Housing Market Tracker - Reverse Mortgages Up, KKR Down

Subprime Fallout

Mortgage Application Volume Plummets. "Mortgage Bankers Association's weekly application survey: Mortgage application volume tumbled 22.6% during the week ending Feb. 15 as most interest rates rose. The MBA's mortgage application index fell to 822.8 for the week, from 1,063.5 during the previous week. Refinance volume dropped 27.9% during the week, while purchase volume fell 11.5%. Refinance applications accounted for 61.7% of total applications." (BusinessWeek, Feb. 20th)

KKR Arm In Talks After Fresh Debt Repayment Delays. "KKR Financial Holdings (KFN) said in a SEC filing Tuesday that a debt repayment due on February 15 on notes issued by conduits holding mortgage-backed securities had been deferred until March 3. KKR Financial Holdings said that this would "allow for restructuring discussions." The repayment date for the debt had already been extended once previously under a restructuring agreement in October, the firm said." (Reuters, Feb. 20th)

Port Authority Auction Bonds Reset at 8% After Rising to 20%. "Interest rates on $100 million of bonds issued by the Port Authority of New York and New Jersey were set at 8% in a weekly auction run by Goldman Sachs Group Inc. after surging to 20% on Feb. 12. Rates had soared from 4.3% when too few buyers bid for the so-called auction-rate debt and Goldman refused to put up its own capital to buy unwanted securities, causing the yield to be set at level predetermined in bond documents. Rates fell yesterday as the prospect of high yields enticed investors." (Bloomberg, Feb. 20th)

Housing: Is it Going to Get Worse Before it Gets Better? "A wave of foreclosures and auctions... will start building massively this year and peak in 2009 and 2010... The worst mortgages started to be written in early 2005, with the peak of the garbage written in 2006 and early 2007. For the Q1'05 mortgages, the worst schlock had two-year teaser rates, which triggered the surge in defaults in early 2007 that touched off the current crisis. Because lending standards got progressively worse in 2005, the default numbers got worse as 2007 progressed. This trend is certain to get much, much worse, given that Sean's data shows that lending standards completely went out the window in 2006 and early 2007, accompanied by a surge in volume." (Whitney Tilson in Seeking Alpha, Feb. 19th)

Radian Group Shares Dip After Citigroup Cuts Target Price. "Citigroup cut its price target for Radian Group (RDN) to $7 from $10, citing the company's fourth-quarter results and worsening credit and credit-related charges. On Friday, the credit enhancement company posted a net loss of $618 million, or $7.74/share, on revenue of negative $130.3M... Citigroup Tuesday widened its 2008 outlook on Radian to a loss of $4.75/share from a previous view of a $1.75/share loss. The 2009 outlook was cut in half to $1.30/share from $2.60/share "due to the continued losses, higher loss expectations over the near- to intermediate-term, and uncertainty regarding total losses." The current Street forecast is for a loss of $2.07/share in 2008." (Trading Markets, Feb. 19th)

Mortgage Lenders Toast Wall Street with Kool Aid. "Mortgage lender IndyMac (IMB) is promising PROFITS in 2008! Countrywide Financial Corp. initially predicted it would earn at least $3.80/share for 2007, and lost more than $2/share. In the early stages of the subprime crisis, the lender asserted it would be a beneficiary of the shakeout in mortgage lending. (And if you drank that Kool Aid, you lose about 80% of your money)." (Trader Mark in Seeking Alpha, Feb. 19th)

Extra, Extra! Trib Bonds Look Bleak! "Even junk bond buyers are turning their noses away from Tribune Co.s corporate IOUs, as some investors grow increasingly skeptical that the media giant -- now owned by billionaire investor Sam Zell... can meet the vigorish. Is a fire sale of debt-laden Tribune assets, including Wrigley Field, and office properties in Los Angeles and Chicago on the horizon? Once considered debt in a blue-chip enterprise, in early February Tribune bonds traded at around 30 cents per dollar of face value, a deep discount. Credit-rating house Standard & Poor's put the media giant on a watch for more downgrades." (Slatin Report, Feb. 19th)

Choppy Housing Market Doesn't Stop Mortgagebot. "Mortgagebot LLC, a provider of consumer-direct online and enterprise-wide point-of-sale mortgage-origination solutions, posted a record year in 2007, despite the housing bubble and the subprime market meltdown. The company has reported a record number of clients, record volume of its Mortgagebot PowerSite solution and record market penetration among commercial banks, savings institutions and credit unions. Mortgagebot said its "same-store" mortgage originations were up an average of 22% and its client base grew 20% in 2007."(Biz Times, Feb. 19th)

Some Feel Rosy Despite Housing Slowdown. "National City Corp. (NCC) spent $2 billion on two old-line banks - Fidelity Federal of West Palm Beach and Harbor Federal of Fort Pierce - only to lose customers after its new signs went up. Florida Bankers Association: In Palm Beach County, National City's market share fell to 7.7% in Q3'07, down from 9.8% in Q3'06. And in St. Lucie County, National City's market share fell to 19.5% from 23.3% a year earlier. The Cleveland bank's Martin County market share held steady at just over 9%." (Palm Beach Post, Feb. 18th)

Reverse Lending on Rise in D.C. "Federal Housing Administration: Nationwide, 107,558 reverse mortgages [were] originated in fiscal 2007, up 249% since 2005... Home-equity conversion mortgages [HECMs] make up 90% of the reverse mortgage market... because the loans are insured by the FHA, making them a much safer investment for lenders... Recent entrants include major lenders such as Bank of America and Quicken... Ginnie Mae issued the first HECM-backed security in November... creating a secondary market in which the debt is sold to investors. The addition of a secondary market creates significant potential for the industry, as all Ginnie Mae securities are guaranteed by the U.S. government." (Big Builder Online, Feb. 16th)

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Comments

[unimpressed...:]

Headline: Mortgage Applications Up.
Story: Mortgage Application Volume Plummets.

What? Are you paying attention? This sloppiness is unacceptable and inexcusable. Sober up before you put finger to keyboard!

2008 Feb 21 03:34 PM

[SA Editor J...:]

You do have a point, however indelicately made. Thanks for pointing out my mistake.

-J.W.

2008 Feb 21 03:40 PM

[reverse mor...:]

Judy... we all have slipping fingers sometimes, and many of us have have certainly made typos (read me too). In your defense I'll say that a search on SA, and seeing your title, got me to click, so slip or not, maybe it was providential.

You (or whomever is reading this) may or may not know there is an entire SEO niche that concentrates on misspellings, capitalizing on the fact we all have slippery fingers, or sometimes a minor brain freeze.

Keep writing, keep searching and remember... "to err is human, to forgive divine".

Now then... let me run this through spell check... :)

Apr 04 11:52 AM