Housing Market Tracker - Will Regulatory Efforts Help Subprime Now?

Quote of the Day

"Investors were paying us big money to filter this business. It's like with water. If you don't filter it, it's dangerous. And it didn't get filtered." - Loan checker Cesar Valenz, on the decline in due diligence on subprime loans during the housing boom. (LA Times via Seattle Times, Mar. 25th)

Video of the Day

For those of you that still feel like you can laugh about the subprime crisis, the housing slump and all the money that's been lost, here's a cute song by Dave Girtsman. Enjoy!

Subprime Fallout

Subprime Watchdogs Ignored. “The FBI is conducting more than a dozen investigations into whether companies along the financing chain concealed problems with mortgages. And a presidential working group has blamed the subprime debacle in part on a lack of due diligence by investment banks, rating outfits and mortgage-bond buyers. In interviews, eight experienced loan reviewers said quantity surpassed quality as marginal lending increased. Squads of 10-15 veteran loan checkers gave way, they said, to packs of 40-50 mostly novice reviewers posted at or near subprime factories such as now-defunct Orange County, Calif., lenders New Century Financial and Ameriquest Mortgage.” (LA Times via Seattle Times, Mar. 25th)

Ex-Countrywide Officer Sees Gold In Slump. “Stanford L. Kurland, former president and COO of Countrywide Financial Corp. (CFC)… will serve as chairman and CEO of a new company that will acquire and restructure distressed mortgages. Private National Mortgage Acceptance Co. LLC, also known as PennyMac, intends to help borrowers restructure loans so they can avoid foreclosure and maintain payments. Kurland: "We'll look to restructure mortgages, and as soon as the loans are re-performing, and if there's the capability and the market liquidity, we'll look to sell… We're prepared to hold five to seven years." PennyMac [is] backed by prominent investment management firms BlackRock and Highfields Capital Management.” (AP via Baltimore Sun, Mar. 25th)

Junk Bond Losses Top $35 Billion, JPMorgan Sees More. “Merrill Lynch indexes: Junk bonds have fallen an average 3.9% this year, losing about $35 billion. Some funds managed by John Hancock Advisers LLC, OppenheimerFunds Inc. and Fidelity Investments are down more than 7%, showing that even the largest investors were caught off guard by the collapse. While the Federal Reserve has slashed benchmark interest rates by 3 percentage points since September, it has been unable to get investors to increase their purchases of the riskiest assets. The declines are choking off financing for speculative- grade companies, boosting defaults.” (Bloomberg, Mar. 25th)

State Subprime Help. “Two major bills are on the table in Albany to help people caught in the subprime mortgage crisis... [Former] Gov. Eliot Spitzer [had] proposed a comprehensive bill that would push lenders to work out terms that allow homeowners to stay in their homes. Lenders would be required to attend settlement conferences, where they could assign lower, more realistic values to homes and reduce monthly payments. Today, half of all foreclosures in New York are finalized without the borrower and lender ever speaking… The bill would also rewrite lending practices, giving consumers greater protection under New York's anti-predatory lending laws. (Newsday, Mar. 25th)

Thornburg Offers $1.35 Billion of Debt Paying 18%. Thornburg Mortgage Inc. (TMA), the "jumbo" mortgage [non-subprime] specialist trying to stave off bankruptcy, plans to sell as much as $1.35 billion in senior notes with an initial yield of 18%. The lender jumped more than 70% in premarket trading. Thornburg: Investors buying the notes will receive warrants totaling up to 48% of the company's common shares… Thornburg is asking for NYSE approval to issue the new securities without a shareholder vote. Waiting for that approval “would seriously jeopardize the financial viability of the company,'' Thornburg said. [The company] must raise almost $1B by this week to meet margin calls.” (Bloomberg, Mar. 25th)

Fed May Buy Mortgages Next, Treasury Investors Bet. “For the Federal Reserve to keep the financial markets from imploding it needs to buy troubled mortgage bonds from banks and securities firms, say the world's biggest Treasury investors. After cutting interest rates [and other moves], the Fed has been unable to promote confidence. The difference between what the government and banks pay for three- month loans almost doubled in the past month to 1.69 percentage points. PIMCO manager Bill Gross: The only tool left may be for the Fed to help facilitate a Resolution Trust Corp.-type agency that would buy bonds backed by home loans.” (Bloomberg, Mar. 24th)

Fannie Awaits the Wrecking Ball. “Fannie Mae and Freddie Mac have been given the authority to lower their capital to just 3% of the mortgages they hold, down from 3.25%, allowing them to support about $200 billion more in mortgage commitments. Regulators cut Fannie and Freddie's capital requirements by a combined $5.9B, while allowing them to borrow up to $33 for every dollar they have on hand… Mortgage lenders now own or guarantee about 45% of all U.S. mortgages in existence, but they are expected to buy or guarantee about 80% of all the mortgages made this year… Fannie has become overextended… and too subject to the twin vagaries of rising defaults and falling home prices.” (Motley Fool, Mar. 24th)

New Real Estate Closings Rule Gets OK Reviews. “New disclosure rules for mortgages should give consumers a clearer understanding of loan terms and closing costs. Under the proposed rules, issued March 14 by the Department of Housing and Urban Development, people buying or refinancing a home would be provided with a standard Good Faith Estimate that prominently displays the loan's interest rate and monthly payment, whether that interest rate can increase and by how much, and whether the loan has a prepayment penalty or balloon payment. The first page of the document also would list the loan's estimated closing costs, so consumers could easily compare loan offers.” (Orlando Business Journal, Mar. 24th)

Washington Sees Several Fronts For Attacking Mortgage Crisis. “Senior Treasury Department officials have spent months drawing up a blueprint for financial-market regulation... The Treasury plan could propose moving the Fed out of day-to-day supervision of state-chartered banks… Instead, the Fed would be given a more sweeping responsibility to monitor financial-market stability… Critics have long complained [about] the alphabet-soup of regulatory agencies... At least eight federal agencies supervise different segments of financial markets. Some have overlapping authority, like the Fed and the Office of the Comptroller of the Currency, which both regulate parts of the banking industry. Other pockets are mostly unregulated, such as mortgage brokers and hedge funds.” (Wall St. Journal, Mar. 24th)

Are Atlanta Home Mortgage Lenders and Brokers Being Squeezed out of the Mortgage Market? “Atlanta mortgage brokers operate as a virtual lending arm for larger banks like Countrywide, Chase (JPM) and Bank of America (BAC)… capturing business that the larger banks retail divisions miss or can’t handle. Larger banks [generally] depend on loan originators with less experience to process loans… Hundreds of small brokers and lenders have thrown in the towel… and many more are expected to follow. The number of smaller broker shops that are still in business are roughly the same amount there was before the refi-boom. Some are… asking elected officials to reenact GAFLA (Georgia Fair Lending Act) laws that were passed… during the [housing] boom.” (Los Angeles Chronicle, Mar. 24th)

Clinton Pushes For Restructuring, New Thinking On Foreclosure Crisis. “[Part of] Hillary Clinton’s new four-part plan to address the nation’s housing crisis: Expand the federal government’s capacity [specifically, the FHA] to facilitate broad-based mortgage restructuring for people who can’t afford their payments in tandem with a private-sector auction of large pools of mortgages as a way to loosen credit markets and give lenders an incentive to refinance troubled loans. [And] pass legislation that clarifies any legal issues that might discourage mortgage companies from restructuring loans by balancing the interests of mortgage investors, homeowners and the mortgage servicing companies.” (Detroit Free Press, Mar. 24th)

Fed: No Talks on Joint MBS Buying. “The U.S. Federal Reserve, responding to press reports, said it is not discussing coordinated purchases of mortgage-backed securities with other central banks… The Financial Times reported… that "central banks on both sides of the Atlantic are actively engaged in discussions about the feasibility of mass purchases of mortgage-backed securities as a possible solution to the credit crisis." The newspaper said the Bank of England appears most enthusiastic to explore the idea, the Fed is open in principle but only as a last resort, and the European Central Bank appears least enthusiastic.” (Wall St. Journal, Mar. 22nd)

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Comments

[H2O]

Whats the diff between - delusional - Corpo's - and Gov Leaders ????

Rambo Lives - Give Hillary a break - so she's a little delusional - Somebody in the Clinton family needs some - umpaws - After all she's just following Bush - making there war's romantic .....

~ Draft dodgers - Billy boys and Baby Bush's war stories ~

I was fighting in the mountians of afgan - and it was a 50 day battle - didn't even sleep - and I got caught alone - bullets and morters all around - I had single handedly then suddenly - i ran across a cave - seeking shelter - I crawled in - and low and behold - it went into a hidden valley - and I found 72 virgins there - I made love for the rest of the war - a virgin a night - what a romantic war..............

So whats wrong ????

Weve had a delusional PREZ before !!!!

[H2O]

It's 3:00 Am - The Phone is Ringing

It's 3:00 AM - and the phone is ringing in the White-House - and
Rambo Hillary - is under the desk - snipers all around - another
phone is ringing - a fast call to Hillarys rich supporters......

Help-Help Hillary screams - The phone is ringing - and snipers
have me pinned down .......



The economy is busted - another bail-out hillary supporters yell !!!!



WE don't even need to mention - what billy's-willy is up to at
3:00 in the morning in the white-house ....