Subprime guidance may hit 60% of Countrywide ARMs
Submitted by
CalculatedRisk on Tue, 03/06/2007 - 2:15pm (33 comments)
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Part of me thinks we shouldn't need guidelines, but another part of me realizes there will never cease to be lenders stupid enough to shoot themselves in the foot with subprime loans, as long as they're capable of making them. Given this, I hope that these guidelines take or perhaps they can become mandatory.
http://about.countrywide.com/presentations/docs/RayJay%2003-06-07%20FINAL%20(website).pdf
Slideshow presentation, p. 24 is interesting.
Bank of America
You can listen to his presentation here.
""The worst thing would be over-activism," Sieracki said. "There is a market here that needs to be served." "
Replace served with exploited.
Cal beat me to the punch on this one. The other line that I thought was such a hoot was "99.9% are not swinging on a vine" and so even if 95% are dangling there, it could be worse, so what's your problem!
Some people need to be sentenced to hard labor --cleaning out the barn with a coal shovel maybe. Something.
Governor made call on behalf of lender
Governor made call on behalf of lender - The Boston Globe
These lenders deserve to take it on the chin in a big way. If the gov't bails them out it will encourage more of this crap in the future.
I cannot hope but notice a few trends from the pg 24 graph:
If they must cut loan production, there goes some income. If the current portfolio starts going into default... ouch!
Countrywide will be interesting to watch.
Got popcorn?
Neil
Tanta,
loans held for sale, off balance sheet item?
If off balance sheet are delinquency rates included in the disclosures?
tia
I like pages 14-16.
In 2006 they were #1 in ARM and #4 in nonprime(subprime and alt-a?) origination. (page 14)
One way they plan to grow the business is by Expanding the mortgage product line. (page 15)
And some really neat graphs on 13 and 16 that makes me think they had mortgage penis envy!
Question, I don't understand your question.
https://bank.countrywide.com/scontent.aspx?cmtag=Content-SavingsLink
5.40% on a Savings Account at Country wide
Tanta,
sorry for the confusion, say I have a 1B loan investment portfolio, 3% deliquency on the portfolio currently.
I also have an additional 1B in loans held for sale.
The 1B held for sale, due to the "desire" to sell, are they off balance sheet and or are they included in the above quoted deliquency numbers I gave, due to realistically having a 2B portfolio and potentially a higher delinquency rate depending on what is actually held for sale. I hope this clarifies and thanks again.
From Lurker's link:
In the conversation, Patrick vouched for the "current management and the character of the company," said Kyle Sullivan, his spokesman. Sullivan said Patrick told Rubin that he was serving as a personal reference for ACC as its owners pushed for the quick cash infusion from Citigroup that would stabilize their struggling lending firm.
A politician vouching for the character of anything? Yep, you can take that one to the bank... apparently.
http://about.countrywide.com/SECfilings/docs/10-K%20Fiscal%202006.pdf
10-K December
from page 64 -
Total pay-option ARM loan portfolio - $ 32,732,581 K
from page 105 -
Banking OperationsÂ’ portfolio of loans held for investment
$ 73,481,762K
looks like about 50% but i'm not sure. Am i correct?
I think my numbers are completely off. sorry.
What are the chances the FDIC steps in with Countrywide?
Kids, it looks like uncle Ben is going after Fannie and Freddie. Could there be something rotten in Danmark? It is getting interesting!
REBear,
That's total ARMs. We are just looking for hybrids.
Ben's cleaning up Alan's dirty laundry!
Ben is protecting the dollar. The second the smell coming from Freddie and Fanny gets too bad, the foreign investors in their paper are going to bail out.
Bernanke is all, repeate ALL, about the dollar.
Cosmo,
From the same document, page 105
Hybrid ARMs $14,459,105K
IIRC Greenspan wanted to reduce their portfolios but was only able to get the 30% cap in place, yes? The GSE lobbyists are not your small 2bit players.
I don't understand this Bernanke announcement. (Urging legislation to ensure that only affordable housing, some smaller segment, is supported.) Like those 2500 accountants have discovered that the "impairment" is more than the most recent guess of $6B? That was an improvement on the previous $12B, people. And is this a lot of money given our military adventures that spend that in a month?
Ok, I must be missing some Fannie news item...
I don't understand this Bernanke announcement. (Urging legislation to ensure that only affordable housing, some smaller segment, is supported.)
I bet the California, Florida & New York congressional delegations - of BOTH parties - will get right after it.
Or maybe not.
Thanks REBear.
However, that may be total and not reflect what they hold in the bag.
CR- just sent you a graph via email that may hold the answer. Take a look and see what you think.
Straight from the same paper (Merrill Lynch)
ARM applications were 46 percent of all Mortgage applications in 2004 and 2005!
BOOOYAAAAH!
arbogast
Take a pill baby - Yesterday the world was going to end and today your telling us Uncle Ben is all about the dollar. If Uncle Ben is so all about the dollar how come he and his Brother Paulson are on their hands and knees begging the Chinese to devalue our currency by letting theirs appreciate? hummmmm
Not Time Yet
Poor Bears, still waiting.
But it is acoming.
"So says Barry Ritholtz, chief market strategist of the eponymously named Ritholtz Research & Analytics. (In his spare time, he also pens The Big Picture, a must-read blog at The Big Picture, and is a regular guest on financial television, where he tries to provide a counterweight of rationality to the typical ravings heard there.)
"When we see these -3% days, especially after a long stretch of low volatility, it typically means volatility has returned with a vengeance. We should expect to see both higher AND lower prices," he writes in an e-mail."
So, what's ahead? More volatility, as in those previous episodes, which usually follows a drop after a period of subdued volatility, says Ritholtz. The markets also typically attempt to revisit their old highs as psychology is "balanced between complacency and denial," but fail to do so.
Ultimately, deeply oversold conditions create great entry points as markets get oversold, Ritholtz says. But that means breaking below 200-day moving averages, which for the Nasdaq Composite is about 100 points under Monday's close of 2340.68. In other words, considerably lower."
Good read over at Big Picture
"I heard from wmc AEs
No more W2 Stated
No loans under 600 Fico (need clarification on this) not sure if for full doc and stated
Other serious cuts coming soon as well. Also heard no one is happy and many ready to bail.
They are moving toward Alt A with Subprime Rates I feel bad for these guys
"
Mortgage Grapevine: WMC Mortgage
Other serious cuts coming soon as well. Also heard no one is happy and many ready to bail.
And where do they bail to? Just asking not snarking.
Kids, it looks like uncle Ben is going after Fannie and Freddie. Could there be something rotten in Danmark? It is getting interesting!
I have a different take on Ben's announcement and it connects to Warsh's 'Liquidity is Confidence' statement.
We're seeing a multi-pronged effort to keep the economy from melting.
JIT Instant liquidity.
A few things caused the smell test meter to register a frown.
CFC is offering 5.40% on their CD's. I don't see how they can make the net profit margin they did. Loans rates aren't THAT high. They mention that over 1/2 of their net income is from the nonmortgage side of the business. This is starting to remind me of Worldcom where they had a huge margin and no one (competitors) could figure out how they did it.
Notice that they mentioned they PURCHASED mortgage insurance on 2nds and Option Arms. Geiger counter is getting a reading here. As previously mentioned, Home Equity Loans delinquency is high and at an increasing rate.
Keep in mind Tanta's definition of subprime. It all boils down to how "subprime" is defined and as Tanta said, it is clear as mud and is not the same from lender to lender.
OK. new definition from california:
Sub-Prime mortgage = sub-million-dollar home.
This comes from Carmel vally (outside Carmel) where $1M+ homes are still selling well but the sub-million stoopped when the mortgae for sub prime stopped.
Tanta,
apparantly did not provide enough specific information in the hypothetical example.
Let me attempt this another way, could you provide more information on "loans held for sale"?
For instance, how long can they be held? Forever? Thus, the risk stays with the lender in absolute terms?
If, they are held for sale, under GAAP, can the non-performing, delinquency, non-accrual figures be segregated from the other pools that may be held, for instance in the "investment" portfolio?
tia
I found this information on the housingpanic blog site. I did not do any research to check on the accuracy of the information.
HousingPanic
"As subprime lending implodes, Angelo Mozilo is selling Countrywide shares as fast as he can"
He has sold thousands of shares since Jan. 07.
Question,
Loans held for sale are not off balance sheet. They are loans that have been originated or purchased for resale and financed with warehouse lines while awaiting sale. They're typically held for 30-45 days.
The interest rate risk of the loans is hedged, but they are obviously subject to margin calls from their warehouse lenders. Warehouse loans are carried at the lower of cost or market on the balance sheet, which incorporates a reduction in value for impaired loans.
The warehouse loans in nonacrrual status are distressed loans purchased at a discount through the conduit and loans whose credit quality has deteriorated since origination. NPA numbers include both loans HFI and loans HFS.