Keep it up, CR. It can't be said enough b/c mainstream journalists can't/won't tell the truth. Rising median sales price means nothing in a dysfunctional market like this one.
Not sure if it's been mentioned here, but the cover story of the July 6 Nation is a puff piece by a CJR editor on Gretchen Morgenson. I wouldn't mention it except that it includes a brief mention of Tanta as one of "a handful of bloggers" (Larry Ribstein is the only other mentioned by name) that "have created large bodies of work debunking and mocking her and picking her apart." No details of Tanta's critiques are given; there's a mention of Morgenson's argument that Fannie and Freddie should provide mortgage-by-mortgage details of every loan in every security as something the blogosphere unreasonably objected to but there's no suggestion of why anyone might have thought the proposal unworkable.
I'm looking forward to the letters section in a few weeks, though I'll probably be disappointed. Once upon a time the letters section of the Nation was a riproaring free-for-all but a new editorial staff put the clamps on it a decade or so ago--I suppose they thought it was counterproductive for the movement or something but I really miss the old rows.
Continuing from previous topic of MBS downgrades. Which idiot still holds these at high valuations? I would've thought that the holders internally mark down their MBS holdings, even before the ratings agencies do anything. Thus, this should be a non-event.
Question is: Is it? Or are all MBS investors still playing Emperor has no clothes game?
For all intents and purposes for most of America, the music has stopped and if you were fortunate enough to grab a chair in this game of musical chairs, you're gonna hold onto it, and you aren't going anywhere.
The modern frontier is closed for the time being...
Here in the SF bay area the only homes selling are foreclosures or homes selling at 40% or more off their 2006 prices!! Banks here are hardly lending on new jumbo loans!
Same type of sales in Phx.
Foreclosures or short sales.
Although the Board of Realtors will tell you different. And the differents is investors buying very super cheap from the REO list of trash properties - fixing and flipping at super low prices.
When you can buy an REO at $20,000. put $10,000. in it and sell it for $50,000. you still make a good return. And this is noted as a normal seller to buyer sale. So cash talks and loans walk in Az.
I've heard comment that 120% of GDP now is different than back in WWII, where we had more debt but our country is a net creditor to the world. Now we're a net debtor.
I challenge this line of thought.
I would submit that it is beneficial to be a creditor right after WWII -- if a country has the capacity to lend -- because the world is on a path of rebuilding after a period of huge devastation and destruction. The future, almost by definition, will look better, simply because it cannot be any worse. Also, the demography at the time is showing a remarkable increase in population, which indicates good future demand/production.
Similarly...
I would submit that it is beneficial to be a debtor now -- if there's a country/countries who have the capacity to lend it to us -- because the world is essentially production saturated and very few pockets of development opportunities are left.
The future, looks pretty bleak. Overpopulation needs to be solved by people reduction (either voluntarily, or nature takes it course, or by old age retirement/dying) which almost by definition means net productivity/demand goes down. Over consumption of natural resource, means harder and more expensive commodities going forward, esp non-renewable ones; ditto to cleanup efforts linked to global warming (or alternatively, don't clean up, and then spend the same or more on "dealing" with disasters like drought, ocean raising, less water, less viable farmland, etc"... Same or greater cost). Unless we finally found a way to live on other planets, I don't see a "green fields" development cycle repeating soon.
If you think it's insane for USA to borrow; I submit it's even more insane for people to lend it to us!!! It takes two to tango, and right now it looks like one of the party/both is being quite irrational. In an irrational game, the best solution is to play along with it, as long as you keep the endgame in sight.
In our case, it begs the question: Who do you think hurts more in a default? The banker? or the depositor / laborer?
In the case of a massive default; the link/trust between banker and depositor breaks down. At that time, both sides have to live on it's own: The banker without new "deposits", the laborer without work/salary. Or... both sides come to the negotiation table, to vote to continue this insanity? I think reading the world news will tell you where that vote is going.
(i.e. China's still continuing to peg. Japan's still buying UST. These weeks massive 30 year auction is successful beyond words. The status quo continues...)
True crisis that will topple USA occurs when there's a real alternative for the world -- someone else who's willing/able to be the world's banker. That country needs 3 qualities: ability to live with large current account deficits, ability of it's populace/govt to absorb all that extra money, and have the market believe their money is safer than putting it elsewhere.
Until we have that, nothing changes. USA will be a dumping ground for excess goods and excess savings; China & India will be a dumping ground for churning out production at slavery wages.
The Harvard chart showed half of seriously delinquent mortgages being private label but also showed nearly a third of seriously delinquent mortgages being Fannie/Freddie/Ginnie, which seems high considering the supposed safety of conforming loans.
I would like to see some type of risk-adjusted comparison on that topic.
A friend bought a house for $340k in 2003 (nothing down) and rode the equity bandwagon to the tune of HELOCing $240k out of Excalibare and got foreclosed on about 6 months ago, and the house just sold for a little over $200k.
To be able to buy it for $200k at the county steps, you needed a cashier's check for $200k right then and there,
Somebody lost $380K on this one home, and probably millions of more financial horror stories just like it...
Forget about the GSEs market share today, it was well under 50% in 2006, so any data they have misses over half of the transactions from that year. i.e. if someone took out an Alt A in 2006, went under, then someone bought that house with an agency loan today, that transaction is not included in the FHFA data.
Case shiller is much more complete in depth, though it does not have the breadth.
The Harvard chart showed half of seriously delinquent mortgages being private label but also showed nearly a third of seriously delinquent mortgages being Fannie/Freddie/Ginnie, which seems high considering the supposed safety of conforming loans.
It seems a bit unreasonable to lump Ginnie in with Fannie/Freddie conforming. Splitting it out, the Harvard chart shows:
private label: 50% of seriously delinquent mortgages, 15% of all mortgages
bank and thrift portfolios: 11% of delinquencies, 15% of all
other portfolios: 8%/3%
GNMA: 11%/11%
Fannie/Freddie: 20%/56%
Which is enough to give us relative delinquency rates by portfolio type (overall average delinquency rate = 1.
According to Harvard, private label loans were about ten times as likely to go bad as Fannie/Freddie; even without supprting data I feel pretty safe saying they weren't getting a corresponding spread in their rates.
"Lockhart has been a serial offender of bad data points. "
Agreed, even their flawed data series is somewhat suspect. i believe they are manipulating their data, it does not jibe with anything else i have seen.
I missed the last thread...but here's my personal perspective regarding prime loans from 1998, and how they could possibly be in danger of blowing up...
I bought my house in 1998 for $689K, so I took out a loan of just over half a million dollars. My job in high-tech is very uncertain today, and I can assure you I would not be able to make the payments on that loan from 1998 (if I still owned the home) if I were to become the victim of a layoff. That's one of the reasons I sold the house in 2005.
The unemployment in the Silicon Valley is at or near all-time highs. Lots of prime borrowers from 1998 will foreclose on their jumbos if they lose their jobs. And remember that many of those prime borrowers from 1998 subsequently used their HELOC piggy bank to fund lifestyles that maybe they couldn't afford to live.
But that being said, with all the refi possibilities over the past years, I'm surprised if there are many 1998 loans in existence anymore!
Getting back to hyperinflation needing a vehicle (coins or currency) to be possible as we know it, keep in mind that both of those delivery mechanisms spread a very palpable fear that is not only occurring in real-time, but was quite visual. The fear now is all under the surface, a unseen digital fear not unlike that of somebody afraid of flying, because they have no control over the situation in the cockpit.
OK, this is another post that I totally don't understand.
FHFA says the prices they monitor are only down 0.3% for Jan 2009 to Apr 2009.
NAR says May prices are down 16.8% May 2008 to May 2009.
Why are these statements incosistent with each other? Everyone knows prices went way down between this year and last year. It's also plausible that the price drop curve has gotten a lot shallower in recent months. Finally, seasonal variations would usually have prices rising Jan-Apr.
The fact that FHFA is looking at "better performing" loans seems entirely irrelevant to the house prices except for the fact that the loan is 417000 max and that the cash buyers at auctions don't need loans.
On the PBS Newshour last year, there was a story on Zimbabwe and it had people ferreting through the trash looking for food, while undisturbed on the top of the heap was a $10 Million banknote that nobody laid claim to...
That's raw unfettered hyperinflation at it's worst.
Fear due to no control. And fear that due to the last two times they suckered everyone into stocks they got slammed, not many are willing to get back in the pool.
How many times are you willing to see your 401k drop by 30% to 50%?
What's the hapless Fed gonna do? You know they must be pissed that even with massive mortgage intervention they can't hold rates under 5%. Will they commit more to buy GSE paper & Treasurys ?
Here in the NW suburbs of Chicago, the pace of sales recorded at the county courthouse is less than half that of 2006.
And, for example, in Arlington heights where the MLS lists dozens of homes above $1 million asking, and around a hundred total above $600k asking, the highest sale price recorded as of May 20 was $825k, and only 6 homes had sold for $600k or more.
The situation is the same in all the NW suburbs. In even-more-upscale Barrington, only a handful of sales above $1 million have been recorded so far.
The overall market volume is off more than 50%, at the high end, down nearly 100%.
"You know they must be pissed that even with massive mortgage intervention they can't hold rates under 5%"
well, as the TBT knucklehead contingent is aware, USTs have had an impressive rally since friday morning. if the doomsters here are right, they could really fly, and get 30-yr fixeds back closer to 5% than 6% right quick.
"That country needs 3 qualities: ability to live with large current account deficits, ability of it's populace/govt to absorb all that extra money, and have the market believe their money is safer than putting it elsewhere."
jm...the trickle of high end sales is the wile e coyote moment, before he starts the descent...the only question is, how many of those little bubble captions will appear over his head, in succession, and what will they say while he levitates there for a while, before accelerating downward?
Red Roof Inn is defaulting on $332 million of mortgage debt.
No story yet.
While a small default, the trend is clear. Look how quickly the hotel dominos are falling. I expect a trickle through the summer (that is peak travel season). Then, the defaulting should start in earnest.
Airlines that need a bailout:
JAL
Air India
Air Canada
How quickly that list will grow too. (Air travel lags the economy. Thus building aircraft lags the economy by a 8 to 12 quarters!)
"On the PBS Newshour last year, there was a story on Zimbabwe and it had people ferreting through the trash looking for food, while undisturbed on the top of the heap was a $10 Million banknote that nobody laid claim to...
That's raw unfettered hyperinflation at it's worst."
During the German inflation of the 20s a woman went shopping with a basket full of currency. She left it for a moment on a doorstep, and when she came back the cash was still there but the basket had been stolen.
"While such products may be useful in some sophisticated trading strategies, they are highly complex financial instruments that are typically designed to achieve their stated objectives on a daily basis," the notice said. "Due to effects of compounding, their performance over longer periods of time can differ significantly from their stated daily objective."
The notice called on brokerage and advisory firms to properly supervise sales and to make sure all sales material is properly designed.
.......
Two funds that illustrate the magnified impact for a long-term investor are Direxion Daily Financial Bear 3X Shares (trading symbol FAZ) and Direxion Daily Financial Bull 3X Shares (FAS). The bear ETF, which seeks daily returns of three times the inverse of the Russell 1000 Financial Services Index, is down 85% year-to-date, according to FactSet Research. The bull fund, which seeks daily returns of three times the Russell 1000 Financial Services Index, is down 67% in the same period.
However, Mr. Sapir said ProFunds has $27 billion in leveraged long, leveraged short and short ETFs, and that nearly a third of those assets are in products linked to the S&P 500 index. Data show there is a high probability of approximating one-day target returns over longer periods, and that the likelihood of a fund's return direction "flipping" is very low, he said.
"What some are doing is looking at a very limited extraordinary period and drawing conclusions," Mr. Sapir said.
what they really hate is that it cuts directly into the business of selling ridiculously overpriced options to retail suckers... kind of like how WS hated the move away from fractional trading 12 years ago - good forbid joe-six-pack has easy, cheap access to strategies which were limited to CME and stamford types 5 years ago.
Doesn't defaulting on allow the holder of the obligation to accelerate all payments?
Depends on the covenant
Can this force Red Rufie into BK?
We really didn't want to go into BK and purge most of our debt load, but the mean creditors filed an involuntary petition. Without the stigma (thanks GM), corporate BK will become as prevalent as jingle mail.
Seriously Delinquent Mortgages Are So Far Concentrated Among Private Label Securities
But, wait...what? von Mises, Schumpeter, Hayek and Friedman promised me it couldn't be so...anytime the government gets involved it must, of necessity distort things in a way that causes undue risk and loss.
I find it really funny that FNM, FRE and the old-style Brick-and-Mortar, keep-it-on-our-books bank & thrift portfolios are outperforming everything else. This really should put the lie to the claim that this mess is the result of either implicit government guarantees or of government homeownership policy mandates (i.e., the CRA); rather, it's government's "meddlesome" regulatory strings that made these entities less prone to undue risk-taking than the unregulated securities market.
um, Scott... you are aware that FRE/FNM isn't failing because of a running IV to the tune of tens of billions in direct funds from the feds, alongside an ever-growing 'backstop' commitment also by the feds?
FNM/FRE's only competition is with AIG and C (BAC) in terms of being a bigger fiscal drain on our economy than the average war. It doesn't "put the lie" to the above, in fact, it is exhibit A in supporting it.
CalculatedRisk (profile) wrote on Tue, 6/23/2009 - 1:37 pm
I still haven't seen a story on Red Roof yet (I saw the headline).
I agree - there will probably be many more hotel defaults. Those occupancy / RevPAR numbers are killers!
best to all
CR you are correct about the RevPar but the real danger is in debt loads. This isn't like the last times. CRE profit models were priced beyond perfection. Even with optimal operating conditions agressive appreciation was necessary to make these buys pencil out.
IMO the biggest tragedy will be when good, honest hoteliers submarined by the irrational death throes of the overextended chains and then the deflationary spiral gets established.
In 2007, Red Roof was acquired by for $1.3 billion by a group led by Citigroup Inc.'s Global Special Situations Unit and including hotel manager Westmont Hospitality Group.
Umm... 2007? this has got to be part of Citi's $300B Fed-built ringfence.
There are a very small number of conservative banks that didn't get sucked into the mortgage madness, especially in the big bubble areas. Normally prudent banks and credit unions offered 0% down, low doc loans just to get any business during the worst of it. We are all paying the price now. Without the artificially low and meddlesome Fed interest rates, things may not have gotten so out of hand.
Hollywood - I realize they are on an IV, but my point is that their underwriting guidelines, while compromised, were clearly nowhere near as reckless as the "private label" garbage which led the market down this merry path. That they have been swamped by the price drops and are on life support, that is not the same thing as the delinquency rate, which is a better reflection of the underwriting guidelines. If Tanta were here, she'd probably school me, but you are conflating two things that aren't necessarily relevant.
FNM/FRE clearly didn't have sufficient capital backstop to sustain even their own relatively smaller default rates, but they were not the source of the most reckless lending, and were forced by the market, to some extent, to engage in a race to the bottom. The only reason they didn't race to the bottom faster is that the Congress fought to force them to reduce their overall share of the market.
@Coinz There are a very small number of conservative banks that didn't get sucked into the mortgage madness, especially in the big bubble areas. Normally prudent banks and credit unions offered 0% down, low doc loans just to get any business during the worst of it.
I had the impression a lot of CUs, small Banks and Thrifts engaged in this, to the extent they could sell the loans and get them off their books - and they had to in order to compete for business! I was alluding to those loans they elected to keep on their own books.
The point you make is precisely what I am trying to describe as the race-to-the-bottom. More prudent institutions are forced to engage in what they perceive to be overly-risky behavior just to remain in business, since they have to compete with irrational competitors.
Listen: I don't question that FNM/FRE are a horrific financial burden, but really: the default rates of their portfolio are not the same thing as taxpayer bailouts...bailouts don't stop the defaults.
Vonbek777 (profile) wrote on Tue, 6/23/2009 - 1:56 pm
Anybody know how the Disney Resorts and Parks are doing this year?
Nobody but Disney. They are notoriously closemouthed. Anecdotally, (we have season tix) there is no trend to report from the consumer side. The national/ethnic/socioeconomic mix has shifted slightly but nothing newsworthy.
"Hollywood - I realize they are on an IV, but my point is that their underwriting guidelines, while compromised, were clearly nowhere near as reckless as the "private label" garbage which led the market down this merry path."
so the raging drunk in the gutter (FRE/FNM) isn't as bad as the methhead mugger (countrwide)... that doesn't prove much, in fact, it really shows how FRE/FNM set the bar and let the tan man do his routine.
your point is 100% wrong - FRE/FNM totally corrupted the mortgage market and created what will be trillions in losses for the taxpayer for the exact reason that you mock - public/govt entities destroying the natural function of markets.
Comrade Scott,
I'm old school. I don't believe money comes in different colors. Anything less than contracted obligations is a bailout no matter the mechanism or label.
"since they have to compete with irrational competitors. "
right, and irrational competitor #1 was fannie and freddie. they were irrational because they had zero exposure to market risk thanks to the 'GS' in GSE. this really is exhibit A for the Austrian prosecution.
right, and irrational competitor #1 was fannie and freddie. they were irrational because they had zero exposure to market risk thanks to the 'GS' in GSE. this really is exhibit A for the Austrian prosecution
So, are you claiming that CFC and Bear Stearns and Lehman were forced to run to Gilleran and Reich at OTS to slash regulations just to take on insane risks to compete with FNM/FRE?
The housing slump has reduced the median price of an existing home 26 percent from the July 2006 peak, pushing affordability to near record levels. Prospective buyers are now being constrained by rising mortgage rates, the highest unemployment since 1983 and concern the housing rebound will be anemic.
While U.S. builders increased housing starts by 17 percent in May to an annual rate of 532,000, a May 26 report from S&P/Case-Shiller showed home prices in 20 U.S. metropolitan areas fell 18.7 percent in March from the same month last year.
All signs point to further declines. Yale University Professor Robert Shiller, co-founder of the S&P/Case-Shiller index, said earlier this month that prices will continue to fall, contributing to a prolonged recession.
Deutsche Bank AG analysts last week said that U.S. home prices may fall another 14 percent before reaching a bottom as an increase in the jobless rate offsets lower prices. The worse declined may hit the New York and Orange County, California, metropolitan areas, analysts led by Karen Weaver said.
... the protease enzyme genetically modified in the potatoes being sold through Western fast food restaurants as French Fries to protect against Potato virus X causes an “explosive” replication of the H1N1 influenza virus by increasing the acidic conditions of the endosome and causing the hemagglutinin protein to rapidly fuse the viral envelope with the vacuole's membrane, then causing the M2 ion channel to allow protons to move through the viral envelope and acidify the core of the virus, which causes the core to dissemble and release the H1N1’s RNA and core proteins into the hosts cells.
What is the maximum Social Security retirement benefit?
Answer
The maximum benefit depends on the age at which a worker chooses to retire. The amount for 2009 for a person retiring at full retirement age (66) is $2,323. This is based on earnings at the maximum taxable amount for every year after age 21. You can see the maximum amount of taxable earnings for each year at Contribution and Benefit Base.
Furst?
Running out of crap the banks are forced to sell habitable units and we are surprised at a median increase?
Keep it up, CR. It can't be said enough b/c mainstream journalists can't/won't tell the truth. Rising median sales price means nothing in a dysfunctional market like this one.
It came from FHFA....Lockhart has been a serial offender of bad data points.
Damn those pesky appraiser's....
By the time we get cumulative #'s ala CS this, as well as the closer to real #'s, will be "priced in".
Ciao
MS
I guess this just wasn't New Century's century.
So house prices will recover in reports, before mid to high houses corrects?
But if reports show recovering prices, then mid-to-high sellers will have even more psychological encouragement to hold or even raise their prices.
Which is it? Both can't be true.
Time to place bets for the closing market numbers.
UP or DOWN?
Flat or a big last minute swing?
I will go with up by 50 on the Dow.
OT (or, come to think of it, maybe not entirely):
Not sure if it's been mentioned here, but the cover story of the July 6 Nation is a puff piece by a CJR editor on Gretchen Morgenson. I wouldn't mention it except that it includes a brief mention of Tanta as one of "a handful of bloggers" (Larry Ribstein is the only other mentioned by name) that "have created large bodies of work debunking and mocking her and picking her apart." No details of Tanta's critiques are given; there's a mention of Morgenson's argument that Fannie and Freddie should provide mortgage-by-mortgage details of every loan in every security as something the blogosphere unreasonably objected to but there's no suggestion of why anyone might have thought the proposal unworkable.
I'm looking forward to the letters section in a few weeks, though I'll probably be disappointed. Once upon a time the letters section of the Nation was a riproaring free-for-all but a new editorial staff put the clamps on it a decade or so ago--I suppose they thought it was counterproductive for the movement or something but I really miss the old rows.
The Most Important Financial Journalist of Her Generation
josap- flat...
Continuing from previous topic of MBS downgrades. Which idiot still holds these at high valuations? I would've thought that the holders internally mark down their MBS holdings, even before the ratings agencies do anything. Thus, this should be a non-event.
Question is: Is it? Or are all MBS investors still playing Emperor has no clothes game?
For all intents and purposes for most of America, the music has stopped and if you were fortunate enough to grab a chair in this game of musical chairs, you're gonna hold onto it, and you aren't going anywhere.
The modern frontier is closed for the time being...
Here in the SF bay area the only homes selling are foreclosures or homes selling at 40% or more off their 2006 prices!! Banks here are hardly lending on new jumbo loans!
Same type of sales in Phx.
Foreclosures or short sales.
Although the Board of Realtors will tell you different. And the differents is investors buying very super cheap from the REO list of trash properties - fixing and flipping at super low prices.
When you can buy an REO at $20,000. put $10,000. in it and sell it for $50,000. you still make a good return. And this is noted as a normal seller to buyer sale. So cash talks and loans walk in Az.
Rock said Jumbo lending was abundance on his planet.
I've heard comment that 120% of GDP now is different than back in WWII, where we had more debt but our country is a net creditor to the world. Now we're a net debtor.
I challenge this line of thought.
I would submit that it is beneficial to be a creditor right after WWII -- if a country has the capacity to lend -- because the world is on a path of rebuilding after a period of huge devastation and destruction. The future, almost by definition, will look better, simply because it cannot be any worse. Also, the demography at the time is showing a remarkable increase in population, which indicates good future demand/production.
Similarly...
I would submit that it is beneficial to be a debtor now -- if there's a country/countries who have the capacity to lend it to us -- because the world is essentially production saturated and very few pockets of development opportunities are left.
The future, looks pretty bleak. Overpopulation needs to be solved by people reduction (either voluntarily, or nature takes it course, or by old age retirement/dying) which almost by definition means net productivity/demand goes down. Over consumption of natural resource, means harder and more expensive commodities going forward, esp non-renewable ones; ditto to cleanup efforts linked to global warming (or alternatively, don't clean up, and then spend the same or more on "dealing" with disasters like drought, ocean raising, less water, less viable farmland, etc"... Same or greater cost). Unless we finally found a way to live on other planets, I don't see a "green fields" development cycle repeating soon.
If you think it's insane for USA to borrow; I submit it's even more insane for people to lend it to us!!! It takes two to tango, and right now it looks like one of the party/both is being quite irrational. In an irrational game, the best solution is to play along with it, as long as you keep the endgame in sight.
In our case, it begs the question: Who do you think hurts more in a default? The banker? or the depositor / laborer?
In the case of a massive default; the link/trust between banker and depositor breaks down. At that time, both sides have to live on it's own: The banker without new "deposits", the laborer without work/salary. Or... both sides come to the negotiation table, to vote to continue this insanity? I think reading the world news will tell you where that vote is going.
(i.e. China's still continuing to peg. Japan's still buying UST. These weeks massive 30 year auction is successful beyond words. The status quo continues...)
True crisis that will topple USA occurs when there's a real alternative for the world -- someone else who's willing/able to be the world's banker. That country needs 3 qualities: ability to live with large current account deficits, ability of it's populace/govt to absorb all that extra money, and have the market believe their money is safer than putting it elsewhere.
Until we have that, nothing changes. USA will be a dumping ground for excess goods and excess savings; China & India will be a dumping ground for churning out production at slavery wages.
The Harvard chart showed half of seriously delinquent mortgages being private label but also showed nearly a third of seriously delinquent mortgages being Fannie/Freddie/Ginnie, which seems high considering the supposed safety of conforming loans.
I would like to see some type of risk-adjusted comparison on that topic.
A friend bought a house for $340k in 2003 (nothing down) and rode the equity bandwagon to the tune of HELOCing $240k out of Excalibare and got foreclosed on about 6 months ago, and the house just sold for a little over $200k.
To be able to buy it for $200k at the county steps, you needed a cashier's check for $200k right then and there,
Somebody lost $380K on this one home, and probably millions of more financial horror stories just like it...
the Unabanker Untouchables
The Transports say "Kermit."
It looks like we're getting a pump into the close in commodities.
I guess I logged on too late to buy any POT today.
"Rock said Jumbo lending was abundance on his planet."
My jaw still drops when I hear it. Last one I heard was jumbo + 2nd mortgage for improvements. The madness hasn't ended.
/Assuming this was directed at me
It looks like we're getting a pump into the close in commodities. I guess I logged on too late to buy any POT today.
God I'm slow. Only today did I realize that pot is now a commodity.
I think POT was was a buy at 88.20 this morning. Looks like it will close over 92.
I think I need a commodity timing service and a better alarm clock.
POT was due for a good day...take your gains peeps....not time to buy and hold on that for antoher few months. Never hold POT..you get busted.
FHFA data, in a word, sux.
Forget about the GSEs market share today, it was well under 50% in 2006, so any data they have misses over half of the transactions from that year. i.e. if someone took out an Alt A in 2006, went under, then someone bought that house with an agency loan today, that transaction is not included in the FHFA data.
Case shiller is much more complete in depth, though it does not have the breadth.
The Harvard chart showed half of seriously delinquent mortgages being private label but also showed nearly a third of seriously delinquent mortgages being Fannie/Freddie/Ginnie, which seems high considering the supposed safety of conforming loans.
It seems a bit unreasonable to lump Ginnie in with Fannie/Freddie conforming. Splitting it out, the Harvard chart shows:
private label: 50% of seriously delinquent mortgages, 15% of all mortgages
bank and thrift portfolios: 11% of delinquencies, 15% of all
other portfolios: 8%/3%
GNMA: 11%/11%
Fannie/Freddie: 20%/56%
Which is enough to give us relative delinquency rates by portfolio type (overall average delinquency rate = 1.
private label: 3.3
other portfolios: 2.7
GNMA: 1.0
banks/thrifts: 0.7
Fannie/Freddie: 0.4
According to Harvard, private label loans were about ten times as likely to go bad as Fannie/Freddie; even without supprting data I feel pretty safe saying they weren't getting a corresponding spread in their rates.
"Lockhart has been a serial offender of bad data points. "
Agreed, even their flawed data series is somewhat suspect. i believe they are manipulating their data, it does not jibe with anything else i have seen.
15 minutes to close biatches
I missed the last thread...but here's my personal perspective regarding prime loans from 1998, and how they could possibly be in danger of blowing up...
I bought my house in 1998 for $689K, so I took out a loan of just over half a million dollars. My job in high-tech is very uncertain today, and I can assure you I would not be able to make the payments on that loan from 1998 (if I still owned the home) if I were to become the victim of a layoff. That's one of the reasons I sold the house in 2005.
The unemployment in the Silicon Valley is at or near all-time highs. Lots of prime borrowers from 1998 will foreclose on their jumbos if they lose their jobs. And remember that many of those prime borrowers from 1998 subsequently used their HELOC piggy bank to fund lifestyles that maybe they couldn't afford to live.
But that being said, with all the refi possibilities over the past years, I'm surprised if there are many 1998 loans in existence anymore!
But that being said, with all the refi possibilities over the past years, I'm surprised if there are many 1998 loans in existence anymore!
Seems like by now that pool would have self-selected for the unobservant, if not the economically illiterate.
Just a guess on my part: Allot of people got 2nd or HELOCs rather than refi. It was easier, it was cheaper and it was marketed.
So while the 1998 loans are still on the books, there is much more money owed than the first.
"So while the 1998 loans are still on the books, there is much more money owed than the first."
Never underestimate the stupidity...
the median is NOT flawed insofar as it presents an actual snapshot of the market. Those of you who took 8th grade math know that it is not an average.
once again:
no one wanted to acknowledge that the Marin County median was, very recently, around 850K.
DQNews Archives 2006 - Bay Area Press Release
It was! just like no one wants to acknowledge that LA county SFR median is currently at 295K.
DQNews - Los Angeles Times Zip Code Chart
It is (or was last month)!
Reality bites.
From the wsj:
Red Roof Inn is defaulting on $332 million of mortgage debt.
No story yet.
Getting back to hyperinflation needing a vehicle (coins or currency) to be possible as we know it, keep in mind that both of those delivery mechanisms spread a very palpable fear that is not only occurring in real-time, but was quite visual. The fear now is all under the surface, a unseen digital fear not unlike that of somebody afraid of flying, because they have no control over the situation in the cockpit.
OK, this is another post that I totally don't understand.
FHFA says the prices they monitor are only down 0.3% for Jan 2009 to Apr 2009.
NAR says May prices are down 16.8% May 2008 to May 2009.
Why are these statements incosistent with each other? Everyone knows prices went way down between this year and last year. It's also plausible that the price drop curve has gotten a lot shallower in recent months. Finally, seasonal variations would usually have prices rising Jan-Apr.
The fact that FHFA is looking at "better performing" loans seems entirely irrelevant to the house prices except for the fact that the loan is 417000 max and that the cash buyers at auctions don't need loans.
Red Roof Inn is defaulting on $332 million of mortgage debt.
Bah. I don't even blink for anything less than a billion now.
@ hollywood: Your dq link is from '06.
Red Roof End is near
:01pBREAKING
Oracle Q4 revenue $6.86 bln vs $7.24 bln
ORCL beat estimates on top and bottom.
On the PBS Newshour last year, there was a story on Zimbabwe and it had people ferreting through the trash looking for food, while undisturbed on the top of the heap was a $10 Million banknote that nobody laid claim to...
That's raw unfettered hyperinflation at it's worst.
dave..
profit slumps but beats wall street view....they wouldn't have it any other way....spin...
That is exactly it JD.
Fear due to no control. And fear that due to the last two times they suckered everyone into stocks they got slammed, not many are willing to get back in the pool.
How many times are you willing to see your 401k drop by 30% to 50%?
jabil revenue doing same thing....I'm sure glad all these companies laid off workers to meet street views....
Jabil Circuit Q3 revenue $2.62 bln vs $3.09 bln
In that case, as I expect to have a zero balance in my check book by month end - and I have $2.00 - I am rich!!!!!
Opps, forgot the bank fees. Now I am underwater. LOL
i know, i was trying to find the peak (which was absurd). it was 815 a year ago if you look at the most recent CA cities chart.
What's the hapless Fed gonna do? You know they must be pissed that even with massive mortgage intervention they can't hold rates under 5%. Will they commit more to buy GSE paper & Treasurys ?
Here in the NW suburbs of Chicago, the pace of sales recorded at the county courthouse is less than half that of 2006.
And, for example, in Arlington heights where the MLS lists dozens of homes above $1 million asking, and around a hundred total above $600k asking, the highest sale price recorded as of May 20 was $825k, and only 6 homes had sold for $600k or more.
The situation is the same in all the NW suburbs. In even-more-upscale Barrington, only a handful of sales above $1 million have been recorded so far.
The overall market volume is off more than 50%, at the high end, down nearly 100%.
"You know they must be pissed that even with massive mortgage intervention they can't hold rates under 5%"
well, as the TBT knucklehead contingent is aware, USTs have had an impressive rally since friday morning. if the doomsters here are right, they could really fly, and get 30-yr fixeds back closer to 5% than 6% right quick.
"The overall market volume is off more than 50%, at the high end, down nearly 100%. "
right, same in coastal CA. and that's what the oft-maligned median tells you.
"Japan May End $1.5 Billion Venezuela Loan on Seizures " Bloomburg
Ya think? Why lend money to someone who stole the goods? Ya think it matters?
Japan May End $1.5 Billion Venezuela Loan on Seizures (Update3) - Bloomberg.com
"That country needs 3 qualities: ability to live with large current account deficits, ability of it's populace/govt to absorb all that extra money, and have the market believe their money is safer than putting it elsewhere."
Any idea which country that would be?
jm...the trickle of high end sales is the wile e coyote moment, before he starts the descent...the only question is, how many of those little bubble captions will appear over his head, in succession, and what will they say while he levitates there for a while, before accelerating downward?
If Punksatehachipi *** pops his head out, there will be 6 more months of financial winter.
Someone forward this to Seb please... TIA
Red Roof Inn is defaulting on $332 million of mortgage debt.
No story yet.
While a small default, the trend is clear. Look how quickly the hotel dominos are falling. I expect a trickle through the summer (that is peak travel season). Then, the defaulting should start in earnest.
Airlines that need a bailout:
JAL
Air India
Air Canada
How quickly that list will grow too. (Air travel lags the economy. Thus building aircraft lags the economy by a 8 to 12 quarters!)
Got Popcorn?
Neil
"On the PBS Newshour last year, there was a story on Zimbabwe and it had people ferreting through the trash looking for food, while undisturbed on the top of the heap was a $10 Million banknote that nobody laid claim to...
That's raw unfettered hyperinflation at it's worst."
During the German inflation of the 20s a woman went shopping with a basket full of currency. She left it for a moment on a doorstep, and when she came back the cash was still there but the basket had been stolen.
Doesn't defaulting on allow the holder of the obligation to accelerate all payments? Can this force Red Rufie into BK?
Red Ink Inn
"USTs have had an impressive rally since friday morning."
At the expense of 25 S&P points, in case you didn't notice.
Not that this was engineered, or anything.
Probably didn't hurt either that the Fed itself bought 7.5B of 5 yrs yesterday.
To get rates back down in the long end, the Fed is going to have to step up buying, which they will.
WSJ hating on FAS, FAZ, etc....
Finra Urges Caution on Leveraged Funds - WSJ.com
"While such products may be useful in some sophisticated trading strategies, they are highly complex financial instruments that are typically designed to achieve their stated objectives on a daily basis," the notice said. "Due to effects of compounding, their performance over longer periods of time can differ significantly from their stated daily objective."
The notice called on brokerage and advisory firms to properly supervise sales and to make sure all sales material is properly designed.
.......
Two funds that illustrate the magnified impact for a long-term investor are Direxion Daily Financial Bear 3X Shares (trading symbol FAZ) and Direxion Daily Financial Bull 3X Shares (FAS). The bear ETF, which seeks daily returns of three times the inverse of the Russell 1000 Financial Services Index, is down 85% year-to-date, according to FactSet Research. The bull fund, which seeks daily returns of three times the Russell 1000 Financial Services Index, is down 67% in the same period.
However, Mr. Sapir said ProFunds has $27 billion in leveraged long, leveraged short and short ETFs, and that nearly a third of those assets are in products linked to the S&P 500 index. Data show there is a high probability of approximating one-day target returns over longer periods, and that the likelihood of a fund's return direction "flipping" is very low, he said.
"What some are doing is looking at a very limited extraordinary period and drawing conclusions," Mr. Sapir said.
"WSJ hating on FAS, FAZ, etc...."
what they really hate is that it cuts directly into the business of selling ridiculously overpriced options to retail suckers... kind of like how WS hated the move away from fractional trading 12 years ago - good forbid joe-six-pack has easy, cheap access to strategies which were limited to CME and stamford types 5 years ago.
Doesn't defaulting on allow the holder of the obligation to accelerate all payments?
Depends on the covenant
Can this force Red Rufie into BK?
We really didn't want to go into BK and purge most of our debt load, but the mean creditors filed an involuntary petition. Without the stigma (thanks GM), corporate BK will become as prevalent as jingle mail.
Data show there is a high probability of approximating one-day target returns over longer periods
Hahahahahahahahahaha.
I still haven't seen a story on Red Roof yet (I saw the headline).
I agree - there will probably be many more hotel defaults. Those occupancy / RevPAR numbers are killers!
best to all
Seriously Delinquent Mortgages Are So Far Concentrated Among Private Label Securities
But, wait...what? von Mises, Schumpeter, Hayek and Friedman promised me it couldn't be so...anytime the government gets involved it must, of necessity distort things in a way that causes undue risk and loss.
I find it really funny that FNM, FRE and the old-style Brick-and-Mortar, keep-it-on-our-books bank & thrift portfolios are outperforming everything else. This really should put the lie to the claim that this mess is the result of either implicit government guarantees or of government homeownership policy mandates (i.e., the CRA); rather, it's government's "meddlesome" regulatory strings that made these entities less prone to undue risk-taking than the unregulated securities market.
CR: Red roof here
Red Roof Inn Defaults - WSJ.com
or for those without subscriptions: click on the top link here
"Red Roof Inn Defaults on Mortgage Debt" - Google News
um, Scott... you are aware that FRE/FNM isn't failing because of a running IV to the tune of tens of billions in direct funds from the feds, alongside an ever-growing 'backstop' commitment also by the feds?
FNM/FRE's only competition is with AIG and C (BAC) in terms of being a bigger fiscal drain on our economy than the average war. It doesn't "put the lie" to the above, in fact, it is exhibit A in supporting it.
CalculatedRisk (profile) wrote on Tue, 6/23/2009 - 1:37 pm
I still haven't seen a story on Red Roof yet (I saw the headline).
I agree - there will probably be many more hotel defaults. Those occupancy / RevPAR numbers are killers!
best to all
CR you are correct about the RevPar but the real danger is in debt loads. This isn't like the last times. CRE profit models were priced beyond perfection. Even with optimal operating conditions agressive appreciation was necessary to make these buys pencil out.
IMO the biggest tragedy will be when good, honest hoteliers submarined by the irrational death throes of the overextended chains and then the deflationary spiral gets established.
In 2007, Red Roof was acquired by for $1.3 billion by a group led by Citigroup Inc.'s Global Special Situations Unit and including hotel manager Westmont Hospitality Group.
Umm... 2007? this has got to be part of Citi's $300B Fed-built ringfence.
Comrade Scott,
There are a very small number of conservative banks that didn't get sucked into the mortgage madness, especially in the big bubble areas. Normally prudent banks and credit unions offered 0% down, low doc loans just to get any business during the worst of it. We are all paying the price now. Without the artificially low and meddlesome Fed interest rates, things may not have gotten so out of hand.
Hollywood - I realize they are on an IV, but my point is that their underwriting guidelines, while compromised, were clearly nowhere near as reckless as the "private label" garbage which led the market down this merry path. That they have been swamped by the price drops and are on life support, that is not the same thing as the delinquency rate, which is a better reflection of the underwriting guidelines. If Tanta were here, she'd probably school me, but you are conflating two things that aren't necessarily relevant.
FNM/FRE clearly didn't have sufficient capital backstop to sustain even their own relatively smaller default rates, but they were not the source of the most reckless lending, and were forced by the market, to some extent, to engage in a race to the bottom. The only reason they didn't race to the bottom faster is that the Congress fought to force them to reduce their overall share of the market.
good, honest hoteliers submarined by the irrational death throes
Don't fret none, Dawg.
Just keep repeating the mantra of "creative destruction" to yourself.
Anybody know how the Disney Resorts and Parks are doing this year?
Comrade Scott,
Best troll bait I've seen in a very long time. Bravo. I almost got sucked into the unreality vortex you created.
@Coinz There are a very small number of conservative banks that didn't get sucked into the mortgage madness, especially in the big bubble areas. Normally prudent banks and credit unions offered 0% down, low doc loans just to get any business during the worst of it.
I had the impression a lot of CUs, small Banks and Thrifts engaged in this, to the extent they could sell the loans and get them off their books - and they had to in order to compete for business! I was alluding to those loans they elected to keep on their own books.
The point you make is precisely what I am trying to describe as the race-to-the-bottom. More prudent institutions are forced to engage in what they perceive to be overly-risky behavior just to remain in business, since they have to compete with irrational competitors.
@Dawg -
Listen: I don't question that FNM/FRE are a horrific financial burden, but really: the default rates of their portfolio are not the same thing as taxpayer bailouts...bailouts don't stop the defaults.
Vonbek777 (profile) wrote on Tue, 6/23/2009 - 1:56 pm
Anybody know how the Disney Resorts and Parks are doing this year?
Nobody but Disney. They are notoriously closemouthed. Anecdotally, (we have season tix) there is no trend to report from the consumer side. The national/ethnic/socioeconomic mix has shifted slightly but nothing newsworthy.
Thanks Dawg.
"Hollywood - I realize they are on an IV, but my point is that their underwriting guidelines, while compromised, were clearly nowhere near as reckless as the "private label" garbage which led the market down this merry path."
so the raging drunk in the gutter (FRE/FNM) isn't as bad as the methhead mugger (countrwide)... that doesn't prove much, in fact, it really shows how FRE/FNM set the bar and let the tan man do his routine.
your point is 100% wrong - FRE/FNM totally corrupted the mortgage market and created what will be trillions in losses for the taxpayer for the exact reason that you mock - public/govt entities destroying the natural function of markets.
Comrade Scott,
I'm old school. I don't believe money comes in different colors. Anything less than contracted obligations is a bailout no matter the mechanism or label.
"since they have to compete with irrational competitors. "
right, and irrational competitor #1 was fannie and freddie. they were irrational because they had zero exposure to market risk thanks to the 'GS' in GSE. this really is exhibit A for the Austrian prosecution.
Vonbek777 (profile) wrote on Tue, 6/23/2009 - 2:03 pm
Thanks Dawg.
And thank you for not pointing out how utterly depraved it is that I pay attention to socioeconometric attendance characteristics.
right, and irrational competitor #1 was fannie and freddie. they were irrational because they had zero exposure to market risk thanks to the 'GS' in GSE. this really is exhibit A for the Austrian prosecution
So, are you claiming that CFC and Bear Stearns and Lehman were forced to run to Gilleran and Reich at OTS to slash regulations just to take on insane risks to compete with FNM/FRE?
Two Things:
While U.S. builders increased housing starts by 17 percent in May to an annual rate of 532,000, a May 26 report from S&P/Case-Shiller showed home prices in 20 U.S. metropolitan areas fell 18.7 percent in March from the same month last year.
All signs point to further declines. Yale University Professor Robert Shiller, co-founder of the S&P/Case-Shiller index, said earlier this month that prices will continue to fall, contributing to a prolonged recession.
Deutsche Bank AG analysts last week said that U.S. home prices may fall another 14 percent before reaching a bottom as an increase in the jobless rate offsets lower prices. The worse declined may hit the New York and Orange County, California, metropolitan areas, analysts led by Karen Weaver said.
Stop exposing fact through the propaganda......it ticks the "Keepers of the Kingdom" off. No get back to work or no bread for you!
What is the maximum Social Security retirement benefit?
Answer
The maximum benefit depends on the age at which a worker chooses to retire. The amount for 2009 for a person retiring at full retirement age (66) is $2,323. This is based on earnings at the maximum taxable amount for every year after age 21. You can see the maximum amount of taxable earnings for each year at Contribution and Benefit Base.
A couple could double that