Here's our summary of articles and data points on the housing market. It's part of Seeking Alpha's coverage of the real estate market and homebuilder stocks. Like all other topics and stock coverage from Seeking Alpha, you can have this sent to your Blackberry or desktop email by signing up for our no-spam free email subscription service.
Quote of the Day
"That doesn't reflect my optimism for the company. And I'll just leave it at that." - Government-sponsored student lender Sallie Mae CEO Albert Lord on a stormy conference call, in answer to a question as to how analysts should interpret the fact that he sold 97% of his stock holdings in SLM a week earlier. Analysts weren't impressed with Lord's optimism for SLM and the credit markets—shares have fallen more than 30% since Wednesday's call. (Dealbreaker.com, Dec. 19th)
Subprime Fallout
- Fitch Downgrades Bank of America on CDO Risk (Eli Hoffmann in Seeking Alpha, Dec. 20th): "Fitch Ratings downgraded Bank of America (BAC) to Negative from Stable Thursday, as ratings firms scramble to reassess risk after being slammed by investors and economists for not foreseeing massive asset overvaluation that has resulted in huge writedowns by banks worldwide. "Fitch's rating action reflects the fact that BAC's earnings have a significant level of sensitivity to trends in the deteriorating residential mortgage market," it said. "Management recently announced that it will increase provisions substantially to offset deterioration in home equity loans, and negative mark-to-market valuations in its mortgage-related holdings of collateralized debt obligations (CDOs) will be larger than previously anticipated."
- MBIA Bond Risk Soars on $8.1 Billion CDO Disclosure (Bloomberg, Dec. 20th) MBIA Inc. (MBI) tumbled the most since 1987, and the risk of default soared after the world's biggest bond insurer revealed that it guarantees $8.1 billion of collateralized debt obligations repackaging other CDOs and securities linked to subprime mortgages. CMA Datavision: Credit-default swaps tied to MBIA's bonds climbed 115 basis points to 595 basis points, the widest on record. MBIA [said] on its Website yesterday it insured the so-called CDOs-squared, a potentially riskier form of security than what the company typically guarantees. Rising defaults on subprime mortgages packaged into securities have led to bond downgrades and threatened MBIA's AAA guaranty rating."
- Bear Stearns Posts Loss After Subprime Writedowns (Bloomberg, Dec. 20th): "Bear Stearns Cos. (BSC), the second- biggest underwriter of U.S. mortgage bonds, reported its first loss as a public company after writedowns for subprime holdings and declines in the firm's three largest divisions. The fourth-quarter loss of $854 million, or $6.91/share compared with net income of $563M, or $4, a year earlier. The loss was almost four times wider than the average estimate of analysts... The writedown, while smaller than the charges at Citigroup Inc., Morgan Stanley and Merrill Lynch & Co., wiped out Bear Stearns's revenue for Q4. Return on equity dropped to 1.8% for the year from 19% in 2006."
- Home Loan Apps Plunge 19% (Inman News, Dec. 19th): "Mortgage Bankers Association: Mortgage application volume last week posted the sharpest drop in recent years as interest rates continued higher. The group's market composite index, a measure of home loan application volume, tumbled 19.5% on a seasonally adjusted basis from the first week of December. MBA reported that the index that tracks refinancings tumbled 27.3% last week from just one week earlier, while the purchase-loan index fell 10.6%. As a result, the refinance share of applications fell to 53.2% last week from 57.6% one week earlier, while the adjustable-rate mortgage (ARM) share actually rose during the period from 9.4% to 9.9%."
- Give Troubled Borrowers Cash – Greenspan (Eli Hoffmann in Seeking Alpha, Dec. 19th): "Former Fed chief Alan Greenspan said giving money to borrowers facing foreclosure, rather than forcing banks to change the way they do business, "is far less damaging to the economy and far simpler, without the ongoing consequences for the markets." Greenspan is worried that if lenders are compelled to change the terms of outstanding mortgage contracts, it could erode their trust the system and impair market function. "If I'm a mortgage lender and I know my contracts with borrowers can be abrogated for political reasons I will... charge a higher premium to offset that. Any time you undermine contract rights, there are consequences for risk premiums in the future."
- Ambac, MBIA Outlook Lowered by S&P, ACA Cut to CCC (Bloomberg, Dec. 19th): "The ratings outlook for MBIA Inc. (MBI) and Ambac Financial Group Inc. (ABK), the world's largest bond insurers, was lowered to negative by Standard & Poor's, raising the specter of more writedowns for the companies' investment- bank clients. S&P also cut its A rating on ACA Financial Guaranty Corp. to CCC, suggesting potential default. Canadian Imperial Bank of Commerce said Wednesday it may have $2 billion of writedowns on U.S. subprime mortgage securities it insured through ACA... S&P also reduced its outlook to negative from stable for XL Capital Assurance Inc. and placed Financial Guaranty Insurance Co.'s AAA rating under review for a possible downgrade. The actions were "prompted by worsening expectations'' for insured nonprime residential mortgage bonds and collateralized debt obligations of asset-backed securities."
| Tracking the Housing Market and Homebuilder Stocks
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