife earn $165,000 a year, more than double their actual income, says Katrina Vizinau, a housing counselor with Community Housing Development Corp. of North Richmond. Like Mr. Truong, she says, many borrowers say they didn't read the application until later."
To me, this is the key part of the article, and perhaps the fastest, simplest explanation of what has gone wrong in this country for the past 7 years.
Freddie Mac quarterly results...
the U.S. mortgage-finance company hobbled by record foreclosures, will slash its dividend at least 80 percent after posting a quarterly loss that was three times wider than analysts' estimates.
The second-quarter net loss of $821 million, or $1.63 a share, compares with the 54-cent a share average estimate...
Freddie Mac Posts Fourth Straight Loss, Cuts Dividend (Update3) - Bloomberg.com
"Dien Truong, a 35-year-old, water deliveryman, pulled out $156,000 in cash when FirstFed refinanced the $628,000 mortgage on his Richmond, Calif., home in 2005. ... His loan application shows that Mr. Truong and his wife earn $165,000 a year, more than double their actual income, says Katrina Vizinau, a housing counselor with Community Housing Development Corp. of North Richmond. Like Mr. Truong, she says, many borrowers say they didn't read the application until later."
To me, this is the key part of the article, and perhaps the fastest, simplest explanation of what has gone wrong in this country for the past 7 years.
IRE |
But they only had to make an additional $9,000 to make their 'income' that year to 165K. Heh.
The second-quarter net loss of $821 million, or $1.63 a share, compares with the 54-cent a share average estimate...
Should be good for a 200 point rise today.
Actually, this is the key phrase in the article.
"But that changed, she said, when investment-banking firms entered the industry and set lower lending standards, which FirstFed and others followed."
As I learned in college...lowering one's standards can raise one's average, but you are also a whole helluva lot more likely to wake up next to the lunch lady or a domesticated animal.
Nice quotes from Bloomberg:
``Both Fannie and Freddie are going to be profoundly insolvent by the time we're done with this.''
Welcome to the era of degrees of insolvency.
"We remain committed to raising $5.5 billion of new capital and will evaluate raising capital beyond this amount depending on our needs and as market conditions mandate," Syron said in today's statement.
So my philosophical quandary for the day is: Does -$5B qualify as "profound insolvency"?
ambac, due to the weird accounting trick where bad companies get to report profits in proportion to how likely they are to go broke - reports a huge headline profit for the quarter.
Of course absent this accounting trick they made a larger than expected loss.
But the headline figures sound exciting.
Sort of like a doctor telling the family of a dying man that the unfortunate has improved since the last visit because everyone has recently become more sure of his ultimate demise.
OT--Freddie reports $821 million loss
This inflation will begin long before the trust fund of Medicare goes into the red in 2017.
Actually its the Social Security trust fund that goes red in 2017. Medicare is already broke and requires funding from general revenues. Makes your point even stronger...
Question?
If there are 194 homes for sale according to the local MLS and the same MLS reports 35 sales during the March to July 2008 time period - does that constitute a slow down?
I mean it's only 22 months of inventory or something like that.
This being another one of those "its different hear" kinda places NOT!
Latest news release from Freddie: "We don't believe Mr Syron ever saw this coming, because he never got that f... memorandum."
The Majority of U.S. Homeowners Thinks Their Home is Insulated From the Housing Crisis
The Majority of U.S. Homeowners Thinks Their Home is Insulated From the Housing Crisis
Oh, great GoogaMooga, can't you hear me talking to you.
i see most vintages for subprime from 2005 onwards as problematic..is 2004 subprime a very small % of total or it may come into play as prices dip t0 2002 levels? Now option arm has longer duration maturity (typ 5 yrs) so things done in 03/04 would be at play here
The Majority of U.S. Homeowners Thinks Their Home is Insulated From the Housing Crisis
Self-deception is an amazing and powerful thing. I've come to the conclusion that self-deception is the single-most important factor keeping our species from going extinct.
Why blame the homeowners when they trusted the Banks and the banks created,advertised and sold the public on the ARMS.
Where where the federal Banking Regulators while this was going on?
Where was the Congressional oversight while this was going on?
Bank got your tongue?
Michalel LittleBig
Heh, some jerk yesterday predicted Freddie would report a profit.
Also later today, Paulson will announce that Freddie`s securities are backed by the good faith of U.S. Air Force. (just in case the Chinese might ask any weird questions)
Where else can a dude with stretched ear lobes and a three foot bong discuss the FOMC without drawing a yawn? --
Currently Smoking Cannabis - 3:13 am
Try here
, CSC. And reg/pw/login keeps the drive-by riff raff to a minimum. Very intelligent and informed crew.
And reg/pw/login keeps the drive-by riff raff to a minimum.
Well thanks a lot. You don't look so pretty yourself, you anonymous artist you.
LOL, JP. It is a unique handle though.
It's an excellent handle.
And given the man's work, very apropos and timely for an economics blog.
Now option arm has longer duration maturity (typ 5 yrs) so things done in 03/04 would be at play here
Don't forget about the faster than normal recasts as people making the minimum payment hit their 125% LTV caps.
Freddie Mac to Report Quarterly Profit, Miller Says (Update2)
By Jody Shenn
Aug. 5 (Bloomberg) -- Friedman, Billings, Ramsey & Co. analysts said Freddie Mac will report a second-quarter profit, instead of loss as previously forecast, because an increase in interest rates boosted the value of some assets.
The analysts led by Paul Miller now say McLean, Virginia- based Freddie Mac will report net income of 50 cents a share tomorrow, compared with an earlier estimate for a loss of 63 cents. The average estimate of 10 analysts surveyed by Bloomberg is for a loss of 55 cents a share.
Last quarter, rising interest rates boosted the value of Freddie Mac's guarantees on mortgage bonds and interest-rate derivatives used as hedges for its holdings, the analysts said in a report today. Higher fees on new insurance and a rise in the profitability of its portfolio will also help offset losses related to the record surge in U.S. foreclosures, they wrote.
The potential income streams from guarantee assets rise when interest rates climb as the expected lives of the securities Freddie Mac backs extend with a drop in forecasted refinancing and home sales. The yield on the benchmark 10-year U.S. Treasury rose from 3.41 percent on March 31 to 3.97 percent on June 30, according to data complied by Bloomberg.
The Friedman analysts narrowed their expected loss for Freddie Mac for all of 2008 to 87 cents a share, from $2.52, while maintaining an ``underperform'' rating on the shares.
Gains from revaluations won't ``be sustainable in the long term,'' the analysts wrote.
Freddie Mac rose 52 cents, or 6.9 percent, to $8.04 in New York Stock Exchange composite trading today. The shares have fallen about 86 percent in the past year, amid the largest drop in U.S. home prices since the Great Depression.
Freddie Mac and Fannie Mae, the government-chartered companies that own or guarantee 42 percent of the $12.1 trillion of U.S. residential-mortgage debt, ``will continue to have trouble with both credit losses and capital levels'' in future quarters, the analysts wrote.
To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net.
Last Updated: August 5, 2008 16:32 EDT
Banks face higher hurdles to physical oil trading
Banks face higher hurdles to physical oil trading
| Reuters
These bastards shouldn't be allowed to trade anything as long a the US taxpayers are on the hook to bail these assholes out. Need to drive a stake threw the heart of this monster.
Went into a WAMU branch after work tonight, and noted that they are suddenly offering pretty-damn-enticing CD rates to members.
Is this the same panicked last-ditch move to raise capital that IndyMac did? Is WAMU going through its final death twitches on the operating table?
4.15 percent -- 6 month
4.25 percent -- 13-17 months
5.00 percent -- 48-59 months
That beats anything I found online.
-Sharkie
I've noticed CD rates at other banks starting to come back up lately. It wouldn't surprise me that troubled banks will attract yield chasers, the FDIC insures the deposits when they fail, and more importantly, the banks the yield chasers pulled their money out of are more unstable as a result.
Bloomberg gave me a nice bedtime story, and then I wake up to this
The second-quarter net loss of $821 million, or $1.63 a share, compares with the 54-cent a share average estimate...
(source - JP, AP)
Yen headed for one ten. Full speed ahead.
So Dow 14k anyone?
If you want to have some fun guys, just look at Tanta's posts praising Fannie or Freddie and what F or F stock did the next day. So far it's never failed. Thank you Tanta! I hope you are not going to disappointment me today.
So, does Syron( cf FRE losses) resign or does he get booted out.
Does he get excoriated ? Certainly in the comments section at CR.
-K
Anonymous Bosch - do you or have you read the Michael Connelly books featuring your namesake?
FRE posts losss - its not Syron's fault, he is only responsible for profits! Give him a raise now!
Actually, the FDIC has said that teams must not just order pizza and have to diversify their orders (pizza, burgers, and other take out) to prevent early disclosure. Cheers.
"I am thinking of taking out a HELOC and investing it in ABK now."
- ice.patriot
what a generous country! but, it might make sense after all as the guy could get a bail out if it doesn't work well for him.
ABK is Ambac, note the use of the word "investing"
do you or have you read the Michael Connelly books featuring your namesake? -- Miike in Long Island
No I haven't, Miike. To be completely honest, I'm swamped with artists in my family, so I'm familiar with Hieronymus B, and I've always been taken with his utterly nightmarish visions. (They coincide with my own perceptions.) I'm more of the engineering type, form-follows-function, though gene-borne artiness means I try to achieve beauty for practical reasons.
But the tawdry answer to my present handle is that I'm an incurable punster. I've tried rehab many times, but it never lasts long. Had I not been castigated for creativity here, I'd have posted under at least a dozen more equally tendentious handles by now.
This place has really gone down hill. Too bad.
Anonymous Bosch: Thanks much for the great link. I know I am getting older when current events and engaged people are as exciting a 'find' as porn used to be.
I know I am getting older when current events and engaged people are as exciting a 'find' as porn used to be.
[smiley face]
You're still too young to care now, but as you "become older" don't neglect your anti-prostate cancer exercises, whether with Maria's help or not.
ET is a very congenial place.
unearthly writes:
Burbed, have a link to that 1.5% Option ARM number? How many 5-year I/O loans were taken out? I'm sure NoVa was crawling with these kind of loans.
Unearthly - Unfortunately I dont. The guy who posted it got it from the NY FED county by county maps, but the fed took those away.
Note, certain parts of NOVA certainly are cralwing with this sort of paper. Problem is, its heavily concentrated in the hard hit areas (Loudoun & PWC) and much less so, in the close in, so far pretty immune areas.
How very interesting. They are opening a new branch in Irvine next week (yet another connection to the mortgage mess!). At the grand opening, they are providing wine and hors d'oeuvres. Perhaps if we all drink enough, we will be persuaded to give them a bunch of deposits.
Good morning alll...Let me just give you a heads up on just how crooked the lending business has been for the past decade. I have lost over $150,000-$200,000 in fees in the appraisal industry for NOT making the values that these scumbags wanted. This is in a suburban area of the South, where appraisal fees are around $275-350 each. That is a lot of coin because I am a one man shop. Being an appraiser means if you tell the truth about what is really going on it is your mea culpa. You will be blackballed, disowned, and called out for stopping the flow of the system. I was taught as a young boy by my grandfather that if you are good at what you do, fair, and are honest...you will never hurt for business. Guess that was before the mortgage Nazis took over the financial sector. I see the greed that was perpuated from the homeowners all the way up the food chain to Wall Street. Appraisers will only push numbers to EAT not for the money. You would have to have more than 5-10 working for you to make it worth he risk of prison. Some, will not bend to the pressure and hope that good will prevail but I only see the good getting impailed on the sword of truth. Be happy, very very happy you are not in such a profession. Sorry for the rant but I am tired of hearing all the appraisers are crooks...some really are suffering for doing the right thing. The problem is that even the dumb shits you are trying to protect from themselves actually wanted those idiotic LTV's. The banks don't care because they have always known the FED is willing to back the game when it hit extra innings.
Persevere, Money Man. The Good (at just about anything) don't get any attention any more - the people who pay their taxes, those who pay their mortgages, the people who insist on doing the job right.
If it's any consolation, you're among kindred spirits here. Welcome to the gang hanging by the lifeboats. Oh yes, they're stenciled S.S.Titanic.
The howling here in Manhattan when the high end goes thud is going to be loud. I mean, these people have serious entitlement issues and they are NOT going to like having their $1.5M pad decline to $850K. That would be like going from 5th Avenue to 1st. Imagine the shame....