I am gonna say one last thing on the 125LTV refi topic (for now anyway).
this is just one more nail in the coffin of the MBS market. No one is going to want to participate in it.
As it is, the Fed is the only thing keeping mortgage rates from exploding. So far they have spent almost half of the $1.25T they have allocated (and think about that - $1.25T).
Once they run out, if they don't re-up that amount, the MBS market is going to explode. At today's 10 year, we would have 7% street rates on mortgages without the Fed intervention.
The Fed is basically committed to supporting the MBS market forever. think about what that means.
Pigged. Re-posting... in the hopes this isn't just rambling on though I don't claim to know how this would work.
Soylent Green Is People. (profile) wrote on Fri, 6/19/2009 - 2:13 pm
Before you respond... I do think principal forgiveness is the best and only way out of this. The bank would forgive 25-50% of your current debt, restructure the payment based on the rate you have, then have a equity participation requirement if you sell your home over the modified loan balance. Its fair, universal, and can be "one and done". Yes, it will kill MBS holders. I could care less. 50% of something is better than 100% of nothing.
Why not start inflation-indexing housing prices and values, allowing them to adjust with the times and economic conditions? END the ridiculous and socially-useless notion of a home as an investment vehicle, which allows the travesty that is the FIRE economy in the first place. Stop allowing these silly games and making ordinary people risk their livelihoods in this way. Let people speculate in tulip bulbs and beanie babies, not necessities like food and housing. Take all the speculative profit out and I guarantee people will still be buying homes.
On the 1st graph. Shift the Red bars to the left by 9 month, then you will see it is mirroring the Blue bar.
Pime mortgages are hitting with Tsunami with a little delays.
Looking at the trustee sale rolls through Fidelity from August 08 to Feb 09, most of them were 'postponed by mutual request'. Starting in late April, it became very rare to see those postponeds anymore. They are 85% back to lender, 8 cancelled, 7 sold approximately. I just started saving the results so dataset is too small to be useful yet.
Way off in the grass OT:
WIMBLEDON, England (AP) - Rafael Nadal will not defend his Wimbledon title.
The top-seeded Spaniard announced Friday he is withdrawing because of tendinitis in his knees.
He is the first reigning Wimbledon men's champion to not defend the title since Goran Ivanisevic in 2002 - and only the second in the last 35 years.
The grass-court Grand Slam tournament begins Monday.
We now return you to regularly scheduled programming...
The loan mods are and will continue to be failures. No matter how low the interest rate, or LTV guideline they are fully amortized payments making the monthly payment higher(or at best no lower) in almost all cases. Add to that the fact they will be paying on a depreciating, underwater asset with little hope of recovery any time soon. Most will just walk.
From Fox Oct 2008
WASHINGTON -- The Federal Reserve on Wednesday raised the interest rate that it pays to banks who keep excess reserves at the central bank. The new rate will be the federal funds target rate less 0.35 percentage points. The old formula was the fed funds rate less 0.75 percentage points. The Fed said that the narrower spread "would help foster trading in the funds market at rates closer to the target rate." The Fed said it would make further adjustmtnets to the rate as needed.
Here's my survey of what is going on in my neighborhood (Sandy Springs/Atlanta, GA):
6 out of 72 of the townhouses where I live are for sale, which is a little more than normal .They are fee simple, brick Williamsburg style, and well maintained. Listing prices range from $135K for a 2 bedroom foreclosure to $170K for a 3 bedroom. All have been on the market since early spring. None have sold or gone under contract. Sales prices last year were in the $225K (3 bedroom) to $175K (2 bedroom) range. Even though these townhomes are affordable & convenient for commuting to work, they are not selling. I think people are just too afraid to buy right now due to falling prices and rising unemployment.
At the local Kroger all high end pet food--Iams, the organic stuff they won't eat, etc.--is being discontinued and is on clearance.
And finally, has anyone else seen the ads for ABC Evening News about their " New Normal" series? It seems joblessness and poverty is to be the new normal.
-- how are the banks making any money on the reserves? --
By not loaning it out they are at least not losing money. Since they are not competent to judge risk, they will wait until much to late to re-enter the market. But by then the excess capacity will have been wrung out.
However the US Banks are not the only fish in the pool. The competition (and also their creditors) will be looking to relieve them of those reserves, and at the same time are also in a position to stake earlier claims on new enterprises.
California's unemployment rate has reached a modern high of 11.5 percent. Forty-seven of the state's 58 counties are suffering double-digit rates, with Yuba and Sutter approaching 20 percent.
"The Federal Reserve on Wednesday raised the interest rate that it pays to banks who keep excess reserves at the central bank. The new rate will be the federal funds target rate less 0.35 percentage points."
Whoa whoa whoa...I was JUST told on the last thread that the plan was for the banks to earn their way to solvency by earning interest on the $800+ Billion in excess reserves at the Fed. If the target rate is zero to .25, they are earning NEGATIVE .35 to NEGATIVE .10 percentage points! Does this not imply they are losing money on their reserves at the Fed??
I still haven't heard any reasonable answer for what the Fed eventually intends to do with all those excess reserves when the banks supposedly "earn" themselves out of this mess. To me, the highly inflationary outcome is still the most likely.
.25% on $800 Billion in reserves is only $2 Billion a year. How on earth is $2 Billion a year, spread across all major financial institutions, going to earn them back into solvency?? Excess reserves must reach into the tens of trillions, or rates are going to have to go way up for this plan to work...
OT:
June 19 (Bloomberg) -- House Republican Leader John Boehner called on President Barack Obama to launch an embargo of gasoline sales to Iran and take “a harder position” on that country’s suppression of political dissent.
U.S. leadership in organizing an international “block” on sales of “refined oil products” to Iran would “have an immediate impact on this regime’s horrible record” of not “dealing with their people in a fair and open way” as it tries to curb protests against the vote that re-elected President Mahmoud Ahmadinejad, Boehner said.
I have an idea for you, Mr. Boehner.
STFU!
It's the Pentagon that addresses protests as a form of 'low intensity terrorism'.
Patriot act?
My ass!
Put me on your watch lists, you POS!
Don't forget the "trading profits." Most big banks had wonderful Q1 trading results. AIG's enormous losses probably played a role in that gain, as well as the remarkable recovery in the stock market. However, I won't believe that this crisis is over until a big bank makes a quarterly profit from its portfolio of loans, the way they are supposed to make money.
Comrade Coinz;
"Maybe California will be in better shape after a multi-notch downgrade by Moody's."
Maybe the bozos in Sacto will pay attention now. They already raised taxes in February, now it's time to get get out the tourniquets and stop the bleeding. Better to lose a limb than to bleed to death.
If you accept the endogenous theory of money ( see Steve Keen's blog ) then money doesn't get created and "pushed" into circulation by the Fed, via the banks - rather its gets pulled by the punters with the banks, via the Fed creating it in response. The Fed, thinking that its all omnipotent doesn't believe this so its shoved the money at the banks who don't have punters to take it up ( also those who do want to borrow it aren't worth lending to ). So it just piles up at the banks, earning a measly .25 ( APY I hope ).
And this won't end until final users, the real users of money actually have a use for it, and the willingness to risk going to the bank to borrow it, and be good for it per the bank. That's a long time away.
@curious - except they didn't make profits - only played accounting games. I could make any business in the world profitable if I could mark the assets to whatever price I wanted them at and get away with it.
Former Corus CEO Glickman is still selling hard (SEC Filing today):
On June 17, 2009, Robert Glickman disposed of 952,201 shares of Common Stock beneficially owned by him. These shares were sold at a weighted average price per share of $0.28 (in multiple transactions at prices ranging from $0.28 to $0.31 per share, inclusive). On June 18, 2009, Robert Glickman disposed of 1,596,344 shares of Common Stock beneficially owned by him. These shares were sold at a weighted average price per share of $0.28 (in multiple transactions at prices ranging from $0.28 to $0.30 per share, inclusive). All of these sales were open market transactions.
Going back to the O mortgage plan for a minute, I still can't get over the gov't endorsing a plan that, unless I misunderstand, would take non-recourse loans and refi into full-recourse loans that could effectively wipe out the borrowers far beyond what walking away would do. A lot of these people are in deep trouble now - how much worse will it be if they could not only lose their house, but anything else they have, or even to the extent of garnishing wages?
Isn't there something wrong with that potential picture?
@ghost - read it before. When it comes to the half-glass of water thing, I'm in the camp that thinks it's full (half of it with air), and hope that the right people will come to their senses before it's too late.
He needs the money to get the best lawyers money can buy against shareholder and SEC suits.
Corus management covered up material disclosures with fluff way too long.
April 20, 2007 Press Release:
"“In spite of the recent decline in earnings, Corus’ overall success in lending to the commercial real estate
market has been nothing short of outstanding” Glickman continued. “In the last ten years, we originated
$20 billion in commercial real estate loans and until very recently had essentially zero charge-offs. During
that period, though, we stressed to you, our shareholders, that we anticipated that we would eventually
have some loan charge-offs. Lending is, by its nature, a risky business and loan losses should be expected.
With that said, we continue, as always, to focus on growing our business. Our list of loans pending
increased by 30% in just the last three months, to $5.1 billion as of March 31. Our originations can be
lumpy and, while loan originations in the first quarter of 2007 were disappointing, we remain optimistic
that by year-end 2007, we can achieve something materially greater than what the first quarter’s annualized
results suggest. Although condominium conversion activity has essentially ceased, condominium
construction continues nationwide, and we plan on actively pursuing this business."
quick question from the last post.- I understand that Fannie and Freddie can do whatever the heck they want to with the loans they own.; but how exactly do they do that with the loan they guarantee? In a loan that they guarantee a lender has made a loan to the borrower and that is where the contractual relationship is - Fannie has merely guaranteed the borrowers performance under that contract. Is there something special about their guarantee that allows them to cram down the lender?
"quick question from the last post.- I understand that Fannie and Freddie can do whatever the heck they want to with the loans they own.; but how exactly do they do that with the loan they guarantee? In a loan that they guarantee a lender has made a loan to the borrower and that is where the contractual relationship is - Fannie has merely guaranteed the borrowers performance under that contract. Is there something special about their guarantee that allows them to cram down the lender? "
nope, I touched on this before - under their GSE charters, they cannot just refinance loans over 80LTV without credit enhancement (usually mortgage insurance).
luckily for them, the govt decided to ignore the law and step on the rights of the mortgage holder.
"(2) For the purposes set forth in section 301(a), the corporation is authorized, pursuant to commitments or
otherwise, to purchase, service, sell, lend on the security of, or otherwise deal in mortgages which are not insured or
guaranteed as provided in paragraph (1) (such mortgages referred to hereinafter as “conventional mortgages”). No
such purchase of a conventional mortgage secured by a property comprising one- to four-family dwelling units shall
be made if the outstanding principal balance of the mortgage at the time of purchase exceeds 80 per centum of the
value of the property securing the mortgage, unless (A) the seller retains a participation of not less than 10 per
centum in the mortgage; (B) for such period and under such circumstances as the corporation may require, the seller
agrees to repurchase or replace the mortgage upon demand of the corporation in the event that the mortgage is in
default; or (C) that portion of the unpaid principal balance of the mortgage which is in excess of such 80 per centum
is guaranteed or insured by a qualified insurer as determined by the corporation. "
Picked up my copy of this two days ago softcover for $15. Have been wanting a copy for quite a while and it was too easy to pass up. The Barnes and Noble was a ghost town, the coffee bar inside had a smattering of high school/college students (on break for the summer) and very few customers buying, with at least six people working the counters and two shelving books. Lots of also-ran books about the financial system and business-survival sorts of works front facing. The fact that "The Road to Serfdom" was there at all was kind of disconcerting. Walking a B&N is sort of like surfing Google Trends in the flesh.
"@ghost - your reference (2) doesn't apply to the already insured loans, does it? "
Very interesting question.
Borrowers that already have MI are especially hosed. The GSEs can break their own laws all they want, but the MIs are each regulated by state laws. They cannot, by state law, insure loans with LTVs over 105, and if they insure a loan with an original LTV of 90, with a new LTV of 100, they are required to charge a higher rate. State law does not permit them to ignore the rates they filed, and they have to file with all 50 states.
So, instead they are treating these as "modifications" of the insurance. new loan, same insurance certificate.
in order to do that, though, there are all kinds of restrictions and hoops to jump through. and each MI (and there are seven of them) has different rules.
So it is possible for a borrower with MI to refi, but it is a lot tougher.
Not to mention, if you started with a 90LTV and only lost value to 100LTV, you still have to pay MI, but if you started at 80, and went to 105, no MI.
@ghost - okay, but as to the original question, in that case wouldn't the third-party lender be made whole by the GSE regardless of what happened with the borrower?
I think it's almost inevitable that, with a billion people in China wide awake for the first time, and a billion people in India, there's going to be some kind of a terrible run against the dollar. And I doubt it can stay orderly, because all of our own hedge funds will be right in the vanguard of the operation. And it will be hard to imagine that that wouldn't create different kind of meltdown.
"@ghost - okay, but as to the original question, in that case wouldn't the third-party lender be made whole by the GSE regardless of what happened with the borrower?"
If by "made whole" you mean paid off at par, yes.
But remember, the owner of the mortgage holds, say, a 7% mortgage that has little chance of refinancing and is guaranteed by Fannie, in an environment of 3.7% Treasury rates.
They get paid back at par, and put their money in a 5% mortgage?
200bps/year * 5 years = roughly 10% of the value, is how much they are ripped off.
New debt chasing goods is not as inflationary as newly printed money is. That's why the Fed is desperate to reflate asset values with debt. It's also why there is so much resistance to debt forgiveness as opposed to more favorable terms for existing debt.
the people buying the Corus ceo's shares are the morons who dont know it is HE that is selling them. Bagholders. Every last one. Except for any insiders who are willing to play some death throes manipulation of the stock before it goes belly up.
@liz - I know that talk about recourse bugs you, but just because it isn't done now doesn't mean it won't be as the losses pile up into the future. It'll be a matter of when (or if) it's deemed profitable to pursue that option.
Amusing that it is thought that people will withhold more in Cali for fear of having to pay more
a year from now. Who knows how it will be a year from now?
Yah, pension fund managers will buy anything, it's not their money and they get bribes and such to buy garbage. The people who hire the pension fund managers don't care either, because they get bribes too.
Seeking deficiency judgments will not be profitable. Judges have to grant them you know. Judges here
are elected.
Judges used to be entirely on the side of the lender. Not anymore. Too many people have come into court literally crying and trembling. It is nothing for a judge to put off the foreclosure sale for 5 months. About 1 month after foreclosure is required at least and there isn't enough court resources to do it that soon so it's taking 2 months. Crying people used to be less unhappy with 3 months more free. Now its 5 months. You think these same judges are gonna award deficiencies? Nahhhhh.
Amusing that it is thought that people will withhold more in Cali for fear of having to pay more
a year from now. Who knows how it will be a year from now?
My guess is that most people didn't pay much attention to how the tax increases, especially removing the child tax credit, will affect their situation.
Then, there are those who refuse to pay early knowing they might not get a timely refund back.
Then, there are those who are actively working to reduce their tax burden and don't plan to pay extra income tax.
"125s, if/when you could get them, were in the high single digits back in the day."
I hadn't looked at them in a long, long time (the '90s), and thought I remembered them being 30 year plus about six or eight points. They were definitely a sub-prime product back then. But, we're in a Brave New World now.
Man, Ghost, sometimes I think I should be wearing a green eye shade, and sleeve garters!
"I think it's almost inevitable that, with a billion people in China wide awake for the first time, and a billion people in India,..."
Right there he loses me. India is still terribly impoverished and ill-run, and China, while better, is filled with low-wage people by any standard. India's middle-class is a thin layer on top of an impoverished mass.
Look, I think even Tanta discussed this as to the 125 thing.
I had somebody come in today who owes about 200k on a house worth 100k (maybe 120k on a
really good day now, but prices are still falling)..
She is love with this house. She wants to die in this house. If the bank offered to refi her at 150k
with a low rate (it's about 8% now), she would prolly accept!!! And the bank would get off good,
too. As an REO, even if it sells at 100k, it will have at least 10k worth of broker's commissions and
expenses. That vs an income stream on 150K? I think this is a no brainer. The lender would
probably chose the 90k selection.
The choice isn't between being whole or losing money. The losing money option was baked in
2 years ago. It is between losing less money and losing more money.
I want my Bank Failure!!!
There is no normal. Not even green eyeshades and garters!
For the 30 years and more that I have been practicing law, in Florida, deficiency judgments have almost never
been asked for with regard to houses. So, if it's broke, it's been broke a long time. The same lenders who would
regularly go after an upside down car borrower ignored and ignore house borrowers, upside down for far more.
And deficiency judgements in Fla are a matter of RIGHT.
Asking for them, and getting them granted, assuming you could, including proof of
value, would be in the 1k to 2k range I'd guess. Per file. I can't see the lenders advancing that kind of
money.
Lenders are certainly not required to ask for them, so it's not the law that's broken.
"The crazy thing is, these were available even early last year. As were option arms."
The 125s were pretty much killed off before the turn of the century, but they came back, just like the blood sucking vampire that they are, during the bubble years. I saw it, and just shook my head.
Option ARMs always seemed to be available in some form. I had access to them through Sierra Pacific (I think that was the name), but never used them. They were for a very special and unusual customer.
Oh, a new twist on unpaid condo and maintenance fees.
A poverty stricken condo asked for and got a receiver appointed for 11
units that were not paying maintenance and being rented. There was never
any question that you could have a receiver appointed, but it would be too
expensive to ask for one for each individual delinquent owner, which is
what people thought was necessary. A smart lawyer asked for one receiver
for the 11 and got it. So the tenants must pay the receiver, not the landlord.
I presume they would be protected from eviction.
will be some unhappy landlords. Most or all of the 11 are in foreclosure.
By the way, the lenders could do the same thing, but they are not.
When everybody is subprime, then nobody will be.
I am gonna say one last thing on the 125LTV refi topic (for now anyway).
this is just one more nail in the coffin of the MBS market. No one is going to want to participate in it.
As it is, the Fed is the only thing keeping mortgage rates from exploding. So far they have spent almost half of the $1.25T they have allocated (and think about that - $1.25T).
Once they run out, if they don't re-up that amount, the MBS market is going to explode. At today's 10 year, we would have 7% street rates on mortgages without the Fed intervention.
The Fed is basically committed to supporting the MBS market forever. think about what that means.
CR, where are the Option ARMs or do they not get reported in their own category?
It's all C.R.E.A.M
Cash Rules Everything Around Me.
Ya Best Protect ya neck!
To err is human
To forgive, subprime
So once I get my loan modified, that means I can borrow more, right?
Pigged. Re-posting... in the hopes this isn't just rambling on though I don't claim to know how this would work.
Soylent Green Is People. (profile) wrote on Fri, 6/19/2009 - 2:13 pm
Before you respond... I do think principal forgiveness is the best and only way out of this. The bank would forgive 25-50% of your current debt, restructure the payment based on the rate you have, then have a equity participation requirement if you sell your home over the modified loan balance. Its fair, universal, and can be "one and done". Yes, it will kill MBS holders. I could care less. 50% of something is better than 100% of nothing.
Why not start inflation-indexing housing prices and values, allowing them to adjust with the times and economic conditions? END the ridiculous and socially-useless notion of a home as an investment vehicle, which allows the travesty that is the FIRE economy in the first place. Stop allowing these silly games and making ordinary people risk their livelihoods in this way. Let people speculate in tulip bulbs and beanie babies, not necessities like food and housing. Take all the speculative profit out and I guarantee people will still be buying homes.
-- At today's 10 year, we would have 7% street rates on mortgages without the Fed intervention. --
And what pray tell happens with intervention? Hu pays for the difference?
On the 1st graph. Shift the Red bars to the left by 9 month, then you will see it is mirroring the Blue bar.
Pime mortgages are hitting with Tsunami with a little delays.
Elephants and Asses
Trampling the Masses
(with some help from their friends)
Commercial Banks: Long-Term Contribution Trends | OpenSecrets
from a pigged question way back:
Last american item purchased: 3 t shirts from American Apparel.
Heh heh - Beavis - He said Deed in Loo.... heh heh...
Oh, I get by with a little help from my friends...
Finance/Insurance/Real Estate: Long-Term Contribution Trends | OpenSecrets
Careful guys (PPT). You could get charged for premature pumping... Wait for it...
American Shotgun Maker:
http://www.remington.com/products/firearms/shotguns/model_870/
Those that have the keys to the US Treasury make the rules, the rest are just subprime.
-- Those that have the keys to the US Treasury make the rules --
No.
Those that buy US Treasuries make the rules.
edit: Those that threaten to sell US Treasuries make the rules.
Looking at the trustee sale rolls through Fidelity from August 08 to Feb 09, most of them were 'postponed by mutual request'. Starting in late April, it became very rare to see those postponeds anymore. They are 85% back to lender, 8 cancelled, 7 sold approximately. I just started saving the results so dataset is too small to be useful yet.
Way off in the grass OT:
WIMBLEDON, England (AP) - Rafael Nadal will not defend his Wimbledon title.
The top-seeded Spaniard announced Friday he is withdrawing because of tendinitis in his knees.
He is the first reigning Wimbledon men's champion to not defend the title since Goran Ivanisevic in 2002 - and only the second in the last 35 years.
The grass-court Grand Slam tournament begins Monday.
We now return you to regularly scheduled programming...
kinda muted elmo vs. kermit cage match here.........
The loan mods are and will continue to be failures. No matter how low the interest rate, or LTV guideline they are fully amortized payments making the monthly payment higher(or at best no lower) in almost all cases. Add to that the fact they will be paying on a depreciating, underwater asset with little hope of recovery any time soon. Most will just walk.
At what interest is the FED paying on the reserves? 10-year yield? FED Fund Rate ?
From Fox Oct 2008
WASHINGTON -- The Federal Reserve on Wednesday raised the interest rate that it pays to banks who keep excess reserves at the central bank. The new rate will be the federal funds target rate less 0.35 percentage points. The old formula was the fed funds rate less 0.75 percentage points. The Fed said that the narrower spread "would help foster trading in the funds market at rates closer to the target rate." The Fed said it would make further adjustmtnets to the rate as needed.
CA is now starting to threaten taxpayers. I guess many people did adjust their withholdings.
Act now to avoid ugly tax surprise, California warns
404 - Not Found - sacbee.com
Please watch carefully now, as the gov't balances equities, bonds, and the dollar all at the same time! Hold your applause!
But Fund Rate is now .25 ? So.... how are the banks making any money on the reserves?
Def Jane - best line in the comments of that article "Fuglier than Janet Reno" - hahahahahahahahaha........
@ Times
I don't know how they are making dough...
Here's my survey of what is going on in my neighborhood (Sandy Springs/Atlanta, GA):
6 out of 72 of the townhouses where I live are for sale, which is a little more than normal .They are fee simple, brick Williamsburg style, and well maintained. Listing prices range from $135K for a 2 bedroom foreclosure to $170K for a 3 bedroom. All have been on the market since early spring. None have sold or gone under contract. Sales prices last year were in the $225K (3 bedroom) to $175K (2 bedroom) range. Even though these townhomes are affordable & convenient for commuting to work, they are not selling. I think people are just too afraid to buy right now due to falling prices and rising unemployment.
At the local Kroger all high end pet food--Iams, the organic stuff they won't eat, etc.--is being discontinued and is on clearance.
And finally, has anyone else seen the ads for ABC Evening News about their " New Normal" series? It seems joblessness and poverty is to be the new normal.
-- how are the banks making any money on the reserves? --
By not loaning it out they are at least not losing money. Since they are not competent to judge risk, they will wait until much to late to re-enter the market. But by then the excess capacity will have been wrung out.
However the US Banks are not the only fish in the pool. The competition (and also their creditors) will be looking to relieve them of those reserves, and at the same time are also in a position to stake earlier claims on new enterprises.
California's unemployment rate has reached a modern high of 11.5 percent. Forty-seven of the state's 58 counties are suffering double-digit rates, with Yuba and Sutter approaching 20 percent.
Here in Chapel Hill, NC, in my neighborhood, homes priced between $350K-$480K are not moving. Not good for me. Definitely not good for my neighbors.
Can't touch this:
Allendale, SC
The unemployment rate in Allendale is 23.40 percent
Speed, you are about to get crispy&cole irritated, by reciting that 20% number.
kcoop -
What happened to my "refresh" button?
"The Federal Reserve on Wednesday raised the interest rate that it pays to banks who keep excess reserves at the central bank. The new rate will be the federal funds target rate less 0.35 percentage points."
Whoa whoa whoa...I was JUST told on the last thread that the plan was for the banks to earn their way to solvency by earning interest on the $800+ Billion in excess reserves at the Fed. If the target rate is zero to .25, they are earning NEGATIVE .35 to NEGATIVE .10 percentage points! Does this not imply they are losing money on their reserves at the Fed??
I still haven't heard any reasonable answer for what the Fed eventually intends to do with all those excess reserves when the banks supposedly "earn" themselves out of this mess. To me, the highly inflationary outcome is still the most likely.
Soylent and ghost thanks for your commentary last post.
Maybe California will be in better shape after a multi-notch downgrade by Moody's.
Sweet zombie jesus.
At what interest is the FED paying on the reserves? 10-year yield? FED Fund Rate ?
25 basis points.
FRB: Interest on Required Balances and Excess Balances
.25% on $800 Billion in reserves is only $2 Billion a year. How on earth is $2 Billion a year, spread across all major financial institutions, going to earn them back into solvency?? Excess reserves must reach into the tens of trillions, or rates are going to have to go way up for this plan to work...
OT:
June 19 (Bloomberg) -- House Republican Leader John Boehner called on President Barack Obama to launch an embargo of gasoline sales to Iran and take “a harder position” on that country’s suppression of political dissent.
U.S. leadership in organizing an international “block” on sales of “refined oil products” to Iran would “have an immediate impact on this regime’s horrible record” of not “dealing with their people in a fair and open way” as it tries to curb protests against the vote that re-elected President Mahmoud Ahmadinejad, Boehner said.
I have an idea for you, Mr. Boehner.
STFU!
It's the Pentagon that addresses protests as a form of 'low intensity terrorism'.
Patriot act?
My ass!
Put me on your watch lists, you POS!
@MyKillK
Don't forget the "trading profits." Most big banks had wonderful Q1 trading results. AIG's enormous losses probably played a role in that gain, as well as the remarkable recovery in the stock market. However, I won't believe that this crisis is over until a big bank makes a quarterly profit from its portfolio of loans, the way they are supposed to make money.
Comrade Coinz;
"Maybe California will be in better shape after a multi-notch downgrade by Moody's."
Maybe the bozos in Sacto will pay attention now. They already raised taxes in February, now it's time to get get out the tourniquets and stop the bleeding. Better to lose a limb than to bleed to death.
If you accept the endogenous theory of money ( see Steve Keen's blog ) then money doesn't get created and "pushed" into circulation by the Fed, via the banks - rather its gets pulled by the punters with the banks, via the Fed creating it in response. The Fed, thinking that its all omnipotent doesn't believe this so its shoved the money at the banks who don't have punters to take it up ( also those who do want to borrow it aren't worth lending to ). So it just piles up at the banks, earning a measly .25 ( APY I hope ).
And this won't end until final users, the real users of money actually have a use for it, and the willingness to risk going to the bank to borrow it, and be good for it per the bank. That's a long time away.
-K
@Gnome - You're not already on the list?
skk - Here's the rub. The "users" have already gone to the banks with their HELOCs and Subprime loans.
CRE has also been leveraged to the max.
Credibility has been (mostly) wiped out.
House Republican Leader John Boehner called on President Barack Obama to launch an embargo of gasoline sales to Iran
I must be confused about which way the oil imports and exports.
@curious - except they didn't make profits - only played accounting games. I could make any business in the world profitable if I could mark the assets to whatever price I wanted them at and get away with it.
"I must be confused about which way the oil imports and exports. "
You are. Iran does not have the refining capacity to produce its own gasoline, thus they must import it.
They can refine uranium, though, so it's all good.
@TARP
I agree completely. The big bank quarterly reports are taken directly from the Handbook of Smoke-and-Mirrors Accounting.
Former Corus CEO Glickman is still selling hard (SEC Filing today):
On June 17, 2009, Robert Glickman disposed of 952,201 shares of Common Stock beneficially owned by him. These shares were sold at a weighted average price per share of $0.28 (in multiple transactions at prices ranging from $0.28 to $0.31 per share, inclusive). On June 18, 2009, Robert Glickman disposed of 1,596,344 shares of Common Stock beneficially owned by him. These shares were sold at a weighted average price per share of $0.28 (in multiple transactions at prices ranging from $0.28 to $0.30 per share, inclusive). All of these sales were open market transactions.
He has dumped almost everything.
"I have an idea for you, Mr. Boehner.
STFU!
It's the Pentagon that addresses protests as a form of 'low intensity terrorism'."
Could these fools just shut it. Boehner is a meddling jackass.
You are. Iran does not have the refining capacity to produce its own gasoline, thus they must import it.
And when we refuse to export the refined petroleum to iran, what happens to our imports of unrefined petroleum?
Going back to the O mortgage plan for a minute, I still can't get over the gov't endorsing a plan that, unless I misunderstand, would take non-recourse loans and refi into full-recourse loans that could effectively wipe out the borrowers far beyond what walking away would do. A lot of these people are in deep trouble now - how much worse will it be if they could not only lose their house, but anything else they have, or even to the extent of garnishing wages?
Isn't there something wrong with that potential picture?
Isn't there something wrong with that potential picture?
Only if you're a borrower.
"Isn't there something wrong with that potential picture? "
It will all make sense if you read this book.
The Road to Serfdom - Wikipedia, the free encyclopedia
"And when we refuse to export the refined petroleum to iran, what happens to our imports of unrefined petroleum? "
I did not say that it was a smart policy move.
Nope.
People are Smart.
Mr. Bohner, excepted.
Is that pronounced BONER?
Re: Glickman
At least he is safe from accusations of trading on inside information.
That CORS is worth precisely zero is pretty obvious...
I guess I'm a bit upset that Nadal isn't playing Wimbeldon this year.
Time to take my meds...
@ghost - read it before. When it comes to the half-glass of water thing, I'm in the camp that thinks it's full (half of it with air), and hope that the right people will come to their senses before it's too late.
He needs the money to get the best lawyers money can buy against shareholder and SEC suits.
Corus management covered up material disclosures with fluff way too long.
April 20, 2007 Press Release:
"“In spite of the recent decline in earnings, Corus’ overall success in lending to the commercial real estate
market has been nothing short of outstanding” Glickman continued. “In the last ten years, we originated
$20 billion in commercial real estate loans and until very recently had essentially zero charge-offs. During
that period, though, we stressed to you, our shareholders, that we anticipated that we would eventually
have some loan charge-offs. Lending is, by its nature, a risky business and loan losses should be expected.
With that said, we continue, as always, to focus on growing our business. Our list of loans pending
increased by 30% in just the last three months, to $5.1 billion as of March 31. Our originations can be
lumpy and, while loan originations in the first quarter of 2007 were disappointing, we remain optimistic
that by year-end 2007, we can achieve something materially greater than what the first quarter’s annualized
results suggest. Although condominium conversion activity has essentially ceased, condominium
construction continues nationwide, and we plan on actively pursuing this business."
who is buying his shares?
quick question from the last post.- I understand that Fannie and Freddie can do whatever the heck they want to with the loans they own.; but how exactly do they do that with the loan they guarantee? In a loan that they guarantee a lender has made a loan to the borrower and that is where the contractual relationship is - Fannie has merely guaranteed the borrowers performance under that contract. Is there something special about their guarantee that allows them to cram down the lender?
"quick question from the last post.- I understand that Fannie and Freddie can do whatever the heck they want to with the loans they own.; but how exactly do they do that with the loan they guarantee? In a loan that they guarantee a lender has made a loan to the borrower and that is where the contractual relationship is - Fannie has merely guaranteed the borrowers performance under that contract. Is there something special about their guarantee that allows them to cram down the lender? "
nope, I touched on this before - under their GSE charters, they cannot just refinance loans over 80LTV without credit enhancement (usually mortgage insurance).
luckily for them, the govt decided to ignore the law and step on the rights of the mortgage holder.
"(2) For the purposes set forth in section 301(a), the corporation is authorized, pursuant to commitments or
otherwise, to purchase, service, sell, lend on the security of, or otherwise deal in mortgages which are not insured or
guaranteed as provided in paragraph (1) (such mortgages referred to hereinafter as “conventional mortgages”). No
such purchase of a conventional mortgage secured by a property comprising one- to four-family dwelling units shall
be made if the outstanding principal balance of the mortgage at the time of purchase exceeds 80 per centum of the
value of the property securing the mortgage, unless (A) the seller retains a participation of not less than 10 per
centum in the mortgage; (B) for such period and under such circumstances as the corporation may require, the seller
agrees to repurchase or replace the mortgage upon demand of the corporation in the event that the mortgage is in
default; or (C) that portion of the unpaid principal balance of the mortgage which is in excess of such 80 per centum
is guaranteed or insured by a qualified insurer as determined by the corporation. "
@crazyv - unless they change the rules, my guess would be that the lender will be made whole, as per the contract.
gabyjan (profile) wrote on Fri, 6/19/2009 - 1:51 pm
who is buying his [Glickman's] shares?
Various retirement funds, hedge funds capitalized by retirement funds, insurance reinvestment funds backed by pension funds, etc. IOW you.
ghostfaceinvestah (profile) wrote on Fri, 6/19/2009 - 3:45 pm
It will all make sense if you read this book.
The Road to Serfdom - Wikipedia, the free encyclopedia
softcover for $15. Have been wanting a copy for quite a while and it was too easy to pass up. The Barnes and Noble was a ghost town, the coffee bar inside had a smattering of high school/college students (on break for the summer) and very few customers buying, with at least six people working the counters and two shelving books. Lots of also-ran books about the financial system and business-survival sorts of works front facing. The fact that "The Road to Serfdom" was there at all was kind of disconcerting. Walking a B&N is sort of like surfing Google Trends in the flesh.
Picked up my copy of this two days ago
Treasury-Altered Reality Plan (profile) wrote on Fri, 6/19/2009 - 1:57 pm
@crazyv - unless they change the rules, my guess would be that the lender will be made whole, as per the contract.
You've never played CalvinFed before have you son?
@ghost - your reference (2) doesn't apply to the already insured loans, does it?
@Dawg -
My momma didn't raise no fools. You play the games you can win.
thanks rob dawg but i dont want them.
You're quite welcome. I imagine after that comment you've been put down for a second helping.
"@ghost - your reference (2) doesn't apply to the already insured loans, does it? "
Very interesting question.
Borrowers that already have MI are especially hosed. The GSEs can break their own laws all they want, but the MIs are each regulated by state laws. They cannot, by state law, insure loans with LTVs over 105, and if they insure a loan with an original LTV of 90, with a new LTV of 100, they are required to charge a higher rate. State law does not permit them to ignore the rates they filed, and they have to file with all 50 states.
So, instead they are treating these as "modifications" of the insurance. new loan, same insurance certificate.
in order to do that, though, there are all kinds of restrictions and hoops to jump through. and each MI (and there are seven of them) has different rules.
So it is possible for a borrower with MI to refi, but it is a lot tougher.
Not to mention, if you started with a 90LTV and only lost value to 100LTV, you still have to pay MI, but if you started at 80, and went to 105, no MI.
totally messed up.
@gabyjan - you'll be fine as long as your fund managers are smarter and faster than the slowest, dimmer managers they're hoping to sell the junk to.
Yeah, skk, from way upthread, that's why there won't be inflation. The money is not out there chasing anything and
certainly not too few goods.
It's not Boehner's fault. His spray tan has taken over his mind, like Venom in the Spiderman comics.
@ghost - okay, but as to the original question, in that case wouldn't the third-party lender be made whole by the GSE regardless of what happened with the borrower?
Apologies if already posted but this was interesting (ht economist view):
An Interview With Paul Samuelson, Part Two - Conor Clarke
I think it's almost inevitable that, with a billion people in China wide awake for the first time, and a billion people in India, there's going to be some kind of a terrible run against the dollar. And I doubt it can stay orderly, because all of our own hedge funds will be right in the vanguard of the operation. And it will be hard to imagine that that wouldn't create different kind of meltdown.
"It will all make sense if you read this book."
Unfortunately, the population is now too dumbed down to read it.
An update of the comic-book version is needed.
Is the manga fad still running?
Arrrghhh. Treasury altered-- no deficiency jugdments are being asked for by anybody.
Therefore, as of now there is no difference between recourse and non recourse.
Iceman: I live in Durham !
Decent houses here under 200k are selling like hotcakes
Neighbors got 10K over their initial (lowball imho) asking price
Took 3 days to sell...
"@ghost - okay, but as to the original question, in that case wouldn't the third-party lender be made whole by the GSE regardless of what happened with the borrower?"
If by "made whole" you mean paid off at par, yes.
But remember, the owner of the mortgage holds, say, a 7% mortgage that has little chance of refinancing and is guaranteed by Fannie, in an environment of 3.7% Treasury rates.
They get paid back at par, and put their money in a 5% mortgage?
200bps/year * 5 years = roughly 10% of the value, is how much they are ripped off.
New debt chasing goods is not as inflationary as newly printed money is. That's why the Fed is desperate to reflate asset values with debt. It's also why there is so much resistance to debt forgiveness as opposed to more favorable terms for existing debt.
So - what's the drinking game for BFF?
edit: BTW, kudos to whoever wrote the glossary entry for BFF.
the people buying the Corus ceo's shares are the morons who dont know it is HE that is selling them. Bagholders. Every last one. Except for any insiders who are willing to play some death throes manipulation of the stock before it goes belly up.
@liz - I know that talk about recourse bugs you, but just because it isn't done now doesn't mean it won't be as the losses pile up into the future. It'll be a matter of when (or if) it's deemed profitable to pursue that option.
So - what's the drinking game for BFF?
One shot for each time that you refresh CR and there's no banking failure.
Amusing that it is thought that people will withhold more in Cali for fear of having to pay more
a year from now. Who knows how it will be a year from now?
"One shot for each time that you refresh CR and there's no banking failure. "
With auto-refresh in force, I'll be under the table before the first announcement!
"They get paid back at par, and put their money in a 5% mortgage?"
Ghost, that brings us to the $64,000 question in my mind. How do we price these 125% LTV loans?
If a 30 year fixed loan at 80% LTV is 5.750%, what should the rate be on a 30 year fixed rate at 125% LTV? That should be priced in the teens.
Except that we don't use risk based pricing anymore. Sigh....
The trick of this CR drinking game is not to get drunk, but to survive till the next day.
"With auto-refresh in force, I'll be under the table before the first announcement!"
Not a bad way to finish up the week!
Yah, pension fund managers will buy anything, it's not their money and they get bribes and such to buy garbage. The people who hire the pension fund managers don't care either, because they get bribes too.
Seeking deficiency judgments will not be profitable. Judges have to grant them you know. Judges here
are elected.
Judges used to be entirely on the side of the lender. Not anymore. Too many people have come into court literally crying and trembling. It is nothing for a judge to put off the foreclosure sale for 5 months. About 1 month after foreclosure is required at least and there isn't enough court resources to do it that soon so it's taking 2 months. Crying people used to be less unhappy with 3 months more free. Now its 5 months. You think these same judges are gonna award deficiencies? Nahhhhh.
No pig. No BF yet. I am betting by the time I get to Brooklyn (45 mins) the magic pig will appear. Twice.
"Ghost, that brings us to the $64,000 question in my mind. How do we price these 125% LTV loans?"
The GSEs do have risk-based pricing:
http://www.freddiemac.com/singlefamily/pdf/ex19.pdf
but for these refis, they are capping the point adds at 2pts (as per govt dictate, I have been told), or about 50bps in rate.
so instead of a 5.5% loan today, they have to get a 6% loan.
125s, if/when you could get them, were in the high single digits back in the day.
Bernie Kosar files bk...
Bernie Kosar, Ex-Browns Quarterback, Files Bankruptcy (Update2) - Bloomberg.com
Yuan
Your link has questionable info....
"first let me say that I have big admiration for Larry Summers as an economist."
that moody's article merits a pig IMO...
so, 10% CA GOs coming soon? I'll buy that for a dollar!
"And finally, has anyone else seen the ads for ABC Evening News about their " New Normal" series? "
Almost worth watching TV to find out about that.
Amusing that it is thought that people will withhold more in Cali for fear of having to pay more
a year from now. Who knows how it will be a year from now?
My guess is that most people didn't pay much attention to how the tax increases, especially removing the child tax credit, will affect their situation.
Then, there are those who refuse to pay early knowing they might not get a timely refund back.
Then, there are those who are actively working to reduce their tax burden and don't plan to pay extra income tax.
"125s, if/when you could get them, were in the high single digits back in the day."
I hadn't looked at them in a long, long time (the '90s), and thought I remembered them being 30 year plus about six or eight points. They were definitely a sub-prime product back then. But, we're in a Brave New World now.
Man, Ghost, sometimes I think I should be wearing a green eye shade, and sleeve garters!
"sometimes I think I should be wearing a green eye shade, and sleeve garters! "
That's part of the New Normal. Gotta get with the program!
@liz - I guess my only comment there is that it shouldn't be a surprise that part of the system is broken too. What's the point of laws again?
"I think it's almost inevitable that, with a billion people in China wide awake for the first time, and a billion people in India,..."
Right there he loses me. India is still terribly impoverished and ill-run, and China, while better, is filled with low-wage people by any standard. India's middle-class is a thin layer on top of an impoverished mass.
green eye shade
No judgement from me, Terry.
Look, I think even Tanta discussed this as to the 125 thing.
I had somebody come in today who owes about 200k on a house worth 100k (maybe 120k on a
really good day now, but prices are still falling)..
She is love with this house. She wants to die in this house. If the bank offered to refi her at 150k
with a low rate (it's about 8% now), she would prolly accept!!! And the bank would get off good,
too. As an REO, even if it sells at 100k, it will have at least 10k worth of broker's commissions and
expenses. That vs an income stream on 150K? I think this is a no brainer. The lender would
probably chose the 90k selection.
The choice isn't between being whole or losing money. The losing money option was baked in
2 years ago. It is between losing less money and losing more money.
I want my Bank Failure!!!
There is no normal. Not even green eyeshades and garters!
"What's the point of laws again?"
Laws define the minimum behavior which is accepted by society. 'Law' is that which is enforced. What is written has no meaning unless it's enforced.
"hadn't looked at them in a long, long time (the '90s), and thought I remembered them being 30 year plus about six or eight points."
I think the seconds were definitely in the 15% range, if you went that route.
The crazy thing is, these were available even early last year. As were option arms.
For the 30 years and more that I have been practicing law, in Florida, deficiency judgments have almost never
been asked for with regard to houses. So, if it's broke, it's been broke a long time. The same lenders who would
regularly go after an upside down car borrower ignored and ignore house borrowers, upside down for far more.
And deficiency judgements in Fla are a matter of RIGHT.
Asking for them, and getting them granted, assuming you could, including proof of
value, would be in the 1k to 2k range I'd guess. Per file. I can't see the lenders advancing that kind of
money.
Lenders are certainly not required to ask for them, so it's not the law that's broken.
"I had somebody come in today who owes about 200k on a house worth 100k (maybe 120k on a
really good day now, but prices are still falling).."
And you know damn well the bank (or the GSE, or whoever holds the credit risk) has the loan marked at below 150 on their books.
So why shouldn't she be allowed to offer to buy the mortgage back at the mark?
Maybe she could come up with the money, maybe not, but at least she should get the option.
"The crazy thing is, these were available even early last year. As were option arms."
The 125s were pretty much killed off before the turn of the century, but they came back, just like the blood sucking vampire that they are, during the bubble years. I saw it, and just shook my head.
Option ARMs always seemed to be available in some form. I had access to them through Sierra Pacific (I think that was the name), but never used them. They were for a very special and unusual customer.
Where did I leave my walker....
Edit: Sierra Western?
So why shouldn't she be allowed to offer to buy the mortgage back at the mark?
For the same reason you'd pay 50% more than the house is "worth".
Ego and emotion.
Oh, a new twist on unpaid condo and maintenance fees.
A poverty stricken condo asked for and got a receiver appointed for 11
units that were not paying maintenance and being rented. There was never
any question that you could have a receiver appointed, but it would be too
expensive to ask for one for each individual delinquent owner, which is
what people thought was necessary. A smart lawyer asked for one receiver
for the 11 and got it. So the tenants must pay the receiver, not the landlord.
I presume they would be protected from eviction.
will be some unhappy landlords. Most or all of the 11 are in foreclosure.
By the way, the lenders could do the same thing, but they are not.
Pigged again!!
Couldn't said it better myself. Best Wu-Tang song ever!!!