Headlines...

lawyerliz_IHB · Feb 16, 2008

According to ummm, I forget who, via Calculated Risk, in credit default swaps, 13-14% of the transactions in several months, including December, the other side of the transaction was never confirmed, meaning if you have a claim, you don't know who you have the claim with, and the counterparty can sell the position to a weaker counterparty.

This is no way to run a railroad or anything else.

graphrix_IHB · Feb 16, 2008

<a href="http://www.housingwire.com/2008/02/15/california-foreclosures-soar-in-january-98-percent-of-auctions-lead-to-reo/">California Foreclosures Soar in January; 98 Percent of Auctions Lead to REO</a>

As home sales slow <a href="http://www.housingwire.com/2008/02/15/california-home-sales-slowest-in-two-decades-prices-keep-falling/">to two-decade lows</a> throughout California, foreclosures are soaring — up a staggering 454 percent in January versus foreclosure volume just one year earlier. 

The number of properties sold at foreclosure auction in the Golden State jumped by 55 percent in January, to a total of 19,821, with a combined loan value of $8.06 billion, according to information service ForeclosureRadar.

Notices of Default recorded in January numbered 38,617, up 16.4 percent from 32,948 in December. This increase follows a 45.1 percent increase from November to December. 

With a minimum of roughly four months between recording of a Notice of Default and the property being sold at auction, the recent increases in defaults clearly indicate that auction sales are likely to also increase further in the coming months.

“The auction sales are a far more accurate indicator of the foreclosure problem. Defaults have not risen nearly as rapidly as auction sales,” said Sean O’Toole, founder of ForeclosureRadar. “While certainly more homeowners are getting into trouble, the far larger issue is that fewer homeowners are able to get out of foreclosure than ever before.”

Homeowners aren’t the only party to foreclosure under pressure. Ninety-eight percent of auction sales went back to the lender in January after receiving no bids, despite the significant discounts now being offered by lenders at auction. Out of the 19,821 homes that went to auction, 13,950 were discounted, with an average opening bid discount of 16 percent. Of that, 4,624 had discounts of 30 percent or more, ForeclosureRadar said.

The majority of these discounts are from the amount owed on an 80 percent first mortgage made in the last 2 to 3 years, meaning that many of these properties are being offered at 50 to 70 percent of their prior value.

At the county level, notable month over month increases in activity were widespread, with the majority of counties seeing increases in auction sales of 50 percent of more in just one month.

For more information, visit <a href="http://www.foreclosureradar.com/" target="_blank">http://www.foreclosureradar.com</a>.

graphrix_IHB · Feb 16, 2008

Securitisation

<a href="http://www.economist.com/displaystory.cfm?story_id=10689043">Fear and loathing, and a hint of hope</a>.

AS GAGS go, it was cheap. But irresistible. As a banker from Citigroup placed his chips on the roulette table, a watching wise-guy sniggered: “There goes another $15 billion.”

Even though it was held (as usual) in Las Vegas, this year's conference of the American Securitisation Forum (ASF), between February 3rd and 6th, was a subdued affair. First staged only in 2004, the event has become a mecca for those whose job it is to spin mortgages, credit-card debt and other bread-and-butter financial assets into tradable securities. But this time attendance was down—and tension up, as the neck-masseuses in the exhibit hall could attest. Black humour and self-deprecation replaced the self-congratulation of past years. John Devaney, a hedge-fund manager who had to sell his 142-foot yacht, Positive Carry, and his Gulfstream IV after making bad bets on mortgage bonds, told an audience: “I'd like to thank the market for dealing me a direct hit. As a trader if you don't get sucker-punched every once in a while, you don't understand what risk is.”

You might suppose that meeting in America's gambling capital would provide symbolism enough. But the conference Super Bowl party had plenty more. It was hosted by Countrywide, a big, troubled mortgage lender that has had to fall on the charity of Bank of America. And, as the guests digested the dramatic ending of the New England Patriots' long winning streak by the New York Giants, they may have sensed an uncomfortable parallel. After a quarter-century of growth that turned structured finance from a capital-market cog into an engine of growth, their business has been buckled by the crash in subprime mortgages and the successive blows throughout credit markets. Worse, some blame securitisation for causing the pile-up in the first place.

The breakneck growth of this business went into reverse last summer, when it became clear that defaults would undermine the structures built around America's mortgage markets. So tarnished has the subprime-mortgage market become, because of shoddy loan underwriting and fraud, that investors are likely to shun securities linked to it for months if not years. Securitisation of better-quality “jumbo” mortgages—too big to be bought by government agencies—is also at a near-halt. “Mortgages were traditionally seen as very safe assets. Now all but the very best are stamped with a skull and crossbones,” says Guy Cecala, of Inside Mortgage Finance, a newsletter.

Nude_IHB · Feb 16, 2008

gee, I wonder if he tried to sell his house too?

lawyerliz_IHB · Feb 17, 2008

Over 100 condo projects in Miami, mostly intended to be expensive, are on a black list by the banks. Most of these are huge buildings.

Some fools think they are going to get their deposit back, since it says so in the contract. Except I'm sure the developer has no money.

Some Vegas stuff blacklisted too.

Anonymous_IHB · Feb 17, 2008

<a href="http://thehousingbubbleblog.com/?p=4166">http://thehousingbubbleblog.com/?p=4166</a>

The <a target="_blank" href="http://www.sacbee.com/103/story/718365.html">Sacramento Bee</a>

...

“In the fourth quarter of 2006, so-called equity extractions – from refinancing, home-equity loans or outright sales – accounted for about 17 percent of Californians’ disposable income, according to Scott Hoyt, the director of consumer economics at Economy.com.”

“That was about twice the U.S. average. Only in Arizona and Nevada did homeowners depend more on home equity for cash.”

Anonymous_IHB · Feb 17, 2008

<a href="http://www.thisismoney.co.uk/investing-and-markets/article.html?in_article_id=430116&in_page_id=3">http://www.thisismoney.co.uk/investing-and-markets/article.html?in_article_id=430116&in_page_id=3</a>



Rock rescue adds £100bn to national debt

Daily Mail

8 February 2008, 8:42am 

Labour's reputation for economic competence has come under renewed attack as the Northern Rock fiasco piles nearly £100bn on to the national debt. 

The Office for National Statistics has told the Government to add the crippled bank's liabilities - estimated at more than £3,000 for every family in Britain - to the public balance sheet. 

This could break Gordon Brown's 'golden rule', namely that public sector debt must be no more than 40% of <a href="javascript:self.name='main';PopUp('you_popup','/pages/jargon/index.html?in_jargon_term=gross','350','150')">gross</a> domestic product. 

It is forecast to be at 38% this year but Northern Rock's liabilities, thought to be around £98bn, could add at least 6.7%. Shadow Chancellor George Osborne said: ' Gordon Brown has staked his reputation for competence on meeting his own fiscal rules. Today those rules have been blown to pieces as a result of his economic incompetence. Gordon Brown has effectively saddled every taxpayer with a second mortgage.'

Anonymous_IHB · Feb 17, 2008

Santa Clara

<a href="http://www.mercurynews.com/realestatenews/ci_8269028">http://www.mercurynews.com/realestatenews/ci_8269028</a>

 Basically every mortgage company says I'm their dream client," said Abramowitz, a management consultant who saved for years to amass a 20 percent down payment for a home in the $1 million range. But right after she agreed to buy the five-bedroom house late last month, the stock market took a steep dive, and lenders began saying her down payment wasn't high enough. "Suddenly everyone was going, '45 percent down.' " 

Abramowitz said she had to present skittish lenders with evidence that home prices in her chosen neighborhood were not depreciating - in fact, they were rising. In the end, they agreed her 20 percent down payment was sufficient, and she is scheduled to close escrow today, which is also her birthday.

Anonymous_IHB · Feb 17, 2008

<a href="http://www.modbee.com/business/story/212341.html">http://www.modbee.com/business/story/212341.html</a>

 Citrigno said some Merced apartments can be purchased for $45,000 per unit. He said that's a bargain because building com- parable units would cost more than twice as much.

Anonymous_IHB · Feb 17, 2008

<a href="http://www.house.gov/bradmiller/images/PredLend07.pdf">http://www.house.gov/bradmiller/images/PredLend07.pdf</a>

Anonymous_IHB · Feb 17, 2008

Re: this comment 

<a href="http://forums.irvinehousingblog.com/discussion/128/?Focus=24858#Comment_24858">http://forums.irvinehousingblog.com/discussion/128/?Focus=24858#Comment_24858</A> 

CommentAuthorlawyerliz CommentTimeNov 19th 2007 thanks

Sad to say, I agree.

I keep saying to people that we will see bread lines and apple sellers, and they keep rolling their eyes at me. 

----------------------------------------------------- 

As LI economy slides, the newly poor seek assistance 

<a href="http://www.newsday.com/news/local/nassau/ny-lipoor0217,0,6000616.story">http://www.newsday.com/news/local/nassau/ny-lipoor0217,0,6000616.story</a>

Anonymous_IHB · Feb 17, 2008

Arcane Market Is Next to Face Big Credit Test 

<a href="http://www.nytimes.com/2008/02/17/business/17swap.html?pagewanted=1&_r=1&hp">http://www.nytimes.com/2008/02/17/business/17swap.html?pagewanted=1&_r=1&hp</a>

<img alt="" src="http://graphics8.nytimes.com/images/2008/02/17/business/17SWAP_2_lg.gif" />

 

<img alt="" src="http://graphics8.nytimes.com/images/2008/02/17/business/17SWAP_1_lg.gif" />

lawyerliz_IHB · Feb 17, 2008

Gosh, I really didn't want to be right.

graphrix_IHB · Feb 18, 2008

<a href="http://www.ft.com/cms/s/0/66db756a-de5d-11dc-9de3-0000779fd2ac.html?nclick_check=1">US banks borrow $50bn via new Fed facility</a>

US officials say the trend shows that financial authorities have become far more adept at channelling liquidity into the banking system to alleviate financial stress, after failing to calm money markets last year.

However, the move has sparked unease among some analysts about the stress developing in opaque corners of the US banking system and the banks’ growing reliance on indirect forms of government support.

“The TAF ... allows the banks to borrow money against all sort of dodgy collateral,” says Christopher Wood, analyst at CLSA. “The banks are increasingly giving the Fed the garbage collateral nobody else wants to take ... [this] suggests a perilous condition for America’s banking system.”

<a href="http://www.nytimes.com/2008/02/19/business/19banks.html"> Wall St. Banks Confront a String of Write-Downs</a>

The deepening losses might make banks even more reluctant to make the loans needed to prod the slowing American economy. They also could force some banks to raise more capital to bolster their weakened finances.

The losses keep piling up. Leading brokerage firms are likely to write down the value of $200 billion of loans they have made to corporate clients by $10 billion to $14 billion during the first quarter of this year, Meredith Whitney, an analyst at Oppenheimer, wrote in a research report last week. 

Those institutions and global banks could suffer an additional $20 billion in losses this year on commercial mortgage-backed securities and other debt instruments tied to commercial mortgages, according to <a title="More information about Goldman Sachs Group" href="http://topics.nytimes.com/top/news/business/companies/goldman_sachs_group_inc/index.html?inline=nyt-org">Goldman Sachs</a>, which predicts commercial property prices will decline by as much as 26 percent.

There has also been a marked deterioration in the market for commercial mortgage-backed securities, which are commercial mortgages packaged into bonds. 

To some, the troubles plaguing commercial mortgage securities seem a logical extension of the turmoil in the residential real estate market. But some strategists argue that the commercial real estate market is not as vulnerable as the housing market. The pressure to package loans that was so evident in the residential market never materialized in the commercial market, these analysts say. 

Also, commercial loans tend to be made at fixed, rather than adjustable, rates, and are not usually refinanced for long periods of time. 

Nevertheless, the cost of insuring a basket of commercial mortgage-backed securities has soared. Last October, for example, it cost $39,000 to insure a $10 million basket of top rated 2007 commercial mortgages (super senior AAA, in Wall Street language) against default. 

Today that price has increased to $214,000. For triple-B-rated commercial mortgage backed securities, those which are riskier, the cost of protection during the same time has soared from $672,000 to $1.5 million. 

The deterioration of the CMBX, the benchmark index that tracks the cost of such credit protection, “started off as a fundamental repricing and then it escalated into something much more than that,” said Neil Barve, a research analyst at <a title="More information about Lehman Brothers Holdings" href="http://topics.nytimes.com/top/news/business/companies/lehman_brothers_holdings_inc/index.html?inline=nyt-org">Lehman Brothers</a>. “We think there is some downside in a challenging macroeconomic environment, but not nearly what has been priced in.” 

Goldman Sachs seems to disagree, with analysts predicting commercial real estate loan losses to total $180 billion, with banks and brokers bearing $80 billion of that in total and about $20 billion this year. 

Current index figures suggest that the banks will face significant pain. Brad Hintz, an analyst at Sanford C. Bernstein & Company, calculated that Lehman Brothers has the highest exposure to commercial real estate-backed securities, with $39.5 billion, followed by <a title="More information about Morgan Stanley" href="http://topics.nytimes.com/top/news/business/companies/morgan_stanley/index.html?inline=nyt-org">Morgan Stanley</a>, with $31.5 billion. (These numbers do not include hedges that the banks may have but do not disclose).

graphrix_IHB · Feb 18, 2008

<a href="http://www.housingwire.com/2008/02/18/subprime-mortgage-litigation-outpacing-sl-crisis/">Subprime Mortgage Litigation Outpacing S&L Crisis</a>

As the estimated financial cost of the current mortgage crisis surpasses the damage of the savings & loan crisis of the late 1980s, a new study <a href="http://www.navigantconsulting.com/A559B1/navigantnew.nsf/vGNCNTDisplayByDocKey/PP698463974514?OpenDocument" target="_blank">released late last week</a> found that the number of subprime-related cases filed in federal courts is also outpacing the savings-and-loan (S&L) litigation of the early 1990s.

The number of subprime-related cases filed in 2007 already equals half of the total 559 S&L cases handled by the Resolution Trust Corporation (RTC) over a multiple-year period, according to financial advisory firm Navigant Consulting, Inc. The subprime numbers represent only federal court filings — so the actual number of cases may be higher.

“The S&L crisis has been a high water mark in terms of the litigation fallout of a major financial crisis. The subprime-related cases appear on their way to eclipsing that benchmark,” said Jeff Nielsen, managing director of Navigant Consulting.

The number of subprime-related cases filed doubled during the second half of 2007, from 97 to 181 (for a total number of 278) cases. These cases included borrower class actions (43 percent), securities cases (22 percent), and commercial contract disputes (22 percent), along with bankruptcy, employment, and other cases.

“This appears to be just the beginning,” said Nielsen. “We are already observing a steady acceleration of continuing litigation activity into 2008. The course of regulatory investigations, the prospect of government intervention and marketplace variables may affect the volume of filings, but the explosion of cases in 2007 suggests a daunting forecast of what is still to come.”

The study found that virtually every participant in the subprime collapse is being sued. 

Fortune 1000 companies were named in 56 percent of cases. Mortgage Bankers and Loan Correspondents represent the highest percentage of defendants (32 percent) but defendants also include mortgage brokers, lenders, appraisers, title companies, homebuilders, servicers, issuers, underwriting firms, bond insurers, money managers, public accounting firms and company directors and officers, among others.

lawyerliz_IHB · Feb 18, 2008

Not big news there, but Castro has apparently resigned.

Rumor has it tho brother Raul is more bloodthirsty, he is also more competent and has tried to loosen up from time to time.

Trooper_IHB · Feb 19, 2008

Given the Arizona Senator's maverick record, voters have every reason to distrust the new McCain. He twice opposed the Bush tax cuts, advocates a big hike in gasoline taxes as part of an elaborate energy policy to halt global warming, and keeps dropping disturbing lines like, "I don't know as much about the economy as I should."

<a href="http://money.cnn.com/2008/02/18/news/newsmakers/tully_gramm.fortune/index.htm?cnn=yes">McCain's econ brain is Phil Gramm - Feb. 19, 2008</a>

southoctracker_IHB · Feb 20, 2008

Who could have ever predicted this could happen? Oh, wait... (updated: fixed link)

<a href="http://tinyurl.com/2qeslx">Subprime loans defaulting even before resets</a>

It turns out that massive interest rate spikes aren't the problem -- many borrowers couldn't afford these mortgages even at the low, introductory interest rates.

"NEW YORK (CNNMoney.com) -- For months, we've fretted about the Armageddon that will hit when subprime adjustable rate mortgages start resetting to much higher interest rates.

What's happening is even worse: Many of these loans are defaulting well before their rates increase.

Defaults for subprime loans issued in 2007 - none of which have reset yet - hit 11.2 percent in November. That represents perhaps 300,000 households, and is twice the default rate that 2006 loans had 10 months after being issued, according to Friedman, Billings Ramsey analyst Michael Youngblood.

Defaults are spiking well before resets come into play thanks to the lax lending environment of the past few years. Many borrowers were approved for mortgages that they had little chance of affording, even at the low-interest teaser rates ." ...

IrvineRenter_IHB · Feb 20, 2008

I should find that story astonishing, but given how totally irresponsible lenders became during the bubble, nothing surprises me anymore.

Anonymous_IHB · Feb 20, 2008

IR - why is that astonishing? If one made next to nothing, already had trashed credit, and someone offers them a lotto ticket which 1. you can extract money from (ex. HELOC), 2. might be worth a million dollars 3. definately is worth free rent for awhile and 4. costs nothing - how many people would turn that down?

Plus, some of those tickets might have come with cash back at closing fraud to boot....

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