Headlines...

NEW -> Contingent Buyer Assistance Program
With so many saying the upper end housing market is doing well, will the builders respond by building more expensive homes and less low end homes?
 
<a href="http://www.mortgage101.com/partner-scripts/inman.asp?ID=63875&ref=patrick.net">New loan guidance wrong for housing</a>





"...troubled borrowers trying to refi off their subprimes or other re-setting ARMs into interest-only loans to minimize payments will be out of luck. Add to that the rising foreclosure count. Also out of luck, the millions who planned defined ownership periods, safely using 7- or 10-year interest-only loans."





"Subprime lending is contracting fast, both by market and regulatory force, and should. "Back-look" review suggests that perhaps a majority of these borrowers could have been approved for better loans (FHA, outside-edge Fannie-Freddie, especially if mobilizing family help, or doing something crazy like saving a little money), and so the net contraction of subprime purchasing power in troubled housing markets may not be terribly large. This new set of criteria is going to diminish purchasing power among the worst-possible group, the "A"-quality borrower. Some of the diminution will be subtle: if approval for an interest-only or option loan is not available, and a price range therefore out of reach, many buyers will step out altogether."





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<p>The real housing-market trouble today has been caused by Wall Street's ability to distribute risk beyond Main Street's ability to tolerate temptation and foreclosures. Everyone out here in the real world knows that the foreclosure poster child is the low-down-payment borrower whose income was not properly underwritten. Instead of this miserable affair, you might have banned "no-doc" underwriting of any loan with less than 20 percent down. You might have banned stated-income underwriting for any loan with less than 10 percent down, and for any interest-only or neg-am structure. You might have limited rate adjustments for any loan with a fixed-rate interval shorter than five years, and likewise confined them to lower loan-to-value ratios. Then stopped for a few months to see what happened. </p>

<p>Nope. Meat Axe scores one, Judgment nothing."</p>
 
<p><a href="http://realestate.msn.com/Buying/Article2.aspx?cp-documentid=5124742">http://realestate.msn.com/Buying/Article2.aspx?cp-documentid=5124742</a> This link is about the riskiest real estate markets in the US. Many cities in CA included.</p>

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<p>The ABX indices for 2007-2 opened today. This isn't a good start and take a look at the coupon of 500 for the B grade nuclear waste. </p>

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<p><a href="http://www.markit.com/abx.jsp?Index=ABX-HE-AAA+07-2">ABX-HE-AAA 07-2</a></p>





Coupon

76

Prices

99.33

99.33

99.33







<p> </p>

<p><a href="http://www.markit.com/abx.jsp?Index=ABX-HE-AA+07-2">ABX-HE-AA 07-2</a></p>





Coupon

192

Prices

97.00

97.00

97.00







<p> </p>

<p><a href="http://www.markit.com/abx.jsp?Index=ABX-HE-A+07-2">ABX-HE-A 07-2</a></p>





Coupon

369

Prices

81.94

81.94

81.94







<p> </p>

<p><a href="http://www.markit.com/abx.jsp?Index=ABX-HE-BBB+07-2">ABX-HE-BBB 07-2</a></p>





Coupon

500

Prices

56.61

56.61

56.61







<p> </p>

<p><a href="http://www.markit.com/abx.jsp?Index=ABX-HE-BBB-+07-2">ABX-HE-BBB- 07-2</a></p>





Coupon

500

Prices

50.33

50.33

50.33







</p>
 
<a href="http://www.courant.com/business/hc-bernanke0720.artjul20,0,6605452.story">Bernanke Adds Fed Warning On Subprime Crisis</a>

WASHINGTON - Federal Reserve Board Chairman Ben Bernanke offered little hope Thursday that the subprime mortgage crisis would ease soon, noting that losses could reach between $50 billion and $100 billion.


"Rising delinquencies and foreclosures are creating personal, economic and social distress for many homeowners and communities," he told the Senate Banking Committee, "problems that likely will get worse before they get better."

 
Call me a nut, but I can't help thinking that if Bernanke is saying there are posible losses of $100 billion from the subprime mortgage crisis, then there are probably closer to 10 times that amount.<p><p>

And like everybody else who is either in denial or trying to remain calm, Bernanke is not speaking of or admitting to the greater fallout from Alt-A and prime.<p><p>

Have we heard the last of containment?
 
I took a peek at the mortgage pools today and trust me the containment is yet to be seen. I even checked 2004 pools and they look ugly. One 2006 Goldman pool had 17% in foreclosure or REO for a grand total of $100 million worth of loans. Impac and IndyMac can only deny their problems a little longer as their REOs are really picking up. Impac said they had about $250 mil in REOs and I found a lot more.
 
I think prime buyers with little skin in the game, will walk just as easily as sub primers. One <em>might </em>make the assumption that primers are better versed in the value of a property...and if they see that they'll be taking a 200-500K hit in "value" on their investment (that won't be coming back anytime soon), they'll walk and lick their wounds. I saw that happening in the late 80's... they called it a "calculated business decision".
 
A great report by Chris Thornberg with a new term <a href="http://www.beaconecon.com/events/InlandEmpire07/Thornberg.pdf">homallucination</a>.
 
<p>Does anybody remember the organizations or companies that would, for a fee, promise to get you out from underneath your upsidedown mortgage without any capital gains tax liability? I wonder when we will start seeing ads or hearing about those deals again.</p>

<p>The first time I read the following I thought it must be a mistake. This is the third time I've read this, and if it is true, I can't decide if it is comical or sad or both.</p>

<p><i>on Friday a Bloomberg article had Secretary Jackson meeting with Bank of China officials in Beijing urging the Chinese to "buy more mortgage-backed securities after a surge in defaults by risky borrowers in the world’s largest economy eroded demand for such instruments." </i></p>
 
graphrix,





On the Thornberg pdf, do you know what the columns are on slide 3? It looks like they are taking an average of the GDP growth info for 2006 Q4 and 2007 Q1 and then comparing this average to LR. What does the LR stand for?





great link!
 
<p>zovall,</p>

<p>First here is a much longer and detailed report but I warn you it is a big file at almost 8MB. </p>

<p><a href="http://www.beaconecon.com/events/InlandEmpire07/IE_07_EcoForecast.pdf">http://www.beaconecon.com/events/InlandEmpire07/IE_07_EcoForecast.pdf</a> </p>

<p>The columns are the percentage of GDP growth on a quarterly basis. I'm not exactly sure what LR means but what it looks like to me is Last Reading but calculated on an annual basis. I looked around the Beacon site and I didn't find anything but I will look some more later tonight.</p>
 
<a href="http://www.ocregister.com/money/zip-areas-sales-1781965-price-median">Home prices down in most O.C. neighborhoods</a>




DataQuick Information Systems reports that in nearly 70 percent of Orange County ZIP codes, the median home price declined during the first half of 2007.

But homes in Capistrano Beach and Irvine's Northwood areas may have been hit hardest this year by speculators buying properties, only to bail out when the housing slump hit. Median prices there fell about 15 percent, DataQuick reported.
 
<p>Sandy Eggo near <a href="http://calculatedrisk.blogspot.com/2007/07/san-diego-nears-recession.html">recession</a>?</p>

<p>Are we next?</p>
 
<p>Here is a <a href="http://www.latimes.com/business/la-fi-caljobs21jul21,0,5944263.story?coll=la-home-business">Times article</a> that hints we might be next. Funny they neglected to mention OC's <a href="http://www.calmis.ca.gov/file/lfmonth/oran$PDS.pdf">unemployment rate</a> increased .4% to 3.9% from the 3.5% of May. So much for the economists predictions that we would would see tremendous job growth in professional and business services. A whopping 1000 jobs in that sector have been created YOY for a rise of .4% and big uptick of 600 jobs from May for a .6% increase. Of course Esmael Adibi says that the EDD is under-counting the jobs in that sector because the state's growth is much higher and it will be revised later this year. Yes the state saw a 2% YOY increase and a .5% increase from May. So even if OC had a the state rate of increase that sector would have added 5500 jobs or 4500 more than reported. This would mean OC's YOY job growth rate would be .65% (.7% would be reported) vs. .4% and OC's unemployment rate would still be 3.9%. So if Adibi thinks that sector is under-counted I think that the losses in the mortgage sector is under-counted.</p>

<p>Here is the bad sign retail jobs decreased by .5% YOY for June and that hasn't happened since 1993. Retail is always a good indicator.</p>
 
<p>Breaking news headline from CNNmoney:</p>

<p><strong>CEO of No. 1 mortgage lender Countrywide doesn't see housing recovery before 2009, Reuters reports. More soon.</strong></p>
 
<p>Irvine is told to accommodate <a href="http://www.latimes.com/news/local/la-me-irvine25jul25,0,7068663.story?page=1&coll=la-home-local">35,000 homes in 7 years</a>.</p>

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