Cote, OT question: I generally have a very high regard for your comments.
Why are you so anti-transit, urbanism, etc.? I ask because I usually find myself nodding in agreement with most of your thoughts, except that area (I'm pro-transit and urban dev, anti-sprawl.
Before the rule change, a borrower hoping to buy a median-priced, $472,000 home could qualify for an initial monthly payment of $3,628 on a subprime, two-year, adjustable-rate mortgage at 8.5 percent. Now, under the new Freddie Mac rules, that borrower has to qualify also at the fully-indexed, higher payment of $5,405 monthly, according to Mark Carrington.
At some point it will become clear that the Fed (allowed) those rates to avoid the need to raise wages.
Either wages go up (inflation) of house prices come down by about 3628/5405
Nice jab Rob Dawg. You figure the amount of freedom in the "elected" business was somewhat constrained or whole bunch constrained?
$265M in credit does not sound like a long leash to me. Is it?
256-70= 186. They can fund at least 200 more 100% LTV in Ca. with such an amount.
"In addition, the Company has received an aggregate of approximately $150 million of margin calls, approximately $80 million of which has been satisfied. The Company has approximately $70 million in outstanding margin calls from five lenders."
OT - Here are pending home sales for San Diego County for the past several weeks, from the San Diego Real Estate Bubble Blog (http://www.bubbleinfo.com) Numbers in parentheses are 2005, 2006, and 2007 totals for the respective weeks.
This indicates that the ramp-up from the spring selling season that occurred in 2005 and to a lesser extent in 2006 is largely absent this year, and that the YOY declines in sales are trending larger as we move forward. Not a pretty picture.
While the declines in SD may be larger than for the country as a whole, This clearly demonstrates that the tightening of standards is taking an increasing bite out of home sales. The March numbers should be ugly.
This refinancing was undertaken in response to that lenders notice to the Company exercising its rights to effect a repurchase by the Company of the loans and other assets it had financed for the Company.
OK, so maybe not everyone else around here is as addicted to 8Ks as I am. But I must still observe that this is one of the finest SEC filing sentences I have seen in quite some time. I mean, think of it, the terrible stress these people are under, and yet they are able to adopt such a graceful, idiomatic way of saying they're robbing Peter to pay Paul.
One imagines the consternation this probably caused at several banks. "Wait just a minute, are we "that lender"?" "No, Phil, I think we're "this lender." "Well, somebody better get on the horn with these jokers and find out which lender we are."
Bad news today, Good news coming in the next couple of days. New Century did today file what is called an 8-K with the SEC and basically stated that we will stop taking new applications. That is the bad news.
Good news is we are being purchased by a major wall street investor that we have all heard of. Due to insider trading laws I am not permitted to disclose the name. But, this wall street firm will be filing their 8-K tomorrow that will state their intention to purchase us. I am certain this will hit the internet quickly and then the cat will be out of the bag.
Any loans currently approved with us we will continue to process and will close."
Cote, OT question: I generally have a very high regard for your comments.
Thanks.
Why are you so anti-transit, urbanism, etc.? I ask because I usually find myself nodding in agreement with most of your thoughts, except that area (I'm pro-transit and urban dev, anti-sprawl.
For the record I am very pro-transit. It serves a vital societal function and is necessary to buffer the dislocations of an economy and transect in transition away from the industrial necessity of dense conutbations. For those reasons I am critical of the obscence social and economic enigneering failures that hide beneath a cloak of being transit. I will repost my transit. exurban, pro-sprawl, anti-planner credos, manifestos, diatribes and screeds on my blog over the next few days where the sane and rational can be spared the pain by staying away. CR is far too civil a place to taint with my rantings on those issues.
"Have some fun - call the retail number and listen to the message
1-877-HOME123"
Home123 is New Century's retail side. The pleasant voice on the message says, "Thank you for calling Home123. Your business is very important to us. However, we are currently experiencing an emergency situation and cannot take your call. So please hang up and call back later."
Emergency situation? Someone over there has maintained a nice sense of humor.
I smell a rat in that rumor. Forgive me, but are the barriers to entry in this market so great that they can't afford to start their own, or pick up the pieces once it goes splat? What in the world does NEW have now worth purchasing?
If it's a PE firm or Hedge fund they're taking a punt in much the same way the big banks bailed out LTCM. Of course back then, Goldman, Morgan Stanley, etc poured over the books to see the positions so they knew what they were buying and had the capital to hold out until the markets became more sane. LTCM's trades were for the most part right but they ran out of money (I know...sounds stupid but humor me). What does a financial buyer think he'll find buying up a busted subprime lender? If anything, those loans are headed for worse times. I guess there's enough capital to buy in something at fire sale prices only to flip it but what's left of the industry and the follow on effect in the housing mkt will be interesting.
the only thing that makes this rumor sounds true is the fact that they got the 265+710. Whoever gave them this amount, especially if it is Barclay's, is more likely to be doing it if they know it's some sort of bridge loan.
My sources tell me the I-bank is CSFB . . . (Casey Serin, F'd Buyer). that would explain why his blog has been down all day, he's been putting together this sweet deal.
Criminal investigations, credit tightening, no barriers to entry . . . why would anyone buy this turkey? Lloyd, don't question your sanity - either there is no buyer, or it's someone with too much skin in the game already to lose. Someone who would want to bury the bodies, settle the lawsuits, and quietly tuck this thing in a drawer.
I think I started that rumor so that I could win the CNBC half-million dollar challenge.
I'm thinking the $265m was what it would take to pawn off any inprocess loans at a discount, RIFF the employees, retain the lawyers, break the leases and print one more press release.
Well, since the rumor mill is grinding overtime, who cares to speculate on (1) a possible buyer of NEW and (2) how they might proceed.
(1) Based on his own disclosure (The page cannot be found it seems possible Tom Brown's hedge fund could be a player;
(2) taking the business private to clear the field of all but the senior debt holders would seem to make the most sense but those kinds of machinations are far beyond my pay grade.
please... Tom Brown ain't going long no NEW. He may have made a big mistake with LEND, or at least come in too early, but no way in hell he's into NEW. Short NEW almost for sure.
Tom Brown is long NEW, read the disclosure at the end of his latest piece.
Trigger,
If there is going to be a buyer of NEW it is likely to look something like the Citi/ACC deal which is providing a large warehouse line along with an option to buy the operating business at what is likely to be a firesale price. It's almost like a prepackaged bankruptcy, but faster and with less money handed to the lawyers. I don't think that comes to pass given the criminal investigation hanging over the company. If something is going to happen it will happen soon - those AEs won't stick around long waiting for the company to "elect to resume accepting applications from prospective borrowers". Sales forces, like produce, don't age well when left on the shelf.
NEW owns a significant stake in some of the high flying hedge funds that have been buying its product for the last few years. It invested the seed money to get them going. Maybe they're turning around and buying their owners out?
Option One... will no longer accept loan submissions for loans above 95 percent combined loan-to-value (CLTV).
CLTV! Now, I know I'm a dummy, so we can skip over that part of the answer but doesn't CLTV imply that they won't be accepting no-doc loans either? I mean without documentation how is it possible to compute CLTV?
I don't think the NEW rumors that we are talking about matter very much. The bottom line is that ever since they got into trouble, we knew that, barring outright liquidation, NEW will:
(i) be acquired
(ii) almost for sure by a wall street house
(iii) almost for sure with current equity being worthless.
So whether they use ch.11 or not matters very little. As the saxon senior exec allegedly said, even SAX would have been bk. if not for MS.
Anyhow, we should concentrate on lending standards, credit crunches and the affect on/of macro issues. The rest is just a soap opera
I'll join the chorus: what does anyone get by buying NEW other than lawsuits, government investigations and a bunch of angry creditors?
Why would anyone want in on that? It doesn't have any assets to speak of, correct?
It must be like someone suggested earlier: maybe the buyer wants to keep certian things under wraps by buying NEW, taking it private and stuffing it in a closet somewhere.
OptionOne is for sales for months and nobody wants it. Of course NEW is much better to purchase.
If this crazy rumor (with probability 1%) comes true it will be BAD news. The reason is, if one of the large creditors lost so much in NEW that it prefers to take over to save at least something - it means that creditor is in really bad shit. Maybe billions.
From HousingWire (hadn't seen these mentioned here before):
"Sources confirmed to HW this morning that Wachovia (NYSE:WB) has shuttered its correspondent lending program; competing mortgage publication MortgageDaily.com was first to report on the story yesterday.
Rumors are also swirling today that Wells Fargo (NYSE:WFC) is likely to shut down its B/C lending platform, although any such move has not been confirmed by bank officials. Housing Wire first reported on the rumors on March 3; Wells officials wouldnt comment at that time, citing company policy, but said that the company remains committed to providing affordable housing options to its customers."
You may be right that Brown is using NEW as a hedge for his (presumed) long position in LEND. However given the tone of his two pieces on subprime lenders, it is hard to imagine him being short either. In addition, his funds performance for the last two months (down 8% in Jan, down 12% in Feb) suggests he hasn't hedged very much in this sector.
Actually, if you take a look at the mortgage originator acquisitions from last year, the conspiracy theorist in me suggests that the big banks are try to cover their asses by acquiring all the dirty laundry so the really toxic stuff stays out of sight.
European CDS holders start to connect the dots. Can anyone here translate subprime into German or French? How about risk layering, liar's loan, snow docs - there's a whole new lexicon those continentals will need to grok. From the WSJ:
"Subprime Surprise for Europeans
MONTE CARLO, Monaco -- This resort town, famous for its high-roller gaming tables, seems far from the disastrous bets made in the U.S. subprime-mortgage business.
But at Citigroup Inc.'s annual credit conference here, speakers and attendees say the turndown in the U.S. subprime market is turning up in investors' portfolios where they don't expect it, reflecting the increasingly connected global markets. Investors are realizing they may own more exposure to subprime-mortgage-loan pools than they thought.
"There are European investors who until a few weeks ago did not know an awful lot about what subprime was who are realizing that they actually have exposure through some of their CDOs," said Citigroup credit strategist Hans Lorenzen.
Talk of subprime mortgages dominated several conference sessions.
While some investors believe the impact of the subprime sector on debt performance long term will be minimal, "as far as the near-term risk of further market correction is concerned, it's at the top of the list" of worries, said Matt King, head of credit strategy for Citigroup.
"In some places like HSBC, you have seen massive provisioning for losses," Mr. King said. "And to be honest, that makes us deeply suspicious" of banks "with exposures in that space who have not declared anything like the same degree of provisioning."
CR,
Tanta was whining about washing the dishes on a previous thread. In order to help her help us, without putting her in the funny vault, is there a way we can take many of her posts (and yours) and combine them into one called "Background & definitions" (sort of like a sticky post that is always at the top of the side)?
We could use her post on GSE guarantees, her translation of "substandard loans", define ACRONYMS (such as FICO, LTV, CLTV, MEW) etc.
I think this would help the new readers and save you and Tanta time to deal with the new stuff without slighting anyone. There is a ton of good info on this board buried in the comments. Thanks for considering the request.
What do buiders do when they stop building houses? Go bankrupt
IMHO there has been way to many homes built and the inventory will have to be absorbed. I know of a lot of people who worked in the RE business who own specuvestment homes (negative cash flow).
Once the housing market bottoms out, we are not expecting a rapid recovery,'' Chief Executive Officer Ara Hovnanian said in the statement. ``Our contract pace is difficult to predict and it will likely vary based on individual market and community characteristics.''
Florida homebuyers canceled 36 percent of their contracts with Hovnanian. Outside Florida, the cancellation rate was 29 percent in the quarter.
Builders like Hovnanian got blindsided,'' said Alex Barron, an analyst with JMP Securities in San Francisco who has a rating ofmarket underperform'' on Hovnanian. ``There was a frenzy of buying and selling that caused prices to rise dramatically, as much as 30 percent a year in Florida at the peak. Now it seems the homebuilders got caught selling to speculators.'
NEW funding: Well we can be pretty darn sure it is not NEW YORK Activist hedge fund manager David Einhorn who quit New Century Financial Corp.'s board late Wednesday, two days after the subprime lender's stock fell 69 percent following disclosure of a federal criminal probe.
This 30 something guy had approx. 3.9M shares of NEW in a $4B dollar hedge fund with an average acquisition cost of $38.90/per share. Lets do the math - oh my it comes to $151,710,000. I might guess his investors might be a bit gun shy right about now.
It is probably not LM. Goosh I cant imagine the exposure right now.
So maybe MER or GS. GS is set to give its numbers on the 13th...I'll bet they delay..any takers?
A completely off topic post....I have been watching foreclosure.com. The numbers are rising but I am having trouble believeing their numbers. Is this really remotely true for TX:
State Info
Updated: 03/08/07 9:19 PM
Foreclosures: 11,626
Preforeclosures: 5,442
Bankruptcies: 34,494
FSBOs: 1,259
Tax Liens: 2
Auctions: 0
ww: see? I let myself get good and whiny, and then someone has an excellent idea.
Rob, you can always calculate CLTV, because all mortgage loans, even no docs, have appraisals (and sales prices, if they're purchases), and that plus the combined loan amounts is all you need. I know you're thinking that if we call it "no doc" it should have no docs in it, and an appraisal is a doc, and so QED. That just shows that you are thinking like a consumer, and assuming that mortgage terms mean things in plain English. A very touching habit of thought, I must say. Would you like an Option ARM?
But don't feel bad! It appears that these high flyin' European investors have been going along all this time assuming that their CDOs were backed by passbook accounts, or possibly Google Ads. This kind of disillusionment has to be painful, like learning what exactly is in hot dogs. Which is probably what a lot of these investors are going to be eating for quite some time if they've been loading up on CDOs.
sounds like they secured a psuedo DIP financing deal (Debtor In Possession). That kind of money is "super" senior to everything else and usually precedes a pre-pack bankruptcy. in this case i suspect pre-pack liquidation. the article mentions they are looking for more money - that's to fill in below the DIP deal. I just looked at the 8k filing and it does not disclose the bank involved. David Einhorn, the dude who resigned from the board today, is an ex-wall st. banker. If there was meat on the carcass to pick on, he would have hung around. My guess is there's so much more than meets the eye here that this thing will "Enron-ize, or Refco-ize."
it would be interesting to see the face value of the assets that the $265mm was lent on, and it would be interesting to see who the lender was...i'd love to know what kind of "wiggle" room this lender left himself for the invevitable liquidation....
ahumbleperson
Is this really remotely true for TX:
Unfortunately it is. We are foreclosing, and I mean repossessing the house, not notices of defaults, roughly 2,000 per month here in DFW. With 4.5% unemployment now, I can only imagine how bad it is going to get when unemployment gets higher.
Further evidence of how slow it is,I agreed on a price with a roofer on Friday, and the next Wednesday he had his crew working on it.
look folks, here is the real deal from someone who knows a little more about the inner workings than any of you blood thirsty spectators/speculators. Before anyone asks, I have been browsing these various forums for well over a year and have been short on several mortgage companies since 10/06. I believe the mortgage/housing industry will have a MAJOR correction at some point in the future. Now that that is out of the way, NEW got caught up in a liquidity crunch that only started in Februrary. Out of ALLLLLLL of the subprime lenders that were still around as of 12/1/06, NEW was the most well balanced (if you can say that of any subprime lender). They have always been at the forefront of changing guidelines and raising rates before getting caught with its pants down in the secondary market. As NEW was the ONLY major mortgage originator paying a very decent dividend over the past couple of years, there were a lot of major hedge and pension funds invested in the company. When EPD's (because values have dropped, guidelines got strickter people couldnt refi or sell) started coming back on all subprime lenders beginning in December, NEW had to go back and revise their FORECASTED earnings for the greater part of 2006 and due to the buy backs obviously did not show a profit, and thus can no longer pay the high dividend. As a result, the major investors such as hedge and pension funds, pulled out QUICKLY, and those left holding the bag cried foul and began filing lawsuits left and right (company has e&o for this by the way). Not only did they loose their dividend, but their stock value plummeted first from just under $40 to $30 to $20 to $15 to $10 to $5. Nobody at NEW committed any fraud, all of you and anyone with some common sense new that the housing market was going to take a hit at some point, therefore beginning at the end of 2004-2005-2006 the founders of the company began their exit strategy from the company and cashing in their stock. They did not know when the market correction was going to happen and when they started pulling out, the company was still VERY profitable. But because those left holding the bag are mad that they have lost millions and millions of dollars and in turn dont want to lose their lucrative positions with xyz hedge fund, they cry fraud and file suit to try to transfer the blame elsewhere. Attorneys are happy to take the case because at the very least, whoever buys the company will have to get the monkeys off its back and require the e&o companies to settle for chump change 1-10 million x33%=bookoo cash. So you have several things working against the BIGGEST subprime player out there, you have the secondary market loosing its taste for subprime in a matter of 2 months time, you have a surge in epd's, you have restatement of earnings due to epd's, you have stock price plummet due to restatement (loss of dividend). You have lawsuits filed, you have bad press every single day for over a month because of all these reasons.
please... Tom Brown ain't going long no NEW. He may have made a big mistake with LEND, or at least come in too early, but no way in hell he's into NEW. Short NEW almost for sure.
Second Curve also owns shares of New Century Financial Corp. (NEW : 3.87, -1.29, -25.0% ) and Accredited Home Lenders Holding Co. (3.87, -1.29, -25.0% ) and Accredited Home Lenders Holding Co.
A late night appearance, to what do we owe this honor?
RonB, you can assume the $265 bank left themselves lots of wiggle room. Can you imagine the presentation in front of the credit committe: Mr. Chairman, we propose to extend credit to New Century which is under criminal investigation, has systematically understated reserves on repurchased loans, currently has 5 lenders unwilling to extend a waiver of the profitability covenant beyond March 15, is being considered for a going concern opinion by KPMG, and holds a warehouse full of loans in a tightening market where buyers are now running away from anything that smells of risk.
The second question (after are you crazy) would be what kind of collateral do they have?
Second Curve also owns shares of New Century Financial Corp. (NEW : 3.87, -1.29, -25.0% ) and Accredited Home Lenders Holding Co. (LEND : 16.78, -0.42, -2.4% )
ww> I simply cant believe these numbers...new times indeed. WRT employment and unemployment here is this:
.
WASHINGTON, March 7 (UPI) -- Latinos make up 13.6 percent of the U.S. employment population, but accounted for 36.7 percent of the 2006 U.S. employment growth, a study showed Wednesday.
Most of the jobs Hispanic workers landed were in the construction industry, the Pew Hispanic Center said.
In fact, two out of every three new U.S. constriction jobs went to Hispanic workers, the center said.
Hispanic employment increased by almost 1 million from 2005 to 2006, with foreign-born Latinos who arrived since 2000 responsible for about 24 percent of the total U.S. employment increase.
Undocumented immigrants accounted for about two-thirds of the increase in recently arrived Hispanic workers, the center estimated.
The center derived its estimates from Bureau of Labor Statistics and Census Bureau data, it said
Thanks, Tanta. I think. Option ARM? Heck when I get tired of pulling with one I switch to the other so I'm all set thankyouanyway. I was thinking about all the tricks that can be used when going no-doc like simultaneously closing on multiple loans and using personal credit for the whopping 5% downpayment and make the number appraisals and such. No doc loans wouldn't show that the applicant, we'll call him Casey, was using a loan from his 401k for the downpayment would they?
I'm still reading with glee all the "subprime won't infect the alt-a or prime market" wishful thinking cheerleaders. If suddenly there is no appetite (as Option One is quoted) for subprime bundles in the secondary markets, what is the appetite for the rest? "Ohmigod, the subprime mortgages are toxic but these alt-a cookies from the same companies with the same expiration dates and same ingredients on the same shelf look just fine."
Rob Dawg,
I'm still reading with glee all the "subprime won't infect the alt-a or prime market" wishful thinking cheerleaders. If suddenly there is no appetite (as Option One is quoted) for subprime bundles in the secondary markets, what is the appetite for the rest? "Ohmigod, the subprime mortgages are toxic but these alt-a cookies from the same companies with the same expiration dates and same ingredients on the same shelf look just fine."
I couldn't agree with you more. Just go to CFC's website and look at all the homes that are their REO in Kallifornia alone. But aren't they the ones that said they are going to be our new mortgage overlord? Their REO count in CA alone was 360 on 12/27/06 and it was 832 on 3/6/07. Angelo and his homies haven't been selling 7+ million shares only because they want to diversify their portfolios. Always follow das CASH.
Noneya,
NEW CENTURY IS HERE TO STAY baby. Did none of you read my previous post? Was it too long winded?
You had a lot of good things in there.
I think they are going down, but that is why I am still holding NEW puts. Checking EBAY out for the Ferrari and Gulfstream jet.
I found this about WMC(WMC is a General Electric Subsidiary). There were rumors WMC was going to close last week but this appears to be what they were talking about:
Well, well....things are certainly exciting right now!
First the good news:
WMC is still open.
Now the bad:
As of today, WMC has closed four operations centers, including Bellevue. This move impacted 400+ of our operations people nationwide, but was part of our effort to attempt to continue operations.
WMC Mortgage now has a minimum FICO requirement of 600.
95% - 660 FICO minimum
90% - 600 FICO minimum
No Stated Wage Earners at all
Please bear with me as we go through this transition. I will have more information in the next 72 hours, and I'll communicate with you as best I can.
In the meantime, loans gotta be picked up, bills must be paid. If I can help with anything, please let me know.
Thanks
Ty Reed
WMC Mortgage
Business Development Associate - Sales
Is there a reason that Citi has it's annual credit conference in Monte Carlo? Is it because they'd like to be someplace that's got better odds than they're getting back home? Is that they're just addicted to gambling, or something?
The problem is not going to be in NEW not taking any new applications. Yes, some people will no longer qualify for loans - big deal.
The problem with NEW is that it is going to be the break in the dam for small correspondent lenders that generate a lot of NEW business. Think of this - no new applications just mean a reduction of business. Smart brokers/lenders will have new channels already in place to handle current originations. The bad part is all of the correspondent lenders who funded loans with the expectation that NEW would be there to buy them and now won't fund them, eventhough they have been funded by the correspondent. Now throw in the dramatic guideline changes at other investors and these loans all become unsellable. You now have a glut of loans headed for scratch and dent land which will exacerbate pricing losses due to the excess supply. This could be the perfect storm that ruins small lenders. Take 5 loans at 80 cents on the dollar and a low net-worth company and that spells trouble.
To make matters worse there is going to be a lot of politicking for the remaining funding dollars available for the last few loans to go through - and the biggest accounts are going to go through first, leaving the smaller volume lenders stuck with a lot of loans on their hands.
We could see a rash of bankruptcies from small lenders if NEW is unable to resume purchasing loans. That is the real problem - the application freeze is no big deal.
For those of you playing along at home, "classification" of loans involves putting them into categories or classes for purposes of estimating allowances for loan losses (reserves) and capital requirements, as well as for determining safety and soundness ratings.
A very topical issue, particularly in light of the prevalence of neg-am ARMS.
So lets say a bank has a significant portion of its loan portfolio in neg-am ARMS. And the interest accruals (and outstanding principal balances) start jumping. Throw in a dose of economic malaise, and perhaps some resets, and presto: some of the puppies arent sitting up begging for mammas milk.
So my question to you is: under these circumstances, how does a bank monitor (and manage the loss allowances) and respond to the changing nature of the loan pool?
Does FDIC dictate the mechanics of the process, or only require that a process be place - with details left to Management?
Does Management let the (dead) puppies lay? Or do they re-evaluate each of the loans on a set periodic, or on occurrence of a significant economic event, basis?
"Among hedge funds, Greenwich (Conn.)'s Carrington seems particularly vulnerable. Managed by ex-Citigroup banker Bruce M. Rose, the fund was launched in 2003 with $25 million in seed money from New Century, which owns about a 35% equity stake. Such an intimate tie between a lender and a hedge fund is highly unusual, say analysts. Carrington specializes in turning subprime mortgages into sophisticated bonds called collateralized debt obligations (CDOs) and selling them to other investors. Not surprisingly, New Century is one of Carrington's biggest suppliers, providing 17% of the loans in a recent deal. Another major supplier is Fremont General (FMT), which says it plans to exit the subprime business."
does anyone know a spanish speaking loan broker ???
This is what I saw :
"I was watching the Spanish-speaking TV channels and Im seeing TONS of commercials advertising ARMs and No-Down-Payment-with-Cash-Back loans. The ads tout, Dont lose your home to foreclosure. We can refinance you! .
So as you can see, the sub-prime lenders & fraudsters havent learned a SINGLE f*ing thing from all the current RE debacle. Chased from prime-time TV, theyve morphed and now -after a few Spanish classes- are invading the Latino airwaves. In my experience, the Spanish-speaking channels seem to be much less monitored by the FCC (or whoever it is that prohibits outrageaously false advertising) and the potential for MORE rip-offs is eminent.
Additionally (and I say this as a latino myself) most latino buyers are not as savvy or sofisticated as the average American consumer. Theyre usually not aware of where to turn for help or redress even when it is readily available. They dont know the local laws very well and on top of all this is theres the language barrier.
I dont get it. The market (aka suckers) theyre targeting with their ads is very specific; the desesperados. So just HOW can these lenders still expect to make any profits off of someone who is upside down, behind payments, with almost no equity and yet looking for a refi?.
Im a missing something here or am I just plain stupid?"
so what impact does the 30 yr fixed rate hitting a new low for 2007 have?
Since i've been reading this excellent blog for some time, dc1000, I know that you claim to be in the real estate biz in DC. So I'll answer your question with another one: how many average wage earners can afford to put 5% down and handle the monthly payments a 30 year requires at 6% on a nice little starter home in Cleveland Park or Kalorama?
...Consumer confidence was knocked off a 2 1/2 year high in March ...
Consumer confidence sank to a three-month low of 92.3, according to the RBC Cash Index. That represented a steep slide from the fairly buoyant reading of 103 in early February,
"Ohmigod, the subprime mortgages are toxic but these alt-a cookies from the same companies with the same expiration dates and same ingredients on the same shelf look just fine."--
Well, the receipie may be different, but the cooks are the same. Three months ago they were talking about all the wholsome goodness of their cookies. Now that the health inspector has arrived and said "I'm thinking that on Sep 1 we'll have a new rule banning rat faeces and insect parts in the cookies" the cooks are saying: "NOO.. that'll kill our business."
yal--Are you sure, I don't think we've discovered yet just how unsophisticated the average American is. It looks like a very low bar to hurdle.
I think the problem is what the avg American was lead to believe:
*Everyone makes money from real-estate
*it never goes down
*home equity is the long term nest egg
*homes go up so much that even if you take some equity out....
*Why pay taxes when your debt is tax deductible
Just imagine how this country would look if for every $ saved in an IRA one would get $2 deduction from income taxes ?
Why do people have to consume all this made in china that breaks after 3 weeks ?
Why people mortgage their homes to get an SUV ?
This is not lack of sophistication this is mass madness.
I was raised outside of the US and the first time I was told that excess consumpation is good was in the US. until now I never buy it I jusy buy what I need.
Yal - I think there's a future for your freudian spelling of "consumpation" -- we consume to much and we get all stopped up with...ok nevermind.
I also am still seeing those 100 percent financing ads and wondering why the those trumpets are still blaring. I suppose it's the lowest fraudsters preying on the most naive buyers among us...but I too wonder when this music will stop.
PS noneya -- Any suggestions, statements of fact or otherwise imperative sentences with an emphatic "BABY" attached make me instantly disregard them. It kind of puts a bunch of hair gel and gold chains on the argument...
COMPLETELY OFF-TOPIC
I asked CR, but he indicated that he is busy, so I thought I'd take some initiative and ask the group.
I noticed Tanta complaining about retyping an explanation of Fannie Mae and Freddie Mac in a recent thread.
Is there anyone who would be willing and able to set up a wiki that could be used for definitions and explanations that seem to come up often?
My idea is that the wiki would be linked from here, with CR's imprimatur. Select people, determined by CR, would be able to edit the wiki, and perhaps provide definitions and acronym explanations for stuff that comes up often.
I think as the housing problem becomes more visible to the mainstream, CR's blog will get a lot more novices, and it would both be a nice service and a way of avoiding repeating explanations.
Just an idea. I'm not capable of hosting or setting up a wiki, otherwise I'd do it myself.
The company did get about $975 million of new financing from Morgan Stanley.
Morgan Stanley's funding included a $265 million loan that's secured by New Century's investment portfolio of mortgages and mortgage-backed securities, two people with knowledge of the deal said yesterday. Morgan Stanley, the second-biggest U.S. securities firm by market value, also provided $710 million -- secured by loans that New Century had planned to sell -- to replace a credit line that another lender revoked.
The investment portfolio was New Century's last remaining unencumbered asset,'' meaning it doesn't have anything left to offer other lenders as collateral, JPMorgan's Wessell said.We feel it is likely that New Century just used up its last option to avoid collapse,'' he said.
Ok, so Alo doesn't have his backside covered in tatoos:
It kind of puts a bunch of hair gel and gold chains on the argument...
and unlike Bernanke, has no gold rings through his left nostril...so important to look right and dress properly for the job.
Don't Dangerfield yourself people.
on life support right now.
It's funny how I keep reading the 'rumors' here and a few days later I end up reading it in a 'respectable' source.
Thanks for the heads ups guys.
Tanta,
NEW is trading down another 20 cents or so. It traded up for a few minutes after the 8-K and it was down over 30 cents at one point.
BTW, thanks for translating the regulatorese this morning. I have a feeling that will be handy reference document in the months ahead.
Who are NEW's five primary lenders?
That's something I'd like to know. Especially which one is extending the $265MM in credit.
This looks to me just like one lender trying to shore up their collateral position at the expense of the others.
(Nothing wrong with that, by the way.)
New Century "has elected..."
Wasn't Al Gore "elected" as well?
Cote, OT question: I generally have a very high regard for your comments.
Why are you so anti-transit, urbanism, etc.? I ask because I usually find myself nodding in agreement with most of your thoughts, except that area (I'm pro-transit and urban dev, anti-sprawl.
Cheers,
Less than 24-hours until Black Friday, or should I say, BK Friday.
Before the rule change, a borrower hoping to buy a median-priced, $472,000 home could qualify for an initial monthly payment of $3,628 on a subprime, two-year, adjustable-rate mortgage at 8.5 percent. Now, under the new Freddie Mac rules, that borrower has to qualify also at the fully-indexed, higher payment of $5,405 monthly, according to Mark Carrington.
At some point it will become clear that the Fed (allowed) those rates to avoid the need to raise wages.
Either wages go up (inflation) of house prices come down by about 3628/5405
Nice jab Rob Dawg. You figure the amount of freedom in the "elected" business was somewhat constrained or whole bunch constrained?
$265M in credit does not sound like a long leash to me. Is it?
256-70= 186. They can fund at least 200 more 100% LTV in Ca. with such an amount.
"In addition, the Company has received an aggregate of approximately $150 million of margin calls, approximately $80 million of which has been satisfied. The Company has approximately $70 million in outstanding margin calls from five lenders."
OT - Here are pending home sales for San Diego County for the past several weeks, from the San Diego Real Estate Bubble Blog (http://www.bubbleinfo.com) Numbers in parentheses are 2005, 2006, and 2007 totals for the respective weeks.
1/31 - 2/6 (374, 310, 281) 9%
2/7 - 2/13 (331, 265, 225) 15%
2/14 - 2/20 (392, 273, 253) 7%
2/21 - 2/27 (410, 387, 305) 21%
2/28 - 3/6 (589, 524, 309) 41%
This indicates that the ramp-up from the spring selling season that occurred in 2005 and to a lesser extent in 2006 is largely absent this year, and that the YOY declines in sales are trending larger as we move forward. Not a pretty picture.
While the declines in SD may be larger than for the country as a whole, This clearly demonstrates that the tightening of standards is taking an increasing bite out of home sales. The March numbers should be ugly.
Someone mentioned Barclays extending about $1 billion in credit in another comment thread earlier? The $265 + $710 is about $1 billion. So Barclays?
Is Nick Leeson running Barclay's RE warehouse dept?
so what impact does the 30 yr fixed rate hitting a new low for 2007 have?
I see dead companies.
No no no David. You have elected to cease seeing live companies.
This refinancing was undertaken in response to that lenders notice to the Company exercising its rights to effect a repurchase by the Company of the loans and other assets it had financed for the Company.
OK, so maybe not everyone else around here is as addicted to 8Ks as I am. But I must still observe that this is one of the finest SEC filing sentences I have seen in quite some time. I mean, think of it, the terrible stress these people are under, and yet they are able to adopt such a graceful, idiomatic way of saying they're robbing Peter to pay Paul.
One imagines the consternation this probably caused at several banks. "Wait just a minute, are we "that lender"?" "No, Phil, I think we're "this lender." "Well, somebody better get on the horn with these jokers and find out which lender we are."
Rumor alert... Now what?!?!
From brokeroutpost
http://forum.brokeroutpost.com/loans/forum/2/101502.htm
"Got this email from my AE today...
Bad news today, Good news coming in the next couple of days. New Century did today file what is called an 8-K with the SEC and basically stated that we will stop taking new applications. That is the bad news.
Good news is we are being purchased by a major wall street investor that we have all heard of. Due to insider trading laws I am not permitted to disclose the name. But, this wall street firm will be filing their 8-K tomorrow that will state their intention to purchase us. I am certain this will hit the internet quickly and then the cat will be out of the bag.
Any loans currently approved with us we will continue to process and will close."
Cote, OT question: I generally have a very high regard for your comments.
Thanks.
Why are you so anti-transit, urbanism, etc.? I ask because I usually find myself nodding in agreement with most of your thoughts, except that area (I'm pro-transit and urban dev, anti-sprawl.
For the record I am very pro-transit. It serves a vital societal function and is necessary to buffer the dislocations of an economy and transect in transition away from the industrial necessity of dense conutbations. For those reasons I am critical of the obscence social and economic enigneering failures that hide beneath a cloak of being transit. I will repost my transit. exurban, pro-sprawl, anti-planner credos, manifestos, diatribes and screeds on my blog over the next few days where the sane and rational can be spared the pain by staying away. CR is far too civil a place to taint with my rantings on those issues.
Another small piece from Broker Outpost:
"Have some fun - call the retail number and listen to the message
1-877-HOME123"
Home123 is New Century's retail side. The pleasant voice on the message says, "Thank you for calling Home123. Your business is very important to us. However, we are currently experiencing an emergency situation and cannot take your call. So please hang up and call back later."
Emergency situation? Someone over there has maintained a nice sense of humor.
Rob-
Thanks. I'll keep an eye out. I'll also have to look up a couple of those words.
To all:
If that rumor is true, the purchaser is whomever has the greatest credit exposure to NEW, and thinks they can salvage the assets.
But my guess is, it ain't true.
Due to insider trading laws I am not permitted to disclose the name.
Huh? But he is allowed to mention that ncen will get bought out? what is this crap?
I smell a rat in that rumor. Forgive me, but are the barriers to entry in this market so great that they can't afford to start their own, or pick up the pieces once it goes splat? What in the world does NEW have now worth purchasing?
If it's a PE firm or Hedge fund they're taking a punt in much the same way the big banks bailed out LTCM. Of course back then, Goldman, Morgan Stanley, etc poured over the books to see the positions so they knew what they were buying and had the capital to hold out until the markets became more sane. LTCM's trades were for the most part right but they ran out of money (I know...sounds stupid but humor me). What does a financial buyer think he'll find buying up a busted subprime lender? If anything, those loans are headed for worse times. I guess there's enough capital to buy in something at fire sale prices only to flip it but what's left of the industry and the follow on effect in the housing mkt will be interesting.
the only thing that makes this rumor sounds true is the fact that they got the 265+710. Whoever gave them this amount, especially if it is Barclay's, is more likely to be doing it if they know it's some sort of bridge loan.
Bridge Loan?
Bridge to where?
Bridge over the river Styx maybe.
My sources tell me the I-bank is CSFB . . . (Casey Serin, F'd Buyer). that would explain why his blog has been down all day, he's been putting together this sweet deal.
Criminal investigations, credit tightening, no barriers to entry . . . why would anyone buy this turkey? Lloyd, don't question your sanity - either there is no buyer, or it's someone with too much skin in the game already to lose. Someone who would want to bury the bodies, settle the lawsuits, and quietly tuck this thing in a drawer.
But again, I say no buyer.
I think I started that rumor so that I could win the CNBC half-million dollar challenge.
I'm thinking the $265m was what it would take to pawn off any inprocess loans at a discount, RIFF the employees, retain the lawyers, break the leases and print one more press release.
Well, since the rumor mill is grinding overtime, who cares to speculate on (1) a possible buyer of NEW and (2) how they might proceed.
(1) Based on his own disclosure (The page cannot be found it seems possible Tom Brown's hedge fund could be a player;
(2) taking the business private to clear the field of all but the senior debt holders would seem to make the most sense but those kinds of machinations are far beyond my pay grade.
please... Tom Brown ain't going long no NEW. He may have made a big mistake with LEND, or at least come in too early, but no way in hell he's into NEW. Short NEW almost for sure.
Probert,
Tom Brown is long NEW, read the disclosure at the end of his latest piece.
Trigger,
If there is going to be a buyer of NEW it is likely to look something like the Citi/ACC deal which is providing a large warehouse line along with an option to buy the operating business at what is likely to be a firesale price. It's almost like a prepackaged bankruptcy, but faster and with less money handed to the lawyers. I don't think that comes to pass given the criminal investigation hanging over the company. If something is going to happen it will happen soon - those AEs won't stick around long waiting for the company to "elect to resume accepting applications from prospective borrowers". Sales forces, like produce, don't age well when left on the shelf.
Broker Universe Rumor of Morgan Stanley buying NEW
Mortgage Grapevine: New Century's back... Yeah!
If that speakerphone conference call really happened, I am sure the SEC will not be happy.
NEW owns a significant stake in some of the high flying hedge funds that have been buying its product for the last few years. It invested the seed money to get them going. Maybe they're turning around and buying their owners out?
I think he/she's blowing smoke.
AE's are sales guys, after all.
Brian's post above is worth considering. The best sales guys they have will be sprinting for the doors.
"Broker Universe Rumor of Morgan Stanley buying NEW"
This sounds likes merger-assisted suicide, like the big dead fish eating the little dead fish.
In the end, all that will be left are fish bones, which we can grind up and pack into our medicine bags.
With the toad bones and ground-up testicles?
Morgan Stanley does make some sense, though.
They have a $3bn line of credit to NEW. They could very well be the largest creditor.
But yeah, it would be a rerun of ACC/Citi.
Tanta, CR -
Thought you'd be interested to know that we just broke the news that Option One has closed the door on all 100 percent fundings, including Alt-A.
Option One Eliminates 100 Percent Mortgages in Subprime, Alt-A; Not Alone : HousingWire || financial news for the mortgage market
We'll have coverage of the buyer-in-waiting for New Century tomorrow.
Brian, he said they have a position in NEW and LEND. Never said it was long? (unless i am missing something??)
Option One... will no longer accept loan submissions for loans above 95 percent combined loan-to-value (CLTV).
CLTV! Now, I know I'm a dummy, so we can skip over that part of the answer but doesn't CLTV imply that they won't be accepting no-doc loans either? I mean without documentation how is it possible to compute CLTV?
I don't think the NEW rumors that we are talking about matter very much. The bottom line is that ever since they got into trouble, we knew that, barring outright liquidation, NEW will:
(i) be acquired
(ii) almost for sure by a wall street house
(iii) almost for sure with current equity being worthless.
So whether they use ch.11 or not matters very little. As the saxon senior exec allegedly said, even SAX would have been bk. if not for MS.
Anyhow, we should concentrate on lending standards, credit crunches and the affect on/of macro issues. The rest is just a soap opera
I'll join the chorus: what does anyone get by buying NEW other than lawsuits, government investigations and a bunch of angry creditors?
Why would anyone want in on that? It doesn't have any assets to speak of, correct?
It must be like someone suggested earlier: maybe the buyer wants to keep certian things under wraps by buying NEW, taking it private and stuffing it in a closet somewhere.
OptionOne is for sales for months and nobody wants it. Of course NEW is much better to purchase.
If this crazy rumor (with probability 1%) comes true it will be BAD news. The reason is, if one of the large creditors lost so much in NEW that it prefers to take over to save at least something - it means that creditor is in really bad shit. Maybe billions.
Home123 recoding here.
When Heroes Go Down
When heroes go down
They go down fast
So don't expect any time to
Equivocate the past
When heroes go down
They land in flame
So don't expect any slow and careful
Settling of blame
I heard you say
You look out for the feet of clay
That someone will be falling next
Without the chance for last respects
You feel the disappointment
When heroes go down
Man or woman revealed
You can't expect any kind of mercy
On the battlefield
I heard you say
You look out for the feet of clay
That someone will be falling next
Without the chance for last respects
You feel the disappointment
When heroes go down
Man or woman revealed
Do you show any kind of mercy
On the battlefield?
From HousingWire (hadn't seen these mentioned here before):
"Sources confirmed to HW this morning that Wachovia (NYSE:WB) has shuttered its correspondent lending program; competing mortgage publication MortgageDaily.com was first to report on the story yesterday.
Rumors are also swirling today that Wells Fargo (NYSE:WFC) is likely to shut down its B/C lending platform, although any such move has not been confirmed by bank officials. Housing Wire first reported on the rumors on March 3; Wells officials wouldnt comment at that time, citing company policy, but said that the company remains committed to providing affordable housing options to its customers."
Page not found : HousingWire || financial news for the mortgage market
Probert,
You may be right that Brown is using NEW as a hedge for his (presumed) long position in LEND. However given the tone of his two pieces on subprime lenders, it is hard to imagine him being short either. In addition, his funds performance for the last two months (down 8% in Jan, down 12% in Feb) suggests he hasn't hedged very much in this sector.
Actually, if you take a look at the mortgage originator acquisitions from last year, the conspiracy theorist in me suggests that the big banks are try to cover their asses by acquiring all the dirty laundry so the really toxic stuff stays out of sight.
European CDS holders start to connect the dots. Can anyone here translate subprime into German or French? How about risk layering, liar's loan, snow docs - there's a whole new lexicon those continentals will need to grok. From the WSJ:
"Subprime Surprise for Europeans
MONTE CARLO, Monaco -- This resort town, famous for its high-roller gaming tables, seems far from the disastrous bets made in the U.S. subprime-mortgage business.
But at Citigroup Inc.'s annual credit conference here, speakers and attendees say the turndown in the U.S. subprime market is turning up in investors' portfolios where they don't expect it, reflecting the increasingly connected global markets. Investors are realizing they may own more exposure to subprime-mortgage-loan pools than they thought.
"There are European investors who until a few weeks ago did not know an awful lot about what subprime was who are realizing that they actually have exposure through some of their CDOs," said Citigroup credit strategist Hans Lorenzen.
Talk of subprime mortgages dominated several conference sessions.
While some investors believe the impact of the subprime sector on debt performance long term will be minimal, "as far as the near-term risk of further market correction is concerned, it's at the top of the list" of worries, said Matt King, head of credit strategy for Citigroup.
"In some places like HSBC, you have seen massive provisioning for losses," Mr. King said. "And to be honest, that makes us deeply suspicious" of banks "with exposures in that space who have not declared anything like the same degree of provisioning."
I'll join the chorus: what does anyone get by buying NEW other than lawsuits, government investigations and a bunch of angry creditors?
Add to that what would be the business model?
CR,
Tanta was whining about washing the dishes on a previous thread. In order to help her help us, without putting her in the funny vault, is there a way we can take many of her posts (and yours) and combine them into one called "Background & definitions" (sort of like a sticky post that is always at the top of the side)?
We could use her post on GSE guarantees, her translation of "substandard loans", define ACRONYMS (such as FICO, LTV, CLTV, MEW) etc.
I think this would help the new readers and save you and Tanta time to deal with the new stuff without slighting anyone. There is a ton of good info on this board buried in the comments. Thanks for considering the request.
What do you thinik about Hovnanian report tonight? They missed and guidance is below estimates. But all withing reasonable numbers.
Do you think builders will tank or just shake some fat and be in business as usual? I mean both stocks and business.
What do buiders do when they stop building houses? Go bankrupt
IMHO there has been way to many homes built and the inventory will have to be absorbed. I know of a lot of people who worked in the RE business who own specuvestment homes (negative cash flow).
Blomberg:
Once the housing market bottoms out, we are not expecting a rapid recovery,'' Chief Executive Officer Ara Hovnanian said in the statement. ``Our contract pace is difficult to predict and it will likely vary based on individual market and community characteristics.''
Florida homebuyers canceled 36 percent of their contracts with Hovnanian. Outside Florida, the cancellation rate was 29 percent in the quarter.
Builders like Hovnanian got blindsided,'' said Alex Barron, an analyst with JMP Securities in San Francisco who has a rating ofmarket underperform'' on Hovnanian. ``There was a frenzy of buying and selling that caused prices to rise dramatically, as much as 30 percent a year in Florida at the peak. Now it seems the homebuilders got caught selling to speculators.'
NEW funding: Well we can be pretty darn sure it is not NEW YORK Activist hedge fund manager David Einhorn who quit New Century Financial Corp.'s board late Wednesday, two days after the subprime lender's stock fell 69 percent following disclosure of a federal criminal probe.
This 30 something guy had approx. 3.9M shares of NEW in a $4B dollar hedge fund with an average acquisition cost of $38.90/per share. Lets do the math - oh my it comes to $151,710,000. I might guess his investors might be a bit gun shy right about now.
It is probably not LM. Goosh I cant imagine the exposure right now.
So maybe MER or GS. GS is set to give its numbers on the 13th...I'll bet they delay..any takers?
A completely off topic post....I have been watching foreclosure.com. The numbers are rising but I am having trouble believeing their numbers. Is this really remotely true for TX:
State Info
Updated: 03/08/07 9:19 PM
Foreclosures: 11,626
Preforeclosures: 5,442
Bankruptcies: 34,494
FSBOs: 1,259
Tax Liens: 2
Auctions: 0
ww: see? I let myself get good and whiny, and then someone has an excellent idea.
Rob, you can always calculate CLTV, because all mortgage loans, even no docs, have appraisals (and sales prices, if they're purchases), and that plus the combined loan amounts is all you need. I know you're thinking that if we call it "no doc" it should have no docs in it, and an appraisal is a doc, and so QED. That just shows that you are thinking like a consumer, and assuming that mortgage terms mean things in plain English. A very touching habit of thought, I must say. Would you like an Option ARM?
But don't feel bad! It appears that these high flyin' European investors have been going along all this time assuming that their CDOs were backed by passbook accounts, or possibly Google Ads. This kind of disillusionment has to be painful, like learning what exactly is in hot dogs. Which is probably what a lot of these investors are going to be eating for quite some time if they've been loading up on CDOs.
sounds like they secured a psuedo DIP financing deal (Debtor In Possession). That kind of money is "super" senior to everything else and usually precedes a pre-pack bankruptcy. in this case i suspect pre-pack liquidation. the article mentions they are looking for more money - that's to fill in below the DIP deal. I just looked at the 8k filing and it does not disclose the bank involved. David Einhorn, the dude who resigned from the board today, is an ex-wall st. banker. If there was meat on the carcass to pick on, he would have hung around. My guess is there's so much more than meets the eye here that this thing will "Enron-ize, or Refco-ize."
it would be interesting to see the face value of the assets that the $265mm was lent on, and it would be interesting to see who the lender was...i'd love to know what kind of "wiggle" room this lender left himself for the invevitable liquidation....
ahumbleperson
Is this really remotely true for TX:
Unfortunately it is. We are foreclosing, and I mean repossessing the house, not notices of defaults, roughly 2,000 per month here in DFW. With 4.5% unemployment now, I can only imagine how bad it is going to get when unemployment gets higher.
Further evidence of how slow it is,I agreed on a price with a roofer on Friday, and the next Wednesday he had his crew working on it.
look folks, here is the real deal from someone who knows a little more about the inner workings than any of you blood thirsty spectators/speculators. Before anyone asks, I have been browsing these various forums for well over a year and have been short on several mortgage companies since 10/06. I believe the mortgage/housing industry will have a MAJOR correction at some point in the future. Now that that is out of the way, NEW got caught up in a liquidity crunch that only started in Februrary. Out of ALLLLLLL of the subprime lenders that were still around as of 12/1/06, NEW was the most well balanced (if you can say that of any subprime lender). They have always been at the forefront of changing guidelines and raising rates before getting caught with its pants down in the secondary market. As NEW was the ONLY major mortgage originator paying a very decent dividend over the past couple of years, there were a lot of major hedge and pension funds invested in the company. When EPD's (because values have dropped, guidelines got strickter people couldnt refi or sell) started coming back on all subprime lenders beginning in December, NEW had to go back and revise their FORECASTED earnings for the greater part of 2006 and due to the buy backs obviously did not show a profit, and thus can no longer pay the high dividend. As a result, the major investors such as hedge and pension funds, pulled out QUICKLY, and those left holding the bag cried foul and began filing lawsuits left and right (company has e&o for this by the way). Not only did they loose their dividend, but their stock value plummeted first from just under $40 to $30 to $20 to $15 to $10 to $5. Nobody at NEW committed any fraud, all of you and anyone with some common sense new that the housing market was going to take a hit at some point, therefore beginning at the end of 2004-2005-2006 the founders of the company began their exit strategy from the company and cashing in their stock. They did not know when the market correction was going to happen and when they started pulling out, the company was still VERY profitable. But because those left holding the bag are mad that they have lost millions and millions of dollars and in turn dont want to lose their lucrative positions with xyz hedge fund, they cry fraud and file suit to try to transfer the blame elsewhere. Attorneys are happy to take the case because at the very least, whoever buys the company will have to get the monkeys off its back and require the e&o companies to settle for chump change 1-10 million x33%=bookoo cash. So you have several things working against the BIGGEST subprime player out there, you have the secondary market loosing its taste for subprime in a matter of 2 months time, you have a surge in epd's, you have restatement of earnings due to epd's, you have stock price plummet due to restatement (loss of dividend). You have lawsuits filed, you have bad press every single day for over a month because of all these reasons.
please... Tom Brown ain't going long no NEW. He may have made a big mistake with LEND, or at least come in too early, but no way in hell he's into NEW. Short NEW almost for sure.
Yes, he does own NEW:
Brown's Second Curve hedge fund stumbles early in 2007 - MarketWatch
Second Curve also owns shares of New Century Financial Corp. (NEW : 3.87, -1.29, -25.0% ) and Accredited Home Lenders Holding Co. (3.87, -1.29, -25.0% ) and Accredited Home Lenders Holding Co.
Tanta,
A late night appearance, to what do we owe this honor?
RonB, you can assume the $265 bank left themselves lots of wiggle room. Can you imagine the presentation in front of the credit committe: Mr. Chairman, we propose to extend credit to New Century which is under criminal investigation, has systematically understated reserves on repurchased loans, currently has 5 lenders unwilling to extend a waiver of the profitability covenant beyond March 15, is being considered for a going concern opinion by KPMG, and holds a warehouse full of loans in a tightening market where buyers are now running away from anything that smells of risk.
The second question (after are you crazy) would be what kind of collateral do they have?
Second Curve also owns shares of New Century Financial Corp. (NEW : 3.87, -1.29, -25.0% ) and Accredited Home Lenders Holding Co. (LEND : 16.78, -0.42, -2.4% )
Brian,
In your opinion, where are the best short opportunities currently? Is it the Bankers such as Merrill Lynch, Goldman, Bear Stearns?
Brian,
In your opinion, where are the best short opportunities currently? Is it the Bankers such as Merrill Lynch, Goldman, Bear Stearns?
ww> I simply cant believe these numbers...new times indeed. WRT employment and unemployment here is this:
.
WASHINGTON, March 7 (UPI) -- Latinos make up 13.6 percent of the U.S. employment population, but accounted for 36.7 percent of the 2006 U.S. employment growth, a study showed Wednesday.
Most of the jobs Hispanic workers landed were in the construction industry, the Pew Hispanic Center said.
In fact, two out of every three new U.S. constriction jobs went to Hispanic workers, the center said.
Hispanic employment increased by almost 1 million from 2005 to 2006, with foreign-born Latinos who arrived since 2000 responsible for about 24 percent of the total U.S. employment increase.
Undocumented immigrants accounted for about two-thirds of the increase in recently arrived Hispanic workers, the center estimated.
The center derived its estimates from Bureau of Labor Statistics and Census Bureau data, it said
Thanks, Tanta. I think. Option ARM? Heck when I get tired of pulling with one I switch to the other so I'm all set thankyouanyway. I was thinking about all the tricks that can be used when going no-doc like simultaneously closing on multiple loans and using personal credit for the whopping 5% downpayment and make the number appraisals and such. No doc loans wouldn't show that the applicant, we'll call him Casey, was using a loan from his 401k for the downpayment would they?
I'm still reading with glee all the "subprime won't infect the alt-a or prime market" wishful thinking cheerleaders. If suddenly there is no appetite (as Option One is quoted) for subprime bundles in the secondary markets, what is the appetite for the rest? "Ohmigod, the subprime mortgages are toxic but these alt-a cookies from the same companies with the same expiration dates and same ingredients on the same shelf look just fine."
ww> You forgot to ask about LM. MER is interesting, however.
NEW CENTURY IS HERE TO STAY baby. Did none of you read my previous post? Was it too long winded?
Rob Dawg,
I'm still reading with glee all the "subprime won't infect the alt-a or prime market" wishful thinking cheerleaders. If suddenly there is no appetite (as Option One is quoted) for subprime bundles in the secondary markets, what is the appetite for the rest? "Ohmigod, the subprime mortgages are toxic but these alt-a cookies from the same companies with the same expiration dates and same ingredients on the same shelf look just fine."
I couldn't agree with you more. Just go to CFC's website and look at all the homes that are their REO in Kallifornia alone. But aren't they the ones that said they are going to be our new mortgage overlord? Their REO count in CA alone was 360 on 12/27/06 and it was 832 on 3/6/07. Angelo and his homies haven't been selling 7+ million shares only because they want to diversify their portfolios. Always follow das CASH.
Noneya,
NEW CENTURY IS HERE TO STAY baby. Did none of you read my previous post? Was it too long winded?
You had a lot of good things in there.
I think they are going down, but that is why I am still holding NEW puts. Checking EBAY out for the Ferrari and Gulfstream jet.
I found this about WMC(WMC is a General Electric Subsidiary). There were rumors WMC was going to close last week but this appears to be what they were talking about:
Well, well....things are certainly exciting right now!
First the good news:
WMC is still open.
Now the bad:
As of today, WMC has closed four operations centers, including Bellevue. This move impacted 400+ of our operations people nationwide, but was part of our effort to attempt to continue operations.
WMC Mortgage now has a minimum FICO requirement of 600.
95% - 660 FICO minimum
90% - 600 FICO minimum
No Stated Wage Earners at all
Please bear with me as we go through this transition. I will have more information in the next 72 hours, and I'll communicate with you as best I can.
In the meantime, loans gotta be picked up, bills must be paid. If I can help with anything, please let me know.
Thanks
Ty Reed
WMC Mortgage
Business Development Associate - Sales
The demand for this new WMC product at these % LTV's and I assume increased interest rates will be much higher than the market will bear.
The suckers in the POA with a massive pre-pay and a 600 FICO will not have any cash to bring you the 10%?
Also, WMC is a member of GE, as a public company are you allowed to post this information before a press release?
What are the new sub 600 rates? 200-300bps above 700+ scores?
Is there a reason that Citi has it's annual credit conference in Monte Carlo? Is it because they'd like to be someplace that's got better odds than they're getting back home? Is that they're just addicted to gambling, or something?
The problem is not going to be in NEW not taking any new applications. Yes, some people will no longer qualify for loans - big deal.
The problem with NEW is that it is going to be the break in the dam for small correspondent lenders that generate a lot of NEW business. Think of this - no new applications just mean a reduction of business. Smart brokers/lenders will have new channels already in place to handle current originations. The bad part is all of the correspondent lenders who funded loans with the expectation that NEW would be there to buy them and now won't fund them, eventhough they have been funded by the correspondent. Now throw in the dramatic guideline changes at other investors and these loans all become unsellable. You now have a glut of loans headed for scratch and dent land which will exacerbate pricing losses due to the excess supply. This could be the perfect storm that ruins small lenders. Take 5 loans at 80 cents on the dollar and a low net-worth company and that spells trouble.
To make matters worse there is going to be a lot of politicking for the remaining funding dollars available for the last few loans to go through - and the biggest accounts are going to go through first, leaving the smaller volume lenders stuck with a lot of loans on their hands.
We could see a rash of bankruptcies from small lenders if NEW is unable to resume purchasing loans. That is the real problem - the application freeze is no big deal.
"Rumors are also swirling today that Wells Fargo..."
Brian,
thanks for the inside info...I love hearing things here first!
oneya said:
"look folks, here is the real deal from someone who knows....."
I'm sorry....what was your point? OOOOOH that "NEW CENTURY IS HERE TO STAY baby" OOOOOKKKKAAAAY baby......you just keep those finger and toes crossed!
LOL
Tanta, tell me another bedtime story:
For those of you playing along at home, "classification" of loans involves putting them into categories or classes for purposes of estimating allowances for loan losses (reserves) and capital requirements, as well as for determining safety and soundness ratings.
A very topical issue, particularly in light of the prevalence of neg-am ARMS.
So lets say a bank has a significant portion of its loan portfolio in neg-am ARMS. And the interest accruals (and outstanding principal balances) start jumping. Throw in a dose of economic malaise, and perhaps some resets, and presto: some of the puppies arent sitting up begging for mammas milk.
So my question to you is: under these circumstances, how does a bank monitor (and manage the loss allowances) and respond to the changing nature of the loan pool?
Does FDIC dictate the mechanics of the process, or only require that a process be place - with details left to Management?
Does Management let the (dead) puppies lay? Or do they re-evaluate each of the loans on a set periodic, or on occurrence of a significant economic event, basis?
Does anyone know where I can obtain information to track Notice of Default (NOD) issued by particular lender?
BK or not for NewCen but "NEW" stock should be going to zero:
The guys on the yahoo BB usually engage in mae calling (shorts Vs Longs) now turned out to be deep thinkers:
Yahoo! Message Boards -
Tanta:
Suppose I'm a bank holding sub-prime and prime loans in my portfolio.
After one year (or some period) of seasoning, can I re-classify the Subs and Prime?
Now this falls into the INTERESTING realm;
"Among hedge funds, Greenwich (Conn.)'s Carrington seems particularly vulnerable. Managed by ex-Citigroup banker Bruce M. Rose, the fund was launched in 2003 with $25 million in seed money from New Century, which owns about a 35% equity stake. Such an intimate tie between a lender and a hedge fund is highly unusual, say analysts. Carrington specializes in turning subprime mortgages into sophisticated bonds called collateralized debt obligations (CDOs) and selling them to other investors. Not surprisingly, New Century is one of Carrington's biggest suppliers, providing 17% of the loans in a recent deal. Another major supplier is Fremont General (FMT), which says it plans to exit the subprime business."
The Mortgage Mess Spreads
Is the party still going on ?
does anyone know a spanish speaking loan broker ???
This is what I saw :
"I was watching the Spanish-speaking TV channels and Im seeing TONS of commercials advertising ARMs and No-Down-Payment-with-Cash-Back loans. The ads tout, Dont lose your home to foreclosure. We can refinance you! .
So as you can see, the sub-prime lenders & fraudsters havent learned a SINGLE f*ing thing from all the current RE debacle. Chased from prime-time TV, theyve morphed and now -after a few Spanish classes- are invading the Latino airwaves. In my experience, the Spanish-speaking channels seem to be much less monitored by the FCC (or whoever it is that prohibits outrageaously false advertising) and the potential for MORE rip-offs is eminent.
Additionally (and I say this as a latino myself) most latino buyers are not as savvy or sofisticated as the average American consumer. Theyre usually not aware of where to turn for help or redress even when it is readily available. They dont know the local laws very well and on top of all this is theres the language barrier.
I dont get it. The market (aka suckers) theyre targeting with their ads is very specific; the desesperados. So just HOW can these lenders still expect to make any profits off of someone who is upside down, behind payments, with almost no equity and yet looking for a refi?.
Im a missing something here or am I just plain stupid?"
so what impact does the 30 yr fixed rate hitting a new low for 2007 have?
Since i've been reading this excellent blog for some time, dc1000, I know that you claim to be in the real estate biz in DC. So I'll answer your question with another one: how many average wage earners can afford to put 5% down and handle the monthly payments a 30 year requires at 6% on a nice little starter home in Cleveland Park or Kalorama?
State bailout;
Story not found - Cleveland.com
Consumers Spooked by Stock Market Drop
Expired
...Consumer confidence was knocked off a 2 1/2 year high in March ...
Consumer confidence sank to a three-month low of 92.3, according to the RBC Cash Index. That represented a steep slide from the fairly buoyant reading of 103 in early February,
"State bailout;"
Ohio, floating a $100 million bond. WTF? The state should be sending a bill to the Mortgage Bankers Association.
Muhlenkamp [$2.4 billion Muhlenkamp Fund]Loses Ground in Mortgage-Market Shakeout (Update1)
Muhlenkamp Loses Ground in Mortgage-Market Shakeout (Update1) - Bloomberg.com
If I didnt already own Countrywide shares, I would be buying the stock,' Muhlenkamp said.
Huh??? An itty-bitty, widdle, teensy, weensy stock market drop spooked the general public confidnence?
Have we forgotten 2002 so quickly? I call "bullshit" on this one.
Looks like C-BASS is having second thought re: Fieldstone.
"Fieldstone acquisition by C-Bass under scrutiny
Buyer may want lower price after subprime lender's stock sags: analysts"
Fieldstone share price implies concern over C-Bass deal - MarketWatch
"Ohmigod, the subprime mortgages are toxic but these alt-a cookies from the same companies with the same expiration dates and same ingredients on the same shelf look just fine."--
Well, the receipie may be different, but the cooks are the same. Three months ago they were talking about all the wholsome goodness of their cookies. Now that the health inspector has arrived and said "I'm thinking that on Sep 1 we'll have a new rule banning rat faeces and insect parts in the cookies" the cooks are saying: "NOO.. that'll kill our business."
yal--Are you sure, I don't think we've discovered yet just how unsophisticated the average American is. It looks like a very low bar to hurdle.
I think the problem is what the avg American was lead to believe:
*Everyone makes money from real-estate
*it never goes down
*home equity is the long term nest egg
*homes go up so much that even if you take some equity out....
*Why pay taxes when your debt is tax deductible
Just imagine how this country would look if for every $ saved in an IRA one would get $2 deduction from income taxes ?
Why do people have to consume all this made in china that breaks after 3 weeks ?
Why people mortgage their homes to get an SUV ?
This is not lack of sophistication this is mass madness.
I was raised outside of the US and the first time I was told that excess consumpation is good was in the US. until now I never buy it I jusy buy what I need.
Yal - I think there's a future for your freudian spelling of "consumpation" -- we consume to much and we get all stopped up with...ok nevermind.
I also am still seeing those 100 percent financing ads and wondering why the those trumpets are still blaring. I suppose it's the lowest fraudsters preying on the most naive buyers among us...but I too wonder when this music will stop.
PS noneya -- Any suggestions, statements of fact or otherwise imperative sentences with an emphatic "BABY" attached make me instantly disregard them. It kind of puts a bunch of hair gel and gold chains on the argument...
COMPLETELY OFF-TOPIC
I asked CR, but he indicated that he is busy, so I thought I'd take some initiative and ask the group.
I noticed Tanta complaining about retyping an explanation of Fannie Mae and Freddie Mac in a recent thread.
Is there anyone who would be willing and able to set up a wiki that could be used for definitions and explanations that seem to come up often?
My idea is that the wiki would be linked from here, with CR's imprimatur. Select people, determined by CR, would be able to edit the wiki, and perhaps provide definitions and acronym explanations for stuff that comes up often.
I think as the housing problem becomes more visible to the mainstream, CR's blog will get a lot more novices, and it would both be a nice service and a way of avoiding repeating explanations.
Just an idea. I'm not capable of hosting or setting up a wiki, otherwise I'd do it myself.
Bloomberg leaks: it's Morgan Stanley.
If true, this is more than a bridge loan. It's not only a quasi-DIP but a quasi sale-through-ch-11 which will probably happen anyway:
- Bloomberg.com
The company did get about $975 million of new financing from Morgan Stanley.
Morgan Stanley's funding included a $265 million loan that's secured by New Century's investment portfolio of mortgages and mortgage-backed securities, two people with knowledge of the deal said yesterday. Morgan Stanley, the second-biggest U.S. securities firm by market value, also provided $710 million -- secured by loans that New Century had planned to sell -- to replace a credit line that another lender revoked.
The investment portfolio was New Century's last remaining unencumbered asset,'' meaning it doesn't have anything left to offer other lenders as collateral, JPMorgan's Wessell said.We feel it is likely that New Century just used up its last option to avoid collapse,'' he said.
Ok, so Alo doesn't have his backside covered in tatoos:
It kind of puts a bunch of hair gel and gold chains on the argument...
and unlike Bernanke, has no gold rings through his left nostril...so important to look right and dress properly for the job.
Don't Dangerfield yourself people.
lenders only seeks repayment guarantee if you convince them for then only you can get a loan.