Must there not be some space between mortage brokers, who don't orginate loans, and lenders who do? There have certainly been many anecdotal reports of brokers filling or altering income figures on mortage applications, making them co-perpetrators in order to make fees, rather than victims, which the lenders would in fact be. Many lenders apparently did not care, because they pass it on the "investors" who bought the loans. I believe those lenders may now be feeling pain as investors fored them to take back bad loans, or to the extent they kept any of this on their own boos, but how are brokers harmed by this fraud exactly? I mean, other than the threat that legislation in response to fraud may make it harder to make certain lucrative loans, of course.
"The mind-set was best explained by the linguist David W. Maurer in his classic 1940 book, The Big Con: As the lust for large and easy profits is fanned into a hot flame, the mark puts all his scruples behind him. He closes out his bank account, liquidates his property, borrows from his friends, embezzles from his employer or his clients. In the mad frenzy of cheating someone else, he is unaware of the fact that he is the real victim, carefully selected and fatted for the kill. Thus arises the trite but none the less sage maxim: You cant cheat an honest man."
Had a charming discussion with a lawyer I know over the weekend. Countrywide put her brain-damaged (from birth injury) client in a neg-amort mortgage. Lovely, huh?
It is not Countrywide's fault. It is Gretchen Morgenson's fault. Countrywide just followed standard industry practices here by 'helping' the brain-damaged person build equity over time.
Well, I won't go as far as to say that you cannot defraud an honest lender. For one thing, there's a phenomenon of sophisticated fraudsters picking small, honest, but not operationally sophisticated lenders to shake down. The thing is, it has to be pretty damned good fraud, because honest lenders can spot the easy stuff.
By and large, the routine fraud is being perpetrated against lenders whose operations are easy to exploit. Why are they so easy to exploit? Because these lenders don't care about what they consider a "cost of doing business."
Countrywide put her brain-damaged (from birth injury) client in a neg-amort mortgage
Is she so brain damaged as to be incompetent to execute a contract?
If so, then putting her in any mortgage (without relying on a trustee or conservator or whatever) would be a problem.
If not, well, then, as long as neg am is legal . . . ?
I agree with you that it's distasteful in the extreme to put a very vulnerable person in such a risky mortgage; I'm not defending this. I'm saying (and I have been in this situation as a lender) that giving that person any loan of any kind is a huge potential problem, and that it gets sticky (from an ADA compliance perspective, especially) to demand that your customer proves that he or she is mentally competent.
Look, we lenders get this kind of situation more frequently than you might imagine. Little old lady comes in, with aggressive young grandson or granddaughter accompanying her, wanting to cash out her home. Loan officer is uncomfortable because he isn't sure that granny is in touch with reality in key places, and it seems possible that grandkid is trying to get hands on the cash.
What do you do? Force the old girl to have a competency hearing? What if the grandkid just gets himself named conservator or guardian or trustee? You can't deny the loan on that basis unless you have a policy of never making loans to guardianships. But who wants to have that policy?
Those are always ugly situations, and they don't always have obvious solutions (although obviously if you're going to make the loan, you'd surely have the sense to rule out neg am).
Countrywide just followed standard industry practices here by 'helping' the brain-damaged person build equity over time.
Troll, I see why you defend GM.
Look, rcyran posts here frequently, and I have never yet seen him post stupid or misleading or gossipy stuff. Nonetheless, he just posted an anonymous second-hand story that provides no other context.
You take it as gospel, and now you want to get on my case because I have criticized GM, GM criticized CFC, so I must be in favor of preying on the disabled. In other words, you sound like the low-rent blog comment version of GM: take an unsourced allegation, treat it as fact, and get all self-righteous with it.
Whether you work at a hedge fund or a mortgage banker, you get hired, go to work, sit down and they say: "Here's the play book. Follow our rules, and try to make as much money as you can, as fast as you can."
You can't blame the people who work at these companies. They are just following the rules. They are working the seams of capitalism, trying to find profits that are there for the taking today (and the heck with tomorrow).
Producing profit out of thin air by exploiting people is what we do as a nation, now that we don't manufacturer or farm a whole lot any more. This is how an advanced service economy works. It has to be highly exploitative, doesn't it?
A government effort to throttle private down payment assistance programs is being challenged by Nehemiah Corporation of America, a Sacramento-based nonprofit that claims to be one of the largest organizations in the niche.
The company has filed a lawsuit against the U.S. Department of Housing and Urban Development in Sacramento federal court, seeking an order to block HUD from shutting down the program.
"HUD's action to move forward with banning privately-funded down payment assistance programs is outrageous, says Scott Syphax, president and CEO of Nehemiah.
He says it appears that HUD acted in complete disregard for the House's passage of legislation that would block it.
Privately funded down payment assistance programs have helped over 600,000 families become homeowners, he says
Friend of mine with considerable resources and impeccable credit has been offered refinancing in Arizona (about 70% of property value) in a 30 year fixed at 6.75%. Decent terms or not?
I owned a mortgage banking firm which in 20 years never had a QC exception. Why? Because none of my employees were on commission. They worked for the company and when the borrower's asked them to falsify the loan application they just denied the loan.
When I first started in the loan business in the early 70's borrowers would lie to me about their income. By the 80's they no longer bothered to lie, but fully expected me to coach them in how to lie. Further, I have had numerous CPA's call up saying that they were preparing a tax return for the borrower and wanted to know how much income we needed to show. When a CPA will call a lender he doesn't even know and assume that he will aid him in committing loan fraud you get a pretty good idea of how widespread lender complicity is.
" British lenders are shunning the Bank of England and turning instead to the European Central Bank on a massive scale, taking advantage of much lower interest rates and guaranteed anonymity to weather the credit crunch. " British banks gorge on ECB's cheap credit - Telegraph
--
The whole US financial system is a fraud. I realize that people find it a thrill to point to this or that and in discovering a new group of fraudsters. The Housing Bubble has merely exposed what some of us have known for years.
See the post (6 or 7 down) on DPA. The seller of the home "donates" money to this "charity". Who then, out of the generosity of their good heart, makes a gift (minus a small fee) to the buyer.
Local realtors have been all over this the last few months, now that FHA is the only way they can shove a mortgage up someones backside.
"The seller of the home "donates" money to this "charity". Who then, out of the generosity of their good heart, makes a gift (minus a small fee) to the buyer."
Time was this scam would have been rendered moot with the appraiser making an adjustment to value because of financing concessions. I guess when almost all of the sales involve concessions there are no concessions.
Several SARs that I filed could not project an early total loss amount because the investigation was in its earliest stages and often records have been destroyed or are missing.
I will never forget my world AE coming to me in the spring of '05 and telling me "we can always fix the income if the appraisal is right".First time I met him.I had one week in the biz...by the end of the second week I knew it was a bubble,and that his was a common attitude.Either the people writing the "underwriting guidelines" believed this was a truly christian nation where no one would lie for profit and risk damnation...or they were actively encouraging fraud.
Is it my deluded perception that this board is mostly about the awfulness of mortgage companies and the cabals of sniggling slime bags who control things....or am I just too optimistic?
If all this is so bad, why is the stock market at a new high? Is the "real estate/mortgage mess" as limited in scope as one kid slapping another in a Kentucky grade school and thus not worth the reading?
if homes can be levered at 125% of value, to craig crackpipe and mary meth, then what makes the stock market all so special that a handful of wingtipped bankers would'nt lever many multiples of that...
i have first hand exerience with this levering in the capital markets...
a former colleauge had been a new issue preferred stock trader, - he went solo, with an assistant, to a BD that allowed him to lever 100/1 , to buy and trade these new issues...
and that's pretty plain vanilla stuff..
The Nehemiah Corporation is a black run organization purporting to assist disadvantaged (you may as well read "black" here too...code for "disadvantaged" tho in fairness they were colorblind in their purloinments..green being the most desired hue) folks by giving them the downpayment they are not allowed to be gifted by the seller, but can be gifted by Nehemiah if the seller agrees to give Nehemiah an additional 1% of the sales price.
This of course makes the borrower more credit worthy.
Bullshit.
In reality, it makes Nehemiah a scavanger feeding on need, a vulture who would be dressed up if in wolves clothing.
Is about time this scam was closed down for it never did more than rob the sellers of 1% of the sales proceeds.
" British lenders are shunning the Bank of England and turning instead to the European Central Bank on a massive scale, taking advantage of much lower interest rates and guaranteed anonymity to weather the credit crunch. "
That's the answer to all our problems... have TWO central banks & pick and choose. Linda like Lending Tree... "When lender's compete you win"... er maybe they win and the rest of us lose... er something.
Tom - yup. They were. But everyone had quotas to meet or bonuses to make, and no one cared. And now they are all reeling around with their hands clapped to their foreheads crying "Who'd a thunk?"
You know, a lot of states passed laws saying that cars had to be locked to deter car theft. I guess it would be too simple to ask mortgage companies to verify apps to prevent fraud? Of course, the honest ones have been doing it all along, at least by sampling.
I am sorry this gets my goat! We recently had fraudulant charges on our credit card. The credit card company has reversed the charges with "no fees" [what ever the hech that means] and is refusing to provide the name/merchant account of the folks that passed on the charges to our credit card. After speaking to many folks in the credit card company, they are refusing because I do not have the right to see who has placed charges on my credit card...Go figure, somebody can say I owe them money but I do not have the right to see who this is!!..The credit card company told me not worry and that this "mistake" was the cost of doing business. I then asked if they were going to alert the police - NO because it was the "cost of doing business".
So, we all pay (never a cent from me however) huge interest rates on credit cards 'cause of the fraud/non-payment aspect. But, they do not from my point of view, take this seriously and pass along the costs to the card holders..
Hit a nerve, sorry for the rant.
This exposure was partly the result of UBSs cautious approach to risk management, which encouraged traders to steer clear of complex and illiquid securities. Instead, the traders used UBSs strong balance sheet to build up a large, leveraged portfolio of highly-rated mortgage-backed securities.
In effect, UBS was creating on its own balance sheet the type of investments that other banks put into off-balance sheet vehicles known as conduits. When liquidity dried up in the markets this summer, what was a manageable market risk turned into a de facto credit risk, says Marcel Rohner, UBSs chief executive. To make matters worse, the ABXsubprime index UBS had used to partially hedge its exposure started behaving oddly, adding to its losses.
O/T...Kohlberg Kravis Roberts and Citigroup are understood to have agreed to form an off-balance-sheet vehicle with
about $5bn of equity and $10bn of debt to buy impaired loans, which could include some from Citigroups investment bank.
The joint venture brings together the private equity firm responsible for some of the biggest leveraged buyouts in
the run-up to the credit crunch and the bank that agreed to finance many of those deals.
The vehicle could allow Citigroup to sell some leveraged buyout debt, which it has underwritten but is struggling to syndicate, as well as other troubled loans.
It would be the first time a private equity firm has formed such a venture with an investment bank and is surprising as KKR irritated many bankers by refusing to back down on the terms of the debt agreed for several of its deals.
I am sorry this gets my goat! We recently had fraudulant charges on our credit card.
Thats odd, I'm going thru almost the same thing at the moment. CC issuer called me on a Monday morning to ask me about a few charges that their fraud detection had 'alerted' on. Damage was minimal and they said they would cover all the charges (~$200).
When the statement arrived, I called the number on a charge I never made. Some outfit that (apparently) sells overstock electronics. They charged my card, but never shipped the item (it was backordered !). What address was it supposed to ship to ? Why mine of course ! Something very fishy about this whole episode.
I'm still wondering where (and when) my CC number was leaked. To the best of my knowledge, I've not had any business with any of the known large leaks of CC numbers. Perhaps there's another shoe about to drop.
Peter Schiff is just being plain silly when he tries to explain away the DJI run-up by pricing it gold, loonies, and wheat. Everyone knows that it should be priced in hamburger and Twinkies.
He IS 100% correct about the US market underperforming international markets.
Well, just to play devils advocate, how much of an impact could funding additional mortgage fraud fighters in the FBI (or whoever investigates it) have?
Don't get me wrong--I'm no free market religionist (I just hope the new regulations get written by a Tanta and not a lobbyist...). But, if fraud is as blatant and common as many in the industry say, couldn't stepped up law enforcement take a big bite out of the abuses? That's not a rhetorical question; I'm not sure how easy and expensive such crimes are to successfully prosecute.
Actually, gng, I can see a role for stepped up enforcement; you look at Georgia, say, where stepped up enforcement (and some new laws) really turned things around.
My stomach simply turns when we demand stepped up enforcement, but no regulatory changes to the business practices that allow fraud to flourish. I mean, you can spend tons of money trying to prosecute certain kinds of flip scams, but it would certainly help if lenders stopped doing double-escrows (buying and selling properties on the same day, with the proceeds of the latter used to accomplish the former).
And of course there is no regulation that requires every borrower to sign a 4506-T. Why not? It doesn't hurt honest borrowers, it costs I think $8 if you actually use it to order the transcripts (and you don't have to do that on every loan, just defined high-risk ones and a good sample of the rest). If the MBA were recommending preventative regulation like this, then it would be less egregious for them to ask for more tax dollars to be allocated to "protecting" them from fraud.
ERISA? Ummm, lawyers and actuaries combining forces. Now there is a winning pair.
Hazard
Hazard,
One of the things about blogs like CR is that you can learn the history that you slept through in school, if you want to fill in holes in your financial education.
ERISA has very little to do with actuaries or lawyers. The 1974 law was passed in the aftermath of a U.S. auto mfg., Studebaker, going bankrupt and leaving thousands of workers without the pensions they were promised for their final years. Congress then said to U.S. employers: If you promise U.S. workers pensions, you (personally) had better deliver, or else your (personal) ass is grass. And if you are involved in helping workers secure their pension benefits, you are an ERISA fiduciary and are personally liable for any misrepresentations of lack of prudence that causes them to lose promised retirement benefits.
By today's standards of "any investment thing goes" ERISA is a harsh law. But it is still U.S. law. And if you are a smart ERISA lawyer in today's stupid investment environment, you are like a lion in a svelt full of antelope. You just try to catch those bastrds and gnaw the sht out of them.
It reminds me of the saying that the banks will loan you an umbrella when it is sunny and want it back when it starts to rain.
Now the banks will loan you the umbrella even during the downpour. You just need to say you'll stay inside while winking. On the off chance your wink was fraudulent and the umbrella does get wet, they simply want "protection" from your evil actions.
Probably not the best of analogies, but what the heck.
Third BOC injection in three days reveals 'clog in the system'
Globe and Mail
October 1, 2007 at 7:54 PM EDT
OTTAWA Something is definitely amiss in Canada's money markets.
The Bank of Canada, for the third business day in a row, injected about $1-billion into the overnight market to defend its key interest rate.
A bank spokesman said the liquidity provision was simply a technical move, a normal quarter-end demand for more cash.
But for the Bank of Canada's monetary policy to work properly, it's not enough to just defend the overnight rate. That rate needs to act as a benchmark for the short-term borrowing rates that corporations, home buyers and consumers pay.
The trickle-down effect does not seem to be functioning.
"It does seem like there is a clog in the system," said David Wolf, chief economist for Merrill Lynch Canada....
....As markets and companies sort things out over the coming months, he believes central bank actions to calm credit conditions are becoming the "new normal," because money markets are so jittery and quick to drive up interest rates.
"I think there's been kind of a wishful thinking that everything was getting back to normal," Mr. Carmichael said.
Instead, he's been watching a steady rise in the rate corporations have to pay for 30-day Canadian money. Non-bank corporations were issuing 30-day commercial paper at a rate of 4.63 per cent on Aug. 1, but that rate had risen to 5.37 per cent by the end of last week, Bank of Canada data show.
Plus, volumes of short-term debt have been declining substantially, Mr. Carmichael added.
"They all indicate that we're still a long way away from normal," he said.....
....Nowadays, however, the Bank of Canada is finding itself intervening frequently to maintain its overnight rate at 4.5.
And on top of that problem, other short-term rates are not falling nicely into line....
GNG - not without constraining laws, no. You can't hire enough FBI investigators to follow every tiny little brokerage. This stuff is very time-consuming to investigate and very, very profitable.
What MBA is frantically trying to avoid is some sort of HOEPA-like legislation (assignee liability) aimed at the worst practices.
I want to reiterate the point that Tanta made earlier about the neg-am. If you offer a lending program, law requires you not to turn away anyone in certain classes who applies for that program and is qualified under the terms. One of them is age. So if I offer negative amortization mortgages and some 78 year old walks in and applies and is qualified, I have to let her have it even if I strongly suspect I am digging her financial grave. Nor can I even "steer" her and others like her away from it without taking real legal risks.
I think and have advocated here before that only assignee liability will constrain the abuses while still allowing some flexibility in the marketplace. The way HOEPA works is that it takes certain types of high-cost mortgages which were strongly correlated to predatory lending, mandates additional disclosures and another three-day waiting period, and makes the assignee (investor) liable for damages if the rules are not followed. It has worked to restrain these mortgages because investors are leery of them, but they are perfectly legal and still available in a pinch.
I think Tanta has done an excellent job of explaining why the average person is unlikely to understand some of the newer mortgage products. Given that, I canot see why an extension of HOEPA rules to the strangest and riskiest products would be unreasonable.
"I would love to be a primary fed-manipulator as their large brokerage trading teams (that so often take opposite positions than the positions they are placing their clients in) are basically able to take virtually "risk-free" trades as they are in position to see the inflows of Fed-head monies coming into the market-stream, they simply take on a risk-free-easy leverage trade with their considerable trading capital and make huge bets that pay off nicely; and if for some reason the Fed withdraws liquidity these large trading-teams sell short, buy puts, and make money on the ride down (enough said on this manipulation, and what I believe is insider illegal trading). The question that we need to ask/ponder is why the so called inflation fighting Fed would be pumping up the money supply."
I read the book called "When Genius Failed" (the one about LTCM) the other day, and that chart by Stagflationary Mark looks like what happened at the end of the LTCM debacle: everyone was fleeing from any kind of risk, so the T-bill yields just kept decreasing while commercial paper yields kept increasing. In that irrational (?) climate, no risk was acceptable, and only T-bills were being purchased. Perhaps that's what we're seeing here.
Back in 2001 I observed blatant fraud and reported it to the mortgage company president who did nothing. I assumed he had confronted the problem employee... When I observed the president and the fraud perpetrator ( a fellow loan originator )engaged in more fraud together I was fired after voicing my concerns and disappointment. The president of the company had just lost his life savings in the stock market crash of '01 by investing in tech stocks. This was his justification for the fraud.
I then contacted federal regulators who said it was under state jurisdiction. I then contacted the state regulators who said it was under federal jurisdiction. I called the FBI back and pressed the person on the phone who referred me to the "white collar crime unit". The first thing they asked was the dollar amount of the fraud and then informed me that it was too small for them to investigate.
I then called the state regulators back and they sent an intake form which I filled out. When I called to ask about it 12 weeks later they informed me that they had decided the case was not worth them investigating.
What does this tell you? The government does not get involved in prosecuting mortgage loan fraud. Unless there is a massive amount of money lost, they ignore reports of it. Typical regulators. But now that they are under scrutiny for sleeping on the job, they will likely be going on snipe and witch hunts.
Scapegoats are in season. Happy hunting!!!
A compression in consumer credit will likely strengthen the US dollar against foreign currencies however. I bet Tanta cannot tell me why.
Can you answer why a compression in consumer credit would strengthen the greenback Tanta?
We have 1.2B in questionable loans that drop to our balance sheet and if we list them, we violate the regs.
So, we we put these on a line item "to sell" and presto.
They vanish.
Oh btw we need 2.8B to cover our bridge of a 6.34 junk bond,
No problem; slate the loan as a security/asset and take a Fed loan for 4.98
There it is all smoothed out.
Mortgage brokers' sleight of hand
By Elizabeth Warren | October 2, 2007
IN THE past five years, if you called a mortgage broker when you were about to buy or refinance a house you may have been told, "We can check with lots of lenders so you'll get the best price." Because you are a careful shopper, this sounds good - one-stop comparative shopping. The broker most likely didn't add, "I'll take a bribe to steer you to the loan that is more expensive for you and more profitable for the lender."
"And if you are a smart ERISA lawyer in today's stupid investment environment, you are like a lion in a svelt full of antelope. You just try to catch those bastrds and gnaw the sht out of them."
Bwahahahaha! I tried an ERISA case in federal district court, many moons ago. New owner of corporation sweeps in, rapes the 4 million pension plan and then basically blows the dough. Easy win for me on motion for summary judgment. Guess what? He's judgment-proof. Watta surprise. ERISA many not be toothless, but it matters little when the meal has already been eaten.
winjr,
Ha ha. Good one. I had an ERISA audit where the client refused to give me payroll records. The prior accountant had simply taken the year end reports and cross footed some columns and multiplied some crap to prove the report had no arithmetic errors. All my boss could say to me was "you gotta work with these people". I still haven't made sense of that statement. I'm just not a team player.
Yes Charles, it's called "Deflation" of which credit contraction / destruction is a symptom. 160 dead lenders is proof that it is happening right now. Be very careful with FX bets against the dollar for the next 12 mos or so. They can go either way depending on what the Fed does.
Breadking news on pending home sales on Marketwach:
Pending home sales fall 6.5% in August
By Rex Nutting
Last Update: 10:00 AM ET Oct 2, 2007
WASHINGTON (MarketWatch) - Flattened by the mortgage crunch, a forward-looking gauge of home sales fell further in August to its lowest level in more than six years, a real estate trade group said Tuesday. The pending home sales index fell 6.5% in August after dropping a revised 10.7% in July, the National Association of Realtors reported. The index is at its lowest level since its inception in 2001. Pending home sales are down 21.5% compared with a year ago and is down 22% compared with six months ago.
Hatzius estimated at least some of the $100 billion decline in unsecured commercial paper has appeared on bank balance sheets.
"From a macroeconomic perspective, unplanned balance sheet expansion is likely to constrain banks' willingness to make loans to borrowers that do not have prearranged liquidity lines," Hatzius said.
This transfer of liabilities from the capital market to the bank system will be temporary if credit conditions continue to improve in the wake of the Federal Reserve's massive liquidity infusion, including a half-percentage-point interest rate cut on September 18, according to Hatzius.
On the other hand, if credit conditions tighten again, it may become tougher for corporations to fund projects, Hatzius said.
"Such a financing constraint could weigh on capital spending and real GDP growth in 2008," he wrote.
Still concentrating on "subprime" I see. It seems that subprime has changed its meaning. Originally, I thought that it meant a loan made to a borrower with poor credit. Now the term is being used to refer to any loan made with, shall we say, looser than conventional terms, regardless of the creditworthiness of the borrower. I'm sure that there are people out there with FICOs in the 700s that took out IOs or ARMs with DTI ratios in the 50-60 range in the bubble areas.
"This exposure was partly the result of UBSs cautious approach to risk management, which encouraged traders to steer clear of complex and illiquid securities. Instead, the traders used UBSs strong balance sheet to build up a large, leveraged portfolio of highly-rated mortgage-backed securities.
"
LMAO... my doctor encouraged me to stay away from red meat, so I'm going to switch to eating lots of hamburgers and barbecued brisket!!!
LMAO... my doctor encouraged me to stay away from red meat, so I'm going to switch to eating lots of hamburgers and barbecued brisket!!!
More like switching from medium-rare to medium-well, 'cause then it's not red, which means it's OK.
How long before we see the bumper stickers:
"Countrywide doesn't defraud people, people defraud people."
Uh, more like "Countrywide doesn't defraud people, people defraud Countrywide."
Must there not be some space between mortage brokers, who don't orginate loans, and lenders who do? There have certainly been many anecdotal reports of brokers filling or altering income figures on mortage applications, making them co-perpetrators in order to make fees, rather than victims, which the lenders would in fact be. Many lenders apparently did not care, because they pass it on the "investors" who bought the loans. I believe those lenders may now be feeling pain as investors fored them to take back bad loans, or to the extent they kept any of this on their own boos, but how are brokers harmed by this fraud exactly? I mean, other than the threat that legislation in response to fraud may make it harder to make certain lucrative loans, of course.
From a great NYer article on con men:
"The mind-set was best explained by the linguist David W. Maurer in his classic 1940 book, The Big Con: As the lust for large and easy profits is fanned into a hot flame, the mark puts all his scruples behind him. He closes out his bank account, liquidates his property, borrows from his friends, embezzles from his employer or his clients. In the mad frenzy of cheating someone else, he is unaware of the fact that he is the real victim, carefully selected and fatted for the kill. Thus arises the trite but none the less sage maxim: You cant cheat an honest man."
Annals of Crime: The Perfect Mark : The New Yorker
BTW-
Had a charming discussion with a lawyer I know over the weekend. Countrywide put her brain-damaged (from birth injury) client in a neg-amort mortgage. Lovely, huh?
It is not Countrywide's fault. It is Gretchen Morgenson's fault. Countrywide just followed standard industry practices here by 'helping' the brain-damaged person build equity over time.
Suggested bumper sticker for Tanta - "Countrywide doesn't mislead people, GM misleads people".
I would be curious to know how much lobbyist funding chases this angle through the halls of congress and who the recipents are.
You cant cheat an honest man."
Well, I won't go as far as to say that you cannot defraud an honest lender. For one thing, there's a phenomenon of sophisticated fraudsters picking small, honest, but not operationally sophisticated lenders to shake down. The thing is, it has to be pretty damned good fraud, because honest lenders can spot the easy stuff.
By and large, the routine fraud is being perpetrated against lenders whose operations are easy to exploit. Why are they so easy to exploit? Because these lenders don't care about what they consider a "cost of doing business."
Countrywide put her brain-damaged (from birth injury) client in a neg-amort mortgage
Is she so brain damaged as to be incompetent to execute a contract?
If so, then putting her in any mortgage (without relying on a trustee or conservator or whatever) would be a problem.
If not, well, then, as long as neg am is legal . . . ?
I agree with you that it's distasteful in the extreme to put a very vulnerable person in such a risky mortgage; I'm not defending this. I'm saying (and I have been in this situation as a lender) that giving that person any loan of any kind is a huge potential problem, and that it gets sticky (from an ADA compliance perspective, especially) to demand that your customer proves that he or she is mentally competent.
Look, we lenders get this kind of situation more frequently than you might imagine. Little old lady comes in, with aggressive young grandson or granddaughter accompanying her, wanting to cash out her home. Loan officer is uncomfortable because he isn't sure that granny is in touch with reality in key places, and it seems possible that grandkid is trying to get hands on the cash.
What do you do? Force the old girl to have a competency hearing? What if the grandkid just gets himself named conservator or guardian or trustee? You can't deny the loan on that basis unless you have a policy of never making loans to guardianships. But who wants to have that policy?
Those are always ugly situations, and they don't always have obvious solutions (although obviously if you're going to make the loan, you'd surely have the sense to rule out neg am).
Countrywide just followed standard industry practices here by 'helping' the brain-damaged person build equity over time.
Troll, I see why you defend GM.
Look, rcyran posts here frequently, and I have never yet seen him post stupid or misleading or gossipy stuff. Nonetheless, he just posted an anonymous second-hand story that provides no other context.
You take it as gospel, and now you want to get on my case because I have criticized GM, GM criticized CFC, so I must be in favor of preying on the disabled. In other words, you sound like the low-rent blog comment version of GM: take an unsourced allegation, treat it as fact, and get all self-righteous with it.
Whether you work at a hedge fund or a mortgage banker, you get hired, go to work, sit down and they say: "Here's the play book. Follow our rules, and try to make as much money as you can, as fast as you can."
You can't blame the people who work at these companies. They are just following the rules. They are working the seams of capitalism, trying to find profits that are there for the taking today (and the heck with tomorrow).
Producing profit out of thin air by exploiting people is what we do as a nation, now that we don't manufacturer or farm a whole lot any more. This is how an advanced service economy works. It has to be highly exploitative, doesn't it?
That bastard, Joe Sixpack, is at the root of all this 'turmoil', I'm just sure of it. The government has got to do something about him.
Nehemiah sues HUD over down payment program
A government effort to throttle private down payment assistance programs is being challenged by Nehemiah Corporation of America, a Sacramento-based nonprofit that claims to be one of the largest organizations in the niche.
The company has filed a lawsuit against the U.S. Department of Housing and Urban Development in Sacramento federal court, seeking an order to block HUD from shutting down the program.
"HUD's action to move forward with banning privately-funded down payment assistance programs is outrageous, says Scott Syphax, president and CEO of Nehemiah.
He says it appears that HUD acted in complete disregard for the House's passage of legislation that would block it.
Privately funded down payment assistance programs have helped over 600,000 families become homeowners, he says
Central Valley Business Times
Very personal question to the experts:
Friend of mine with considerable resources and impeccable credit has been offered refinancing in Arizona (about 70% of property value) in a 30 year fixed at 6.75%. Decent terms or not?
crispy&cole,
I can't believe the reporter there made no attempt to find out who funds this "nonprofit."
I owned a mortgage banking firm which in 20 years never had a QC exception. Why? Because none of my employees were on commission. They worked for the company and when the borrower's asked them to falsify the loan application they just denied the loan.
When I first started in the loan business in the early 70's borrowers would lie to me about their income. By the 80's they no longer bothered to lie, but fully expected me to coach them in how to lie. Further, I have had numerous CPA's call up saying that they were preparing a tax return for the borrower and wanted to know how much income we needed to show. When a CPA will call a lender he doesn't even know and assume that he will aid him in committing loan fraud you get a pretty good idea of how widespread lender complicity is.
Sort of OT but amusing... SST & PRU catfight over "State Street's inappropriate" mortgage investments lol!
UPDATE 2-Prudential sues State Street units for fund losses
| Reuters
OT But a good read.
" British lenders are shunning the Bank of England and turning instead to the European Central Bank on a massive scale, taking advantage of much lower interest rates and guaranteed anonymity to weather the credit crunch. "
British banks gorge on ECB's cheap credit - Telegraph
--
The whole US financial system is a fraud. I realize that people find it a thrill to point to this or that and in discovering a new group of fraudsters. The Housing Bubble has merely exposed what some of us have known for years.
The system of the...
Jas
Bullish reasoning no matter the facts:
Economic Disconnect: Anywhich Way but Loose
Bob-
See the post (6 or 7 down) on DPA. The seller of the home "donates" money to this "charity". Who then, out of the generosity of their good heart, makes a gift (minus a small fee) to the buyer.
Local realtors have been all over this the last few months, now that FHA is the only way they can shove a mortgage up someones backside.
Sorry Tanta, just pulling your legs here. I enjoy your writing and objectivity - that's why I come to read your and CR's blog.
Imagine what will happen, when I start my own housing blog
.
Troll
"The seller of the home "donates" money to this "charity". Who then, out of the generosity of their good heart, makes a gift (minus a small fee) to the buyer."
Time was this scam would have been rendered moot with the appraiser making an adjustment to value because of financing concessions. I guess when almost all of the sales involve concessions there are no concessions.
I read the headline and thought that it meant my Masters of Business Administration was a fraud.
Yes indeed and what we're seeing now is simply phe·nom·e·nal stock market that's rising like a phoenix.
1997 - 2000 Stock market Bubble
2001 - 2006 Housing Bubble
2007 - time for another Stock market Bubble
I mean how can the US economy and the financial shills stay afloat without pushing bubbles.
And American lemmings will follow them again off the cliff....
Several SARs that I filed could not project an early total loss amount because the investigation was in its earliest stages and often records have been destroyed or are missing.
I will never forget my world AE coming to me in the spring of '05 and telling me "we can always fix the income if the appraisal is right".First time I met him.I had one week in the biz...by the end of the second week I knew it was a bubble,and that his was a common attitude.Either the people writing the "underwriting guidelines" believed this was a truly christian nation where no one would lie for profit and risk damnation...or they were actively encouraging fraud.
Is it my deluded perception that this board is mostly about the awfulness of mortgage companies and the cabals of sniggling slime bags who control things....or am I just too optimistic?
If all this is so bad, why is the stock market at a new high? Is the "real estate/mortgage mess" as limited in scope as one kid slapping another in a Kentucky grade school and thus not worth the reading?
Wondering.
Privately funded down payment assistance programs have helped over 600,000 families become former homeowners, he says
@Wondering.
norfolkcounty47
if homes can be levered at 125% of value, to craig crackpipe and mary meth, then what makes the stock market all so special that a handful of wingtipped bankers would'nt lever many multiples of that...
i have first hand exerience with this levering in the capital markets...
a former colleauge had been a new issue preferred stock trader, - he went solo, with an assistant, to a BD that allowed him to lever 100/1 , to buy and trade these new issues...
and that's pretty plain vanilla stuff..
The Nehemiah Corporation is a black run organization purporting to assist disadvantaged (you may as well read "black" here too...code for "disadvantaged" tho in fairness they were colorblind in their purloinments..green being the most desired hue) folks by giving them the downpayment they are not allowed to be gifted by the seller, but can be gifted by Nehemiah if the seller agrees to give Nehemiah an additional 1% of the sales price.
This of course makes the borrower more credit worthy.
Bullshit.
In reality, it makes Nehemiah a scavanger feeding on need, a vulture who would be dressed up if in wolves clothing.
Is about time this scam was closed down for it never did more than rob the sellers of 1% of the sales proceeds.
Thank you for posting this. But there's nothing amusing about it. These are ERISA suits.
If you ever want to experience Jove hurling thunder bolts at you, get on the other side of an ERISA suit.
The ERISA lawsuit wave has only just begun.
Of the money lenders, by the money lenders, and for the money lenders.
" British lenders are shunning the Bank of England and turning instead to the European Central Bank on a massive scale, taking advantage of much lower interest rates and guaranteed anonymity to weather the credit crunch. "
That's the answer to all our problems... have TWO central banks & pick and choose. Linda like Lending Tree... "When lender's compete you win"... er maybe they win and the rest of us lose... er something.
I read the headline and thought that it meant my Masters of Business Administration was a fraud.
Yes and?
Peter again. Sticking with his guns. He is my man.
Euro Pacific Capital | Peter Schiff September 27 2007 Bloomberg Television: Windows Media Player : Broadband
Tom - yup. They were. But everyone had quotas to meet or bonuses to make, and no one cared. And now they are all reeling around with their hands clapped to their foreheads crying "Who'd a thunk?"
You know, a lot of states passed laws saying that cars had to be locked to deter car theft. I guess it would be too simple to ask mortgage companies to verify apps to prevent fraud? Of course, the honest ones have been doing it all along, at least by sampling.
"Cost of Doing Business"
I am sorry this gets my goat! We recently had fraudulant charges on our credit card. The credit card company has reversed the charges with "no fees" [what ever the hech that means] and is refusing to provide the name/merchant account of the folks that passed on the charges to our credit card. After speaking to many folks in the credit card company, they are refusing because I do not have the right to see who has placed charges on my credit card...Go figure, somebody can say I owe them money but I do not have the right to see who this is!!..The credit card company told me not worry and that this "mistake" was the cost of doing business. I then asked if they were going to alert the police - NO because it was the "cost of doing business".
So, we all pay (never a cent from me however) huge interest rates on credit cards 'cause of the fraud/non-payment aspect. But, they do not from my point of view, take this seriously and pass along the costs to the card holders..
Hit a nerve, sorry for the rant.
Moral of my story - if you have lax lending practices, eat the cost dont blame the community by passing on higher costs.
ERISA? Ummm, lawyers and actuaries combining forces. Now there is a winning pair.
On to macro level issues: France is BK!
Lagarde confronts French economic woes - Telegraph
We cannot afford to disappoint again
This exposure was partly the result of UBSs cautious approach to risk management, which encouraged traders to steer clear of complex and illiquid securities. Instead, the traders used UBSs strong balance sheet to build up a large, leveraged portfolio of highly-rated mortgage-backed securities.
In effect, UBS was creating on its own balance sheet the type of investments that other banks put into off-balance sheet vehicles known as conduits. When liquidity dried up in the markets this summer, what was a manageable market risk turned into a de facto credit risk, says Marcel Rohner, UBSs chief executive. To make matters worse, the ABXsubprime index UBS had used to partially hedge its exposure started behaving oddly, adding to its losses.
FT.com / In depth - We cannot afford to disappoint again
O/T...Kohlberg Kravis Roberts and Citigroup are understood to have agreed to form an off-balance-sheet vehicle with
about $5bn of equity and $10bn of debt to buy impaired loans, which could include some from Citigroups investment bank.
The joint venture brings together the private equity firm responsible for some of the biggest leveraged buyouts in
the run-up to the credit crunch and the bank that agreed to finance many of those deals.
The vehicle could allow Citigroup to sell some leveraged buyout debt, which it has underwritten but is struggling to syndicate, as well as other troubled loans.
It would be the first time a private equity firm has formed such a venture with an investment bank and is surprising as KKR irritated many bankers by refusing to back down on the terms of the debt agreed for several of its deals.
Go here:
FT.com / Financials - Pressure mounts on Citigroup’s Prince
I am sorry this gets my goat! We recently had fraudulant charges on our credit card.
Thats odd, I'm going thru almost the same thing at the moment. CC issuer called me on a Monday morning to ask me about a few charges that their fraud detection had 'alerted' on. Damage was minimal and they said they would cover all the charges (~$200).
When the statement arrived, I called the number on a charge I never made. Some outfit that (apparently) sells overstock electronics. They charged my card, but never shipped the item (it was backordered !). What address was it supposed to ship to ? Why mine of course ! Something very fishy about this whole episode.
I'm still wondering where (and when) my CC number was leaked. To the best of my knowledge, I've not had any business with any of the known large leaks of CC numbers. Perhaps there's another shoe about to drop.
Peter Schiff is just being plain silly when he tries to explain away the DJI run-up by pricing it gold, loonies, and wheat. Everyone knows that it should be priced in hamburger and Twinkies.
He IS 100% correct about the US market underperforming international markets.
| Charts - Yahoo! Finance
Unlike every other Perma Doomer, Schiff stands alone as a voracious money maker.
Well, just to play devils advocate, how much of an impact could funding additional mortgage fraud fighters in the FBI (or whoever investigates it) have?
Don't get me wrong--I'm no free market religionist (I just hope the new regulations get written by a Tanta and not a lobbyist...). But, if fraud is as blatant and common as many in the industry say, couldn't stepped up law enforcement take a big bite out of the abuses? That's not a rhetorical question; I'm not sure how easy and expensive such crimes are to successfully prosecute.
Vespatian,
Perhaps the DJI really should be priced in Twinkies. How scary is that?
Actually, gng, I can see a role for stepped up enforcement; you look at Georgia, say, where stepped up enforcement (and some new laws) really turned things around.
My stomach simply turns when we demand stepped up enforcement, but no regulatory changes to the business practices that allow fraud to flourish. I mean, you can spend tons of money trying to prosecute certain kinds of flip scams, but it would certainly help if lenders stopped doing double-escrows (buying and selling properties on the same day, with the proceeds of the latter used to accomplish the former).
And of course there is no regulation that requires every borrower to sign a 4506-T. Why not? It doesn't hurt honest borrowers, it costs I think $8 if you actually use it to order the transcripts (and you don't have to do that on every loan, just defined high-risk ones and a good sample of the rest). If the MBA were recommending preventative regulation like this, then it would be less egregious for them to ask for more tax dollars to be allocated to "protecting" them from fraud.
Hazard,
One of the things about blogs like CR is that you can learn the history that you slept through in school, if you want to fill in holes in your financial education.
ERISA has very little to do with actuaries or lawyers. The 1974 law was passed in the aftermath of a U.S. auto mfg., Studebaker, going bankrupt and leaving thousands of workers without the pensions they were promised for their final years. Congress then said to U.S. employers: If you promise U.S. workers pensions, you (personally) had better deliver, or else your (personal) ass is grass. And if you are involved in helping workers secure their pension benefits, you are an ERISA fiduciary and are personally liable for any misrepresentations of lack of prudence that causes them to lose promised retirement benefits.
By today's standards of "any investment thing goes" ERISA is a harsh law. But it is still U.S. law. And if you are a smart ERISA lawyer in today's stupid investment environment, you are like a lion in a svelt full of antelope. You just try to catch those bastrds and gnaw the sht out of them.
The law of the jungle prevails.
Tanta,
It reminds me of the saying that the banks will loan you an umbrella when it is sunny and want it back when it starts to rain.
Now the banks will loan you the umbrella even during the downpour. You just need to say you'll stay inside while winking. On the off chance your wink was fraudulent and the umbrella does get wet, they simply want "protection" from your evil actions.
Probably not the best of analogies, but what the heck.
Third BOC injection in three days reveals 'clog in the system'
Globe and Mail
October 1, 2007 at 7:54 PM EDT
OTTAWA Something is definitely amiss in Canada's money markets.
The Bank of Canada, for the third business day in a row, injected about $1-billion into the overnight market to defend its key interest rate.
A bank spokesman said the liquidity provision was simply a technical move, a normal quarter-end demand for more cash.
But for the Bank of Canada's monetary policy to work properly, it's not enough to just defend the overnight rate. That rate needs to act as a benchmark for the short-term borrowing rates that corporations, home buyers and consumers pay.
The trickle-down effect does not seem to be functioning.
"It does seem like there is a clog in the system," said David Wolf, chief economist for Merrill Lynch Canada....
....As markets and companies sort things out over the coming months, he believes central bank actions to calm credit conditions are becoming the "new normal," because money markets are so jittery and quick to drive up interest rates.
"I think there's been kind of a wishful thinking that everything was getting back to normal," Mr. Carmichael said.
Instead, he's been watching a steady rise in the rate corporations have to pay for 30-day Canadian money. Non-bank corporations were issuing 30-day commercial paper at a rate of 4.63 per cent on Aug. 1, but that rate had risen to 5.37 per cent by the end of last week, Bank of Canada data show.
Plus, volumes of short-term debt have been declining substantially, Mr. Carmichael added.
"They all indicate that we're still a long way away from normal," he said.....
....Nowadays, however, the Bank of Canada is finding itself intervening frequently to maintain its overnight rate at 4.5.
And on top of that problem, other short-term rates are not falling nicely into line....
GNG - not without constraining laws, no. You can't hire enough FBI investigators to follow every tiny little brokerage. This stuff is very time-consuming to investigate and very, very profitable.
What MBA is frantically trying to avoid is some sort of HOEPA-like legislation (assignee liability) aimed at the worst practices.
I want to reiterate the point that Tanta made earlier about the neg-am. If you offer a lending program, law requires you not to turn away anyone in certain classes who applies for that program and is qualified under the terms. One of them is age. So if I offer negative amortization mortgages and some 78 year old walks in and applies and is qualified, I have to let her have it even if I strongly suspect I am digging her financial grave. Nor can I even "steer" her and others like her away from it without taking real legal risks.
I think and have advocated here before that only assignee liability will constrain the abuses while still allowing some flexibility in the marketplace. The way HOEPA works is that it takes certain types of high-cost mortgages which were strongly correlated to predatory lending, mandates additional disclosures and another three-day waiting period, and makes the assignee (investor) liable for damages if the rules are not followed. It has worked to restrain these mortgages because investors are leery of them, but they are perfectly legal and still available in a pinch.
I think Tanta has done an excellent job of explaining why the average person is unlikely to understand some of the newer mortgage products. Given that, I canot see why an extension of HOEPA rules to the strangest and riskiest products would be unreasonable.
I do alot of reading as you all probably do. I found this to be a real good read. Long but informing.
FSU Editorial: "Outlook For Week October 1" by Stephen
Tetreault 10/01/2007
OT Again.
I especially like this paragraph!
"I would love to be a primary fed-manipulator as their large brokerage trading teams (that so often take opposite positions than the positions they are placing their clients in) are basically able to take virtually "risk-free" trades as they are in position to see the inflows of Fed-head monies coming into the market-stream, they simply take on a risk-free-easy leverage trade with their considerable trading capital and make huge bets that pay off nicely; and if for some reason the Fed withdraws liquidity these large trading-teams sell short, buy puts, and make money on the ride down (enough said on this manipulation, and what I believe is insider illegal trading). The question that we need to ask/ponder is why the so called inflation fighting Fed would be pumping up the money supply."
Neal,
Here's a chart of the clog.
Bank Lawyer's Blog
OTS Grabs For The Brass Ring (fun regulator dirt)
Bank Lawyer's Blog: OTS Grabs For The Brass Ring
re: the clog
I read the book called "When Genius Failed" (the one about LTCM) the other day, and that chart by Stagflationary Mark looks like what happened at the end of the LTCM debacle: everyone was fleeing from any kind of risk, so the T-bill yields just kept decreasing while commercial paper yields kept increasing. In that irrational (?) climate, no risk was acceptable, and only T-bills were being purchased. Perhaps that's what we're seeing here.
Back in 2001 I observed blatant fraud and reported it to the mortgage company president who did nothing. I assumed he had confronted the problem employee... When I observed the president and the fraud perpetrator ( a fellow loan originator )engaged in more fraud together I was fired after voicing my concerns and disappointment. The president of the company had just lost his life savings in the stock market crash of '01 by investing in tech stocks. This was his justification for the fraud.
I then contacted federal regulators who said it was under state jurisdiction. I then contacted the state regulators who said it was under federal jurisdiction. I called the FBI back and pressed the person on the phone who referred me to the "white collar crime unit". The first thing they asked was the dollar amount of the fraud and then informed me that it was too small for them to investigate.
I then called the state regulators back and they sent an intake form which I filled out. When I called to ask about it 12 weeks later they informed me that they had decided the case was not worth them investigating.
What does this tell you? The government does not get involved in prosecuting mortgage loan fraud. Unless there is a massive amount of money lost, they ignore reports of it. Typical regulators. But now that they are under scrutiny for sleeping on the job, they will likely be going on snipe and witch hunts.
Scapegoats are in season. Happy hunting!!!
A compression in consumer credit will likely strengthen the US dollar against foreign currencies however. I bet Tanta cannot tell me why.
Can you answer why a compression in consumer credit would strengthen the greenback Tanta?
OCC letter granting approval for BofA to purchase $2 billion in newly issued preferred securities from Countrywide Financial Corp.
http://www.occ.treas.gov/interp/sep07/int1086.pdf
rich, being an actuary (and a pension actuary at that), I understand ERISA (and its limitations) very well.
My take:
We have 1.2B in questionable loans that drop to our balance sheet and if we list them, we violate the regs.
So, we we put these on a line item "to sell" and presto.
They vanish.
Oh btw we need 2.8B to cover our bridge of a 6.34 junk bond,
No problem; slate the loan as a security/asset and take a Fed loan for 4.98
There it is all smoothed out.
Can you answer why a compression in consumer credit would strengthen the greenback Tanta?
Charles Murata
You forgot to triple dog dare her.
My guess: as credit become more expensive, fast money floods in to chase yield.
Funy thing is, it hasn't happeed yet.
Profit Off Your Own Demise!
Mortgage brokers' sleight of hand
By Elizabeth Warren | October 2, 2007
IN THE past five years, if you called a mortgage broker when you were about to buy or refinance a house you may have been told, "We can check with lots of lenders so you'll get the best price." Because you are a careful shopper, this sounds good - one-stop comparative shopping. The broker most likely didn't add, "I'll take a bribe to steer you to the loan that is more expensive for you and more profitable for the lender."
Mortgage brokers' sleight of hand - The Boston Globe
Ouch
"And if you are a smart ERISA lawyer in today's stupid investment environment, you are like a lion in a svelt full of antelope. You just try to catch those bastrds and gnaw the sht out of them."
Bwahahahaha! I tried an ERISA case in federal district court, many moons ago. New owner of corporation sweeps in, rapes the 4 million pension plan and then basically blows the dough. Easy win for me on motion for summary judgment. Guess what? He's judgment-proof. Watta surprise. ERISA many not be toothless, but it matters little when the meal has already been eaten.
Well, the markets are totally back to business as usual.
Why, even the euro is coming down.
USA! USA! USA! USA!
This cannot possibly last. In the words of Dick Cheney, these are "death throes".
And, please, please remember. The Clintons are out of the market.
winjr,
Ha ha. Good one. I had an ERISA audit where the client refused to give me payroll records. The prior accountant had simply taken the year end reports and cross footed some columns and multiplied some crap to prove the report had no arithmetic errors. All my boss could say to me was "you gotta work with these people". I still haven't made sense of that statement. I'm just not a team player.
Topher,
I have traded futures for a living for 20 years and have not encountered any "risk free" trades.
Yes Charles, it's called "Deflation" of which credit contraction / destruction is a symptom. 160 dead lenders is proof that it is happening right now. Be very careful with FX bets against the dollar for the next 12 mos or so. They can go either way depending on what the Fed does.
Hey!
You guys sleeping in today?
Hey Banker!!
"Fed Fails to Restore Creditor Confidence, Pimco Says "
Fed Fails to Restore Creditor Confidence, Pimco Says (Update1) - Bloomberg.com
Breadking news on pending home sales on Marketwach:
Pending home sales fall 6.5% in August
By Rex Nutting
Last Update: 10:00 AM ET Oct 2, 2007
WASHINGTON (MarketWatch) - Flattened by the mortgage crunch, a forward-looking gauge of home sales fell further in August to its lowest level in more than six years, a real estate trade group said Tuesday. The pending home sales index fell 6.5% in August after dropping a revised 10.7% in July, the National Association of Realtors reported. The index is at its lowest level since its inception in 2001. Pending home sales are down 21.5% compared with a year ago and is down 22% compared with six months ago.
Banks confined if credit woes persist: Goldman
Hatzius estimated at least some of the $100 billion decline in unsecured commercial paper has appeared on bank balance sheets.
"From a macroeconomic perspective, unplanned balance sheet expansion is likely to constrain banks' willingness to make loans to borrowers that do not have prearranged liquidity lines," Hatzius said.
This transfer of liabilities from the capital market to the bank system will be temporary if credit conditions continue to improve in the wake of the Federal Reserve's massive liquidity infusion, including a half-percentage-point interest rate cut on September 18, according to Hatzius.
On the other hand, if credit conditions tighten again, it may become tougher for corporations to fund projects, Hatzius said.
"Such a financing constraint could weigh on capital spending and real GDP growth in 2008," he wrote.
Interesting times. All the data continues to show housing crashing, yet the Fed rate cut has given Wall Street hope.
Greenie having second thoughts?
Spoiler
Still concentrating on "subprime" I see. It seems that subprime has changed its meaning. Originally, I thought that it meant a loan made to a borrower with poor credit. Now the term is being used to refer to any loan made with, shall we say, looser than conventional terms, regardless of the creditworthiness of the borrower. I'm sure that there are people out there with FICOs in the 700s that took out IOs or ARMs with DTI ratios in the 50-60 range in the bubble areas.
I guess all the momo quants are busy writing new algorhythms to account for the current "shitty news = better for equities" paradigm.
"This exposure was partly the result of UBSs cautious approach to risk management, which encouraged traders to steer clear of complex and illiquid securities. Instead, the traders used UBSs strong balance sheet to build up a large, leveraged portfolio of highly-rated mortgage-backed securities.
"
LMAO... my doctor encouraged me to stay away from red meat, so I'm going to switch to eating lots of hamburgers and barbecued brisket!!!
LMAO... my doctor encouraged me to stay away from red meat, so I'm going to switch to eating lots of hamburgers and barbecued brisket!!!
More like switching from medium-rare to medium-well, 'cause then it's not red, which means it's OK.
I'm sorry, but why do we need American mortgage companies?
In an age when foreign capital effectively underwrites American borrowing, why keep these overpriced, irksome middle men on retainer?
Think of the savings. Also think of the pleasure of gutting this industry of skimmers and scammers. C'mon, folks: let's outsource this mofo!