Viewing details of messages, sorted by time of last reply ("sticky messages" first)
Summer of 2008 crisis
My expectation for a systematic crisis in the summer of 2008 comes from the volume of resetting adjustable rate mortgages (ARM's) which peak next March. There are over $500 Trillion in derivatives world wide. Some of those Trillions directly play off the mortgage backed securities (MBS) that are now worthless since no one will give a bid to buy them when hedge funds and pensions must sell them.
The unfortunate homeowners lose their houses when their mortgage reset to higher monthly payments according to the terms of the adjustable mortgages (ARM's) ending their teaser, introductory, low rate periods. These mortgages have been bundled together when they were first made and sold to investors as bonds labelled MBS's. The MBS's also were accumilated in colateralized debt obligations (CDO's) which function like mutual funds that instead of being full of stocks are full of MBS's and derivatives. Banks, pension funds, insurance companies and other financial institutions bought these MBS's and CDO's because the rating agencies described much of the MBS's and layers of the CDO's as AAA, AA, and A, which are the labels for the very best investment grade bonds and financial instruments. Much of the CDO's and MBS's came from mortgages that defaulted or will default over the next 18 months. The term used for these mortgage related complex financial instruments which no one will buy and thus have little or no value is 'toxic waste'.
Everyday now the main street media is full of TV and print stories about houses being foreclosed. The financial media is full of hedge funds and banks losing vast sums of money from the toxic waste. The worst is still ahead. The first peak in resetting ARM's is in October. It takes at least six months for a house mortgage to go from the first nonpayment of the mortgage to the bank owning the house (REO). This is a downward spiral that lowers that comps that other houses get their prices. Add to this that house sales have declined and more houses are being built, the future for toxic waste can only be worse.
One index that tracks the declining value of toxic waste used for derivatives called the ABX shows in dramatic detail the collapse of derivatives: view link
There you can see how the rating agencies such as Moody's, S&P and Fitch have done horrible jobs of describing MBS's as AAA, AA, A, BBB and BBB- because the prices of these bond bundles and bonds have collapsed reflecting them as toxic waste. Rating agencies are starting to regrade the toxic waste to lower labels, but that is like shooting a dead horse then pronouncing it dead when it was already dead before shooting it.
Now comes the politics of the Democrats promoting a bailout and the politics of the President rejecting a bailout of the unfortunate, stupid people who signed up for the ARM's, the banks that made and sold the MBS's and the world wide investors of MBS's, CDO's or derivatives based on toxic waste. Ms Clinton's proposal will be a campaign issue. But, if my evaluation plays out, then the US and the worldwide investors will be in deep shit by next summer well before the fall 2008 elections.
I have tried to make this simple and readable. The financial instruments involved remain far more complex. It takes days and weeks for experts to place a true price on the financial instruments by pricing them to what real buyers will pay for them. This mark-to-market price remains difficult and the lack of clarity in what they are worth changes moment to moment so they are decribed as having a lack of transparency or opaque. When investors try to get their money from funds having toxic opaque waste, the funds can deny them access to thier money claiming that there is no bid or they don't know what their toxic waste is worth.
Added to this horrible development, the Federal Reserve (Fed) is coming to the rescue of the banks through its primary broker dealers on Thursday, Friday and Monday. The Fed makes temporary loans to its primary broker deals called repurchase agreements (repos). The Fed takes the toxic waste as collateral and gives the banks Treasuries notes to use. The repos must be repaid in 3 days by the banks. World wide Central Banks such as the Fed have added over $300 Billion dollars on Thursday, Friday and Monday.
Please remember that the worst is still ahead.
The unfortunate homeowners lose their houses when their mortgage reset to higher monthly payments according to the terms of the adjustable mortgages (ARM's) ending their teaser, introductory, low rate periods. These mortgages have been bundled together when they were first made and sold to investors as bonds labelled MBS's. The MBS's also were accumilated in colateralized debt obligations (CDO's) which function like mutual funds that instead of being full of stocks are full of MBS's and derivatives. Banks, pension funds, insurance companies and other financial institutions bought these MBS's and CDO's because the rating agencies described much of the MBS's and layers of the CDO's as AAA, AA, and A, which are the labels for the very best investment grade bonds and financial instruments. Much of the CDO's and MBS's came from mortgages that defaulted or will default over the next 18 months. The term used for these mortgage related complex financial instruments which no one will buy and thus have little or no value is 'toxic waste'.
Everyday now the main street media is full of TV and print stories about houses being foreclosed. The financial media is full of hedge funds and banks losing vast sums of money from the toxic waste. The worst is still ahead. The first peak in resetting ARM's is in October. It takes at least six months for a house mortgage to go from the first nonpayment of the mortgage to the bank owning the house (REO). This is a downward spiral that lowers that comps that other houses get their prices. Add to this that house sales have declined and more houses are being built, the future for toxic waste can only be worse.
One index that tracks the declining value of toxic waste used for derivatives called the ABX shows in dramatic detail the collapse of derivatives: view link
There you can see how the rating agencies such as Moody's, S&P and Fitch have done horrible jobs of describing MBS's as AAA, AA, A, BBB and BBB- because the prices of these bond bundles and bonds have collapsed reflecting them as toxic waste. Rating agencies are starting to regrade the toxic waste to lower labels, but that is like shooting a dead horse then pronouncing it dead when it was already dead before shooting it.
Now comes the politics of the Democrats promoting a bailout and the politics of the President rejecting a bailout of the unfortunate, stupid people who signed up for the ARM's, the banks that made and sold the MBS's and the world wide investors of MBS's, CDO's or derivatives based on toxic waste. Ms Clinton's proposal will be a campaign issue. But, if my evaluation plays out, then the US and the worldwide investors will be in deep shit by next summer well before the fall 2008 elections.
I have tried to make this simple and readable. The financial instruments involved remain far more complex. It takes days and weeks for experts to place a true price on the financial instruments by pricing them to what real buyers will pay for them. This mark-to-market price remains difficult and the lack of clarity in what they are worth changes moment to moment so they are decribed as having a lack of transparency or opaque. When investors try to get their money from funds having toxic opaque waste, the funds can deny them access to thier money claiming that there is no bid or they don't know what their toxic waste is worth.
Added to this horrible development, the Federal Reserve (Fed) is coming to the rescue of the banks through its primary broker dealers on Thursday, Friday and Monday. The Fed makes temporary loans to its primary broker deals called repurchase agreements (repos). The Fed takes the toxic waste as collateral and gives the banks Treasuries notes to use. The repos must be repaid in 3 days by the banks. World wide Central Banks such as the Fed have added over $300 Billion dollars on Thursday, Friday and Monday.
Please remember that the worst is still ahead.
Nasty Builder Actions
Faced with a $195.6 million loss in the fourth quarter, the Miami-based homebuilder is telling subcontractors that it wants further cost cuts or they'll be excluded for six months from future bidding.
By JEFF COLLINS
The Orange County Register
Lennar Corp. is asking its homebuilding subcontractors to cut their current charges by 5 percent or more or face a minimum six-month ban on bidding for work, a company executive said late Tuesday.
The builder, one of the bigger developers in Orange County with plans to build up to 9,500 homes in the former El Toro Marine Base, began circulating letters and meeting with subcontractors earlier this month seeking cuts that reflect lower home prices, said Jeff Roos, Lennar's Southwestern U.S. Regional Vice President.
"As our customers continue to pay us a lower price for our homes, we must in turn pay you a lower price for your services," said a letter circulated to subcontractors in Lennar's Orange Coast, Corona, Temecula and Palm Springs divisions.
Roos said similar requests are being made of Lennar subcontractors nationally.
"Every builder is doing the same thing,"
view link
----------------------------
But the latest news -- that mega-developer Lennar will dump more than $6 million in costs on homeowners -- has Stoneybrook residents crying foul and preparing a lawsuit.
The residents' grief came to a head Tuesday when the County Commission granted Lennar the ability to tax its residents for $6.6 million in infrastructure costs.
Lennar had asked the county for designation as a community development district, a special taxing district that issues bonds to pay for things such as drainage and roads. Several residents said Lennar never told them they would have to pay for the infrastructure, which has already been built. Residents said they were under the impression they would only have to pay for future maintenance through their homeowners dues. But commissioners ruled the developer did everything by the book.
The decision, coupled with Lennar recent increase in some homeowner's dues by $200 a year --
Today, the complex is about 43 percent sold, which county staff said is less than two-thirds as far along as Lennar hoped. County staff said Lennar will fall almost $8 million short of its revenue goals for its first two years if the sales trend keeps up.
Indeed, Stoneybrook is only 54 percent built, and at mid-day is nearly as quiet as the nearby Carlton Reserve.
view link
---------------------------------
The Sun Sentinel. “If you think you’re paying more to live in your condo, townhouse or gated community, consider this: It may get worse before it gets better.”
“Experts fear that with homes selling slowly, owners who can no longer afford payments may soon abandon them. If that happens, those left behind in communities run by associations must make up the missing share of money to maintain roofs, roads, landscaping and pools.”
“‘We’re seeing a 100 percent increase in the number of files turned over to us [by associations] for lien and foreclosure,’ said Gary Poliakoff, whose Fort Lauderdale-based law firm represents 4,200 associations in Florida.”
“By beating the bank to the punch, associations that foreclose can at least get some income by renting the unit, view link
------------------
Are homebuilders themselves breaking the law and guilty of mortgage fraud (via known false/over-inflated appraisals) when they offer cash back and massive incentives?
A $500,000 house with $50,000 incentives or cash-back = a $450,000 house, no matter what your loan, mortgage broker, neighbor, builder, realtor or appraiser says.
Centrex 2 day sale $100,000 off. view link
"Rolodex of Realtors" Catherine Reagor is now channeling fricking Carl Bernstein, and dominating the Phoenix media (and soon to be national media) with this cash-back mortgage fraud exposure in Phoenix. State targets mortgage fraud
Catherine Reagor
The Arizona Republic
Jan. 23, 2007 12:00 AM
A wave of mortgage fraud in the Valley has prompted state legislation that would define it as a crime punishable by up to 10 years in prison.
A day after The Arizona Republic's special investigation into cash-back mortgage deals, Sen. Jay Tibshraeny of Chandler introduced a bill that would make mortgage fraud a felony.
By JEFF COLLINS
The Orange County Register
Lennar Corp. is asking its homebuilding subcontractors to cut their current charges by 5 percent or more or face a minimum six-month ban on bidding for work, a company executive said late Tuesday.
The builder, one of the bigger developers in Orange County with plans to build up to 9,500 homes in the former El Toro Marine Base, began circulating letters and meeting with subcontractors earlier this month seeking cuts that reflect lower home prices, said Jeff Roos, Lennar's Southwestern U.S. Regional Vice President.
"As our customers continue to pay us a lower price for our homes, we must in turn pay you a lower price for your services," said a letter circulated to subcontractors in Lennar's Orange Coast, Corona, Temecula and Palm Springs divisions.
Roos said similar requests are being made of Lennar subcontractors nationally.
"Every builder is doing the same thing,"
view link
----------------------------
But the latest news -- that mega-developer Lennar will dump more than $6 million in costs on homeowners -- has Stoneybrook residents crying foul and preparing a lawsuit.
The residents' grief came to a head Tuesday when the County Commission granted Lennar the ability to tax its residents for $6.6 million in infrastructure costs.
Lennar had asked the county for designation as a community development district, a special taxing district that issues bonds to pay for things such as drainage and roads. Several residents said Lennar never told them they would have to pay for the infrastructure, which has already been built. Residents said they were under the impression they would only have to pay for future maintenance through their homeowners dues. But commissioners ruled the developer did everything by the book.
The decision, coupled with Lennar recent increase in some homeowner's dues by $200 a year --
Today, the complex is about 43 percent sold, which county staff said is less than two-thirds as far along as Lennar hoped. County staff said Lennar will fall almost $8 million short of its revenue goals for its first two years if the sales trend keeps up.
Indeed, Stoneybrook is only 54 percent built, and at mid-day is nearly as quiet as the nearby Carlton Reserve.
view link
---------------------------------
The Sun Sentinel. “If you think you’re paying more to live in your condo, townhouse or gated community, consider this: It may get worse before it gets better.”
“Experts fear that with homes selling slowly, owners who can no longer afford payments may soon abandon them. If that happens, those left behind in communities run by associations must make up the missing share of money to maintain roofs, roads, landscaping and pools.”
“‘We’re seeing a 100 percent increase in the number of files turned over to us [by associations] for lien and foreclosure,’ said Gary Poliakoff, whose Fort Lauderdale-based law firm represents 4,200 associations in Florida.”
“By beating the bank to the punch, associations that foreclose can at least get some income by renting the unit, view link
------------------
Are homebuilders themselves breaking the law and guilty of mortgage fraud (via known false/over-inflated appraisals) when they offer cash back and massive incentives?
A $500,000 house with $50,000 incentives or cash-back = a $450,000 house, no matter what your loan, mortgage broker, neighbor, builder, realtor or appraiser says.
Centrex 2 day sale $100,000 off. view link
"Rolodex of Realtors" Catherine Reagor is now channeling fricking Carl Bernstein, and dominating the Phoenix media (and soon to be national media) with this cash-back mortgage fraud exposure in Phoenix. State targets mortgage fraud
Catherine Reagor
The Arizona Republic
Jan. 23, 2007 12:00 AM
A wave of mortgage fraud in the Valley has prompted state legislation that would define it as a crime punishable by up to 10 years in prison.
A day after The Arizona Republic's special investigation into cash-back mortgage deals, Sen. Jay Tibshraeny of Chandler introduced a bill that would make mortgage fraud a felony.
10 million loans could go into default over 18 mo
Backdraft from the Bubble
There are signs that the bursting housing bubble is poised to unleash an explosive backdraft with negative and potentially far-reaching implications for Wall Street and Washington.
In recent years, writes the The New York Times,
borrowers have flocked to riskier mortgages that gave them the means to keep up with an overheated housing market. Now some advocacy groups say that as delinquencies and foreclosures mount, so too will lawsuits against lenders.
“I think a class action is coming,” said John Taylor, the chief executive of the National Community Reinvestment Coalition, a Washington group that is an advocate for low-income borrowers. “It’s a storm cloud that’s waiting to really open up and rain on the lenders’ parade.”
Taylor contends that lenders have marketed their riskiest loans to low-income borrowers in violation of so-called fair-lending laws, which require that a loan be made only when there is a substantial likelihood of repayment.
What's more, according to the Mortgage Foundation, the
fallout from the surge in subprime and bad credit mortgages taken out during the housing boom could become a major issue in the 2008 national elections, political analyst Charlie Cook told the National Association of Realtors at advocacy training sessions in D.C., this week.
As many as 10 million loans could go into default over the next 18 months as borrowers run into financial problems when the low-interest introductory period of their loan terms ends...
Speaking at a luncheon, Cook said that the number of potential foreclosed loans is so large that problem subprime/exotic/ bad credit mortgages like interest-only home loans could “be a big political issue” while 2008 national campaigns are underway.
“The issue is not on the political radar screen today but it could be in 18 months,” he said.
There are signs that the bursting housing bubble is poised to unleash an explosive backdraft with negative and potentially far-reaching implications for Wall Street and Washington.
In recent years, writes the The New York Times,
borrowers have flocked to riskier mortgages that gave them the means to keep up with an overheated housing market. Now some advocacy groups say that as delinquencies and foreclosures mount, so too will lawsuits against lenders.
“I think a class action is coming,” said John Taylor, the chief executive of the National Community Reinvestment Coalition, a Washington group that is an advocate for low-income borrowers. “It’s a storm cloud that’s waiting to really open up and rain on the lenders’ parade.”
Taylor contends that lenders have marketed their riskiest loans to low-income borrowers in violation of so-called fair-lending laws, which require that a loan be made only when there is a substantial likelihood of repayment.
What's more, according to the Mortgage Foundation, the
fallout from the surge in subprime and bad credit mortgages taken out during the housing boom could become a major issue in the 2008 national elections, political analyst Charlie Cook told the National Association of Realtors at advocacy training sessions in D.C., this week.
As many as 10 million loans could go into default over the next 18 months as borrowers run into financial problems when the low-interest introductory period of their loan terms ends...
Speaking at a luncheon, Cook said that the number of potential foreclosed loans is so large that problem subprime/exotic/ bad credit mortgages like interest-only home loans could “be a big political issue” while 2008 national campaigns are underway.
“The issue is not on the political radar screen today but it could be in 18 months,” he said.
BoA (mortgage backed securities) Downgraded to CCC
BoA MBS Class Downgraded
Class B-5 of Banc of America Funding Corp. mortgage pass-through certificates, series 2002-1, has been downgraded from BBB to CCC by Fitch Ratings and assigned a Distressed Recovery rating of DR1. In addition, Fitch affirmed the ratings on five other classes in the transaction. The downgrade was attributed to a deterioration in the relationship between credit enhancement and loss expectations.
view link
Class B-5 of Banc of America Funding Corp. mortgage pass-through certificates, series 2002-1, has been downgraded from BBB to CCC by Fitch Ratings and assigned a Distressed Recovery rating of DR1. In addition, Fitch affirmed the ratings on five other classes in the transaction. The downgrade was attributed to a deterioration in the relationship between credit enhancement and loss expectations.
view link
2.2 million foreclosures
The nonprofit Center for Responsible Lending forecasts 2.2 million households in the subprime market either already have or will lose their homes to foreclosure the next few years.
view link
view link
Housing Bubble Bust
The housing bubble is popping. Year over year declines in sales volume and prices prevail. Speculators and those with ARMs are getting foreclosed in ever increasing numbers.
Mortgage backed securities (MBSs) are in trouble and mortgage lenders are closing. Complex financial instruments such as derivatives and credit swaps are declining in value and thus raising costs.
The Fed announced stricted guidelines for mortgages which will cause 20% to 50% fewer subprime mortgage originations. $1.2 Trillion in adjustable rate mortgages (ARMS) are going to be reset at higher rates.
Mortgage backed securities (MBSs) are in trouble and mortgage lenders are closing. Complex financial instruments such as derivatives and credit swaps are declining in value and thus raising costs.
The Fed announced stricted guidelines for mortgages which will cause 20% to 50% fewer subprime mortgage originations. $1.2 Trillion in adjustable rate mortgages (ARMS) are going to be reset at higher rates.
liars' loans up to 62% of mortgage originations -
liars' loans up to 62% of mortgage originations - 90% lie
So far this year[2006], the association (Mortgage Brokers Association for Responsible Lending) notes, liars' loans have shot up to an estimated 62% of mortgage originations.
Interestingly, a recent sampling of 100 stated-income loans by an auditing firm in Virginia (based on IRS records) found that 90% of the income statements were exaggerated by 5% or more, while almost 60% of the stated amounts were exaggerated by more than 50%.
view link
So far this year[2006], the association (Mortgage Brokers Association for Responsible Lending) notes, liars' loans have shot up to an estimated 62% of mortgage originations.
Interestingly, a recent sampling of 100 stated-income loans by an auditing firm in Virginia (based on IRS records) found that 90% of the income statements were exaggerated by 5% or more, while almost 60% of the stated amounts were exaggerated by more than 50%.
view link
